Marketing Tips - Building a Marketing Database

BMA WHITE PAPER

Sometimes database marketing produces astounding results. Other times, despite the best efforts of dedicated and intelligent people, it falls short of expectations. From those who have had the latter experience, what could they have done differently? Where does the real world expose kinks not covered in theories and models?

Sometimes database marketing produces astounding results. Other times, despite the best efforts of dedicated and intelligent people, it falls short of expectations. From those who have had the latter experience, what could they have done differently? Where does the real world expose kinks not covered in theories and models?

At Hunter Business Direct we revisited 10 years' worth of database marketing histories from fifty companies. We talked with these companies at length, accumulating masses of hard data and informed speculation. We then re-validated our findings and searched for common denominators. What we discovered is the following twelve key principles for successful database marketing:

• Understand that successful database marketing is not a technology issue. 
• Draw a picture of a process diagram of how the marketing database needs to work.
• Focus on any output that will be used outside your direct control.
• Develop an effective customer contact plan.
• Do not equate direct marketing with direct mail or telemarketing 
• Build the database manually first, before you automate it. 
• Collect only data that will absolutely be used in the next twelve months.
• Be rigid, not flexible. 
• Use a simple but proven software package. 
• Centralize all data entry and validate outside input files.
• Build and refresh your database on line with telemarketing.
• Build a prototype, not a pilot.

If you understand and honor these principles, your program is far more likely to be successful. If you are already engaged in database marketing, but your own program is not producing the desired results, you may wish to realign it using the twelve proven principles as your yardstick.

I. Understand that successful database marketing is not a technology issue.

Too often, people see the secret of successful database marketing as buying a lot of powerful "gee-whiz" computer equipment then trying to squeeze their way of doing business into the technology. Dialog management is a recently recognized core competency that many of us are striving to develop. We are asking no less of our database than that it become the mind of our organization, a repository of corporate memory, and the touchstone for individual and corporate learning. In essence, we want it to enable us to capture, at the individual event level, the ongoing stream of dialogue with our customers and prospects. We can then use it to enhance our effectiveness across the various functional areas of our enterprise.

This is not a technology issue. It is about a new way of doing business that includes establishing processes and measurements to ensure we then act on information acquired at the contact level. The real change centers on systems, processes and corporate culture, not technology, which is merely an enabler.

Unless business strategy informs and drives what you do with the technology and how, you are spinning your wheels. The starting point is determining what you need to accomplish, what information you need to do it, and how you will need to change your corporate culture to make happen. Only then should you look for the technology to give you an assist. Anything less is the equivalent of buying an expensive toy without any operating instructions.

II. Draw a picture or process diagram of how the marketing database needs to work.

The first key is to work backwards: Understand how you are going to use the data you acquire. This means identifying the applications the database will support over the next twelve months.

Common examples are: 

 

• launching a new product 
• strengthening your lead management process 
• assisting in cross-selling or increasing product penetration
• supporting your dealers or distributors
• gathering information about competitors
• managing major accounts
• conducting customer or customer satisfaction research

Then, determine what you need to know to plan an effective campaign for each application, as well as how, where and by whom this information can be acquired. This forms the content of your process diagram. The concept is to integrate information into the overall sales process before you try to make the technical decisions necessary to link the data you retrieve to functional input and output formats. It is essential that the business drive the database and not the other way around.

A picture, it is said, is worth a thousand words. This is never more apparent than when you are trying to get your arms around the database marketing process for your company. Take the time to prepare a flow chart that shows you precisely the movement of information into and out of the database. Such an all-on-one-page presentation will often show you where potential problems may hide. This lets you uncover them and implement solutions while you can still change things with pencil and eraser, not an army of programmers.

It is not necessary that you understand how it will all be accomplished to develop such a map. Still, you do need a good grasp of how people (and which people, by job title) in your organization currently gather, process and use customer information. Where are the gaps in the process? What information would you like to have easy access to, but do not? (Perhaps because bits of it reside in the all-too-fallible memories of dozens of individuals, or on scribbled notes stuck away in countless file folders.) How often should that information be refreshed, and by whom? How will you be able to access it?

III. Focus on any output which will be used outside of your direct control.

Even the best, most insightful information is only as valuable as the uses to which it is put. Having your end goals clearly in mind is therefore critical, at the outset, and to gather ideas from the people who will need to be involved from other departments. It is a matter of managing expectations, getting buy-in, and making sure the data you intend to acquire will, indeed, be a good fit with the operations of other areas in your company. Hidden inside these comments is the need to educate those who work with the data on how to synthesize data and how to use it with sensitivity. Anchoring expectations about relationship and dialogue management will allow your users to create value and provide relevance in every contact they make.

