By Jessica Tsai
NEW YORK—Arthur Middleton Hughes is old, rich, and famous—the latter two of which he attributes to his success in database marketing. Another contributing factor may be the many books he’s written on the topic, the latest of which is entitled, Strategic Database Marketing. In his presentation at the 2008 DM Days Conference and Expo here this morning, Hughes—vice president and solutions architect at Texas-based KnowledgeBase Marketing—explained how, even though we’ve had to sacrifice the intimacy of 1950s-era mom-and-pop grocery stores, technology can help marketers bridge this gap, improve customer loyalty, and, ultimately, increase sales.
There are two types of database people, Hughes says:
- The constructor: knows the ins and outs of how to build the list and getting it onto the Web; and
- The creator: knows how to use the names and build loyalty and repeat sales.
Companies will inevitably hit a dead end if they lack either of these, Hughes told the crowd. You need both types of database marketers to make it work. Hughes outlined the nine biggest mistakes marketers fall into when attempting to squeeze some benefit from their customer database:
- Lack of strategy. "What are you doing with the database?" Hughes asked. Building it is easy, but making a profit means marketers must figure out, "If I were a customer, why would I want to be in this database? What’s in it for me?" A successful database collects data on customer purchases, permits ad-hoc analysis, fuels information to create a customer lifetime value (LTV) table, and helps marketers figure out what motivates their customers.
- Focus on price. Databases build loyalty—coupons don’t. Study after study has shown that customers generally care about more than just low prices—though the current economic conditions may have pushed price higher on a consumer’s list of priorities. A positive shopping experience, according to Hughes, is typically associated with feelings of recognition, good service, quality information, convenience, and helpfulness.
- Lack of testing and controls. Most marketers fail to implement a control group when testing out the effects of their campaigns, opting instead to go big and launch the program on the whole database. Key measuring points include: response rates, return on investment (ROI), profits, and lifetime value.
- Poor segment strategy. Use your database to figure out who your best, most-loyal customers are—and then do everything you can to keep them, Hughes said. Those prime customers make up the bulk of your revenue. Don’t waste your resources on the less-valuable ones. Having customers complete profiles can also help you determine how they prefer to communicate with you and what their individual needs are.
- Failure to use the Web. The Web is an excellent place to collect customer data and shopping behavior. Moreover, after a consumer makes an online purchase, Hughes advises marketers to send a follow-up confirmation email within 30 seconds. The benefit is so tremendous, he says, that "if your software engineers can’t get this done, get rid of them."
- Building in-house. It costs too much and takes too long to build a database in-house. Many vendors—some present at DM Days—allow companies to outsource their database and save the headache of trying to build their own. Vendors in this field include: Experian, Merkle, and Harte-Hanks.
- Treating all customers alike. Returning the concept of segmentation, Hughes reiterated the importance of treating customers differently depending on their stage in buying cycle and their profitability.
- Lack of a retention program. It costs far more to acquire a new customer than it does to retain an existing one, and yet, Hughes said, marketers still fail to implement a retention strategy. One of the best ways to hang onto a customer, Hughes added, is to sell them another product.
- Lack of leadership. Marketing leaders need to take initiative to tie together the internal and external units. Channels include the Web, management information systems, customer service, technology support, telemarketing, service bureau, and direct agency.
A database has the power to give marketers insight into the preferences and needs of their customers. With the proliferation of choice, the customer has less incentive to be loyal. A database gives marketers an opportunity to make that personal connection. "You have to touch people’s lives," Hughes said.
