CRM: Tapping Into the Power of Your Database

The smart technology designed to help marketers with customer relationship management (CRM) can get confusing pretty quickly. Direct marketing, database marketing and CRM are all overapplied terms, which, in many cases, have overlapping meanings. In order to run a successful catalog business, you must understand the fundamentals of targeted marketing—that means building and using a database of all your customers and inquiries.

“First off, I would caution anybody from jumping right in and looking at tools,” says Katie Cole, director of analysis and learning at Quris, an electronic touch communication consultancy. “Tools are just a relatively small part of a much larger process. The data mining process must start with a knowledge of the business itself.”

Vice president of sales and marketing for cataloger Delta Education, Mary Ann Kleinfelter, says tracking should begin with chronicling customer behavior, tendencies and preferences.

“You could be selling a lot of widgets in your catalog and be in blissful ignorance because what you don’t know—if you’re not in tune with your database—is that the widget buyers may buy from you once and never buy again. It may be that the gadget buyers are the ones who will continue to buy from you for years and years and will sustain a long-term, profitable business,” she says.

Such attention to detail may lead you to greater selectivity in who receives your catalogs. The more targeted your catalog mailings are, the more qualified the prospects, Kleinfelter reasons.

Where Do Databases Come From?

Think back to the first day you excitedly began taking orders. This is the day your database was born. Even if you haven’t focused on a database from the on-set, you have the information you need to get started now.

“Everybody who ships orders has this information. It’s just a matter of getting to it and using it. Just a by-product of filling orders can become a very good database, and you don’t have to spend that much money,” Kleinfelter explains. Basic pertinent information includes not only product preferences but shipping and method-of-payment preferences, amount of money spent, physical location and other contact information.

There are a variety of ways to create your customer database for your catalog.

The first option is to bring a large information technology (IT) staff in-house to build your database. Programmers and other technology specialists build proprietary software and tailor the marketing program to your company’s needs. “This has a lot of advantages, because each business is slightly different, and the software can be customized to be a real competitive advantage,” says Kleinfelter.

Steve Helle, senior director of Evista product management at Excite@Home, has spent years helping companies build CRM databases. One of the chief advantages to bringing the technology in-house, he says, is saving time. To send out a promotion, one of his clients used to request a customer name and address list from the internal IT staff, and wait up to five weeks for the information. Now the entire process takes just hours.

“A marketer doesn’t want to be removed from this process. He wants to do it himself, on his own time, and play with data in a variety of ways,” says Helle. This works best with a proprietary database.

However, Kleinfelter points out that proprietary software is a pretty tall order for a small cataloger. Luckily, there are other options.

Kleinfelter says a second choice is to purchase a more general piece of software and customize it. To successfully run the program, you’ll have to have an in-house IT department, she says.

The third option is to completely outsource both the software and its implementation to a service bureaus. One drawback to outsourcing is that catalogers often must send information to more than one source, says Helle. Customer relationship management marketing becomes complicated and time-consuming when a whole customer profile does not exist in one place.

The fourth choice is a combination of the second two--and one that Kleinfelter says she’s successfully used. Consider your current mode of taking and shipping orders. Chances are you store this information on a computer system. Try using a small IT group to maintain this system and then use an outside service to gather these transactions, move them to the database and update it. “It’s a kind of hybrid of both in-house and outsourced services,” Kleinfelter explains.

What’s Right for Your Company?

Word-of-mouth is very powerful in the catalog industry, says Kleinfelter. Before taking the database plunge, talk to other people about methods they’ve used successfully—and be sure to get your IT team involved. “There’s more to it than just numbers. Your outsourcer must understand your company’s goals,” she says.

Helle tells his clients who are looking at setting up CRM systems to first and foremost, keep it simple! “We see companies all the time who look at $1 million software with lots of bells and whistles that they don’t need or can’t use,” says Helle. “There are really only [seven] things they need to look for, so focus on those”:

1. Database analysis: ability to perform analysis of the customer database via a point-and-click interface (i.e. eliminating the requirement to write programmatic instructions to analyze the database).

2. Marketing channel: ability to output the marketing message to direct mail, telemarketing centers, e-mail or just a file-based extract.

3. Segments: ability to turn database queries into defined segments within a campaign.

4. Promotion history: ability to track what promotions were sent to an individual, and what their response to the promotion was.

5. Promotion to multiple levels: ability to promote to different levels (e.g. households, individuals, account holders, etc.).

6. Treatments: ability to define different marketing messages to different segments within a campaign (e.g. send a 20-percent discount offer to one market segment, and send a 10-percent offer to another segment).

7. Randomization: ability to market to a random subset of the marketing group.

Cole says to first look at infrastructure issues. Be sure the size and electronic structure of the database is appropriate for your needs. Look at the software’s analytical capabilities. Does it allow you to see complex marketing models using data visualization? What are the technology’s graphical capabilities? And don’t forget that hardware and platform requirements must be compatible with your company’s existing systems, or you’ll end up spending more money than it’s worth.

Helle adds that if your existing systems are problematic, you should concentrate on data quality.

Putting Your Database to Work

Helle says that in order to improve customer relationship management, your system should have the capability to communicate with customers via e-mail. Be sure your new system is flexible.

The benefits of having a complete, usable database, says Kleinfelter, are that you can target offers customers will want to respond to, rather than taking a shot in the dark.

“Catalogs are relatively expensive propositions, and it’s getting more expensive every day, with printing, postage, even ink costs. Every time you send out a catalog, you need to make sure it counts,” says Kleinfelter.

Each effort must be as targeted as possible. This means faster and more efficient prospecting and testing, Kleinfelter explains. Testing offers based on information segments, such as first-time vs. repeat buyers, will tell you much more about predictable buying behavior than a simple split test.

Finally, she says, “Follow the old 80/20 rule, and concentrate on your very best customers.”