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:
- 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.
- 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.
- 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.
- 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.