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THE IMPoRTANCE oF DATABASE MARKETING IN SoCIAL NETWoRK ADVERTISING


IVA GREGUREC UNIVERSITY oF ZAGREB, CRoATIA TiHoMir vraNeevi UNIVERSITY oF ZAGREB, CRoATIA DaMir DobriNi UNIVERSITY oF ZAGREB, CRoATIA

Abstract The last two decades have witnessed drastic globalization achievements and technological innovations that do not only have a major impact on the individual but have also produced profound changes in all aspects of business, including marketing. Owing to current trends, the means of realizing one of the primary goals of every business, that is, satisfying customers needs, have been greatly changed. Contemporary businesses focus their marketing efforts on creating databases of the existing customers and stimulating their company loyalty. The establishment and effective management of a customer database enables a personalized approach to every customer. It is personalization based on relevant information resulting from employing a customer database that can allow businesses to acquire new customers and retain the current ones as well as build a longterm relationship with customers that leads to greater marketing efficiency. One of the new trends that implies using databases is social networking. Social networks have thus become a location where users can not only communicate among themselves but also communicate with businesses. Without a quality database marketers would not be able to appropriately exploit social networking as an advertising medium and send personalized messages to individuals. Therefore the aim of this paper is to exemplify the importance of marketing databases in social network advertising.

Key words: database marketing, social networking, advertising, personalization

Introduction
Companies have started to pay more attention to understanding customers and their behaviour. They have realized that by using the right information about their customers, they can gain a competitive advantage in their business surroundings. Collection of important information by creating long-term relationships with their customers and by observing customer behaviour is facilitated by development of advanced information technology. Technology allows companies to maintain long-term relationship with customers once the affiliation has started by entering information into the database, and to adjust their offer based on real and not just perceived customer wants and needs. If the companies want to satisfy the desires and needs of their clients and if they want to build longterm relationships, they need the right information. This information can be received by continuous process of data collection and analysis. Companies must constantly collect data and enter them into a database, and with the use of technology convert data into useful information that helps companies to know what their customers need at any moment. Databases are of great importance for the company and therefore they need constant maintenance. Companies that want to have a quality database must take care that the data is organized and refreshed regularly. only quality data can help businesses to find out current wishes and needs

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of its clients and only quality information enables companies to predict future behaviour of their clients. It allows companies to build a personalized offer and to maintain a quality relationship and cooperation of companies and clients. Creating a database affects the ability of enterprises to follow the entire lifetime of clients, their current and future behaviour. Effective implementation of database marketing depends primarily on quality of customer data. Social networks, as one of the biggest trends in the 21st century, abound with information that individuals are revealing about themselves, which marketers can use for their needs so investment in building relationships and advertising on social networks grows continuously. The evidence for that lies in research published in February 2011, which shows that investment in worldwide social networks advertising in year 200 amounted $55.20b, and in 2010 worldwide social networking ad spending was almost $2b. The assumption is that the amount in 2011 will grow to nearly $b, which is the increase of 8.7%, but it would probably not stop there [eMarketer1].

database marketing [DeTienne & Thompson, 1996, p 14]. According to Brown [200, p 110] database marketing is a form of direct marketing using databases of existing or potential customers to generate personalized communications in order to promote a product or service for marketing purposes. According to Blattberg et al [2008, p 4] database marketing can also be defined as the use of customer databases to enhance marketing productivity through more effective acquisition, retention, and development of customers. From this definition we can emphasise three key words; customer database, marketing productivity and customer management, which represent the essence of database marketing. The first and one of the basic characteristics of database marketing is to use customer database in order to perform comprehensive analysis of the data in the database. The database is defined as a grouping of items or data that exist in a relationship with a particular subject [Robertshawe, 2008, p 15]. Another important determinant in defining database marketing refers to marketing productivity. The important role of database marketing is to increase marketing productivity, which is manifested by reduction of marketing activities costs to increase return on investment. At the end, probably the most important determinant of database marketing is customer management, which includes acquiring, retaining and developing relationships with customers. From the foregoing it can be concluded that the company, establishing effective database marketing, beam their marketing activities to customers, with the aim of increasing productivity and long-term success of whole company [Blattberg et al, 2008, p 4]. From the very definition [Blattberg et al, 2008, p 13] of database marketing three basic reasons arise: 1. Enhancing marketing productivity 2. Enabling the development of a customer/firm relationship 3. Creating a sustainable competitive advantage Todays business environment in the last decade shows an increase of the importance of database marketing due to some of the following reasons: [Blattberg et al, 2008, p 7]

