Customer Database: What It Is, What It's for, How to Run a Customer Base
The customer database is a must-have tool for the development of an organization, which leads to an increase in sales. The effectiveness of this mechanism depends on your skills in working with it. In order not to waste time, you should not collect numbers from potential customers without any further work. Therefore, we recommend finding out what you need a customer database for, how to create it if you have none, and how exactly to work with it, providing the protection of customer data.
What is a customer database
The customer database is the personal data of clients, which you can use effectively. On the one hand, it looks like a simple list of leads. But in fact, this tool is much more complex than it seems at a glance. A customer database is a detailed history of the relationship between an organization and a customer. It provides a personalized approach to each customer because it contains information about to whom and at what time it is best to make an advantageous offer that motivates the customer to purchase a product or service.
The emphasis should be made not only on rebuy of loyal customers, but also on a systematic, individualized approach. To clarify, here is an example. A person got interested in a certain car model on the dealer's website and left a phone number to inquire about detailed information. The sales manager contacted the potential buyer. It turned out that the person was in financial difficulty due to a job loss. What solutions could be made here? One of the probable events is that the salesperson determines that there would be no sale from this call and forgets about that person. But the best option would be to add the person's contact data into the database and contact him after a while, finding out whether his financial capabilities have changed, and offering him a bargain on the required car model. This reminder would have an effective result.
Why do you need a customer base?
Maintaining a customer database and proper work with it brings the following benefits to the organization:
- Improving the quality of service by collecting personal information about your customers. For instance, when you know the customer's date of birth, age, whether they're attending university, and more, you can track their requests and send them offers specifically customized for them: holiday promo codes or student day discounts. That's how consumers get a positive impression of the company. This means your products and services get recommended to their acquaintances.
- By using the client base you can segment customers, for example, by their financial capabilities: the economy segment, the middle class, and VIP-clients.
- Organizing marketing promotions is far more effective if you are aware of your customers' preferred channels of communication. For some people, these are calls, some prefer social media notifications, and others prefer email newsletters.
- A customer database provides an opportunity to track customers' steps through the sales funnel, motivate them to make a purchase, or remind loyal customers about yourself. It is far more profitable to enrich the database with the personal data of customers who make purchases regularly than to attract a larger number of people who are not interested in the product.
- The customer database collects different kinds of information about customers. This way you can assess the company's prospects and consider your development strategy.
The basic types of customer databases
The customer database has two approaches: the first is based on the ways of collecting data about customers, the second is based on the specificity of this information. Let's take a closer look at the types of contact databases and their characteristics.
1. General customer base
In such a database potential buyers are included, who in the future may become loyal customers if you interact with them properly. This information can be provided by means of a marketing analysis of the market.
2. Active customer database
Customers who made at least one purchase within a certain period of time are taken into account here. The time period varies from one organization to another, but usually it is about a month.
3. Inactive customer database
This is a storage of information about those customers who have not recently made any purchases, but they can do it in the future.
4. Accountant customer database
This database stores information about customers' details and the history of orders. The current data is the data that the customer used last time.
5. Extended customer database
One of the most effective versions of client databases. It includes: personal data, demands, number of orders, regularity of purchases, etc.
This database is used for mass mailing in various situations. It stores customer contacts and their names. This database is not used for advanced marketing analysis.
How to create a customer database from scratch
If your company is just starting out, the question of how to collect a customer base from scratch is relevant to you. Its forming is carried out in several ways, from random creation to organized work with customers (exhibitions, conferences, conducting groups in social networks, etc.), which expands the opportunities for experts in the marketing sphere. To begin with it is advisable to understand each of the methods and choose the best options for your company, helping to interact effectively with customers.
A lead magnet is the most popular method, the essence of which is a special offer that the company presents to the audience in exchange for their data, such as email. A promotion, a gift for the first purchase, discounts - it all works perfectly for the customers and brings them benefits, and you in return expand your database.
SMM, or social media marketing is another low-cost and effective option for expanding your customer database. Constant high-quality and interesting content, conducting various contests, advertising from bloggers - these can attract the right target audience, also, it increases coverage and the chance of expanding your database. If you "warm up" your subscribers for a long time, the number of buyers is likely to increase, because they know you as a familiar organization to which they can trust to keep their contacts or personal data.
