Maximise your profitablility - utilise your database, here's how...

It is widely accepted that in business valuations, an up-to-date, cleansed database is a business asset (although it will more than likely not be on the balance sheet) and it significantly enhances the desire to purchase a profitable business. In some businesses all they have to sell is a database, but what a lucrative asset it can be!

Many years ago, businesses didn’t have to keep information on customers – not even their names, purely because there were plenty of customers and you didn’t have to “fight” for your market share. Ah, but times have changed.

Database management, profiling and segmentation, customer relationship management software, client value and behaviour patterns, database marketing, attrition and retention rates are all in use to maximise the return on the asset and investment that is your database.

Why should I bother you ask? Well the first point I raised is fairly important from a wealth creation perspective and there are many others. Customers who have bought from you in the past are highly likely to purchase from you again in the future. It’s cheaper, more effective and more profitable to promote to customers who actually like what you’re offering (as they’ve had a positive experience from you in the past. Customers today are more discerning; they’re educated and they are individuals who want to be treated as such – not just a number. So the more you can “connect” and understand their needs, desires and motivations the more you can provide them what they want = the more they’ll buy = greater profitability.

“Although I invented the term "profit center" 40 years ago – one of my lesser contributions – a subsidiary of a division is not a profit center, but a cost center. The only profit center is the customer. Until the customer has paid his bill, there are only costs, and until the customer has come back with a repeat order there is no customer.”
PeterDrucker – management consultant guru

That was one smart Italian!

To further substantiate the point (which is based upon Alfredo Pareto’s principle of the 20:80 theory), the top 20% of your customers (by sales value) will deliver more than 80% of your profits!* So in very simple terms - develop the value of your existing clients and you will increase your profits dramatically. Fact.

“If eighty percent of your sales come from twenty percent of all of your items, just carry those twenty percent."
Henry Kissinger- former US Secretary of State

So maximising the database is a very effective way of developing greater profits. But, to make it effective, the database isn’t just a list of names, numbers and addresses with maybe their $ value to you (an operational database); to make it truly profit generating the database should be grouped, segmented and defined according to influencing and motivational factors. The most commonly used technique for direct marketers is F.R.A.C:

•         Frequency (what is their trend of purchasing)

•         Recency (last time they purchased)

•         Amount (how much they spend with you) and

•         Category (what segment type they are under), and previous transactional information on products or services purchased.

Now in the ideal world one would have all this information and plenty of time to gather it, enter it, analyse it and determine the appropriate courses of action with it. Not quite so feasible when time is of the essence in busy business lives. What one has to do though is establish the information that will be the most important to know about one’s clients and then identify what will motivate or determine a purchase in the future.

Create a set of criteria for data collection that would assist in determining the clients’ motivations – Is it location? Is it price driven? Is it just demographic related? Is it a particular product or service you offer? Is it convenience? Is it by association – trend factors? It’s not just a matter of a whole lot of data, it’s the right type of data! (Remember we’re in the information age and you need to have the right information to get the right results.)

Once the factors are clear and recorded, you can then have a marketing database from which one can develop highly personalised relevant promotions and campaigns to clients, groups and segments increasing their value to you and thus profits.

I know of businesses that achieve over a 30% response rate (clients actually coming back in store and purchasing) by conducting fairly simple personalised marketing strategies to their database. 

How do you find this information you ask? As always fairly simple – ask them. Yes, survey clients and establish the information that you require, whether it be face to face, over the phone or in a written format, all one has to do is ask. It will take time and is an ongoing process, but like any relationship, the better you know them, the better you can fulfill their needs.

“Genius is 1% inspiration and 99% perspiration. Accordingly a genius is often merely a talented person who has done all of his or her homework.”
Thomas Edison - founder of General Electric

*Source: the Customer Marketing Method – Jay Curry, published by the Free Press.