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Operational vs. Marketing Databases
By Arthur Middleton Hughes
Those new to database marketing often have trouble
distinguishing a marketing database from an
operational database. What is the difference and why
it is important?
An operational database is one that is used to take
orders and fulfill them. It can be a catalog
fulfillment system, or something connected to a
Point of Sale system in retail stores. It keeps
track of inventory and payments. It takes credit
cards. It is run by accountants, since it must
balance to the penny.
It supports the IRS tax filings and regulations. It
is managed by IT for the finance and operations
groups in the company. It is seldom outsourced.
Records are seldom if ever deleted. It is based on
accounts and transactions. Few businesses can run
successfully without an operational database.
A marketing database is based on customers. It keeps
track of each customer and what that customer has
purchased, the communications sent to the customer,
and the responses back from her, including survey
results, complaints, etc. The marketing is created
for the marketing department, and is usually
outsourced. It is used to build relationships with
customers, for cross sales, up sales, reactivations
and new acquisitions.
It is usually in relational format so that all of a
customer’s transactions can be viewed. Demographic
data is often appended to it, and computed fields
added: lifetime value, RFM, cumulative annual sales
and transactions, and the results of campaigns. You
often run National Change of Address on the
database. You consolidate the duplicates when you
find them.
With a marketing database, the marketing department
develops campaigns designed to build customer
loyalty or increase sales. The customers are divided
into segments based on behavior (frequent buyers) or
demographics (seniors versus young marrieds, versus
college students).
Campaigns are created for different segments, with
responses put into the database record so you can
see the return on investment from each campaign.
Lifetime value is used to predict the value of each
customer. Models are used to predict attrition. You
cannot successfully run a cell phone, long distance
phone company, or credit card company without a
marketing database. Marketing databases are used by
banks, insurance companies, airlines, hotels and
most of the Fortune 1000.
When the marketing department in any company decides
that it needs a marketing database, it will usually
let the IT department know of it. IT, typically,
will say either that “Well, we can build you one. No
problem.” Or “Why can’t you just modify the
operational database that we already have to
accomplish your mission?” Both answers are wrong and
dangerous for marketing.
The reason you cannot make an operational database
do the work of a marketing database is that the
structure (based on accounts) and the governance
(financial and operations) are inconsistent with
customers and marketing. The marketing folks want to
create segments, append data, compute LTV, determine
next best product for each customer, post responses
and survey results which are not transactions, and
use the database to measure campaigns which means
storing promotion history.
IT usually cannot build a marketing database in
house. The reason is that none of the usual IT
software works. Marketing databases use new software
that must be purchased. Staff has to be trained to
use it. You have to have software that corrects the
addresses, accomplishes duplicate consolidation,
creates segments, and permits marketers to create
campaigns and do back end analysis.
Marketers want to have the database available to
them on their PC screens so that they can view
records and run counts and campaigns. You don’t do
that with an operational database. The marketing
database must be built in relational format on a
server. In an operational database, the goal is to
create a standard format that will run for months
without modification. A marketing database format
will be constantly changed as the department creates
new campaigns, surveys, promotions, and segments,
and adds demographic information such as age,
income, home value, length of residence, etc.
If the marketing department lets IT build the
marketing database for them, they can kiss their
dynamic customer relations building programs
goodbye. For one reason, operational concerns always
take priority over marketing. Which is more
important: getting the bills out and maintaining
inventory, or sending out some marketing promotion?
You know the answer to that. You lose.
So it is vitally important to marketing success that
you have a marketing database, and that you
outsource it to some service bureau that has skills,
software and years of experience building and
maintaining marketing database. Don’t let them tell
you that you can let your marketing program hitch a
ride on the operational database.
---- Arthur Middleton Hughes is vice
president/solutions architect at KnowledgeBase
Marketing. His website is dbmarketing.com. Contact
Arthur at
Arthur.hughes@kbm1.com or at (954) 767-4558.
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