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12 Essential Database Marketing Techniques
By Arthur Middleton Hughes
In this two-part series, well-known database
marketer Arthur Middleton Hughes, shares his top 12
essential database marketing techniques.
We have learned a great deal from database marketing
in the last two decades. The following is a list of
the 12 essential techniques used in database
marketing. Anyone who works in marketing today has
to be familiar with and be able to use all of these
methods. Test your knowledge with this list.
1) LTV. Customer Lifetime Value can be calculated in
any industry, business to business or business to
consumer. It is used to direct marketing strategy.
In the early days of database marketing few knew how
to calculate it or how to use it. Today it is widely
practiced. It is powerful and it works.
2) RFM (Recency, Frequency, Monetary Analysis) is a
highly successful way of predicting which customers
will respond to promotions. It has been around for
fifty years, but even today many marketers do not
understand it or use it properly. It is a versatile
tool that has helped to make database marketing
successful.
3) Customer Communications. Personalized customer
communications, based on data in a database, can be
shown (using tests and controls) to increase
customer retention, loyalty, cross sales, up sales
and referrals. They are effective and they work.
They are the principal reason why you build a
marketing database.
4) Appended Data. It is possible today to append
data to any name and address file to learn age,
income, home value, home ownership, presence of
children, length of residence, and about forty other
valuable pieces of information about any household.
This information can be used to create customer
segments, and guide strategy designed to create
powerful customer communications. Similar
information can be appended to business to business
files: SIC code, number of employees and annual
sales.
5) Predictive Models. Using appended demographic and
behavioral data, it is possible to create models
that predict, accurately, which customers are most
likely to defect, and which customers are most
likely to respond to new initiatives. Modeling,
combined with customer communications, can be very
powerful technique that can increase response and
reduce your attrition rate.
6) Relational Databases. Putting customer databases
in a relational form makes it possible to store an
unlimited amount of information about any customer
or prospect, and retrieve it in an instant in a
hundred different ways. Relational databases are
essential to modern database marketing. Marketers
need to understand the principles involved.
7) Caller ID. Set up originally as a call routing
device, Caller ID linked to a customer marketing
database permits customer service to get a
customer’s complete record up on the screen before
taking a call. As a result, the CSR can speak to the
customer as if she knew her, bonding with her and
building close rapport. This helps deliver on the
promise of database marketing.
8) Websites. The web has revolutionized database
marketing. A modern website, with cookies can do
almost everything that a live operator can do, and
much more, showing and enabling customers to print
pictures of the product, maps, instructions,
background information and details. Web sites are
not wonderful at selling. They are a tremendous
research tool and customer bonding and ordering
tool. No database marketer can be really successful
without a personalized website with cookies.
9) Email. Despite the SPAM, emails have emerged as a
powerful database marketing tool. The ability to
contact customers immediately “Your product was
shipped today. Here is the tracking number…” makes
for vastly improved customer relationships leading
to retention and increased sales.
10) Tests and Controls. Since 1980 marketers were
sending out direct mail, and measuring the response
to each campaign. Today, we can use our database to
measure much more. Setting aside customers in a
control group, we can measure with pin point
accuracy the short and long term effect of any
marketing initiative.
11) Loyalty Programs. Most customers are delighted
to participate in well designed loyalty programs.
Airlines have been outstandingly successful in these
programs. Their use has spread to supermarkets,
hotels, retail stores, and a variety of industries.
They are part of the mix of retention building
services that database marketing has made possible.
12) Analytical Software. It used to be that after a
campaign, you got canned printed reports showing
what happened. Today, marketers have very
sophisticated analytical software linked to their
database so that each analyst can do any type of
standard or ad hoc report before, during and after a
campaign, with the results printed on his PC
printer. We have “hands on” marketing which has made
database marketing very powerful.
---- Arthur Middleton Hughes is vice
president/solutions architect at KnowledgeBase
Marketing (www.kbm1.com). He is the author of The
Customer Loyalty Solution (McGraw Hill 2003).
Contact Arthur at Arthur.hughes@kbm1.com or at (954)
767-4558.
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