Why Databases Fail

Database marketing only works if the customer benefits by it, according to Arthur Middleton Hughes, vice president/solutions architect for Richardson, TX-based marketing services firm KnowledgeBase Marketing. Many companies keep databases on file, but never use them.

“The important thing about a database is using it to make money,” Hughes says. "Building a database is easy, but making money with a database is hard.”
The lack of a marketing strategy is a major culprit in why databases fail, Hughes says. Basic strategy dictates that you put yourself in the customer’s shoes and ask, “Why would I want to be on this database? What’s in it for me?” If you can’t come up with a good answer, he says, the database will fail.

A common mistake is that companies focus on price instead of service when conducting database-marketing programs. “Database marketing builds loyalty,” Hughes says. “Discounts do not build loyalty. Do not use the database to provide discounts. Use the database to provide dialogue, recognition and service.”
Another problem is the failure to use tests and controls. Everything can be measured in database marketing, but companies must set up control groups that do not receive new communications. Some key measurements to test are response rates, return on investment, profits, and lifetime value.

Also most catalogers need to make better use of the Internet to gather and track customer data, he notes. “The Web is really the greatest thing to happen to database marketing,” Hughes says. Also, he said customer service workers should have information on customers when they talk to them on the phone. Company websites should have this information when they receive customers as visitors.

--- This article was printed in a Jan. 2005 issue of List and Data Strategies for Multichannel Merchant.