Visiting exhibitions, events and forums is a great way to increase customers' loyalty to the brand and the company. For example, fitness centers organize "open door days", where they hold various contests, training, raffle off certificates for visiting the gym, and hold workshops. Visitors get interested, leave their contact information, and subsequently buy a subscription and become loyal customers.
Hiring a competent manager is also an effective way. The clients who are used to working with a particular person trust this business relationship, and therefore the brand with which the person works. But finding such a specialist is not an easy thing to do. Acquiring partners is also a technique that works. It is essential to develop mutual cooperation with companies doing business in related business areas.
Cold calls is a technique that has traditionally had a low conversion rate, but it should not be disregarded at all. You should try and analyze the achieved results.
Ready-made client databases are a dubious option, as buying an already formed audience will not bring you new clients. In most cases, the contact information there is inactive, and users are not interested in your products or services. It’s up to you to decide whether it's worth buying a ready-made customer database or not.
Please note that in order to create an efficient database, it is important to thoroughly analyze your target audience. For instance, your business is to sell natural tea. Who may be interested in buying it? Young people from 18 to 25 who want to stand out; women over 25 years who choose healthy food; white-collar workers who prefer tasty tea, etc. This is just a small range of possible segments. By defining your audience, you will personalize your offers, thus making it easier and faster for you to gain a customer database.
Tools for maintaining client databases
In today's world, more and more organizations are using automated methods to manage their customer database. For this purpose, special services and programs are applied, as we analyze below.
Excel is the easiest and most versatile way to work with a customer database. It is appropriate if you have a small and medium business. The data is compiled in the form of a table, which is adjusted to the various purposes of the company. It is convenient to structure the information and store customer cards. This method is free. Among the disadvantages there is a threat of data loss and its copying, the inability to conduct a full-fledged audit.
Google Sheets is also a convenient and free option without any excessive functionality, there is the possibility to work as a team online and view changes. Among the disadvantages there is the fact that it is not suitable for big business, it is quite difficult to automate some processes, and the information security is insufficient.
Microsoft Access is the software that keeps your data safe and secure. You can maintain a cloud database, as well as work alone or with many users. The working mechanism is similar to Excel. Among the disadvantages there is the fact that in case of failure in the local network, the information may not be saved. There is also a risk of errors.
CRM systems are specially designed automated services for maintaining a customer database. It is considered the most reliable and convenient way for large organizations. It has a number of advantages over the previously mentioned programs: the ability to store any amount of data, connection to social networks, segmentation of users, statistics, tracking and optimization of managers' work, monitoring of the sales funnel. The program is set up to simplify the work of employees (for example, it processes the request left by the client, sends the necessary message, etc.). Among the disadvantages there is the complexity of training, as well as the fact that not all the functionality in the CRM is free.
How to segment the customer database
A thorough study of the target audience allows you to properly segment buyers. Thus, the customer base has its own criteria for dividing customers into groups. Let's analyze them in more detail.
The extent of "warming up" of the customers
In marketing, there are the categories of "cold", "warm" and "hot" customers. But what do they mean? The first term refers to a group of people who either don't know anything about the company at all, or who do, but aren't particularly interested in it. If you have some cold leads, or customers who have bought something from you on occasion, your job is to warm them up to the condition of "warm" customers. These people are potential customers who show interest in the company by signing up for email newsletters, social media, and participating in various promotions and lotteries. A "warm" client already has the opportunity to move to the "hot" condition - a regular customer who is interested in regular purchase of goods or services. Such clients bring a regular income to the company and are the easiest from the sales point of view.
Types of customers by their purchasing behavior
Customers can be classified in different ways and there are many of them. The use of one or another characteristic depends on the activity of the organization. Below we give examples to clarify how to work with different types of customers.
"Regular customers" or "friends" are a category of people who are interested particularly in your product and make regular purchases. They may also recommend your company to their acquaintances. This segment generates more than a half of the organization's income.
"Ordinary" or "average" customers are people who have made/are making purchases at your store, but they also purchase a product from another manufacturer.
