The 5 Money-Making Benefits of Database Marketing
As one of the foremost database marketers in this business, one of my strategic partners has agreed to an interview for this post . Brian Fey represents one of many of the direct marketing specialists I use in my consultancy to help clients leverage data to improve their bottom lines.
With over 30-year career in the business, Brian has worked as a Market Research Analyst, a Database & Direct Agency Executive, an Independent Database Marketing Consultant, a Marketing Services Entrepreneur and a CRM Director. He recently returned to the consulting arena.
As a consultant, Brian designs, builds and manages customer databases to help marketing and sales achieve their goals.
He answers my questions below.
Q. What key marketing strategies are supported by the database marketing approach?
A. Following are 6 of the key strategies that you really cannot pursue in earnest without a marketing database:
- Lead Generation & Management
- Customer Acquisition
- Customer Retention
- Customer Growth
- Customer Referrals
- Customer Loyalty It's important to note that the presence of a well-managed marketing database encourages marketers' natural desire to be more accountable in marketing & sales.
Q. What do you view as the top five money-making benefits associated with database marketing?
A. Here they are:
1. Improved Customer Understanding (better planning of marketing investment)
2. Expense Reduction/Operational Efficiency (marketing & sales)
3. Revenue Improvement/Better Performance (marketing & sales)
4. Greater Visibility of Business Performance (shared vision & understanding)
5. Greater Confidence & Predictability (cofidence)
Q How does Customer Relationship Management (CRM) differ from database marketing?
A. CRM is a customer-centric approach to business. It requires a deep understanding of the customer and to succeed, all functional areas of the business must embrace it.
Database Marketing is a subset of CRM.
A viable database allows marketing to becomes customer-centric and create CRM. I define database marketing as:
- A planned system of customer dialog
- Driven by a high level of customer understanding
- Using a variety of communication channels
- Always seeking to produce some prescribed action
- Measurable in both cost and results
- Expandable with confidence. People confuse the two (CRM & Database Marketing) because the customer database -- which lies at the center of any effective CRM initiative -- typically comes from the marketing department.
Q. Do you think businesses as a whole understand the importance of database marketing? Why do you say that?
A. Some businesses really understand the importance of database marketing and are good at it. In my experience, these businesses tend to have shorter sales cycles (i.e. catalogers, ecommerce, retail, fund-raisers, etc.), smaller profit margins, and their revenue generation processes make it comparatively easy for them to determine their Return on Marketing Investment.
The majority of businesses, however, don't understand what database marketing is and/or the benefits it can deliver to their business.
Why?
My experience has been that these businesses often have long (and complex) sales cycles, high margins and little ability to track their marketing investment. They also tend to simply give sales all the credit for revenue. They tend to view marketing as a cost center.
TRENDS & FUTURE: Increased competition and the shift to a buyer driven (i.e. social) marketing environment are forcing many of the companies who haven't embraced Database Marketing (and CRM) to rethink their traditional approach & transform their marketing and sales operations.
Q. Could you describe the characteristics of a relational database?
A. Relational databases allow marketers to manage large and diverse data sets -- something that is impossible to do in a spreadsheet environment.
Most importantly, Relational Database Management Systems (RDBMS) allow marketers to associate different kinds of data to one another.
Let’s consider a few of the different data types that most marketers work with.
COMPANY/ACCOUNT INFORMATION -- company name, industry, postal address, website URL, customer status, etc.
TRANSACTION INFORMATION -- this data includes transaction date, products purchased, quantities, prices, discounts, etc.
FINANCIAL INFORMATION -- this data includes billing dates, amounts collected, amounts due, etc.
CONTACT INFORMATION -- this data includes peoples name, postal addresses, phone numbers, email addresses, preferences, demographics, facebook page, twitter handle, LinkedIn profile, etc.
CAMPAIGN -- this data includes cost, channel(s), duration, responses, cost/response, revenue goal, revenue performance, etc.
EMAIL ACTIVITY -- this data includes date sent, date bounced, date opened, data link clicked, etc. WEB
ACTIVITY -- this data includes IP address, referring site, search term, page viewed, time on page, etc. RDBMS's allow us to store all of this data in a single place relating the different types of data to one another.
