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CHAPTER 2:

RELATED LITERATURE AND STUDIES

The literature and studies cited in this chapter tackles the different

concept, understanding, and ideas, generalization or conclusions and

different development related to study of the customer database from the

past up to the present and which serves as the researchers guide in

developing the project. Those that were also included in this chapter

helps in familiarizing information that are relevant and similar to the

present study.

2.1. Local Literature

Firms nowadays in the Philippines have just begun to use the technology

to obtain customer information in their database marketing processes to

enhance customer relationship management. According to the research

made in UP Diliman (2015), about improving customer relationship

through database marketing: businesses uses an action research

approach to develop a new framework about how they can do this

database system. Results showed that integration of the local and

database marketing enhances the effectiveness of customer relationship

management practices. For example, a database offers benefits such as

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increased consumer data collection accuracy and speed, cost savings,

and greater interaction and better relationships with customers.

Technically, there are forms of databases that predate the computer age.

During the first half of the 20th century, companies kept large numeric

databases on punched cards, and the data was retrieved and sorted by

mechanical tabulating equipment. However, the term "database"—

sometimes written as two words—did not come into usage until the

1960s, and today is only used to refer to computer databases.

Computer databases, in turn, predate true Database Management

System or DBMS, because in the 1960s most computers stored data

sequentially on magnetic tape. This precluded quick access to data,

which requires random access, as is possible with a spinning computer

disk. Early database systems, which were developed for mainframe

computers, could handle only a single data file and were oriented toward

specific data-processing functions. For example, a certain DBMS would

be used for maintaining accounting records and an entirely different

DBMS would be used for tracking inventory. Companies and researchers

began experimenting with systems that would process transactions as

they occurred rather than in daily batches. Later, DBMS were developed

that could handle multiple functions and different files, usually in a

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"hierarchical" database structure. Unfortunately, these databases, which

comprised the thrust of the commercial market through the 1970s, were

not very amenable to database redesign, and were usually fairly tedious

to navigate. The development of the "relational" model largely alleviated

these shortcomings. This model, developed throughout the 1970s, based

its programs on "abstract" input models, independent of the specific

database design, and thus was immune to database redesign. It further

offered users a far less convoluted and cumbersome navigational

process.

Instead of being designed for a specific industry or task, subsequent

generations of DBMS have offered more flexibility and customization,

including the ability to perform additional programming. DBMS tailored to

specific applications—such as scientific data, text retrieval, image data,

spatial and geographical information, and many others—continue to

abound. Some of the more common general-purpose DBMS for the large

and complex data processing needs of corporations include Oracle,

INFORMIX, Microsoft, Ingres, and Sybase SQL-Server, all of which run

on UNIX-based workstations and minicomputers, and DB2 for IBM

mainframe computers.

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DBMS became commercially available for the personal computer in 1981

with the introduction of dBASE II, a program originally developed in 1976

based on the relational model. This and subsequent versions, dBASE III

and dBASE IV, were the most popular DBMS for personal computers in

the 1980s. By the 1990s, numerous DBMS for DOS, Windows, and

the Macintosh operating systems were competing on the market, but

none dominated. Some of the more common programs were Paradox,

FoxBASE and its successor FoxPro, Microsoft Access, FileMaker Pro,

DataEase, and Lotus Approach. These software packages typically cost

several hundred dollars.

Units of data within a database are generally called "records." Each

record is unique and is further broken down into a limited number of

"fields," which describe attributes of the record. For example, in an

employee database, a record exists for each employee, and the fields

within each record may designate each employee's name, title, salary,

date of hire, telephone extension, supervisor's name, and so forth. The

fields may or may not be unique to the record, but at least one must be

unique for the record to be unique. The fields may contain fixed or

variable information, and they may contain either text or numbers.

Figures in value- and date-type fields can be used for computations

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when the DBMS is used to analyze the data. Fields can even contain

pictures, video clips, or sound if the DBMS and the computer hardware

are capable of handling such multimedia data. Records with the same

set of field classifications are usually kept within one file. In a business

database, sets of records often exist both for concrete things, such as

clients or vendors, and for activities, such as orders, payments, and

production statistics.

While many DBMS are specially tailored to specific industry applications

and can only be customized by a programmer, often DBMS users have

the ability to design at least some attributes of the fields or records and

specify how fields, records, and files relate to each other. In companies

or organizations that maintain complex databases, a database designer

or database administrator position is generally created specifically for

this task. Designing databases is also a major activity of computer

consulting services.

