Using Database Marketing to Target Loyal Customers: A Small Business Guide

1 Mar

by Joel R. Evans and Barry Berman

As we noted last month, too many firms concentrate on how to woo new customers and do not pay enough attention to what they can do to gain the loyalty and increased patronage of their current customers. One of the ways to improve this situation is to develop a customer database and use it to better communicate with these customers.

WHAT IS DATABASE MARKETING? It is a way of collecting, storing, and using pertinent information about customers. Although customer databases are often associated with computerized management information systems, they may also be used by small firms that are not computerized. 

Here is an illustration of how a small, non-computerized firm can rather easily set up and utilize a customer data base: 

  1. People could be asked for their names, addresses, telephone numbers, and product interests by having forms and pencils available at the checkout counter. They could be encouraged to provide the data by offering a monthly raffle and awarding a low-value prize to the winner.
  2. The customer information gathered in step 1 would be entered onto large index cards. The company would alphabetize the cards and keep them in a filing cabinet.
  3. Once customers have filled out forms, they would be asked for their names on each subsequent trip to the store. Thus, information in the database files would be updated from the sales receipts.
  4. Separate special mailings could be targeted at regular customers and at noncustomers in the database.

By adhering to the preceding procedures, a firm could learn more about its most important customers and treat them better. For example, in many situations, some version of the 80-20 principle probably applies, whereby 80 percent of sales are made to 20 per- cent of customers. With database marketing, a firm could identify those 20 percent and better satisfy them through superior product selection, announcements of special sales, personal attention, etc. In addition, the firm could identify and place heightened emphasis on the next 40 percent of its customers, a group that has often been ignored by companies.

Via database marketing, a retailer could also determine which customers are no longer shopping with that firm and which customers are shopping less often. In these instances, people may be called– in a cordial manner–to find out why they are no longer shopping with the company (or shopping less). Based on the explanations given, the firm could then offer special promotions geared directly to those people.

Research studies have repeatedly shown that people will patronize a firm with which they have been unhappy if they are given the opportunity to voice their opinions (which may be complaints), they are listened to in a courteous manner, and they feel that a firm has responded to their concerns. By no means are those customers “lost causes.” In fact, properly dealing with the customers who have had gripes might lead to even stronger loyalty by them to the firm.

What’s the key to successful database marketing? It must be viewed in a positive way as a beneficial tool, and not as an unwelcome and burdensome chore. KNOWLEDGE IS POWER; AND POWER LEADS TO PROFITS.
 

6 Responses to “Using Database Marketing to Target Loyal Customers: A Small Business Guide”

  1. helijundell March 1, 2015 at 11:15 am #

    I really agree the point which is 80 percent of sales are made o 20 percent of customers. We always notice how to expand out customers,but nut manage information of loyalty customers. The database is good idea to manage 20 percent loyalty customers first, then we keep following them ann find new loyalty customers. Now most of stores will ask customers to fill forms like email or phone number. But these information privacy does not help company to develop new customers. If we always offer new and big discounts for them,if they can not be used and invite their friends to go shopping together. That is anther way to acquire new customers.

  2. rzheng March 1, 2015 at 9:03 pm #

    I can’t agree with you more. Building loyal customers is as same important as developing new customers. As a company, we can’t only focus on how to attract new customers, but pay more attention to our current customers and try to get more interaction or conversation with them. Once a customer becomes very loyal to your brand, he or she must recommend your brand to family and friends.

  3. hancy100 March 5, 2015 at 2:38 pm #

    It’s a great point that using database marketing to build customer loyalty and attract new customers. From collecting customers information, we can find out who are our loyalty customers and focus on how to keep their loyalty, like membership card is a good way to keep customers loyalty.

  4. hancy100 March 5, 2015 at 2:41 pm #

    Reblogged this on marketersworld100.

  5. Henan Hou (Hester) April 19, 2015 at 2:51 pm #

    The heating topic of big data really gives the light to the puzzle of customer behaviors. With the development of technology, data becomes costless but difficult to decode. It is essential for modern businesses to translate the targeted data to useful information for better business operations. Companies could better understand their customers and address their needs accordingly through database marketing.

  6. jeremyh86 January 19, 2016 at 9:33 pm #

    This is a great intro to database marketing. I think a challenge for many small businesses is that they don’t feel they have a need or the time to invest in a database. I know it wasn’t until about the 5th time I saw it that I was convinced it needed to happen.

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