Eight Steps to Energize Your Marketing Database
Published in the DMA Insider
When you energize your marketing database with these eight proven strategies, its value will increase exponentially, and you’ll fundamentally change the way you view the purpose of your database. A marketing database doesn’t have to be reserved only for marketing anymore, but can be used to define your company’s core business strategy. Here are eight possible outcomes you’ll identify:
- Your greatest business growth opportunity.
- Strategic definition for your distribution channel, sales force
or telesales force.
- Unknown facts about your customers.
- A quantum leap in knowledge and strategy development by qualifying
- Unknown opportunities about your customers and prospective customers
to channel your strategy towards needs-based segmentation.
- Why to implement a spaced-repetition contact strategy.
- Historical benchmarks and objectives using key metrics.
- How to impact your business model.
Whether you are a consumer or business-to-business marketer, these steps are timeless in their ability to impact your business. The dynamics between consumer and b-to-b are often different, but the underlying opportunities are adaptable to each other. Here are eight steps you can undertake today:
Step 1: Conduct Intensive Customer Analysis
Have you ever queried your database for the names of your best customers? Do you know the name of your very best customer? How about your top ten, or top 100 customers? Often, simply knowing the identity of your best customers offers a strong clue about the types of consumers or businesses who are the bread and butter of your business.
How many times has your business needed to generate sales quickly? If you’re like most businesses, there is inevitably a month or season when sales are slow. When you need to generate revenue quickly and reliably, you should look no farther than your very best customers. Prospecting efforts in off-seasons usually fare worse than in peak-season, so it makes great business sense to leverage your best customers with offers that will generate fast sales, and with predictable and reliable cash flow results when you need it most.
So what should you analyze? Here are three points:
- Generate a comprehensive list of your customers. It should include
customer name, location, sales or product volume, customer type (demographic
or psychographic data if you’re a consumer marketer, SIC for
b-to-b), and perhaps another key data point unique to your business.
- Determine your priorities. What is most important for you to know
about your customers? Is it sales dollars or product volume? Location?
Demographic/psychographic data or SIC? Or another variable? Once your
priority is determined, sort the data. For example, if your priority
is by sales dollars, sort your customers from highest to lowest.
- Group your customers. Depending upon the size of your database,
you should divide your customers into groups of quintiles, deciles,
or demi-deciles (or twentiles). Quintiles are five equal groups of
customers, 20% of the customers per group. For example, if you have
1,000 customers, your five groups would each have 200 customers. Deciles
are groups of 10% each. Using the 1,000 customer size example, there
would be ten groups of 100 customers each. And demi-deciles would have
twenty groups of 50 customers each.
No doubt you’ve heard the “old 80/20 rule,” where 20% of your customers generate 80% of your sales. The “old 80/20 rule” has a name. It’s called the Pareto Principle and it’s a good guideline to use. However, among dozens of customer analyses, I’ve concluded I have yet to find exactly 20% of customers representing 80% of sales. With a broad-based consumer client, we learned that 40% of customers represented 60% of sales. While impressive, it didn’t solidly identify what we needed to know. What we did learn, though, was there was indeed some “top-heavy” customers. In this case 3% of the customer base represented 16% of sales.
Business-to-business has an entirely different dynamic. Time after time the “80/20” quotient is really closer to “90/10”; that is, 90% of sales come from just 10% of the customers. In the most extreme b-to-b example, we learned that 96% of sales came from 10% of customers. If this were your business, how would this impact your strategy?
Knowing the average sales volume per customer within each segment (quintile, decile, or demi-decile) will be an eye-opening experience. Consider one b-to-b marketer whose top 10% of customers had an average annual sale which exceeded $375,000. And within this same analysis, we learned the average customer in the bottom 40% of customers contributed sales of less than $1,000. In this case, we realized there was an enormous opportunity to serve these smaller customers differently. Instead of the need for personal sales visits, this group could be served by a well-trained telesales force.
Step 2: Use And Involve Your Sales Or Telesales Force
When your business strategy calls for using sales people, either in person-to-person visits, or calls by telephone, it is essential that you involve them early. Most sales people have independently created their own database or rolodex. That information is of great value to your efforts, so share your vision with them. And don’t expect them to provide you with much data until you have convinced them that contributing to a corporate marketing database will be an asset to them.
From a practical standpoint, sales people should be sent letters, email, or other eye-catching correspondence. It’s best to come from the sales director or business manager. Urge them to send lists of customers, but give back to them more than they gave you such as qualified leads (more about that in Steps 3 and 4), and give it back to them in an easy-to-use format.
Step 3: Profile Who’s Important
Profiling your customer database is an important step toward increasing your knowledge. You have the option of submitting a random sample of your database to any number of information service companies, or going the extra step (and expense) of appending data to your customer database.
Either way, you’ll come out a winner. Profiling is a good first step. It’s relatively inexpensive to have the data run. However, your primary expense may be in the time required to pull apart the volumes of pages and putting them into readable charts and interpretation.
Consumer profiles can literally identify thousands of demographic and psychographic data points, down to telling you if the household spends more than $50 on sweaters, or spends more than average on videos. This knowledge opens up the opportunity for new media choices, or strategic alliances with another marketer who is complementary to your business.
B-to-B profiles can help you identify sales values of your customers, and specifically tell you how many businesses, by name, that are not on your database within a specific SIC. By analyzing your penetration within an SIC, and going a step further and analyzing companies within SIC by sales or employee size, you will have a much deeper understanding of the potential growth of your business.