Once a database is designed, records are created by performing data

entry, either human or computer-assisted, such as through bar-code

scanning. Records can be added, deleted, or modified instantly, i.e.,

nearly in real time, or, if there are large volumes of records that require

modification, they can by updated, or processed, by a computer

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operating in batch mode at some specified time after multiple computer

users have entered the requests for changes. Such batch-mode data

processing typically takes place after the business day is over in order to

record the day's sales or shipments.

While all databases include records and fields in one form or another,

DBMS vary in how they treat the relationships between records and files.

The two best known categories of DBMS structures or models are flat-

file and relational. Flat-file systems treat the relationship between fields

and records as a two-dimensional table with columns and rows for

records and fields, and they are limited in their ability to analyze data

from more than one file. Some of the simpler flat file programs, usually

called "file managers" instead of DBMS, can only open and analyze

records in one file at a time. Relational DBMS, on the other hand, can

analyze data from multiple files with complete flexibility of relationship

between records of the multiple files. Other types of DBMS models that

can relate data in more than one file but only in restricted relationships

include hierarchical DBMS, which relate records from different files in a

one-way, many-to-one tree structure. In such a relationship, there exists

a number of levels of operation in which each "child" record has only one

"parent," and variables are restricted accordingly. Another type, network

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DBMS, can relate records directionally. The ability to relate records

reduces the redundancy of data and makes it unnecessary to update

multiple records when data in a single related record changes. A typical

scenario of the relationship between data in two files would be the linking

of a record in a purchase order file to the customer file based on a single

unique field, such as a customer identification number. The latest model

is the object-oriented database, in which units of data are treated as

abstract objects. Thus, the operations and functions are not dependent

on the database application. A particular advantage of the object-

oriented database is its ability to create new objects in terms of

previously defined objects. This model is most suited for databases

containing a combination of media, such as text, sound, and pictures. By

the early 1990s, relational DBMS had become the most popular category

for new DBMS purchases among businesses.

Once a database is created, the DBMS can be used to select records

that meet user requirements based on the information contained (or not

contained) in their fields. For example, in using an inventory database,

the user can check the availability of a product that meets certain criteria

—such as style, color, and additional features—each of which are

defined in the fields. A retrieval request may be made for a single,

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specific record or for multiple records. An example of a request for

multiple records in a customer database would be for all those

customers whose invoices are past due. The user would, in this case,

request records in which the difference between today's date and the

date the invoice was recorded being sent is, say, greater than 30 days,

and in which the "date of payment receipt" field is blank.

Different DBMS offer different methods of entering commands or

"queries" to retrieve information. The most common query command

format is Structured Query Language (SQL), in large part because it

allows several users on a network to access a database simultaneously.

Some DBMS offer the choice of query by command, through menus, or

by example forms.

In addition to data retrieval, DBMS allow the user to sort data in the fields

by any criteria. This could involve all records in a database or, more

practically, those that meet specified selection criteria. For example,

records can be selected from a sales database of all salespeople who

sold over a certain total dollar amount, and that list then can be sorted to

rank the salespeople by amount sold.

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Finally, DBMS software allows for generation of various printed or

electronic reports from the selected data. One of the most common

formats of a database report is a table based on a list of sorted records

with selected fields displayed. Data from individual records can also be

automatically merged into templates, or empty fields of specific forms or

attributes. Additionally, mailing labels can be created by printing data

from name and address fields. Some DBMS also incorporate additional

software features, such as spreadsheet, word processing, and

communications functions, permitting further manipulation of information

retrieved from the database.

Databases and DBMS are used on all kinds of computer systems, many

of which permit multiple users to access a database simultaneously. On

mainframe and minicomputer/midrange systems, users access the

database through multiple terminals. DBMS are also increasingly being

used on client-server computer networks of personal computers or

workstations, including over corporate intranets using a Web browser

interface. The database and the DBMS server software reside on one

computer that acts as the server, and other copies of the DBMS software

are on each of the client computers linked to the server. Finally, there

are distributed databases, in which a database is physically stored in two

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or more computers at different locations yet managed by a single DBMS

through copies of the software at each location.

2.2. Foreign Literature

Many firms have adopted the database for promotional purposes

(Williams, 2000) but have not yet fully capitalised on its interactive

marketing capabilities (Rowsom, 1998). Nevertheless, some

practitioners and consultants are realising the potential for integrating a

system with organisational databases. For example, Rowsom (1998, p.

