Nuts & Bolts: Database
Building a database is easy; however, making money with a database is challenging, according to Arthur Middleton Hughes, vice president and solutions architect for KnowledgeBase Marketing. At the DMA07 Conference & Exhibition held in Chicago this past October, Hughes identified five common mistakes that cause databases to fail.
1. Diving in without a marketing strategy. Hughes says developing a successful marketing strategy is a process that includes four steps: 1) Collect data on your customer’s purchases, demographics and lifestyle; 2) build a database that permits ad-hoc analysis; 3) construct a lifetime value table; and 4) determine what motivates your customers.
When creating a database, marketers should always ask, “What would I want to be on this database? What’s in it for me?” If you can’t come up with a good answer, the database will fail, Hughes cautions.
2. Focusing on price instead of service. Database marketing builds loyalty, discounts do not. Hughes advises marketers use the database to provide dialogue, recognition and service to override price points.
For example, rather than cents-off coupons, Kraft Crystal Light sent fitness-themed newsletters to its club members and created a catalog to sell merchandise bearing the Crystal Light emblem. According to Hughes, the program succeeded because consumers prefer to read information about fitness instead of browsing through product discounts.
3. Failing to test against a control. Because database marketing is accountable, everything you do can be measured. However, marketers need to set up control groups that use key measurements such as response rates, ROI, profits and lifetime value.
For example, Western Union sent a preferred customer card to everyone who had used its service more than three times. The program worked well initially. However, after two years the company was unsure if it still was boosting profits. Without a control group, profits could not be verified.
4. Failing to link the database to the Web. Web personalization requires database information such as purchases, preferences and contact names that customer service reps need when they speak with customers over the phone.
5. Building your database in-house. According to Hughes, building your database in-house will take much longer and cost much more than outsourcing the project. There are scores of vendors with experience in building marketing databases.