Database marketing is essentially a form of market segmentation. It uses information in databases to try to understand how groups of people can best be appealed to through marketing.
This can help a company in two main ways. First, it can help the company to find the people who are most likely to consume its products. It can mine the databases to separate, in a very precise way, the people who are likely to buy from those who are less likely to buy. This helps the firm to reach more potential customers. Second, it cuts down on the money spent on marketing, thus making the firm's marketing efforts more efficient. This happens because the firm does not waste money reaching out to people unlikely to buy. It also happens because the firm can create different appeals to different sorts of people, making those appeals more likely to work.
In these ways, database marketing helps a firm reach more customers at a lower cost.