24) noted the potential of the integration of information into database

marketing for electronic commerce but forecast that ‘instituting database

marketing on the Web will be like making the leap from playing checkers

to playing multi-level chess.’ However, comprehensive academic

research about the integration of internet and database marketing is

lacking. There has been recognition in the academic literature about

internet and database marketing separately (for example, Forrest &

Mizerski, 1995; Montgomery, 1999; Hoffman & Novak, 1996), but not

about their integration.

A preliminary framework for this study was developed from the literatures

about the internet and database marketing (Hagel & Singer, 1999;

Peppers, Rogers & Dorf, 1999). This framework has the three usual

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parts of a system: inputs, processes and outputs. That is, inputs of

internet information about customers are processed and converged with

a firm’s customer databases, to produce a series of strategic outputs

such as improved customer relationship management. Consider these

three proposed parts in more detail.

Firstly, the inputs are the customer information gathered from the

internet. Four primary types of customer data are identified in the

literature, namely, descriptive data, transaction history, direct preference

measures and externally derived data (Hagel & Armstrong, 1999; Holtz,

1992). This information contains both active data, or information

provided by the customer with their full knowledge, participation and

often feedback, and passive data or information derived from

observation of the customer’s behaviour that may occur without their

direct knowledge (Gates, 1999; Heinen, 1996). But how these types of

information apply in the integration of internet marketing and database

marketing needs to be discovered. Thus the first research issue is: How

can customer data be gathered passively and actively through the

internet for customer relationship management purposes?

Secondly, the processes integrate information gathered from the internet

with information in the organisation’s database. The literature suggests

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that the information gathered from the internet is processed through

identification, standardisation, de-duplication and consolidation

procedures, and a unique reference number is applied to a customer

irrespective of whether the customer is a business or an individual

(Seybold, 1999; Loney, 1998; Inmon & Hackathorn, 1994). Records are

stored in an organisational marketing data warehouse and updated

automatically through data derivation methods such as cookies and web

form log-ins (St Laurent, 1998; Strader, Lin & Shaw, 1999). But more

details are required for the comprehensive framework sought for this

research. Thus the second research issue is: How can customer data

from the internet be integrated into database marketing processes?

Finally, the strategic outputs are the possible uses of the internet

information that can be ‘mined’ from databases (Peacock, 1998). The

literature suggests that customer data can be used in customer

relationship management, for example, prospecting for new customers

(Hanson, 2000; Campbell, 1997), segmenting customers (Jackson &

Wang, 1994; Nash, 1993), retaining customers (Sterne, 1999; Campbell,

1997), and forging customer loyalty (Forcht & Cochran, 1999). That is,

they are used to build one-to-one, long-term and sustainable customer

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relationships that add value to both the customer and the company

through the use of information technology (Buttle, 2000a; Hamil, 2000a).

Databases are used in all kinds of businesses for all types of functions:

in sales to compile information about clients and potential clients and to

keep track of client correspondence; in accounting to keep track of

accounts payable and receivable; in purchasing to choose suppliers and

their goods and to place orders; in manufacturing to keep track of

supplies of component or raw materials; in shipping and receiving to

keep track of orders and shipments; in marketing to track records of

advertisers and prospective advertising outlets; and in human resource

management to maintain records of employees and match resumes of

applicants to job openings. The same DBMS may be used to manage all

such tasks in the same organization.

Customer databases are especially important to service industries for

maintaining ongoing customer relations. Financial institutions, such

as banks, stock brokerages, and insurance companies, rely on DBMS to

keep track of customers' financial accounts. Utilities, such as telephone

and electric companies, also keep databases of customers, tracking

usage of utility service, varied rates, and billing information. Maintenance

and repair services, such as those repairing office equipment or

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appliances, keep service and repair records for each customer.

Specialized, and often very simple, DBMS are popular for keeping track

of clients or contacts.

For certain brokers or agents, database systems are especially crucial

for selecting the goods or services to be sold. One of the first large-scale

DBMS for business was the Sabre airline reservation system introduced

in 1964. It contains data on the flights and seats of most commercial

airlines, permitting a coordination of reservations. Both airline booking

departments and travel agents depend upon Sabre and other computer

reservations systems, such as Apollo. More recently, the Sabre

database has powered scores of Internet-based travel services that

allow travelers to search for their own itineraries and fares. Travel agents

also use other computer reservation systems to book hotel rooms in

major hotels. Other businesspeople who use databases in their business

include real estate agents, who keep databases of properties for sale

that can be searched by the attributes desired by individual customers.

