Live from DMA06: Nine Database Marketing Sins to Avoid

Oct 18, 2006 7:04 PM  By

San Francisco—The early morning session at any conference can do a lot to put attendees on the right path for the rest of the day, and Arthur Hughes’s “Nine Deadly Mistakes in Database Marketing” session on Tuesday morning was certainly not a snoozer. The spry senior, author, and vice president/solutions architect of technology-enabled marketing firm KnowledgeBase Marketing held the audience’s attention with clever anecdotes, case studies, and stories about direct marketers who have excelled and failed when it came to leveraging their databases.

After admonishing attendees that every marketer should not only have a database of customer information and preferences but also actually use the information, Hughes emphasized that “database marketing only works if customers benefit from it.” To illustrate his point, Hughes gave nine ways that marketers fail in database marketing:

1) Lack of a marketing strategy. Database building, Hughes said, is easy, but making money with a database is difficult. To create a strategy, marketers need to figure out what motivates customers, then market to them via user groups, newsletters, loyalty programs, status levels, and event-driven communication such as birthday gift purchase reminders. Above all, Hughes said, you should put yourself in your customers’ shoes: “Would it work for you?” he asked.

2) A focus on price instead of service. Database marketing should be used to build loyalty, something that discounts and coupons don’t do, because they train customers to think about price rather than quality. Hughes said marketers should use databases to provide a dialogue and recognize and serve customers.

3) Failure to use tests and controls. Marketers must set up control groups when testing new communications so that there is a standard metric to compare new metrics to. “You should do this every time you send out messages,” said Hughes. “There should be a difference, and if there’s not, then you’re wasting your time.” Key metrics to measure: response rate, return on investment, lifetime value, and profit.

4) Lack of a segment strategy. The entire database should not be treated equally, Hughes said. Rather, customers should be segmented and marketed to in a way that will resonate. For example, an airline’s “silver level” passengers should be marketed to more heavily than its “gold level” customers because the company has more to gain from converting the silver-level flyers to even more frequent customers. The gold-level passengers, meanwhile, have already reached their fullest potential in terms of spend, so the airline will not see as much return on continuing to market to them at such high levels—though of course the airline still needs to invest in them in order to retain their business. (See #7 below.)

5) Failure to use the Web. Use your database to personalize customers’ online experience by greeting them by name when they visit your Website. Follow this with immediate feedback when an order is place by providing a confirmation page and e-mail.

6) Building the database inhouse. The skills to create a well-functioning database are far different from other IT skills, Hughes said. With scores of vendors with experience building databases, he advised marketers to outsource the building of the database and to focus on marketing instead.

7) Treating all customers alike. It sounds so simple—and it is: Loyal customers are more profitable than new or disloyal customers. Yet many companies fail to continue marketing to profitable customer segments. Hughes told attendees to budget for a retention strategy…which leads us to…

8) Failure to develop a retention program. This can be as simple as communicating with customers. “People like to hear from you,” said Hughes.

9) Lack of a forceful leader. Database marketing success requires directing the activities of internal and external departments. Without a leader, goals across multiple departments won’t get accomplished.