Free-form comments, for instance, can refresh a contact person's memory prior to each new contact with a given client. Or, perhaps, help a marketing manager discover which hot buttons are at the front of customers' minds these days. With practice, it is relatively easy, when you are on the phone with a client, to take notes on the conversation within a "comments" section on the computer. Then at any future point, you and others can do a word search for any key work or phrase that may appear in the comments.

Do not limit your thinking to sales and marketing staffs, in regard to either input or output. Consider, as well, the applications such key information could have in such areas as product development, research and development, literature fulfillment, logistics, or customer service.

IV. Develop an effective customer contact plan.

It is imperative that your plan enables you to capture all customer contact information to help manage your customer relationships. Research shows that good relationship management correlates directly with building a base of loyal customers. And customer loyalty, in turn, is the single most powerful predictor of bottom-line profitability. The primary issue is the integration of all contact information across the enterprise to ensure that the right message is being delivered to the right person via the right medium at the right time. You must also take care that the investment made is appropriate and proportionate to the level of commitment/opportunity.

Before you chalk this off as too self-evident to require repeating, consider that it was not always so. As recently as the late '80's, a group of organizational design specialists from Harvard Business School researched more than 750 companies to generate greater profits and customer loyalty. They found that the vision, values and energy of the leadership team are foundational to an empowered learning organization model. However, contrary to expectations, they could find no direct correlation between any specific corporate leadership style and either customer loyalty or profitability. The did, however, discover other critical linkages. Among these:

Customer loyalty (measured in such quantifiable terms as recency, frequency and amount of purchases), product penetration and referrals of new customers all drive revenue growth and profitability.

Customer satisfaction is, of course, a prerequisite to customer loyalty. But in its softer qualitative forms (as measured by traditional customer surveys, for instance), it is no guarantee of such loyalty especially if price competition heats up.

Except for clear market leaders, the only reliable correlations found between loyalty and customer satisfaction occur when the latter is defined according to the quantitative behaviors above.

There is a direct, two-way linkage between customer loyalty and employee satisfaction; each drives the other. In other words, satisfied employees are critical to achieving the external service values that build customer loyalty. And working with loyal customers greatly enhances both satisfaction and loyalty quotients for employees. Employee satisfaction is highest when employees are empowered to make decisions, equipped with the right tools for serving their customers, and recognized/rewarded for success.

Customer loyalty is highest when there are strong linkages between a company's values proposition, external service values, and core competencies (i.e., when your business plan builds on your strengths, accurately reflected in both communications and offerings).

Also critical to customer loyalty is a direct feedback loop linking customers and prospects to an internal person able to handle their issues.

Consider these findings in light of how you can use your marketing database as a management tool. Maintaining the right kind of customer contacts is key to keeping the momentum going for the whole upward spiral of satisfaction, loyalty, and profitability. By tracking and monitoring customer contacts, you will have an early warning system to identify the earliest signs of deteriorating performance, and be able to take corrective action before too much damage is done.

Your contact plan needs to support all the applications you have previously defined. It should also identify and document, with a high level of clarity, how you are going to get the data you need to implement your marketing program for the next twelve months. It is the road map for:

• sourcing and populating your database
• designing your selects
• designing the vehicles for delivery of information

In short, a disciplined contact plan is the first step toward assuring ready access to all the information you need for informed decision-making.

V. Do not equate direct marketing with direct mail or telemarketing

Curiously, many programs have gone astray because they were too limited in vision. Direct marketing is not a synonym for direct mail or telemarketing. Rather, it is integration of marketing across all contact media, including all costs incurred in obtaining the sale. Building a cost-justified integrated marketing model (database) lets you link these costs together.

A good contact-capture plan is also critical to wise resource allocation. A key component of effective database marketing is its ability to track costs as it synchronizes and organizes all these contacts. This, in turn, is critical to measuring the impact of your program. The economic value of any single activity, for instance a mailing, cannot be measured in isolation. It must be linked to the higher-cost contact medium it supports such as a field sales call, as well as to the lower-cost contact media that support it such as trade show inquiry generators.