In this relational database environment, the system interacts with the data in a way that is meaningful to marketing. Users can be given a view that:
- Displays Account information, but also shows all of the related Contacts, Transactions & Financials related to that account;
- Displays the Contact information, but also shows all of the related Campaigns, eMail Activity, Web Activity, etc.
Relational databases, even more importantly, enable the marketer to deliver reports & dashboards that would never be possible using spreadsheets.
Q. Why do some companies still not see the critical importance of knowing their customers, their purchase behavior or their contact points with their organizations?
A. In my experience, the simple answer is this: they don't want to change. Business is good, so why change something they don't believe needs to be changed.
TRENDS & FUTURE: Increased competition and the shift to a buyer driven (i.e. social) marketing environment is forcing many of the companies who haven't embraced customer-centricity (enabled by a sound customer database) to rethink their traditional approach -- and go through the painful process of transforming their marketing and sales operations.
Q. What are the symptoms of dysfunctional databases or poorly implemented CRM initiatives?
A. Lack of accountability (no results tracking)or worse, lack of consensus (where the results are tracked, but not everyone believes in the numbers, or uses the information to plan investment).
Q. How do you go about helping them create a more robust marketing database?
A. My approach is fourfold:
1. Assess & Plan -- gain a thorough understanding of the existing information asset and what kind of information is needed by whom, when & for what purpose -- then devise a plan to deliver the appropriate database & functionality
2. Build & Test -- deliver the database (something that using today's much more advance technology -- we can do very quickly & inexpensively) -- and test it with users
3. Train & Launch -- user acceptance (and that includes senior executives who have never seen a database before) is crucial. The system has to be easy to navigate, it has to make users jobs easier, and it has to do its job very well
4. Manage & Administer -- this is where most companies fail, they don't have the necessary skill sets in-house. So we prefer to stay involved with the client and operate their system.
We use the "Salesforce.com" system as the primary RDBMS because with it, we can deliver value very quickly. Plus, the environment allows us to be able to respond very quickly to changing requirements -- did I mention that we do all of this with very little (if any) need for IT support?
Q. From an infrastructure point of view, how would you address resistant silos within a typical organization? What other barriers do you see to successful database marketing and how do you resolve them?
A. The single most important factor is that the "initiative" must have senior executive support. The CEO, CMO and CIO must all buy-in to both the measurable objectives as well as the delivery plan.
When you have this kind of support -- the resistant silos crumble pretty quickly because a well-designed and properly managed relational database will always deliver improved performance.
Q. Who is the typical database champion within an organization? Who are the most likely candidates to take on this task? Could you cite site an example from your past experiences?
A. In my experience, it's typically a Marketing executive. I've been involved in many assignments where a new marketing executive is brought in and given Senior Management support for a database marketing initiative. This is a very good situation.
Ideally, you want to have both the Senior Marketing & Sales Executives championing the initiative -- they're the ones who will probably have to allocate funding. They've also have to get the CEO on board.
Q What skills do you want to see in marketers you would choose to lead the effort to shore up an organization’s database marketing capabilities?
A.Most importantly, they need to communicate effectively with Senior Executives in every functional area.
Getting the CEO on-board is absolutely mandatory. Gaining cooperation from the Sales executive need to support the initiative because will make or break database marketing.
The database marketing leader should understand both the "art" and the "science" of marketing by possessing both creative & analytic skill sets. They know how to manage cross functional work groups.
Take it from me, it takes a special kind of person to go from a creative briefing with designers, copywriters and web masters to later step into a database meeting with database administrators, software specialists and data analysts.
Q. What advice would you give to marketers who see the potential for database marketing but can’t seem to get it off the ground?
A. Find some low hanging fruit and proactively point-out opportunities in your organization that you know are "ripe" for a database marketing solution. Document customer acquisition costs, customer churn rates or customer satisfaction levels if at all possible.
Competitive case studies are also a great place to start. Look for success stories from your competitors using database marketing.
Finally, consider engaging a consultant to come in and give you an objective point-of-view on your operation. People inside the organization may be too close to the problem or lack credibility.