Manage your customer database
Small and medium-sized businesses are increasingly using databases to manage their customer relationships, improve sales and customer satisfaction and identify key trends. Customer relationship management (CRM) is a central part of many small business' overall sales and marketing strategies.
This guide will help you understand the concept of CRM and how to use a database for marketing. In particular, you will learn what kind of information your business should collect in a CRM database and how to integrate it with other systems in your business.
The guide also provides advice on developing your customer database and choosing a supplier for your customer database system.
Improve customer relationships with your marketing database
The business benefits that customer relationship management can bring, including increased sales, improved marketing communications and customer satisfaction
The better your business can manage its relationships with customers, the more successful it will become.
What a database can do for your business
An effective marketing database will enable you to communicate better with your customers. For example, it will let you:
- analyse sales data and individuals' personal information
- focus your marketing activities more precisely and save you money
- reward regular, profitable customers with targeted special offers
- measure the effectiveness of your marketing activities
Benefits of CRM
A good sales and marketing database is also the first stage in developing a customer relationship management (CRM) system, which will help you understand how, and what, your customers buy from you.
The benefits of a CRM system include:
- increased sales to new and existing customers through better timing identifying needs and cross-selling of other products
- improved marketing communications
- enhanced customer satisfaction and retention
- increased value from your existing customers - and reduced cost to serve
You should consider rules relating to privacy and data protection in direct marketing when buying a database.
Direct electronic marketing is regulated by the Privacy and Electronic Communications Regulations 2003 (PECR). These regulations define what you can and can't do or say in your marketing messages - eg you must disclose your identity and a valid address to all recipients.
The General Data Protection Regulation (GDPR) applies in the UK from 25 May 2018. Alongside the Data Protection Act 2018, the GDPR introduces new rules on processing and safeguarding personal data.
Set up a customer relationship management system
What to consider when setting up a customer relationship management database, including the various options such as creating your own or using a supplier
There are a number of practical issues to consider when introducing a marketing database as part of your customer relationship management (CRM) system. You will need to:
- estimate the likely scale of the system
- balance your requirements against your budget
- consider integration with other business systems
Depending on your practical needs, you can choose between various ways of setting up a computer-based marketing database.
Create your own system
The least expensive option is to create a simple system of recording and compiling data (such as invoices, sales records for existing customers, and customer contact lists) in a single spreadsheet. You can then regularly update your customer contact records.
Using a software supplier
If you want to do more with your customer sales and marketing data, you could buy a basic software package and create an office-wide database that all your staff can use.
Alternatively, you could buy a dedicated CRM package such as Oracle, SAP, Peoplesoft, Microsoft, Onyx and Pivotal. However, CRM packages generally require servers, staff training, and customisation so setting them up can be quite complicated.
For more information, read about how to choose a supplier for your customer database system.
You could commission bespoke software and integrate it with your existing software and your website. This can be expensive and may be more appropriate for larger and more complex businesses.
Or you could opt for a managed CRM solution such as Software as a Service (SaaS), where you use software that is hosted externally by an application service provider (ASP). This is known as 'cloud computing'.
You'll need to make sure that you comply with privacy and data protection rules about sales and marketing databases that hold personal information. For more information, see email marketing.
Building your customer database
Building your database and considering what information you need to keep and how you will structure your data by various characteristics of your customers
You can use information already held about your customers to build a database. This information could come from manual or computerised systems. It is a good idea to check the accuracy of this data, before compiling your database.
Think about how to find out who your best and worst customers are and what they buy from you.
If building your database involves the processing of personal data, you will be expected to comply with the Data Protection Act 2018 and the General Data Protection Regulations (GDPR). The most relevant principles are that you must:
- process personal data fairly and lawfully
- only collect personal data for specified purposes
- ensure that personal data is accurate and, where necessary, kept up to date
Structuring your data
If you are selling to business markets, you could compile information about:
- what they do - industry sector, public or private sector, turnover, number of employees and location
- their buying behaviour - how they place orders, their size and frequency
- names of contacts within a company
If you are selling to consumers, you could compile information about:
- your customers' buying behaviour, including product usage and brand loyalty
- their age, gender, occupation and approximate income
When compiling information, make sure that you comply with data protection legislation, including the General Data Protection Regulation (GDPR).
Developing your customer database
Ways to develop your customer database to include current and prospective customers, including advice on buying databases or building your own
To get your marketing database working for you, it should include details of prospective as well as existing customers. People who enquire about your company should be included and 'flagged' for approach in the future.
Only a percentage of the general population will buy your products or use your services so it's important you target the right people. If you focus your marketing on them, your efforts will be more successful. Aim too widely with your marketing and you risk spreading your resources too thinly. See segmenting you email marketing lists.
Not all customers have the same needs. It makes sense to build up a profile of your customers and group them according to their different requirements. This will give you a good idea of how likely they are to purchase what you are offering.
Build your database
There are a number of ways you can find new prospective customers to grow your database, here are a few examples:
- Networking - When you meet a potential customer at a trade show or event, exchange business cards or contact information. You can then add their details to your database if you tell them who you are and how you plan to use their details for marketing purposes and they consent.