For example, say that Mailer A generates a 3 percent inquiry response, while a like quantity of Mailer B brings in 10 percent, at very similar cost. Before database marketing, these are the only measurements available. The logical conclusion: let us have more like B, and no more like A. But further suppose that both A and B ultimately resulted in the same dollar sales volume, since A's message more effectively encouraged self-selection by responders. But for B, the cost of follow-up sales calls was more than three times higher than for A. Other things being equal, such information is far more insightful in your assessment of relative value.

VI. Build the database manually first, before you automate it.

Unless you begin by using a paper-based system to think through such questions as what to collect, from whom, and what to report, to whom, you may find it far more difficult to fine-tune your program further down the line. It is much easier to spot gaps and make changes while you can still see the picture as a whole, spread out on your desk.

 

VII. Collect only data that will absolutely be used in the next twelve months.

"Snapshots in time" have a very short shelf life these days, as five-year business plans are often revisited a dozen times or more before they expire. If you are working from outdated data, expect less optimum results.

Instead, stick to defining and acquiring the information you absolutely, positively must have to run and measure marketing campaigns within the next year. Then make sure you use the information you have gathered. It is the best-proven way to continually breathe new life into your database.

VIII. Be rigid, not flexible.

It sounds contrary to everything you have ever been told. Flexibility is supposed to be a good thing--the sine qua non for creativity, innovation, out-of-the-box thinking, and all other good things. Maybe so, in some aspects of your business life, but not here. Success is not defined by "being able to select any information." Success is achieved by actually using the data and creating relevance and value at every point of contact with our customers and prospects.

An inherent trap is lurking in the very fact that the computer lets you capture and retrieve an inordinate amount of information. Without strict, consistent guidelines, the temptation is great for people to throw in everything but the kitchen sink. What you end up with is a junk pile, especially if the information is not kept fresh. The more information there is to store, the harder it is to use it before its freshness date expires.

IX. Use a simple but proven software package.

Costs of database marketing software can range from $300 per person on your network to over $2,500 per person. It is significant to note that the primary difference among the different price levels has more to do with the sheer volume of workstations and of data each can support, not in the sophistication of the functions available.

Most contemporary software packages, at any price level, have more functional complexity than you will ever have occasion to use. If your needs should change in the future, there are often add-ons you can buy to expand functionality. The question is not how vast their array of functions is, but how good a job they do in handling the specific tasks you require.

That is why it is content, not format, that you (or your consultants) need to understand before you even begin to shop for a system or program. This, in turn, demands a good grasp of the basics of managing information as you envision it in your company. It also means thinking through your needs, which will allow you to clearly define your functional requirements.

• How many customizable fields will I require for each individual within a customer enterprise (beyond name, address and phone)?
• How difficult will it be to train users within my business to update customer information routinely? 
• Are the program's reporting functions sufficiently flexible and customizable to give me the information I will need in a format that makes interpretation easy?

Input format is important as well. "Garbage-in/garbage-out" is more than just an idle phrase. It means everything in the world of database marketing. The computer is very unforgiving of the user who types in "Paula C. Jones" when it has been programmed to expect "Jones, Paula C." Unless you define your input parameters with great specificity, and uncompromising rigidity, a good share of the data you have so assiduously entered will be nowhere to be found when you need it.

If you have a MIS department, these are the kinds of technical questions with which they can help you. But only marketing professionals can formulate the questions to begin with, because only you fully understand how you will use the information.

MIS people are in their field because they are fascinated with computers and all the amazing things they can do. They are likely to divert your attention to a host of peripheral functions, such as ability to link your database to your Web site; to send out e-mail thank you notes automatically; to send names to telemarketing; or to trigger a paging device. Some of these may, indeed, be nice to have (if you actually use them), and could save clerical time. But they are hardly key to your primary goal of managing marketing information. Be careful not to get caught  up with the bells and whistles--stick to the nuts and bolts.

It may help to think of each enterprise with which you do business as occupying a three-dimensional grid--rather like a giant Rubik's Cube. Understand that the first goal of database marketing should be maximum penetration of existing loyal accounts, which represent your best potential customers. Only after you have a process in place to mine this mother lode thoroughly should you be looking for other, similar enterprises to tackle.

Picture the various functional titles, applications served, or other need-related descriptors for each decision-maker and influencer you need to reach within an account to sell your product. Sales managers, for instance, are likely to have similar functional needs, regardless of where they happen to be doing business within a large enterprise. If your product or service works for one of them, chances are it could be a fit for their counterparts elsewhere in the organization, as well.

Then, picture the various activity levels in your sales process---ranging from trade show prospecting, for instance, to consummating the sale.

