Building a Profitable Customer Database

Posted on by Dana VanDen Heuvel

iStock 000013137495XSmall thumb Building a Profitable Customer DatabaseWe’ve all heard that it’s often much easier to sell to a current customer than to a new one; but current customers can be much more valuable than that. According to research from the book Angel Customers & Demon Customers, the top 20 % of your most profitable customers could generate somewhere between 120 to 150% of our profits while the bottom 20% may cost you about 20 to 50% of your profits. Building a profitable customer database can seem like an overwhelming and time consuming task at first, but the long-term rewards profitable outcomes are worth the climb.

Database Specifics

Your database should be more than a customer’s name and contact information. In fact, a true customer database should include all activities and information associated with a customer during the lifetime of that customer’s interaction with the company.

More to the point, a profitable customer database contains five key elements.

  • Complete Contact Data & Preferences – Having a customer’s digits is not the end of the road. You need to know as much about how to reach them as possible, including which channels they prefer and respond to best.
  • Purchase History – Collect and track consumer information including transactional data on purchases, date of purchase, frequency of purchase, and method of payment.
  • Lifetime Value – Consider the lifetime value of a customer and what information you would like to know in order to establish a rich and long-lasting relationship with them.
  • Customer Service History – Profitable databases are the heart of your customer service and loyalty programs. Even a small retail business can keep track of interactions with customers which can translate into marketable profile data down the road.
  • Lead Source – Always track how customers found you; this is one of the most overlooked pieces of data and the only way of measuring what forms of promotion are effective.

A Bit About Technology

Customer databases can be as simple as a contact manager or as elaborate as a complete customer relationship management (CRM) tool. Whatever tool you choose, the most important factor in its success is how well the tool is used in your organization. The sophistication of your database is less critical that your rate of adoption. We generally recommend that a company find the simplest tool that everyone can use and focus on making the most of what you have.

Acquiring Data

You may now be wondering, “How do I acquire this data?” For some businesses it is much easier than others because patrons may provide information in required paperwork. For other businesses it can be more of a challenge.

  • Point of Purchase – Consider checkout signage such as a sign at the front desk or a posting on your website asking customers to fill out some information to receive relevant offers and information.
  • Promotions & Surveys – Contests and surveys to current customers are excellent ways to append (add) data to your customer database, deepening your understanding while rewarding your customer for their information. Make sure to include some profiling questions on the form.
  • At Every Touchpoint – Think of all of the ways your customers come in contact with you. A restaurant might do data collection on a table tent, you can ask for profile data in your email newsletter, warranty registration cards often ask profiling data and myriad other touchpoints can provide ample opportunity to learn more about each and every customer.
  • Seek Permission – Most importantly, always ask for permission to contact them or send them marketing information in the future.

Using the Data

Any business can provide a discount, but no one can replicate how you interact with your customers. For example, a local retailer tracks their customer’s sizes, fashion preferences, and times of purchases. When they get a new line or shipment in and see something in a particular size or style they think certain customers will like, they will call them to let them know. This results in customers feeling appreciated, important, and in turn they remain loyal. This retailer is no longer wasting resources on generic direct mail pieces to “Homeowner” but rather maximizing customer loyalty.

Not By Database Alone

The existence of a marketing database does not equal database marketing. In order to make the most of the information you’ve collected about your customers, you need to make every marketing decision with the data in mind. Moreover, the most effective database programs are those that are integrated with effective customer service programs. We call this “brand and database integration.” For your company, this means delivering an experience consistent with the value of the patron in your database.

Database Marketing Moments

The company that uses the power of a profitable customer database has the best chances of attracting attention, being the most relevant and winning the sale. As they say, knowledge is power!

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