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 outlines the practical steps in getting a database started, such as what sort of system you need, how to find the right solutions provider and how to develop your customer database.

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Using your sales and marketing database to improve customer relationships

The better our business can manage its relationships with customers, the more successful it will become.

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

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 can find information on cost to serve on the FAFH Consulting website- Opens in a new window.

You can read about CRM in our guide to customer relationship management.

Read some rules about buying databases in our guide on email marketing.

CRM regulations

Direct electronic marketing is regulated by the Privacy and Electronic Communications Regulations 2003. 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.

Read more about privacy laws in an overview of email marketing under privacy laws in our guide on email marketing.

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Set up a customer relationship management system

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 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. For more information, see the page in this guide on compiling your customer data.

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, see the page in this guide on 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) – known as ‘cloud computing’. For more information about the benefits and risks of this option see our guide on cloud computing.

You can read about ASPs and outsourcing on the Software Source website- Opens in a new window.

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 our guides on email marketing and IT and e-commerce.

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Compiling your customer data

You can use information already held about your customers – whether on manual or computerised systems – to build a database. It is a good idea to check the accuracy of this data, before compiling your database. See the page in this guide on keeping your customer database accurate.

Think about how to find out who your best and worst customers are and what they buy from you.

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, check that you have complied fully with legal requirements, particularly those of the Data Protection Act 1998. See our guide on how to comply with data protection legislation. You can also find out about the Data Protection Act 1998 on the Information Commissioner’s Office (ICO) website.

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Developing your customer database

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. 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. For more information, see the page on how to target the right people in our guide on email marketing.

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.

Having established a customer profile, you should then consider looking for additional prospects by buying in a tailored database or list. Bear in mind that it is only usually possible to buy and sell personal information held in a database if the people concerned have agreed that their information can be passed on. For more information, see the page on rules about buying databases in our guide on email marketing.

For a fee, you could become a member of the Direct Marketing Association on the DMA website- Opens in a new window, 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.

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Keeping your customer database accurate

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.

Inaccurate data not only wastes your budget, but it can adversely affect your business’ image through:

• wrong addressing
• duplicated mailings
• personalisation errors

Updating and organising your data enhances your ability to communicate to the right customer. The Data Protection Act 1998 also requires you to update personal information you hold on databases. Under this act, you must only hold customer data for as long as you need it. Read about the Data Protection Act 1998 on the Information Commissioner’s Office (ICO) website- Opens in a new window. You should not retain personal information for future use. For more information, see our guide on email marketing.

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 1998 and electronic marketing. Consumers can opt out of being contacted by telephone, fax, post or email, and it is important that people who have opted out are not contacted from your database. See the page on opt-ins and opt-outs in our guide on email marketing.
• 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.

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How to choose a supplier for your customer database system

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
• consultants
• database bureaux
• 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.

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

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. For more information, see the page on questions for CRM suppliers in our guide on customer relationship management.

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