Marketing Database Segmentation Importance

In: Business and Management

Submitted By Ezio
Words 444
Pages 2
1. What is the importance of segmentation to marketing, and how is it used in database marketing?
To execute different marketing actions and strategies, segmentation is a must. Especially in the increasingly divided market. One size fit all doesn’t work anymore. Without segmenting, marketing efforts would be completely lost and profit not maximized. Segmentation provides a road map for the marketer, to know exactly which product is most suitable for which segment of the market. Moreover, segmentation helps predict future behaviors and market trends.
In order to properly segment a market, information needs to be collected that represents the market to analyze their needs, wants, buying behaviors etc. This is where database marketing comes. Segmenting the customer database into submarkets allows for more effective marketing of products and services.

2. What variables might be used in database segmentation?
Industry category, Household size, Geographic location and Psychographics.

3. Describe how tabulation techniques are used to segment a database.
Based on historical information databases large samples are created. After that the samples data is divided in three ways based on an analysis of historical response data in conjunction with marketing assumptions. Recency of purchases, frequency of purchases and money spent are elements used to segment the data.

4. What is RFM and how is it used to segment a database? What are the limitations of formal RFM techniques?
RFM is a technique used to determine who the most profitable customers are. Who purchased recently, how much and when. It
RFM has limitations and may not produce a segmentation as good as other techniques. RFM does not take advantage of all variable customer data, and instead employs only RFM counter variables.
Large companies have so many more data variables available and so they can create…...

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