Car dealers and brokers also use databases for locating the various

makes and models of cars and their accessories. Real estate agency or

car dealer networks may use distributed databases to share information

on the properties or cars each broker has locally.

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Finally, for some companies, the production or management of a

database is their primary business. They conduct their business by

selling access to their databases to other companies or the public. The

types of databases provided by database vendors include literature

retrieval databases (citations and full text of articles or reports), numeric

databases (such as stock quotes), individual credit histories, directories,

maps and other graphics, and employment listings. Some of the better

known text-information database vendors are Dialog, LEXIS-NEXIS,

Dow Jones News/Retrieval, ORBIT/Questel, and Chemical Abstracts

Service. Corporations subscribe to these database services to research

information about their market, competitors, or emerging technologies.

For most subscription databases, the software used by the customer for

searching the databases is not the same as the DBMS used by the

company for creating and updating the database. The software used by

the client only permits retrieval and possibly sorting and printing of the

data, and it typically has an easy-to-use graphical user interface. Such

database software is called "search software." The client may remotely

access the vendor's database through communications software and

a modem or a network connection, especially over the Internet, or the

database vendor may distribute the database with search software on

disk, typically a CD-ROM.

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The fastest-emerging area of the database-management industry

involves the use of parallel database systems to mine data over a server.

This entails utilizing several general-purpose database systems in

parallel to approximate the functions of highly specialized, task- or

industry-specific databases in lieu of going through the steps of

designing a special-purpose, highly focused system that may well be

quickly outmoded by developing technology. In addition, many

researchers have been working toward the perfection of a system that

seamlessly merges the object-oriented and relational models.

Developers are beginning to hit on a solution that incorporates the SQL

search language and the platform-independent Java programming

language. This type of database affords a great deal of the visual

attractiveness and user-friendliness of Internet applications alongside

standard DBMS capabilities.

The depth and quality of a marketer's database are, not surprisingly, the

keys to successful DBM. Specifically, these attributes are important be-

cause

 the data must be detailed enough to identify good leads

 the data must also be accurate so that the intended recipients are

reached

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 the database software must be flexible enough to allow detailed ma-

nipulation and effective maintenance

Customer information must be sufficiently detailed in order for the mar-

keter to make meaningful distinctions between those who are likely to be

most receptive to the marketing and those who would be either unquali-

fied (e.g., can't afford) or uninterested (e.g., no need). Conversely, the

marketer doesn't need to be saddled with storing and updating extrane-

ous data that do not serve any compelling business need. As this sug-

gests, before the database is ever used, the marketer must also be ade-

quately familiar with the market, based on in-house sales history data or

outside market research, to know what demographics or other traits

characterize good sales prospects.

But detail alone can't save an error-ridden database. If mailing ad-

dresses or phone numbers are out of date, the information may be

worthless. There are various tools a marketer might use to update the

data, such as using change of address records, but otherwise out-of-

date records can be dead weight that only cost the marketer money with-

out any promise of returns. (This is not to suggest, however, that there is

no value in maintaining historical data when it is understood as such; this

sort of information can be extremely beneficial in predicting future behav-

iors.) Similarly, if the demographic and other information about potential

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customers is wrong—they really aren't in the right income bracket even

though the database says they are—then DBM also fails because the

marketer is, in essence, contacting people at random.

The software and hardware on which the database is maintained can

also impact DBM's effectiveness. In an age of fast, relatively inexpensive

desktop computers and increasingly sophisticated software for them, this

aspect is not as great of a concern as it might have been in the early

1990s or before. Most off-the-shelf database software can support mod-

erately advanced data management and manipulation; it's harder to gen-

eralize about high-end and proprietary systems, but the best ones offer

substantially more powerful resources—including data mining tools to

help identify and understand meaningful patterns—than does ordinary

retail software. The main systems issues are (1) having adequate data

management tools in the software to finely comb through data and cre-

ate marketing lists based on multiple narrow criteria, and (2) having

enough processing power, particularly in the case of large lists, to run

such database filters in a timely and efficient manner.

Acquiring Data; Finding and maintaining such detailed and accurate data

is the challenge in database marketing. There are two main ways, often

used in combination.

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1. In-house data. Established customer records or other in-house market

data is often the basis for starting DBM. Past customer information

can provide valuable demographics for identifying new customers, as

well as signaling existing customers who may be eligible for additional

sales. This can be the most valuable marketing information of all, as it

is based on actual purchases. Other in-house lists might include peo-

ple who have inquired about products but never purchased, or others

whom the company has marketed to in the past.