Database marketing
The first step in creating database is to determine the purpose of database usage, or better said defining data that it will contain, which is followed by determining of methods and techniques for data collecting and analysis. The objectives of making and using database are: [Dobrini et al, 2005, p 25] identifying potential customers defining the customers who will receive a personalized offer updating customer orders increasing customer loyalty etc. Database marketing draws its origins in direct marketing which evolved in the 10s with the emersion of direct response method, and later, the emersion of newspaper inserts. Biggest milestone in the development of database marketing refers to the beginning of the personal computers and the Internet usage for they are interactive media that most intensely affected the further development of direct marketing, and also the development of

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expansion and development of information technology growth of the Internet importance lower productivity of mass marketing increasing marketing responsibilities (marketing accountability) increasing interest in customer relationships establishing a competitive advantage. Modern information technology enables companies to process and manipulate huge amounts of data about customers, which is supported by advanced software, which still shows an intense development. Except software development, modern information technology includes increased importance of the Internet and electronic business. Today Internet allows direct collection of data about customers in real time, which is of great importance for the implementation of marketing activities. The increase in the importance of database marketing has been driven by lower productivity of mass marketing. In the past, marketing activities were based on mass marketing, which is characterized by non-personalized customer service that does not suit todays market conditions. Database marketing allows separating profitable from unprofitable customers and thus ensures that marketing activities of a company focus on the profitable customers. Specifically, mass marketing entails high costs of marketing activities, loss of key customers, and ultimately lower marketing productivity. In response to the mentioned problems, companies have turned to modern marketing concepts, where one of the most common is database marketing. It is based on a personalized approach to each individual customer, which leads to increase of customer response [Blattberg et al, 2008, pp 7-]. Given the dynamic market environment, companies today recognize the importance of creating long-term and quality relationships with their customers, in which database marketing helps them achieve the goals. This policy allows the company successfully serving the customer where the ultimate goal is creating competitive advantage. The application of database marketing is extremely important for creating and maintaining relationships

with customers.Aquality and long-term relationships with customers often result in customer loyalty, and we know that loyal customers constitute the biggest value of each company [Database Marketing Institute]. Database marketing can be a source of competitive advantage. Specifically, within the database marketing, the company has a large scope of information about customers and based on these company can form the best service or product and customize the promotion of products or services to customers more efficiently than the competition, and thus improve their market position. Therefore, it can be concluded that the value of the company is determined by the value and volume of customers information that the company owns. A very important concern in database marketing and social networks advertising is privacy of clients that is now considered to be one of the leading tasks of each company. It is not just a moral issue of the company, but the key issue of maintaining good and long-term relationships with clients, which provides a strategic advantage and the ability to survive on the market. Privacy of customer data can be a source of problems, but also a source of new business opportunities [Panian, 2003, p 22]. If the company violates the privacy or endangers the client, it will very likely undermine its relationship with the customer and thus devalue all the efforts to build a useful database. Those who once had such a negative experience probably will never again go back doing business with a company that has badly treated their data. Violation of privacy could result with legal sanctions (punishment) for example Law on Personal Data Protection [Law]. This will not only cause expenses but also loss of reputation on the market and can seriously threaten the entire business and give competitors an advantage. on the other hand, if a company has a good system of security and protection of data about their customers, and if this system is publicly declared, it will give customers the signal that they are essential and that the company cares about their privacy. This strengthens the trust of clients, which also has a major role in gaining their loyalty [Panian, 2003, p 22]. Companies and clients should resolve this issue together with communication that enables companies to look for more personal information about its

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customers. In this process customers should be able to define what information company can use without limitations, and what information should be especially protected. This way companies come in a possession of detail information that will enable them to perform better analysis and ensure the business success in the future. In marketing terms, this means that the enterprise will be able to define their goals and the ways of achieving them better, but that will also increase the chances to build relationships and all the benefits that the relationships bring along. In many countries the issue of protecting customer privacy is governed by the law, but if the companies want to attract more attention and trust of their clients, companies should give more attention, effort and resources to privacy than it is required by the law itself [Law].

