This is a critical question that has to be answered by any company selling goods or services to assure its future existence.
A very interesting article, written by Everett Martin in "Sales and Marketing Management", even though of some years ago, explains more herein:
A very interesting article, written by Everett Martin in "Sales and Marketing Management", even though of some years ago, explains more herein:
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Section: Database Marketing: DO OR DIE
"We're trying to
make the sails while we're still sailing," says Eric Clem, barely
conscious of his play on words.
In trying to make
sales happen more effectively, Clem, marketing communications manager for
American Mobile Satellite Corporation, is in the same boat as most marketers
plying the uncharted waters of database marketing: he alters course
frequently and knows he's a long way from port.
"We didn't leap
into total automation," he says, describing how the process of building
a database for lead tracking and other tasks has ebbed and flowed for nearly
two years at the Reston, Virginia-based company, which provides satellite
services for cellular phone companies.
Despite his enthusiasm
for creating detailed profiles of prospects and customers, Clem, like
marketers at many small and mid-sized companies, dove into the process and
then found he could take it no farther, at least for now.
For one thing, half of
the company's 12 field salespeople keep their own databases on PCs that
aren't compatible with the software that Clem uses for lead tracking. For
another, a consultant is revamping the company's entire information system,
so that, when the job is finished by the middle of next year, all data on a
customer will be available in a single file. "It'll be one-stop shopping,"
he says eagerly, but for now all he can do is wait.
If most
business-to-business marketers were as far along as Clem on the databasing
curve, there would be no cause for alarm, but they're not. "I'm shocked
at how much bad marketing is going on," says consultant James R.
Rosenfield. "It's still a wasteland out there."
Even high-tech
companies that, presumably, should be leading the way, haven't gotten to
first base in databasing, says the San Diego-based Rosenfield, still smarting
from a recent run-in with IBM. Responding to an ad for the company's AS/400
computer system, he called the 800 number and waited while the phone rang
nine times. ("Three should be the maximum," he says.) Eventually, a
human being answered, only to put Rosenfield on hold for two minutes. When
the young man came back on the line, Rosenfield asked about the AS/400.
"What's
that?" the rep inquired.
"The computer you
advertised."
"Well, I don't
happen to be familiar with that," said the rep, letting drop that he
worked for an outside company. "All we do is send out brochures from
here."
At that point,
Rosenfield was ready to settle for a brochure, so he gave the rep his name
and address. To date, no material has arrived.
What, then, is this
concept that, while seeming to embody the right stuff for success in a
customer-focused era, has thus far failed to capture the fancy of top
management at most small and medium-sized companies? In his book, Strategic
Database Marketing, (Probus Publishing Company, 1994) Arthur M. Hughes
defines database marketing as "managing a computerized relational
database system that collects relevant data about customers and prospects,
which enables us to better service and establish long-term relationships with
them."
Done right, says
Hughes, databasing helps build loyalty, reduce attrition, and increase
customer satisfaction and sales. "The database is used to target
offerings to customers and prospects, enabling us to send the right message
at the right time to the right people."
Surviving
the 1990s
Despite its promise, many companies that should know better continue
to ignore database marketing or, worse, botch the job. In a gentler era, such
glitches as the one experienced by Rosenfield might be laughed off, but not
in the lean, mean 1990s. How serious is the problem? Several experts in the
area of database marketing contend that companies without a marketing
database will be out of business by, say, the year 2000.
"Probably sooner," says Tracy Emerick, president of Taurus
Direct Marketing, a Hampton, New Hampshire, consultancy. "With a finite
number of business sites and households out there, you can't afford not to
have a lock on your customers."
The strongest blast comes from the head of a small industrial company
who, after trials and tribulation, installed a marketing database and cleaned
up on the competition. "You're an idiot if you don't at least use some
databasing techniques," says this CEO, who, because competitors haven't
caught on to his act, prefers to remain anonymous.
"It can't hurt," he continues. "It's an easy way to
access and segment information about your customers, which, by the way, is a
good working definition of database marketing."
In a mundane industrial market where most companies rely mainly on
their own sales forces or independent reps to promote their products, the CEO
had the nerve to fire his own reps six years ago and, using a database to
prioritize his sales effort, built strong relationships with customers via
direct mail, trade shows, telesales, and ads in industry publications.
