Improving the Profitability of Your Customer File

One of the best ways to improve the profitability of a customer marketing database is often overlooked. Keeping a customer file cleaned and updated is not a difficult task if a routine, regularly scheduled maintenance program is established and followed. The longer the maintenance aspects of a customer database are overlooked, the more ineffective the customer database becomes.

Routine ZIP code correction, address standardization, and elimination of duplicates are almost always done at the time of the mailing. Do not always rely on the post-processing at this time to keep the data cleaned and organized. The more accurate the customer database, the better the response will be. A regular maintenance plan is more cost-effective and time-effective than doing a major overhaul on a less frequent basis. It also makes sales reporting more accurate and reliable. Part of the maintenance program should include documenting the aging of customer records. There are no absolutes regarding how long a customer record should be kept, but it is difficult to imagine the rationale for keeping a customer record with no activity for longer than 36 months.

Keeping the sales and product information up to date is also critical to any marketing database. Without up-to-date and accurate information, database marketing becomes more of a guessing game than a solid marketing strategy.

The Basics

One of the key elements to a good marketing database is a solid structure to contain the data. While this may seem elementary, good field definition and database rules are not commonplace in the education market. A typical marketing database in the educational market should have dedicated fields for address information, since a great deal of database marketing is based on the address elements. Other factors to consider as you build your database include:

• Institution Name: There should be a dedicated field for the institution name that is never used for anything else.
• Primary Address Field: This should contain the main address, such as street or post office box information. It should not be used to house “attention to” information.
• Auxiliary Address Field: This is optional address information that helps to get the piece delivered after the piece arrives at the institution. Examples would be “Math Department” or “Library.”
• City, State, ZIP: If possible, each of these elements should have individual fields as well to enforce good data entry.
• Individual Name: Every database should have a dedicated field for the customer’s name. It should only contain a name and not title information. If maintaining a title is also important, then a separate field should be dedicated for title information. Keep in mind that customer job responsibilities can change, so maintaining titles can add a step to the upkeep requirement as well.

A lot of marketing database information is gathered from “ship to” or “bill to” information. Therefore, it is imperative that good data entry standards are set and maintained at the time of entry of the order. If there are multiple points of data entry, be sure that all personnel are following the same standards and procedures. System prompts and restrictions can be use to direct data entry standards. The use of system maintenance tables can also help in many cases.

Going a Step Further

Good maintenance, data structure, and database organization can do a lot to improve the profitability of the customer file. However, these methods are limited in scope. Today’s education market is constantly changing—more than 750 schools and districts closed or merged in each of the last two school years. Change in the marketplace causes lists to go stale if they are not updated and refreshed periodically. In a customer file containing three years’ worth of transactions, 20% or more of the educators are no longer at the institution.

Database marketing techniques can identify the closed schools and educators who are no longer at the institution. Closed institutions on a customer file are generally a small segment but, if a customer file is mailed 10 to 20 times over a period of 24 months, a significant amount of marketing resources are being waste—including money that could be used more effectively.

The quality of the mailing list is the single, most important factor that affects the response rate. Promotions must be targeted to the right audience, and they must reach their intended recipients. With the customer list, quality of data is also of the utmost importance. The delivery of a promotion depends on accurate names and addresses. If an educator has recently left the institution, it is likely that the promotion piece will be forwarded to the new person. However, if a person has not been at the institution for six months or longer, the forwarding rate decreases.

An education marketer can divide the customer file into three segments based on educators who:

• Are still present at the institution
• Have left the institution
• Cannot be validated

As expected, the educator still present at the institution is the best-performing segment. Typically, there is a response rate on the “no longer at the institution” because of the pass-along factor, but the response rate is low, making this an unprofitable segment. Again, re-allocation of those marketing dollars to profitable areas is the goal.

Methods for Improving Prospecting

One of the primary objectives of database marketing is to determine or improve the profitability of prospecting. It costs significantly more to acquire a new customer than to keep an existing customer, and all marketers have limited budgets. Education marketers are no exception.

There are many approaches to determining the best prospects. Some marketers do it by their knowledge of the market and their prospects. Others spend a lot of resources on complex statistical models that rank prospects for their propensity to respond. Where do you start?

Statistical models, such as CHAIDS, regression analysis, and neural net require significant internal and external resources. These statistical analyses should be explored only after more basic techniques are exhausted.

Finding the best prospects can start with customer profiling. Education marketers have the luxury of having a wealth of demographic information to use in profiling their customers. The concept is to find demographic clusters within the customer file that outperform the average. For example, a customer profile may indicate that a lot of customers cluster in suburban and rural areas with high enrollment. In addition, it may show that there are more customers in schools that have a higher Title I expenditure. Identifying the characteristics among your customers and prospects to help determine which segments will best respond to your direct marketing efforts is referred to as “pattern recognition.” Using this knowledge, marketers can focus more of their efforts on prospects that have the same demographic composition.