Getting the Most Value From Your Marketing Database

THE FIRST STEP in building an effective case for a marketing database is to determine the scope of your effort.

Traditionally, organizations have embarked on database projects for reasons such as improving and measuring marketing programs, managing customer relationships, developing customer intimacy or describing the extent of marketing successes to senior management.

However, the actual value recognized by organizations is relative. Improving marketing campaigns, for example, might mean annual efficiency savings of $5,000. For a second firm, this kind of enhancement could mean $10 million in incremental sales per year. And quantifying successes might mean reporting on a quarterly mailing, or publishing data about daily campaigns online.

A marketing database may add value to your organization, but there are no guarantees. Even companies that have conducted detailed preliminary studies of such a system sometimes fail to demonstrate real value once the system is up and running.

Many factors can influence just how much value a marketing database can add to your firm. Let’s look at some of them.

Business Economics * Customer value differential. What is the variance in the value of your customers? Are they all about the same, or are there significant differences in their worth? Greater differences in customer value contribute to greater opportunities for customer management.

* Product margins. What are the average margins of your key product categories? Unacceptably low margins can cause problems with program economics and the related results you will realize.

* Database marketing budget. If your budget is low, you can employ the database in fewer marketing efforts. But this, of course, will result in fewer marketing database success stories.

Marketing Environment/Practices * Number and nature of marketing channels. More channels mean more opportunities for customer management .

* Market size. A very small market will produce far less than a very large one.

* Market growth. If your market is growing quickly, there are more chances to determine the best ways to use your database and apply these practices to acquisition efforts.

* Length of customer relationship. If by the nature of your business the term of your relationship with customers is relatively brief, you may have challenges justifying major investment in a relationship system.

Organizational Characteristics * Marketing’s role. If marketing takes a back seat to manufacturing and sales in your company, a marketing system clearly will be of less value.

* Know-how. What is your firm’s level of expertise in database marketing? Obviously, it’s a good idea to have as many specialists on staff as possible.

* Sharing. To what extent will the marketing system be used by several divisions or groups within the company? If you can expand its use, it can add greater value to your business as a whole.

* Readiness. This is a general measure of how your firm has prepared uses for the database. You gain points here if you have planned ahead, and therefore can more readily demonstrate value.

Product/Service Characteristics

* Maximum number of products and services per customer. This will influence your opportunities to cross-sell, upsell, renew or resell products and services to your customers, and allow related opportunities to prove the value of database programs.

* Product/service targeting. If your products appeal to a very targeted audience, this is an excellent chance to apply a marketing system and related targeted marketing efforts.

* Product/service customization. If your products and services can be customized, you can go with more targeted marketing efforts, and thus create the potential for more database-driven successes.

Database Landscape * Data capture. What data can you capture on customer behavior? If you can’t get much, there’s surely going to be some challenges in segmenting your customers and placing a value on them, in targeting your marketing campaigns, and in turn proving the worth of your database.

* Current processing. If you perform a lot of repetitive, inefficient processing to support marketing programs, a database could cut some of these expenses.

* Related systems. What other systems could benefit from the data or functionality in your marketing database? If there are several, it’s far easier to confirm the system’s worth.

While you don’t need all these factors working in your favor before embarking on a new or improved marketing database initiative, the more you stack the deck the better.

Note that this approach is very different from a new business case. In this instance you are itemizing where, how, why and the extent to which a new marketing database represents an opportunity.

A business case, on the other hand, serves to express probable revenue generation and potential cost reductions from the programs and applications that will be driven by the system.

Both methods are necessary. But evaluating these factors needs to come first.