"Frequency is the key," he says, revealing his promotional bias.
"We call people once a quarter. I like repetition: reach and
frequency!"
Another critical difference from traditional selling is that those
calls aren't strong-arm sales pitches. They generate orders, but they also
glean information to update the database. "It's a mistake to compensate
salespeople solely for selling when you should be paying them to get information
about prospects and customers as well," says the CEO.
Scoffing at the notion that databasing is just for mega-corporations,
the CEO argues that "it makes more sense for small companies, because
the president or owner is likely to be the company's chief salesperson as
well." Backed by reliable information about people genuinely interested
in the company's product, the president can concentrate on the prospects and
customers most likely to buy.
Why, then, is databasing so scarce among small and medium-sized
companies? "People are scared of the term," snaps the CEO.
"They think it means computers, which ain't necessarily so. We put
everything on index cards for the first two years, before shifting over to
computers."
Stone
Age Databases
Deep in the crevices of the managerial mind, however, is the hope that
customer loyalty can be maintained by a field sales force steeped in the
knowledge of their accounts right down to wedding anniversaries and
preference in football teams. Top salespeople, in fact, scribbled down such
tidbits long before anyone heard of databasing. The problem is that many
field reps either scribble the wrong information or, seeing no long-term
payout, don't bother to do anything.
At worst, this means the company is paying dearly to have most of its
salespeople calling blindly on prospects. At best, it means the elite
performers on the sales force possess an intimate knowledge of their
accounts, which they may or may not snare with other departments in the
company.
Either way, the chances are excellent that few people have a handle on
who the company's best customers are and, even more important, why they buy.
"If you want to develop long-term relationships, you've got to know how
you acquire customers," Frederick W. Timmerman Jr., executive director
of corporate research for United States Automobile Association (USAA) said at
a recent conference held by the Marketing Institute.
For Timmerman, this means systematically keeping in touch with your
clientele and doing it without bothering them. USAA, based in San Antonio,
Texas, started out as an association providing auto insurance to both active
and retired military personnel and their families. As it has expanded into
mutual funds and other areas of financial services, it has relied on a
combination of continuous research and customer care to nail down its
position in a hotly competitive market. Today, with a membership of 10,000,
it has gone beyond market segmentation to deal with each person one-on-one.
"We talk to each member four times a year," says Timmerman,
noting that people can request not to be called. "It's important to know
whether members want to be communicated with by phone or mail."
Developing trust is a gradual process, he says. Once someone feels
comfortable talking to a rep, it's possible to ask open-ended questions that
truly enrich a database. "We ask members who else they're doing business
with, who's their banker," says Timmerman, "to see how we compare with
them."
Knowing where customers are coming from is a big step toward knowing
where they're going, which, its advocates proclaim, is the destiny of
database marketing. "We are in the midst of a fundamental change in the
way business-to-business firms market," says Randall B. Bean, a vice
president with database builder Harte-Hanks Data Technologies.
Look
Who's Driving
Bean points out that, as technology makes it possible to communicate
with likely buyers on a one-on-one basis, people are referring to the process
as database-driven marketing. A few years ago, marketers might have recoiled
at the thought of digitized information driving them to do anything, but Bean
says, where he once dealt almost entirely with banks and other financial
services marketers, he now has clients in 15 major industries.
"It's much more than people just climbing on a bandwagon,"
he says. "Databasing enables management to measure the effectiveness of
the entire business. This could involve anything from examining how a company
creates new business to looking at opportunities for cross selling and
identifying the best prospects for new products."
Currently, it's hard to find many instances where sales, marketing,
operations, and finance are all singing off the same computerized song sheet.
Indeed, Bean says that, when he walks into a client's headquarters for the
first time, he's likely to be confronted with an oversupply of balkanized
databases. "To get one view of the customer, I may have to consolidate
from five to two hundred sources of information at one company," he
says.
Such consolidation is well worth the effort, says James W. Obermayer,
vice president of sales and marketing of Inquiry Handling Service Inc. in San
Fernando, California. Describing the rigors of building an intelligent
database, he says, "The challenge is to structure relationships between
existing company databases. For example, all sorts of patterns emerge when
you integrate a database of prospects against accounts receivable."
