6 Ways to Use a Database to Grow Your Business
By Keith Loria for America's Backbone Weekly
For more than 50 years computers have been gathering and storing data. Now, by combining the aggregate of many forms of data and information into a very large data warehouse (Big Data) and using Business Intelligence (BI) to datamine this information, we can efficiently discover new trends, anomalies, and analytics.
This includes the ability to move up the chain from forensic data to real time, and most importantly, to predictive analysis. New software applications available mean small and medium-sized businesses now have the ability to discover valuable insights previously only available to larger companies.
Chris Lynde, founder and CEO of dbSignals, says to understand the importance of database marketing, consider the following facts.
It costs 6-7 times more to acquire a customer than retain an existing one (Bain & Company).
A 5% reduction in your customer defection rate can increase profits by as much as 5-95% (Bain & Company).
A 2% increase in customer retention has the same effect as decreasing your costs by 10% (Leading on the Edge of Chaos, Emmet Murphy & Mark Murphy).
70% of buying experiences are based on how the customer feels they are being treated McKinsey.
"With statistics like this, it is easy to understand why it's important to improve the customer experience," Lynde says. "If a business is interested in increasing revenue and driving down costs, they need to get a better handle on who the customer is, what their interests are, and how best to communicate with them."
To compete effectively, you need to develop a holistic view of your best customer in order to deliver timely and relevant offers -- which is where database marketing excels. It provides you with a 360-degree view of your customers, giving you the power to target the right person, at the right time, with the right message and channel.
"A successful database marketing strategy will produce a measurable impact on revenue and ROI by optimizing response, focusing your customer communications, and lowering costs," Lynde says. "Implemented correctly, you will increase customer acquisition, retain more customers and enhance the customer experience while becoming more profitable in the process."
Here are 6 ways to use a database to grow your small business:
1) It all starts with the data: Think through what's important to capture, how you will use it, and what your reporting requirements are. "The data model needs to be wired tight and right from the beginning or you will spend time and money trying to reconfigure it downstream," Lynde says. "It's the old 'garbage in, garbage out.'"
2) Understand the systems: databases are useless unless you have people who have the skills to use the raw materials. "We spend too much time trying to get data into structures and clean it, and not enough teaching people how to do things like data visualization, mashups and predictive analysis," says Scott Klososky, principal at consulting firm Future Point of View.
3) Segment the data. One of the primary purposes of a marketing database is to segment customers and prospects into like categories with similar lifestyles, product preferences, buying cycles, and profitability in order to provide timely, relevant promotions. Segmentation helps you figure out what motivates a customer and allows you to define the multi-buyers that are typically the most profitable segments. Using this information you can create copy, offers and subject lines that appeal to the interests of each segment.
4) Cleanse your data on a regular basis. Your vendor should be able to provide a variety of data hygiene services including postal and email address standardization, national change of address processing, delivery point validation, spam trap suppression and other email correction and validation services. "A clean list also enhances your match rate if you decide to append demographic data or emails," Lynde says.
5) Look at data as a valuable technology asset and treat it that way: "Organizations should have a visual diagram of the status of all their data sources and work to constantly improve the quality and size of the databases, just like they would work to improve their property, or cash situation," Klososky says.
6) Choose your vendor wisely; when preparing a database strategy, be sure to do due diligence. "Mail responsibly and always adhere to best practices and you will minimize unsubscribes and avoid being blacklisted," Lynde says.
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