A Database for all Reasons
Originally Published November 1998, some progress has been made with CRM and new online sales tools. Back then, I identified the reasons for starting your database. Today those of you that did this and are using it, have most likely grown substantially. I know that my clients that embraced this concept are different companies today, several times larger than they were. Sadly many small businesses did not start a database, or even captured customer in Excel so they could sort and analyze them. It is nice to see how important this recommendation was so many years later, but disappointing that I see so many small businesses in the same place they were then!
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By Ron Burgess - November 1998
The latest developments in marketing technology have been our focus for many years. Many of those developments and trends are driven by technology in some form or another. We have explored customer service, closing the sale, listening to the customer, and building customer loyalty.
These topics certainly don’t seem like hard-core techno-marketing subjects, however in today’s world they really are. Each subject listed above can only be fully engaged in if adequate information is delivered to the company in easily usable ways. This kind of information must be captured using a database.
As businesses see the return on investment possibilities in a wide range of marketing areas, the use of a database will be at the center of this development. Once a database is established with customer and prospect information, it can be used for a wide variety of functions. These include sales management, customer service, promotional development, product research and development, and monitoring the success of all these areas, all core marketing areas. In the near future marketing with a computerized database, will be no more unusual than accounting functions on the computer.
But here is the real story- the efficiency of computerized accounting can cut cost of operations, but the effective use of marketing databases can increase business! Thus the return on investment of these systems can easily pay for themselves.
A prime area of database usages is in direct marketing. In the past direct marketers used various lists to “test” the effectiveness of each. If the list worked (provided a return that was acceptable) then the direct marketer would buy the list again and again until it was “tired.” This system was effective in that it allowed some crude market segmentation versus mailing to every one in town. Now, using new methods of “predictive modeling,” marketers are able to increase these direct mail responses by double and triple. Selecting prospects that are more likely to buy your products, starts with knowing about your own customers, and delivering pertinent data to experts who can find the common elements between them and then clone those characteristics from new lists. (Maintaining these lists requires a good database.)
Richard Cross and Janet Smith, authors of Customer Bonding: Pathway to Lasting Customer Loyalty, state that “Instead of the traditional list-by-list marketing process, we’re seeing the emergence of a new name-by-name process.” This method can significantly reduce the costs and time involved in developing new prospect lists for direct marketing and telemarketing. These methods are being employed by Staples, Inc. In an article by Cross and Smith, in Marketing Tools (June), Steve August, of Staples states that “Modeling proved effective in reducing mailing waste and increasing response, even with lists that had previously not performed well. They now have the advantage of listing response by extracting only that name shat score in the best performing groups of the list.
Large companies have often been able to employ advanced marketing methods to achieve better results than smaller companies.. Now however, many of these new technologies are with in reach of medium and even small businesses. Using existing customer data, several companies can now provide additional data (data appending), or predictive modeling for relatively small businesses. We recently bought a series of demographic data for a small dairy operation in Colorado for 16,000 existing customers. The cost was just over $900. In return the dairy can now determine the ages, number of children, seniors, and cars in each household, by address for their customers. While they had been servicing these customers for 25 years, they could only guess at who was really in each house they delivered to milk to each morning at 4:00a.m.. Now demand can be determined by route based on family size; because they know which families will have kids going to college in a few years.
In addition, using a service by Metromail, the most profitable customer profiles can be determined and matched with non-customers on existing routes. These families can be specifically targeted with direct mail or door to door introduction. (Their current method is to simply walk to the door and introduce the company whether the household has one or seven people in it.) The payoff will be realized in several areas; more efficient sales calls, more efficient truck loading, and the ability to build proforma sales volume for new route building.
The internet is also becoming a way to find data. A company called Acxiom just announced a new Internet service that uses unique access keys to match up customer files with enhancement data from the firm’s multi-source database. The system allows direct access over the Internet (with appropriate security measures and company screening). This new type of product holds promise for smaller companies that can’t afford full time data analysts.
While the future of database marketing may look a little like the Brave New World, and privacy issues will undoubtedly be hotly debated for some time, the practical uses of matching products and services with only those who may have an interest also promises to reduce waste (and trees) while delivering more pertinent messages to consumers and businesses. Messages that will be less likely to be considered “junk.”
The message is clear from all the marketing periodicals, business schools and practical knowledge, knowing more about customers can increase bonds with current customers and build new business. This can only be accomplished with a database. If you haven’t started to build yours yet, it’s time to start learning more about them You will see high returns in multiple marketing areas.