Marketing gurus tell us that customer retention is the key to any successful business: it apparently costs at least seven times more to find a new customer than it does to keep an existing one and just a five per cent increase in retention can boost profits by over 60 per cent.
But keeping customers can be more difficult than it sounds. It’s not just a simple question of having great products and customer service. Some customers will move suddenly and without warning but many more will gradually reduce their purchases over a period of time. If your business is very small, the chances are that you know all your customers well; as you get bigger, it gets harder and that’s when having a good marketing database can make all the difference.
The problem for most companies is that their database is mainly an ordering system that records transactions for stock management and accounting purposes. Gaining any useful marketing information usually means running all your analysis separately in a parallel system fine if you have plenty of staff on the team to do it but unrealistic in most small businesses.
Rollout-rollons
The quality of off-the-shelf marketing databases has been steadily improving over the past couple of years and prices have been falling. But products and features change all the time so it’s best to get advice from a specialist software supplier. A word of warning first: most companies find that their whizz-bang databases soon start gathering dust because they underestimate implementation and staff training time. This is particularly true of overly-complicated systems with lots of features that you may never need. A simple modular system, that enables you to add more advanced features only as-and-when you need them, may be a good starting point.
If you have more than 2000 records, an alternative is to consider outsourcing to a data bureau. A third party supplier can take your raw product data and return it in a more customer-centric form, often via a remote web browser, so that you can use it for profiling, segmentation and campaign management.
A value alternative?
People often assume that outsourcing will be more expensive than an in-house solution but this is rarely true. The entry price for database hosting is about £2000 a month probably less than employing someone on a permanent basis in house to do the job, and there may well be other, less obvious, cost-savings. For example, the hosting company will buy in suppression files and regularly run these across its clients’ data.
In addition, a good hosting company will have extensive experience of running databases, there are no staff training costs, and will already have all the necessary equipment and will keep up-to-date with new technology. The result is that you may well find that your costs actually fall considerably and that your data is cleaner and your campaign implementation time’s shorter.
In addition, they may well provide other services free of charge such as disaster recovery plans and relevant data protection registration.
Know your supplier
If you think that outsourcing may be the answer for you, then a little planning can go a long way towards avoiding costly mistakes. The following areas should be considered:
Do your homework. How long has your prospective supplier been in the industry? Do they employ enough personnel with industry knowledge or do they only employ people they can train themselves? Are they specialists in hosting with dedicated staff or is hosting ancillary to other parts of their business?
Ask them about their software and hardware. What operating system do they use, for example, Oracle or SQL? Flexibility is important and you do not want to be tied into a software that limits your ability to move your database to another supplier or back in-house. How up to date is their hardware? What software and suppression file licences do they hold and will they charge you extra for using these? What are their security, storage and disaster recovery procedures (if any)?
Look at their current customer base. Will you be a big fish in a small pond or vica versa? Being with a huge name in the industry is great but you must be confident that you will be looked after properly and not stepped over all the time for the bigger accounts’ work.
Database hosting can be the equivalent of a made-to-measure suit for an off-the-peg price but that doesn’t mean it’s the right solution for everyone. Remember, whatever you decide to do, research and planning are critical: even the best suits can go out of fashion very quickly.
