A Tale of Two Databases: Marketing and Operational

In keeping with the move toward multichannel marketing, many catalogers are converting their house files into customer marketing databases, says Arthur Middleton Hughes, vice president/solutions architect for Richardson, TX-based database marketing firm KnowledgeBase Marketing. Some are using advanced techniques to increase customer response, retention, and cross-sells. In return they are seeing increased rates of retention and increased order sizes.

But to achieve these synergies, Hughes warns, you need to be using a marketing database. Using a traditional operational database won’t delivere the desired result.

“An operational database is used to process transactions and get out the monthly statements,” Hughes explains. “For a cataloger, this database is used to process the orders, to charge the credit cards, arrange shipment, and handle returns and credits. A marketing database gets its data from the operational database, if there is one.” But the marketing database includes much more:

• preferences and profiles provided by the customers

• promotion and response history from marketing campaigns

• appended data from external sources

• lifetime value and RFM (recency/frequency/monetary value) analysis, leading to creation of customer segments

• modeling for churn and next-best product

“The marketing database passes data back to the operational database,” Hughes says. “It may advise the operational database on which segment each customer has been placed in, which may lead to operational decisions. ‘Gold’ customers, for example, may get different operational treatment.” The marketing database can also inform the operational database of customer preferences leading to different operational treatment.

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