Take database analytics from theory to practical application in this essential article for the small business owner.

The answer is simple. You increase marketing efforts to your most responsive customers and reduce marketing efforts to your least responsive customers.

A Simple But Powerful Database Analytics Example

Here's an example to show you how you can apply RF scoring to a real marketing issue.

Let's say that you have a database of 5,000 names and you want to mail out a flier that promotes a new product. The campaign is going to cost you 80 cents per piece to print and mail for a total of $4,000.

The only problem is that your budget for the promo is $2,000 which means you can only afford to mail 2,500 of your customers. The question becomes, which 2500 customers do you mail? Easy - perform an RF analysis on your list of 5,000 names and mail out the top 2500 customers based on RF score.

RF scoring allows you to mail your most responsive customers. It allows you to focus your marketing dollars on the customers most likely to respond. It's simply smart marketing.

Remember, the best way to predict future behavior is to look at past behavior. If someone has made some type of transaction with your business in the past, then the chances are good that they are willing to make another transaction with you in the future. When in the future? At the point where the need is greatest - immediately after their last transaction. They might need to a little marketing help in order to make that transaction a reality. That is where you and the power of database analytics come in to the picture.

As time goes on, your customer will need your products and services less and less. They will either have what they need or will have found substitute products and services from other suppliers. This means the best time to market to your customers is right after they have made a transaction with you.

I want to discuss two very specific RF values and what they mean to your small business.

RF Score of 51

Suppose you run your RF scoring and find you have 100 customers that scored a 51. A 51 score is very important. It means that the customer is very recent but has only made one transaction with your business. In other words, they are a new customer. Now, new customers can do one of two things; they can remain a customer, or they can purchase additional products and services from other competitive businesses.

As a small business owner, you will obviously want to ensure that they stay a customer. Customer retention is critical to any small business. By running an updated RF score every week or two, you can collect all the customers that score a "51" and send them a marketing piece. Perhaps it is a New Customer Packet that includes a thank-you letter, a list of company benefits, a free article to download off your website, and an incentive to make another purchase from your online store within the next 30 days.

Remember, the more recent a customer, the better the chance they will respond to a marketing communication.

RF Score of 15

At the other end of the spectrum are the customers that have an RF score of 15 (and probably a 14 & 13.) These are the customers that have made a high number of purchases with you but not for a long time. They have a low recency but high frequency score. These customers have most likely defected to a competitor's products and services. They have found an alternate source and that is why their recency score is low.

I recommend you reduce your spending with them since they are not likely to respond to your promotions. Another option is to try and win them back (but keep in mind it may be too late for this.) You might try a customer reactivation program where you take these high frequency and low recency customers and send them an extreme promotion in an effort to get their attention. Perhaps a 50% off coupon or maybe even a free product.

Defected customers will need something big in order to act. It is worth trying a program like this to measure the results. However, if your marketing budget does not permit it, then I recommend you spend your promotion dollars on your high RF scoring customers and minimize your marketing expenditures on the low RF scoring customers.

Please make sure you browse all the articles in the Customer Database section of this website. You will find many more examples of using the power of database analytics and RF scoring to maximize your business profits.

Your database is your single most important tool in growing your business. Start using the power of database analytics now.

Part 3: Database Analytics - A Practical Approach