Building and Managing Your Marketing Database, Cont.
Lesson 2: DATABASE APPLICATIONS
Let's examine some of the most important applications of your marketing database.
Reporting
Analyzing the data in your marketing database will give you an ongoing status of where your business stands in response to any marketing programs you create. You should be able to use your database to track how much revenue you’re generating from each marketing promotion and the exact promotional source you’re getting the new sales from (for more about source codes, see Promotional Source Codes).
To be an effective reporting tool, your marketing database should provide you with the following information:
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The ongoing status of your business, including response to your marketing programs, how much revenue you are getting, and who it is coming from. |
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Counts from your house file by segment, including geography, source, age, income, company size, etc. |
Profiling
Profiling helps you develop a better business understanding of your market by allowing you to analyze the people who are responding to your programs. Profiling will allow you to group customers into categories. It should also be used to guide your creative development, product selection and marketing program development.
Response Analysis
Response analysis will allow you to develop segmentation methodologies, development of new products, and evaluation of the cost and effectiveness of your marketing promotions. We'll cover this important topic in much greater detail in one of our upcoming tutorials.
Lifetime Value Estimation
One of the key uses of your database will be to determine the lifetime value of your customer, in other words, what a customer is worth to you over time. A more formal definition of the lifetime value of your customer is what a customer will purchase from you in the future, calculated at today’s prices using net present value.
Understanding this critical piece of information will allow you figure out what you should spend to acquire that customer. You don’t know how much you can afford to lose or to pay to get that customer unless you know his or her long-term value to your company. And the best way to accurately determine that long-term value is to analyze the information that you collect in your marketing database.
List Segmentation
Finally, a properly constructed marketing database will allow you to segment your customers and prospects into various target market groups as you grow your business. Targeting your prospects more effectively will save you much time and money in the execution of your direct marketing programs. For example, let’s assume that your company makes high-end servers for medium to large-sized companies in the business-to-business market. In 2002, you decide to develop a new product especially designed for Fortune 1000 customers. Marketing this new product will require you to reach managers from Fortune 1000 companies. Of course you will not be able to do that segmentation unless you included company size in your initial data element definition.
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