"Thrifty" customers or "fans of discounts and promotions" are a category of people who scan the market in search of a better offer. For such customers, it is worth thinking through various marketing activities. This type also includes " accidental", "impulsive" consumers who purchase goods occasionally and irregularly.
"Specific" customers always know what they want and what terms of purchase they need. By studying their demands, the company can interest them and transfer them to the group of "regular customers".
"I'll just have a look" or "passers-by" can become your customers if you find the right approach to them.
It's worth mentioning that every customer belongs to a certain group. The customer is also able to transfer from one category to another or leave your customer base at all.
Level of importance of the client
Each client brings a particular profit to the company. Considering the LTV (Lifetime Value) index, interesting conclusions can be made. Customers can be ranked by their importance by means of ABC-analysis. At the top of the hierarchy there are the customers who bring the company the largest share of profits ( from 50-80%), and at the bottom there are those who bring up to 20%. Of course, you have to give priority to the most important customers. This requires learning how to properly segment customers (according to their financial solvency, preference for certain types of goods, etc.), and you can do this with the help of CRM. Segmentation helps you conduct marketing activities more effectively, while working in a more targeted way.
How to manage a customer database
For efficient work, you need to properly manage the company's database, making it more structured. The directory should include information about the organization - mode of operation, contacts for feedback, names of employees and their positions, links to social networks, etc. Next, you should segment your customers (by the level of loyalty, engagement, location, interests or hobbies, etc.) This way, it will be easier and more convenient to track each customer at the stages of the sales funnel. You can also record the stages of the transaction — which products the customer orders more often, what are the objections and needs of the customer, the status of the order, where it is, and so on. Please take into account the following important points:
Busyness of the client - you need to understand how much time a person is willing to dedicate to a conversation with you and put this data in the database.
Changes and new information - if there is any new information, it is important to enter it into the database in time.
One manager works with a particular client - it is important that the specialist who works with a certain consumer does not change, because he already knows the client "in person".
How to analyze the received data
The customer database is an excellent reflection of the effectiveness of your marketing strategy and the efficiency of your employees. But it's important to understand what your goals are. It may be identifying the most important customers or determining the reaction to a special offer. Depending on this, different types of analysis are recommended. Let's take a closer look at the most well-known of them.
RFM analysis is a method of segmenting customers by frequency and amount of purchases in order to identify those who bring more money. This method includes three evaluation categories: transaction age (Recency), transaction frequency (Frequency) and investment (Monetary). Separating by these methods helps determine which customers are loyal and which ones are inactive. This is the basis for creating advertising campaigns that are targeted on those customers who bring the maximum income.
ABC analysis is one of the most popular methods of analysis. It is based on the Pareto principle: 20% of the effort provides 80% of the result. The concept is to rank customers in terms of their importance. As a result, customers are divided into three groups: group A (the most valuable customers), group B (intermediate or medium), group C (the least valuable).
How to protect the customer data
It's important to properly protect the personal customer data that you add to the database and to keep it safe from public leakage.
These 5 ways can help keep your database secure:
Legal protection. It is important to properly determine the information that is not to be shared by employees. They, in their turn, must sign a non-disclosure agreement.
Permissions and access settings. It is essential to provide employees only with the data that you allow them to access.
Personal accounts. Each employee should have their own individual password and login. This is done in order to know who works with what sections/tools and to control all the activities.
Screenshot protection. This feature prohibits taking a screenshot and saving personal data of customers.
Reliable antivirus programs. It is important to have good antivirus programs for protection against third-party intrusion.
Creating, maintaining and expanding a customer database is a necessary factor for the successful development of an organization. By building marketing strategies for attracting new customers, data processing, analysis of information you increase company profits, increase the loyalty of your customers and estimate the effectiveness of your managers' work.
As you know, there are many services for managing a database of contacts. Your task is to choose the right one that suits the level and goals of your organization. The same applies to segmenting, maintaining and analyzing your client base.
Efficient and attentive work with the client base leads to a better relationship with consumers and increases sales. The main thing is to fill in the necessary information in time, to be able to segment the audience correctly and to provide the security of personal data.