The Customer Contact Database

A well-coded customer database will allow you to use customer data to build highly profitable marketing programs. It will be your number one tool in selecting the best customers for each individual marketing program you create.

We've all heard how important it is to collect customer data but most people are challenged to actually "do" something with all this information. Collecting the data is the easy part. Figuring out what exactly to do with it is only slightly more difficult.

The first question that must be answered is this - what data is important to collect and what data is not? The answer is quite simple - any customer transaction that can be measured should be tracked via your customer contact database. This includes the obvious customer name & address info but also includes the following:

• Date of last transaction
• Number of lifetime transactions
• Total dollars spent
• Type of industry
• Type of customer

How can you tell if a customer is still a customer? How can you determine if a customer has defected? How do you calculate your customer retention rate? Yes, you guessed it - you're customer contact database will tell you. A properly coded database will help ensure repeat business, reduce marketing costs, increase loyalty, segment your markets, and identify your most valuable customers.

You don't need to be a large corporation in order to take advantage of the power of database marketing. Even a 1-person business can develop an extraordinary advantage by developing a customer contact database and learning how to use it for strategic marketing.

As a small business owner, you will find yourself in one of three basic categories.

Category 1: You don't have a formal database at all.

Category 2: You have an existing database but it isn't coded with the proper information.

Category 3: You have an existing database that is coded properly.

I would estimate that less than 1% of all small business owners fall into category 3. Perhaps 60-70% of you fall into category 2 and the rest fall into category 1.

If you are looking for a recommendation on a customer contact database program for your small business, click here.

Customer Type
Every small business has four distinct customer types they will want to code in their database. They are Suspects, Prospects, 1st-time Buyers and Repeat Buyers. By coding these customer types in your database, you will be able to immediately pull out any of these various groups for specific marketing communication programs. Below is a summary of the four customer types.

Target Market
I highly recommend you add Target Market as a custom field in your database as it will allow you to pull customer lists by specific market segments. The only reason to pass on it is that you have a type of business that is so narrow and focused, that you really have only one or two customer types.

The first step is to actually define your target markets. If you own an existing business, you should already have a good idea of your target markets. If you are a new business, you may need to research just who your target markets are. Click here for an article on uncovering your target and niche markets.

Recency, Frequency, & Monetary Fields
These last 3 custom fields I recommend you create are the key to allowing you to put together powerful database marketing programs. Here's a brief definition of each.

Recency
Recency is the term used for the date of last transaction. Why is this important to code? Because the best predictor of future customer behavior is past customer behavior. Customers that are more recent are more valuable to your business than customers that are less recent. Whenever a customer makes a purchase, you will simply go into their record and plug in the date of purchase into this Recency Field.

Frequency
Frequency is simply the number of "transactions" that a customer has made with you since they have been added to your database. Again, the best predictor of future behavior is past behavior. Someone that has purchased from you three times in the past year is likely to purchase again. The "transaction" does not necessarily have to be a monetary purchase. It can be any type of contact that you can reasonably measure such as a web visit, a phone call, a completed form. Of course it definitely includes any and all purchase transactions. This field will simply contain a number that is equal to cumulative transactions.

Monetary
This field will simply show a cumulative total of the money spent by a customer. Every time the customer makes a purchase, you will go in and add the value of the transaction to the number already there.

If you would like more information on the terms Recency, Frequency, and Monetary, please review this 3-part database marketing article.

I hope you take the steps required to code these important fields into your customer contact database. Be sure to read the additional articles posted in the Customer Database Tips section. There, you'll discover how to actually use your database to grow profits and reduce expenses.