Database marketing is wrongly criticized, says Obermayer, because some
companies attempt to solve their problems with what he calls "ignorant
databases." Usually, these are just lists of company names, often
purchased from an outside supplier. They may include the name of a contact at
each company, but there is no indication of why prospects might want to buy
the company's product or what they would do with it.
That's the least a marketer should expect from a relational database,
says Ed Pfeiffer, a direct marketing adviser to Deloitte & Touche LLP.
Although the technology has been in place for some time, however, most senior
managers look on it as a way to process data faster rather than a strategic
tool that can radically alter the way they look at their business.
Mixing Beer and Diapers
When management embraces the concept, though, the results can be
dramatic, says Pfeiffer, observing that a little number crunching will turn
up some "crazy, random correlations" that let marketers pounce on a
sales opportunity. For example, he relates how marketers at a large warehouse
club suddenly noticed an unlikely correlation between sales of disposable
diapers and beer. Checking into the matter, they found that young fathers
assigned to buy diapers in the evening often picked up a six pack on the same
trip. To enhance the process, the store moved a beer display next to the
diapers, and sales jumped 10 percent.
Although a small business-to-business company theoretically could come
up with computerized insights of this sort, the odds are against it, at least
for the time being. Unlike the anonymous CEO who built his own system, most
heads of small and medium-sized companies have shown little stomach for
embracing database marketing as a strategic tool.
Even if they did, they would find the cost of a ready-made system
prohibitive. "Done properly, databasing pays for itself quickly,"
says Bean of Harte-Hanks, but because of economies of scale, it's expensive
for a small company to undertake.
In the end, most business-to-business marketers who see the light will
probably pursue a course similar to that charted by Eric Clem of American
Mobile Satellite. Using the SNAP program from Dun & Bradstreet's Sales
Technologies subsidiary, Clem maintains his own database of prospects gleaned
from ads he's run in trade publications. "It's changed the way we
advertise," he says. "We know which publications have a high
response rate and which ones don't."
But, even though he works closely with the sales force, there's no
system in place to inform him of the fate of a lead once he's handed it off
to the appropriate rep in the field.
Hopefully, Clem and his superiors are getting into databasing in time
to hold their own in a hotly competitive market. Unfortunately, many other
marketers are content to approach the subject like politicians invoking
motherhood: by extolling the virtues of a painful process they're certain
never to experience first-hand.
PHOTO (COLOR): Database on business-to-business firms.
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BY MARTIN EVERETT
BETTING YOUR DOLLARS ON A DATABASE
Any marketer can get a small
company into database marketing on their own without spending a lot of money,
if they happen to be handy with a computer. Very handy.
By extracting data from existing
account files and dumping it into a desktop system, marketing executives can
create an accessible picture of your company's best customers for less than
$3,000. Buy some outside lists to put on top of this, and you can do an
efficient job of prospecting as well.
Unless they happen to have people
who are intimately familiar with marketing databases, larger companies are
likely to hire an outside firm to get them on line. Cost: $100,000 and up to
create the database and at least $200,000 a year to maintain it.
"The kiss of doom is to use
your own management information systems people," quips consultant James
R. Rosenfield. Industry experts say relying on in-house MIS staff is a
mistake for two reasons. First, most MIS people have never built a marketing
database, so it's likely to take them longer than a professional databasing
company to come up with what is needed, and they may bust the budget in the
process. Second, there's a political advantage in retaining an outside
service bureau, because it will create and maintain a database at the
marketing department's behest.
Regardless of whether the project
is handled inside or outside, it's important that it be directed by a team
headed by a strong marketing executive. In his book, The Complete Database
Marketer (Probus Publishing Company, 1991), Arthur M. Hughes suggests having
two types of people on the team, whom he calls constructors and creators. The
former like to put pieces together, as in computer programing or tinkering
with hardware. The latter enjoy developing ideas for using the information
once it's in the database.
Of tightfisted skeptics, Hughes
asks: "Can you afford all these [database] fields? Can you afford not to
have them if your competition moves heavily into database marketing?"
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By
Martin Everett
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