Creating a customer database
A customer database is most often used by businesses to gather customer contact details (with permission) and buying history, so information about products and services can then be sent to customers, or segments of customers.
On this page:
- Benefits of a customer database
- Which information to record
- Obtaining customer information
- Computer-based vs. manual databases
- Keeping your database up-to-date and secure
Benefits of a customer database
By using a customer database to keep in touch with, and market to, your customers, you can:
- increase awareness of your brand
- enhance marketing opportunities
- build and strengthen relationships between you and your customers
- build trust in your products and services
- increase your profits
Your best customers are your existing customers
Because your best customers are your existing customers, it makes sense to keep in touch with them. It is generally easier and cheaper to gain repeat sales from your existing customers than it is to find new ones.
Your marketing database will also help youidentify your 'types' of customers, and keep track of when you last sold to them.Using your database, you'll be able to identify similar groups of customers and tailor your marketing to them. For example, you might want to reward 'gold' (big-spending) customers with special offers or you might contact customers who you haven't heard from in the last three months. By keeping in touch with customers, your business maintains front-of-mind awareness with them.
Find out more about how to identify your customer groups by taking this free lesson, on how to target your marketing.
Direct marketing using email and mailouts
When you contact your customers directly with offers and information, this is known as direct marketing. Two common forms of direct marketing are email and mailouts. E-newsletters are often used in email marketing, and mailouts can include letters, catalogues, brochures, product samples with information, and coupons or vouchers. Find out more about using email marketing and personalised direct mail letters.
Which information to record
The basic information you need to record in your database are customers' names, email addresses and addresses. Other details you record will depend on your business, but may include:
- purchase history (if known)
- service history (if you are a service business)
- any complaints a customer has made or products they have returned
- birthdays (so you can send a discount voucher as a gift)
- in the case of business-to-business relationships, account history (do they pay on time?).
Recording buying habits / purchase history is perhaps most important because it enables you to see:
- what your best selling products or services are
- whether certain types of customers buy certain products more
- how long it has been since a customer purchased from you
- whether there are possibilities to sell customers products or services that complement those they have already purchased.
In addition, once you know each customer's purchase history, it quickly becomes apparent who your gold customers are - the small percentage of customers who provide most of your profit. This is sometimes known as the 80/20 rule - because commonly 80% of a company's business often only comes from 20% of its customers. When you know who these customers are, you can develop strategies to retain them; using resources you might not be able to afford to spend on all your customers. Find out how fashion designer Annah Stretton applies the 80/20 rule in her business by reading Success by design – Annah Stretton.
Obtaining customer information
From your own customers
Depending on the nature of your business, you may not even have to ask customers for their contact details as you may be invoicing them. However, you will still need to ask customers for their permission to contact them with promotional material, and assure them you won’t pass on their contact details to other parties. You could perhaps do this via email at the same time you send an electronic invoice or via a letter when you next ship an order to the customer. Make it easy for customers to get back to you with a 'yes please' or 'no thanks'.
If you have to actively seek customers' details, do it as part of the sales process in-person or via your website, and gain their permission to be contacted at the same time. When taking customers' information in-person, keep the questions limited so your customers don’t feel interrogated. Finally, make sure staff understand the importance of obtaining customers' contact details, and explain which information needs to be obtained, and how to record it.
Purchasing third-party lists
Customer databases or mailing lists can be bought; however, not only does this cost, but such lists will contain details of individuals not interested in receiving information about your business. In addition, such lists may be sold to many other businesses, meaning the people on the lists end up getting bombarded by numerous companies - including yours.
Furthermore, bear in mind the people on the list may not have actually agreed to have their contact details shared, or they may have fallen prey to a box automatically ticked 'yes please - share my details' because they did not actually see it at the bottom of a web page or order form. If this is the case, any information you send them will likely be viewed as spam - causing annoyance rather than interest in doing business with you.
It's far better to focus on your existing customers. This way, you can be sure the people on your list are interested in your products and services and are happy to be contacted by you.
To learn more about what you can and can't do with people's personal information, read the New Zealand Marketing Association's Best practice guidelines for direct marketing data [PDF 60kb].
Computer-based vs. manual databases
Your customer database will, ideally, grow continuously and therefore, its format needs to be user-friendly and adaptable. A manual database could take the form of a collection of business cards or a notebook, if you deal with other companies rather than the general public. However, there is a limit to how much information you can record using such systems, and once your database exceeds a certain size, pulling up information quickly will not be possible.
A computer-based customer database has many advantages - it can be easily updated, it has greater functionality, you can back it up, and information can be searched for and located quickly within it. A computer-based database can take the form of an Excel spreadsheet, or Customer Relationship Management (CRM) software. Ask around to find out what software others in your industry are using, and consider what scale system your business needs, how much you are willing to invest in software, and what training you and your staff will need to use it to its full potential.
Keeping your database up-to-date and secure
To get the most out of your database, the information needs to be accurate. You'll waste time and money emailing and posting to wrong addresses or to people who have left a company. Make sure you regularly 'clean' your database by updating contact details and customer purchase history, and check to see if any customers have become gold customers by making large purchases in recent times. Bear in mind that if your customers are predominantly under-30, their postal addresses are likely to change more often because many of them will be renting.
Make sure you back up your database regularly. To determine the frequency, work out how many customers' details you would lose if you lost a few weeks of information. In addition, consider limiting the staff who can access the list in full. It is not unheard of for disgruntled employees, or those leaving to work for a competitor, to take a copy of a former employer's customer database with them when they leave.