Social networking
Social networks are one of the largest Internet developments in the 21st century. They are considered as a new medium of direct marketing and they represent one of three of cyber communities (beside blogs and chat systems). Its main purpose is making new friendships or maintaining those that already exist [Sheldon, 2008, p 7]. Every year, social networks are gaining in importance both for users and for marketers who incorporate them into their media plan. over 300 different active social networks exist today. Each has its own specific characteristics, beginning with the ideas of connecting the dominant target group, the possibility of interaction and visual identity [Ross, 2007]. The first webbased social network site (SixDegrees.com) with similar characteristics as ones that exist today was launched in 17 [Stround, 2008, p 278]. Social network allows individuals to present themselves, to articulate their social needs, to establish or maintain connections with others [Ellison et al, 2007, p 1]. The main motivation for using social networks is a consequence of social influence and desire for belonging to a particular community [Vazdar, 2007, X]. Social networks enable users to be part of a large, international community and to share information, opinion and content with other members of the network. This sharing process companies see as their opportunity to advertise and hope to find a new way to use these communities [Zeng et

al, 200, p 1]. Social networks as a medium of direct marketing help companies target individual consumers by using databases companies adjust personalized offer to customers. Advertisers pay attention to social networking sites and are using the content from users profiles to target ads individually tailored to consumer. These ads can be based on general demographic, geographic, psychographic information to deliver personal (individual) ads [Grubbs Hoy & Gender, 2010, p 28]. Even though, marketers are still too afraid that they intrude users privacy and their personal space, so they do not take advantage of this medium as much as they could. But social networking platforms encourage users to post and share personal information as part of their online social interactions [Grubbs Hoy & Gender, 2010, p 2]. However, it is assumed that the investment in advertising on social networks in the coming years will increase [eMarketer2]. Companies should have in mind that the social network sites are places ... where actual and potential customers are interacting, and it shapes how they think [Fisher, 200, p 10]. The core of social networking sites consists of personalized user profiles. Individual profiles are usually a combination of users images, posts and lists of interests (hobby, music, book, and movie preferences) which makes useful source for database marketers. Different sites impose different levels of privacy in terms of what information is revealed through profile pages to non-affiliated visitors and how far strangers versus friends can traverse through the network of a profiles friends [Trusov et al, 200, pp 23]. Social networks enable users to build and maintain contacts with their family, friends and business partners in a virtual environment, while at the same time they help users to find other people by using key words and descriptions. Since 2004 when they first became widely known in todays familiar form, social networking sites have dramatically changed the functionality of the Internet. The potential to reach consumers directly and in a personal and social environment has meant that marketers are forced to advertise in this new medium [Kelly et al, 2011, p 1].

Advertising on social networking sites


We have already mentioned that social networks are considered as new media of direct marketing, but also they are considered to be the new

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advertising medium on the Internet where online advertising is considered to be a form of advertising that uses the Internet and the global network to deliver the marketing offer and to attract customers [jeli, 2008, p 239]. according to another definition, Internet advertising means advertising that appears when consumers search the Internet, including banner ads, ticker ads, ads interval (interstitials), skyscrapers, e-mail marketing, including spam, and other formats [Kotler, 2000, p 148]. The most common way of Internet advertising is through banners, and the same goes for the social network advertising. Some of them are: [Social networking1] Floating ads: These ads move across the screen of a specific web page. Trick banners: These are the least popular form of ads, because they resemble an error message. The banner might have a dialogue box, which tells you that your computer is not secure, and certain actions must be taken. If you take these actions, you are brought to the advertisers website. Pop-up ads: Pop-up ads display the advertising in a new window. Video ads: As the name implies, a video ad is similar to a television ad, since it displays a video that advertises the product. According to Fisher [200, p 11] the most common measurement of the social network advertising impact are following parameters: Unique Visitors, Cost per unique visitor, Page Views, Visits, Return Visits, Interaction Rate, Time spent, Video installs, Relevant actions taken. In addition, three most common pricing methods of social network advertising are: [Social networking1] CPM (cost per mille) - The cost per one thousand impressions. This is service providers favourite method of collection for advertising space because it does not depend on consumer reaction to the ad CPC (cost per click) - the advertiser pays the social network a specific amount of money for every visitor that clicks through the ad and visits the website product or service, advertisers prefer this form of advertising space

CPA (cost per acquisition), and is also known as affiliate marketing - the social network publisher only gets paid when someone actually makes a purchase at the vendors website (Amazon for example). This is a form of advertising that best suits the advertisers, because they can accurately calculate the cost of advertising. Advertising on social networking websites can help a business to grow whether it is a small or a large corporate business. Depending on social network company chooses when promoting its product or business, marketing could be expensive, inexpensive or free [Social networking2].

