Top Ten Most Common Mistakes Made By Direct Marketers Regarding the Use of a Customer Database
By Perry D. Drake

The following article, written by Perry D Drake, appeared in DM News, July 22, 2002.
Compiled from Perry's new book "Optimal Database Marketing," it provides direct marketers with a listing of the most common mis-uses of a marketing database.

Marketing databases allow marketers to reach customers and cultivate relationships more effectively and efficiently than ever before thanks in part to technological advances. They provide a means to establish and enhance relationships, that is, if they are designed properly and used correctly. Unfortunately, this is often not the case.

However, through just some basic understanding of the issues surrounding the build and use of a customer database, a direct marketer can put themselves in a position to best exploit this most valuable company asset.

Some of the most common mistakes made by direct marketers regarding the establishment and use of a customer database and the information it contains are:

  • Having no methods or procedures established for monitoring the vitality of the customer base over time. Statistics such as retention, reactivation, conversion and percent new-to-file will allow a direct marketer to more easily determine the success of various marketing strategies and head off problems before they become inevitable and capitalize on opportunities.

  • Lack of proper standards regarding data hygiene including householding the file prior the delivery of promotions, NCOA processing, etc. The result being mailing inefficiencies and potential customer service problems. According to the DMAís List Database Council/Research Departments 19th Annual List Usage Survey only 61% of responding companies use NCOA processing. Scrub that data!

  • The perception that all response models are created equal. Many managers donít realize that roughly 75% of the analysts time should be spent becoming intimate with the customer data through data manipulation and massage to ensure itís predictive power is exploited to itís fullest potential. As such, one can say, it is as much an art as it is a science.

  • Misunderstanding of how to properly use a gains or lift chart when making a promotional decision and often basing decisions on the cumulative and not incremental gains. One should think of the ďbucketsĒ of a gains chart as nothing more than unique customer segments and determine which ones individually met your requirements for the mailing campaign.

  • Lack of basic knowledge regarding database architecture, hardware and software. Lacking even a basic knowledge, a marketer is not in the best position to establish marketing specifications for the database that are reasonable and will maximize effectiveness.

  • Little knowledge of the rules that must be followed when establishing promotional or list tests to ensure results are readable, reliable and projectable and a lack of understanding of how to read test results once final. Testing is the foundation upon which a direct marketer builds their business. With a database, names can be selected for certain treatments and comparisons on the customerís reaction to these treatments made. Based on these results, in conjunction with marketing cost and revenue figures, the most profitable decision can be made. Without knowledge of proper test planning and analysis, one therefore is not in the strongest position to help their company grow. Learning the proper way to design and analyze your marketing tests is not difficult, it simply takes a certain amount of discipline.

  • When contemplating a database build, underestimating the effort and skill set required. Such a project will be highly complex and time-consuming. Specific steps are required to ensure success such as determining current and future data requirements and business rules, specifying ad-hoc reporting needs, determining maintenance schedules, evaluation of resource needs for the build and the on-going maintenance of the database, etc.

  • Not monitoring or inadequately monitoring promotional intensity over time. Email communications, acknowledgements, product inserts, and even name rental all add to list fatigue. Customers can handle only so many communications and promotions without it beginning to have a negative effect on response. Some more than others. Donít forget, your best customers are also very likely to be someone elseís best customers. Through some simple testing, you can gauge the effects of over promoting your customers and therefore determine the most appropriate strategy.

  • Lacking a standard segmentation scheme by which to measure and track customers over time and yield more efficiencies in marketing campaigns. You use these segments in part to monitor customer vitality and migration over time and to develop stable and reliable forecasts.

  • Purging customer records after 24 months of inactivity (or less). Most marketers do not understand the implications of doing this. When purging such data, you cannot properly measure customer lifetime value and make comparisons between marketing programs, you become less efficient in future mailing campaigns, and you cannot create analysis files for purposes of determining what uniquely separates responders from non-responders or renewers from non-renewers for tests conducted more than two years ago. At a minimum, a direct marketer should roll up key data for inactives including all promotional data and make available for future analysis purposes for at least 4 years. If database storage space is an issue, then store and save such inactives to tape.

Having a customer database is great. But if it is not utilized fully or properly it can and will become a costly overhead and eventually be considered a failure by upper management. And, that is unfortunate.

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