Finally, picture the various "businesses" (e.g., departments, divisions) that comprise the umbrella organization.

In other words, the database we are describing supports a four-level architecture: by individual, by functional title or application served, by street address, and by enterprise. The database also supports tracking the relationship cycle from the point at which an individual becomes a prospect through inquiries and trial purchasing to becoming a secure, highly satisfied, core customer.

This model and the database architecture it represents support many complex-selling models. Because the focus of your relationship marketing database will be on the individual, each such mini-block is occupied by a specific buyer or buying influence. You will want to be able to track the key buying behaviors, needs and key influencers associated with each, as you learn them. This kind of information lets you analyze how your most successful efforts might be extrapolated to reach others who reside on the same "street" within the mega-cube that make up the enterprise.

In other words, we map individuals into buyer groups with the same economic values, then map them into street addresses, and into accounts.

A good software program will let you consider these "streets" in any of the three dimensions. You can slice or dice the enterprise cube in a number of different ways to get information. For instance: 

• How many individuals in any one "business" within this enterprise have asked us for a quote? What functional areas do they fall into? 
• How many engineering managers throughout the enterprise have asked us for literature? 
•  In which functional areas do we have the greatest product penetration (e.g., customers who order at least X different products from our line)?

With older software programs, you may need to make these inquiries one at a time. But most of today's versions speed the process by allowing you to ask a string of questions interactively, via point-and-click queries right on the screen. This kind of information, instantaneously available, can help you develop strategies as to which specific people to target throughout a given enterprise, as well as how to get their attention and turn them into buyers.

Within each "street address," you may want to be able to customize fields to fit your business needs (or theirs). For instance, you may want to track not just that they asked for literature, but which ad or direct mail piece, and which message, sparked the inquiry. When you lose a customer, why have they defected ? Which salespeople have been most successful with which communications techniques ? And so on. Be aware that not all software packages are adequate for such customization.

X. Centralize all data entry and validate outside input files.

It is tempting to invite everybody with customer contact opportunities and a computer to input information for this intriguing new process. After all, isn't it better? What if whoever answers the phone, should gain a nugget of really valuable customer information ?

 Don't do it. Lack of discipline in data entry destroys access to and integrity of the data. Many novice database marketers have learned, to their chagrin, just what a mess can ensue if you have 243 people attempting to input data. Other than the free-form comments field discussed prior, you are far safer assigning a few carefully trained people to the input task. By all means encourage all to pass on information to them---preferably via a form designed specifically for that purpose. But if you want to make sure the information is retrievable, centralize the input function. And assign members of this team to double-check with your primary source, your customers, to confirm any survey (or other) information you have obtained from secondary outside sources.

 

XI. Build and refresh your database on line with telemarketing.

In the integrated marketing model the highest contact frequency with your customers and prospects comes from your telemarketers. These are the people who get real-time information that they then can share across the enterprise.

Let us think about how it really works: your telemarketers are on the phone with customers and prospects on a regular basis, anyway---which makes them a great resource for updating the information bank. Has anything relevant to your database changed at the client company ? Are the names you have listed still there, in the same positions ? Aren't there questions that you as the head of marketing and sales want or need answered ? Here is your opportunity to ask market intelligence and customer satisfaction questions and identify problems. Carefully maintained and refreshed, your database becomes an efficient engine for sending out printed information.

XII. Build a prototype---not a pilot

This may sound like a purely semantic distinction, but it really reflects a particular mindset. Experience suggests that prototypes encounter fewer political barriers inside almost every organization. They can have an important impact in setting appropriate internal expectations for your program.

A pilot program is often perceived as a pass/fail exercise: if it is going to work at all, it must work the way it does now. If others see what you are doing as cast in concrete, you have essentially boxed yourself in to a process which will almost inevitably call for changes, based on what you learn on the way. When that happens, it is all too likely that others will consider the experiment as a failure.

On the other hand, people expect a prototype to be work in progress. Which is just how you want it to be perceived. Any learning, thriving organization is in a constant state of change. The more you learn about how to apply your database, the more you, and the organization, are likely to see the value of further additions and changes to it. And the more these modifications are focused on providing value to the customer, the greater the ultimate value to you and your organization.

About the Author:

Nicholas Poulos is Vice President Consulting for Hunter Business Direct, a business consulting firm that helps companies transform their sales and marketing operations to focus on building sustainable customer relationships. Located in Milwaukee, WI, they can be reached at 414-332-8050.