2. Commercial vendors. Scores of list vendors provide marketing lists to

businesses for a fee, but quality and usefulness of these vary widely.

Traditional, bare-bones "mailing lists" containing only names and ad-

dresses aren't well suited for database marketing. However, when

more detailed data on potential customers are available commercially,

often the information is maintained more rigorously than a marketer

can do on its own. Commercial vendors usually are also able to main-

tain such data at a lower cost to the marketer.

Choosing which internal and external data to use, then, is of paramount

importance in DBM. Typically, the cheapest route is not the best, be-

cause inexpensive or free data are unlikely to have undergone satisfac-

tory maintenance. An effective database is updated regularly and bad in-

formation is weeded out. Some experts recommend that to be consid-

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ered an effective investment, no more than 4 percent of a database

should be out of date. This can be measured in the number of mailing

pieces returned to the sender, the number of disconnected phone lines,

and so forth.

DBM STRATEGIES

The more a company knows about a customer or likely customer, the

better able it is to attract and hold on to that customer. The requirements

for a successful DBM strategy are a nuanced understanding of the data-

base, as well as a creative marketing person or staff who can generate

and implement ideas that attract customers on a more personal basis

than traditional mass marketing. Since DBM takes time to produce re-

sults, another requirement is long-range persistence and patience.

Even when they have made a commitment to use DBM, businesses of-

ten struggle with defining the strategic rationale for doing so. Some at-

tempt DBM simply because competitors have used it or because they

have a general wish to increase sales. Such vague motivations can lead

to a poorly conceived and executed DBM strategy. To fuel DBM initia-

tives, marketers should have specific objectives driven by market knowl-

edge and business needs. These objectives should determine what

kinds of data are collected and maintained (not too little and not too

much), at what cost, and so forth. To preserve the strategic focus and

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relevance of the DBM initiative, some advice keeping project oversight

closely controlled by the company's sales and marketing departments,

rather than by other areas of the company.

Many companies have been reluctant to invest in DBM because the pay-

off is not immediate and the requirements are demanding. Numerous

studies confirm the fact, however, that the company which shies away

from DBM will eventually lose customers to the competitor that does em-

ploy this strategy. This is especially true in businesses in which competi-

tion is most intense, such as in retail or in nonprofit organizations depen-

dent on private donations.

Database Management, in which the right customer is targeted and re-

mains a loyal customer, is the wave of the future. It is not without contro-

versy. Often a great deal of personal information is required of the cus-

tomer, and the issue of privacy is going to become more important as

more organizations and businesses turn to this method of marketing.

Data obtained by private industry and organizations is unregulated.

Abuses of information have occurred. Surveys conducted in the early

1990s by private research firms such as Lou Harris indicated a strong

aversion on a consumer's part to too great an invasion of privacy. There-

fore, businesses should practice responsible DBM, as how a firm han-

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dles the information it gathers will increasingly determine its future suc-

cess or failure using DBM strategy.

Innovation, an important new application of database marketing methods

is on the Internet, where the data collection and marketing functions can

interact in real time. Innovative marketers have begun collecting data on

potential customers who view their web sites, and, moreover, customiz-

ing the online information or promotions for the particular person viewing

the site based on this information. This is accomplished by uniquely

identifying visitors—often actually their computers—when they first view

the site. For the visitor, the process may involve taking a voluntary sur-

vey or registering to view restricted-access features on the site. Or, more

simply, the site may be configured to merely place an identification

"cookie" on the visitor's computer that can then be read in subsequent

visits. Depending on what information is contained in the cookie and

what the marketer's objectives are, the cookie may be used to track fre-

quency of visits or other information. While this also raises privacy con-

cerns, the promise of DBM on the Internet is the same as it is in all other

forms: the more the marketer knows about its customers, the better it is

able to generate new sales by delivering targeted and relevant marketing

messages to individuals.

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2.3. Conceptual Framework of the Study

INPUT PROCESS OUTPUT

Respondents for
Manual paper-based
system vs. Customer
Database Computer- - Data gathering from Customer
based Survey: surveys Database for
5 IT Experts - Statistical treatment
Rankine
of data
Enterprises
10 Rankine
Enterprises - Assessments of the
Employees respondents
10 Rankine
Customers

FEEDBACK

Diagram 2.1 Conceptual