And of course, with any profile you’ve opened up the possibilities of creating response models, and other models that will make you more profitable.
Step 4: Qualify Customers and Prospective Customers
The expense of qualification often lends itself best in business-to-business companies, but can have application with high-end consumer product sales, too. The range of options for qualification includes:
- One-to-one contact by phone. It’s the most thorough, the most effective, and yes, the most expensive.
- Mail Surveys. You’re limited to information from those who respond, but the volume you generate may be just what you need.
- Inferred Data. By modeling your customer base, you’ll qualify them in an indirect, but usually reliable way.
Importantly, you’ll learn the competitive products your customers or prospective customer buy, the volume they purchase, and why they purchase it. Perhaps the most valuable information you can gain is by asking what product the customer plans to purchase in the future, how much, and when. If you can get answers to this triumvirate of leading questions, you’ll be able to directly sell the benefits of your product to customers who purchase significant volumes, and at the time they’re ready to buy.
Any time you engage in a qualification process, I recommend you start with these headers on two columns: the question you’ll ask in one column, and how you plan to use the information in the other column. After completing your list, you’ll be able to identify the “nice to know” questions from the “essential to your business” questions so you drop the ones less important, keeping your qualification to the point without adding unnecessary expense.
Step 5: Needs-Based Segmentation Strategies
Needs-based strategy is simply this: the customer tells you what they want so you can position, produce and sell your product to the market as they need it, not only as you want to sell it. The segmentation element of this strategy can be masterfully implemented with database marketing.
By knowing who is on your database, profiling them, asking them questions, and learning what they need and why, you will fundamentally change the way you create your marketing programs. In one example, we surveyed several thousand prospective customers, asking what product they used, why, and the volume they planned to use in the future. We divided this universe into two groups: one group served as a control group where we did nothing different, but in the second group, we employed a spaced-repetition contact strategy (see Step 6). After several months of the test group receiving personalized letters and postcards that positioned the product we were selling directly to the needs of the customer, we surveyed both groups again. The results were impressive as you’ll learn in Step 6. This is a simple strategy to use, but you must engage your customer in a dialogue first before you can implement it.
Step 6: Adding Value with a Spaced-Repetition Contact Strategy
Frequent contact, timed to coincide with purchase plans, will produce results. Pulling off a successful spaced-repetition contact strategy requires detailed planning and follow-through. There is an important tool that will make planning your program much easier: a detailed flow chart. A flow chart ensures you leave no stone unturned. If you plan every possible response to a every type of contact, you’ll be prompted to make a phone call later, mail a letter, or drop unresponsive prospects off your list.
The key to this success of this type of planning is that every marketing tactic is included, such as media advertising, public relations, trade shows, Internet traffic, or whatever you do to come in contact with your customers and prospects. Also essential is the timing of your contact.
Another aid that complements your flow chart is a matrix that details the following:
- Market Segment. Good-Better-Best customers or Good-Better-Best
prospects, for example.
- Contact Date. Either stated as a specific date, or number
of days or weeks following a previous contact.
- Message. The message should be focused to the needs of the
customer or prospect.
Offer. One of the great pitfalls of effective database marketing is having a weak offer. Consumer marketers are usually better at identifying a consumer hot button, such as a free gift, discount, or other incentive. Business-to-business marketers who are attempting to generate leads constantly fall into the trap of “for more information call ...” Better: merchandise your “information.” Call it “Eight Proven Strategies To Grow” or make it an “Interactive Process To Calculate Your Own Savings.”
- Components. If you are using direct mail, you’ll need to keep in mind your production restrictions if you are using heavy personalization. Noting the components of your package will keep you from straying into costly production requirements.
In the example referenced in Step 5, where a sequence of specifically spaced letters and postcards were sent to prospects, we went to great lengths to personalize every communication to the customer’s needs. When we called back both groups, we found that the control group had actually purchased what they told us they were going to purchase six months earlier. When we called the test group, we learned that our sales had increased an impressive 51% over the control group. Why? Because the personalized direct mail spoke to their needs.
Step 7: Establish Key Metrics
The past is often the greatest predictor of the future. Databases hold incredible secrets about your past marketing programs. Organizing the top level information in your database, and reviewing it periodically will give you assurance that your business is moving the right direction, or will be an early warning sign of problems ahead.
Ideally, key metrics will enable you to compare statistics on an annual, quarterly, and monthly basis. There are obvious measurements you should chart such as sales and profit. But there are a few hidden bits of data that can lead your decision making. Tracking your marketing expenditures, cost per sale, cost per lead, or conversion levels over time are essential. Charting your response rates and profitability monthly or quarterly are a must. Then develop measurements such as marketing efficiency ratios that permit you to look at the numbers differently, but succinctly.
Understanding your company’s rich sales and marketing history will enable you to better plan your expected results, and predictably tell you when to capitalize on a trend, or pull back when response is down.
Step 8: Analyze the Data to Build a Business Model
The intelligence from your marketing database can profoundly impact your business model. It may indicate changes in your distribution channel. It will reveal strategies that weren’t obvious and give you a blueprint for next year’s marketing program. It will help senior management and ownership of your company look into the crystal ball and imagine the future. Extract a wealth of data, set aside time with key people to discuss what you have, and in a matter of weeks, days, or perhaps a few hours, you may be able to set a course for your business that will take you to a higher level of innovation and profitability. Use this information to energize and establish direction for your business model. Then follow it, and see your profits grow.