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Thursday, May 15, 2008

A Marketing Database-Your Business' Central Nervous System

In this day Web 2.0 of blogging, websites, search engine marketing, and You Tube, we lose site of the most important fact in marketing. Each of these vehicles represent different contact points of your business' prospects and customers. The "central nervous system" of all this information was (and still is) a "marketing database".

The late Bob Stone in his book, "Successful Direct Marketing Methods, 7th Ed (co authored by Ron Jacobs), defined direct marketing as follows:


"Direct Marketing is the interactive use of advertising media, to stimulate an (immediate) behavior modification in such a way that this behavior can be tracked, recorded, analyzed, and stored on a database for future retrieval and use."

The database, and I will refer to it as a "marketing database", is a central part of direct marketing. Without a means of collecting all the information into a logical and meaningful order, your marketing will fail because you lose the ability to track and analyze each campaign's effectiveness and ROI.

What is a database? It is a collection of information stored on a computer. A "marketing database" is more than a name and address of an individual or company. It is a collection of customer and prospect information from all contact points. Contact points include in part:
  • Search Engine Marketing visitors to your site (that left some contact information)
  • Inbound telephone
  • Direct Mail Responses
  • Sales orders-on or off line
  • Prospects: website visitors, catalog requests, BRC's responses, post cards for additional information, subscribers, past customers etc.
  • Responses from Infomercials
A marketing database collects and organizes this information and has at least the following pieces of information:
  • Name
  • Address
  • Telephone number
  • Source of customer or lead
  • Email address
  • Ongoing sales information related to each contact/purchase-(date of sale, sale amount, number of purchases, skus purchased)
  • A unique identifier for each record on the database
  • Responses (and their key codes identifying the specific campaign and media) from all campaigns linked back to the specific recipient.
Having this information, you can begin to develop multiple initiatives. They are designed around the data collected to improve marketing initiatives, and identify historical customer value to your organization. These are not mutually exclusive. The more analysis you perform improves future marketing campaigns. These initiatives fall into two broad categories:
  • List segmentation for marketing campaigns
  • Customer analysis of data
List Segmentation
  • Segmentation by Sales -conduct an analysis by RFM-Recency, Frequency and Monetary variables. These are three metrics found on any transactional database. Having this kind of analysis will identify the old "80/20" rule. 80 per cent of your sales come from 20 percent of your customers. Identifying who they are and having the ability of scientifically selecting them saves a lot of wasted advertising dollars.
  • Select by trigger event-maintain and update RFM information on each customer. Evaluate the change in behavior month-to-month. If there is a decrease at a set amount, say 10%, pro-actively create marketing programs to change the customer's behavior.
  • Segment by Communication Channel response information to identify best customer or channels of communication. For example, you can evaluate ROI by channel. You might find that a two step lead generation and telephone follow-up produces a higher ROI than mailing a large catalog for an immediate sale.
Data Analysis
  • Use analytical information to pro actively trigger marketing campaigns. For example, update your RFM scores. Based on the customer's historic value, create a VIP club with sliding scale of rewards. The more valuable customers receive greater rewards.
  • Overlay demographic or firmagraphic information onto your marketing database. Identify customer penetration by demographic or firmagraphic criteria. When I worked at a b-t-b catalog marketing company, we overlayed SIC code and employee size data. I found that there were significant pockets of customers in SIC codes other that our core groups. Based on this profiling, I looked for advertising vehicles reaching the uncovered SIC's.
  • For more sophisticate analytical procedures, conduct a model to predict behavior. You will need a specialist for this who understands statistics and data. The beauty of this procedure is that you are able to predict behavior and identify the likelihood with a certain degree of probability that action will take place. You can select only those customers or prospects most likely to exhibit that behavior. This saves you a lot of money because your advertising dollars are spent on those people most likely interested in your service.
The size of your customer base and your technology budget will determine your database software needs. For many small companies, a MS Access database is sufficient. You have to know database technology to properly set it up. Access databases can easily accommodate several hundred thousand records. If you do not know database design, you can contact us for a consultation.

If you database is larger, you probably would go onto some server such as SQL or even Oracle. You would need technical experts who would maintain this data for you. There are also online databases, but I do not know or recommend any company.

In summary, you can lose site of the key components needed for marketing in Web 2.0. You need a professionally designed website, email communication, direct mail AND a database to maintain in a logical order all of this valuable marketing information. Without a database to analyze the data, you could be spending a lot of advertising unwisely.
By Eric B. Mohr/EBM Direct Marketing Services LLC ©

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