Usage of database marketing in social networking advertising


In this chapter we will mention the two most popular global social networks (Facebook and MySpace), ways of advertising on them and how they use the database in order to personalize the offer for individual users. As a comparison, according to the survey published in December 200, advertising spending on MySpace worldwide will fall by 21% in 2010, while advertising spending on Facebook will increase by 3% [IAB]. Facebook is one of the most popular social networks. According to Facebook website it is a social utility that helps people communicate more efficiently with their friends, family and co-workers. The company develops technologies that facilitate the sharing of information through the social graph, the digital mapping of peoples real-world social connections. [Facebook1] It came to existence in 2004 as an on-line database of Harvard students and was recognized as a source for finding people. Today Facebook has more than 500 million active users worldwide, and over 250 million users are active each day and entrepreneurs and developers from more than 10 countries that advertise on Facebook [Facebook2]. This is a huge number for companies to target. But through database, and after creating an ad, it appears on profiles and pages that are relevant to individual users. Facebook offers businesses the opportunity to promote their products, services and brands to their fans using services such as Facebook Pages and Facebook Ads. Facebook Pages allow fans the opportunity to engage with a business and its brands in a variety of ways, whereas Facebook
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Ad can tell you about how ads can be targeted at very specific groups of users. In this article we will concentrate on the Facebook Ads. For the determination of target groups on Facebook, company can use Facebook database, but it is important for a company to know what advertising goals they want to achieve, which consumers they want to target for products/services company offers and at the end what are the characteristics of those consumers. According to Facebooks publications its database provides the enterprises to segment customers by location of customer (Facebook Ads uses a users IP address and their profile information - country, state, city, radius to determine location), by language (Facebook has been translated into over 70 languages, Ads can be adjusted based on preferred language), according to demographic characteristics (age, birthday, gender, relationship status, preferred language), according to some personal factors (education, workplace, interests, likes ...) [Facebook3]. once a company chooses its own criteria for selecting target groups, Facebook will display the approximate number of people that targeting encompasses [Facebook4]. Ads can be paid according to two models: CPC (cost per click) and CPM (cost per mille). MySpace is a leading social entertainment destination powered by the passions of fans [MySpace1]. It is an interactive social network that has the same function as Facebook, as well as all other social networks, and the function is to maintain and gain new friends, create a personal profile, participate in groups, blogs and forums, exchanging pictures, music and video [MySpace2]. MySpace first appeared 2004 and was the strongest social network in the world, until April 2008 when position was taken over by its main rival Facebook. The target group of My Space are primarily teenagers and younger people (it has a 50% market share in the 13-35 demographic), who want to stay in touch with friends and want to have a sense of belonging [Crunchbase]. Today MySpace has more than 100 million users worldwide, and half of them are in the U.S. Myspace is localized in 30 countries and translated into 1 languages [MySpace2]. Besides Facebook, MySpace is the most popular social network in the world, and the two of them constantly fight over the number of users and the number of advertisers who are present on them. Advertising on MySpace social networking website works similarly to Facebook. Marketer set up his

ad and chooses how he wants to pay (CPC cost per click or CPI/CPM cost per impressions/cost per mille). MySpace, just like Facebook database contains information about age, gender, education level, relationship status, occupation, parental status, hobbies and interests, location, and so on which can be used for more precise ad targeting [MyAds].

Conclusion
Database marketing is the process of building, maintaining and using customers and other databases for the purpose of contacting, transactions and building relationships with clients. Companies often use database marketing for three reasons: because of increased marketing productivity, developing and improving relationships with clients, and for building a sustainable competitive advantage. Today, at time of crisis, with the reduced clients budget and more rational spending, the impact of businesses that use database marketing is increasing because the consumers buying decisions are significantly affected by managing relationship with clients. Using database marketing, companies are gaining trust of their clients, and building a positive relationship with them easier and quicker. And thus, successful relationships with clients result in higher competitive advantage which is otherwise very difficult to achieve. Due to lower budget of consumers, but also because of the increasing availability of consumers, enterprises must have some kind of presence on the network, whether with their profile pages through which they gain loyalty or through advertisements, mostly in the form of banners. And what companies must keep in mind is that once they start gaining popularity, the best way to continue the growth trend is to make sure they keep up with their pages and update them with new information, news or changes. Fresh content will keep loyal customer and attract new ones. The aim of this article is to raise awareness about advantages of database marketing over the traditional marketing methods among companies in Croatia and wider region who still have not recognised its value. We propose further research of local companies marketing practices on social networks to determine present state of the art and

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to be able to set directions for developing future advertising actions.

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