- Offer incentives - collect contact information at events or online by offering something in exchange for a business card or registration. This could be entry to a competition, a discount voucher or exclusive online content.
- Customer referrals - ask your current customers to refer a friend or business contact that might be interested in your product or services. You could offer an incentive such as a discount for this.
- Optimise your website - make sure that your website is optimised to collect sales leads with strong calls-to-action to sign up.
- Record enquiries - if a potential customer calls or emails your business with an enquiry, be sure to log their details.
No matter how you gather contact details, you must ensure you comply with the Data Protection Act 2018 by acting fairly and lawfully whenever and however you collect personal data. In particular, you must get consent before you send someone marketing messages. To be valid, consent must be knowingly and freely given, clear and specific affirmative action. See consent under GDPR.
Buying a database
Having established a customer profile, you could then consider looking for additional prospects by buying in a tailored database or list. Bear in mind that there are rules about buying email databases. It is only usually possible to buy and sell personal information held in a database if the people concerned have consented that their information can be passed on. Under the GDPR, you must keep records to demonstrate what the individual has consented to, including what they were told, and when and how they consented. If you buy personal data from another organisation, you must provide people with your own transparency information detailing anything that they haven't already been told.
For a fee, you could become a member of the Direct Marketing Association, where you can find a registered direct marketing agency and promote your business by being listed in their directories.
You can specify exactly what type of person or organisation you want on your list, in terms of the:
- size and type of the organisation - if you are selling to businesses
- age, gender, income or lifestyle - if you are selling to individual customers
Lists are usually offered for:
- rent - one-off use only
- sale - providing unlimited usage
If the list is rented, most organisations forbid you from adding the names on the list to your database, except when you have received a response to your approach.
You should therefore consider giving an attractive incentive, such as a generous offer to encourage your prospective customer to respond.
Keeping your customer database accurate
Maintaining accurate data records through proper data cleansing to remove incorrect, out-of-date contact information and complying with the Data Protection Act
Data hygiene - the principles and practices that serve to maintain accuracy in computer data - is crucial for an effective customer relationship management system. It is a good idea to 'clean' your database regularly.
Your database can become inaccurate when your contacts:
- move between job roles and organisations
- change their email address or phone number
- move house
- change their name, eg after marriage
- have changes in circumstance that mean they no longer have an interest in your product or service
Customers that receive marketing communications that are inaccurate or not of interest may find it annoying. This can affect your reputation. Sending materials to the wrong person or address is also a waste of budget.
Updating your database
Updating and organising your data enhances your ability to communicate to the right customer. The Data Protection Act also requires you to update personal information you hold on databases. Under this act, you must hold customer data for no longer than os necessary.
Email bounce-backs and undelivered mail are a sign of out-of-date information. You should take steps to update or remove these contacts straight away.
It is also good practise to remove a contact who hasn't interacted or responded to your communications in a long time. This indicates they aren't interested.
Advanced data tagging and enhancement technology and services can provide the highest possible standards of data accuracy and consistency.
By adopting such methods, you can:
- Improve efficiency - businesses that do not employ data capture tools often have records that are misspelled, incorrect or missing important details.
- Ensure compliance with your legal obligations, particularly those relating to the Data Protection Act and electronic marketing. You need to consider your options for opt-ins and opt-outs. Consumers can opt out of being contacted by telephone, post or email, and it is important that people who have opted out are not contacted from your database.
- Improve campaign effectiveness - inaccurate data can result in the proposed message not reaching the targeted recipient, although you will still incur the cost of delivery.
If the information you have on record changes frequently, you might consider automating your update procedures, perhaps by means of integration with other systems.
Choosing a supplier for your customer database system
Criteria for selecting a supplier for system such as custom or off-the-shelf database software, and what to consider such as cost per licence and support costs
The main decision when choosing a supplier depends on the type of solution you need. You have a number of options:
- general database software
- off-the-shelf customer databases
- application service providers
It's a good idea to try to quantify the benefits you expect to receive by improving customer relationship management. It may help to calculate how it will affect revenues, profitability and the cost of servicing customers.
Return on investment
Fundamentally, you should regard this as an investment in your business rather than a cost. The return on that investment is not just an increase in new customer sales, but satisfied customers who feel that they are being treated as individuals and are therefore more likely to buy from you again.
You may want to set a budget and carry out a cost-benefit analysis, bearing the following points in mind:
- what the cost is per user or per licence
- how many software licences you need
- if buying a product, what the cost is of updates and in-house support costs
- if renting a service from a supplier, the set-up and subscription fees
- the cost of staff training, ongoing maintenance and help-desk support
Research your options
You could also find out about the most commonly employed solutions:
- within your industry
- adopted by similar-sized businesses in other sectors
You might find it helpful to prepare a brief and request proposals from two to four potential suppliers before choosing one.
You should be prepared to invest time and money into the process and consider some questions for potential CRM suppliers.