What are the five main challenges associated with database marketing?

Question

What will be an ideal response?

Answer 1

The five main challenges associated with database marketing include:
1. Some situations are just not conducive to database marketing. Building a customer database may not be worthwhile when: 1. the product is a once-in-a-lifetime purchase (a grand piano); 2. customers show little loyalty to a brand (there is a lot of customer churn); 3 . the unit sale is very small (a candy bar) so customer lifetime value is low; 4. the cost of gathering information is too high; and 5. there is no direct contact between the seller and ultimate buyer.
2. Building and maintaining a customer database require a large investment. Computer hardware, database software, analytical programs, communication links, and skilled staff can be costly. It's difficult to collect the right data, especially to capture all the occasions of company interaction with individual customers. Sometimes companies mistakenly concentrate on customer contact processes without making corresponding changes in internal structures and systems.
3. Employees may resist becoming customer-oriented and using the available information. Employees find it far easier to carry on traditional transaction marketing than to practice CRM. Effective database marketing requires managing and training employees as well as dealers and suppliers.
4. Not all customers want a relationship with the company. Some may resent knowing the company has collected that much personal information about them. Online companies should explain their privacy policies and give consumers the right not to have their information stored. European countries do not look favorably on database marketing and are protective of consumers' private information. The European Union passed a law handicapping the growth of database marketing in its 27 member countries.
5. The assumptions behind CRM may not always hold true. High-volume customers often know their value to a company and can leverage it to extract premium service and/or price discounts, so it may not cost the firm less to serve them. Loyal customers may also be jealous of attention lavished on other customers. Loyal customers also may not necessarily be the best ambassadors for the brand. One study found those who scored high on behavioral loyalty and bought a lot of a company's products were less active word-of-mouth marketers than customers who scored high on attitudinal loyalty and expressed greater commitment to the firm.