Why databases are a valuable asset print Print

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Computer-based databases offer you a powerful tool for marketing more of your products and services to your existing customers, and speeding up business processes. This guide covers the benefits of a good database, how to set up a database, how you can learn more about your customers from a database so that you can find more customers like them, and how to generate more sales from a database.

This guide aims to show you why a good database is a valuable asset for your business. It concentrates on customer databases because these are most immediately beneficial for most businesses, but other databases (such as inventory or supplier databases) can also improve your business management significantly.


What is a database?

In simple terms, a database is a collection of information. All businesses already have databases of one kind or another. The business cards you have collected in your drawer or cardholder, your address book, or the Rolodex on your desk are essentially simple databases.

The more organised this information is, the more use it is to you. Entering details into a database software program allows you to harness the power of a computer; to sort and use the information efficiently to improve the running of your business and generate more sales.

For instance, generating invoices automatically from a database without having to retype all the details improves management efficiency, while mail merging direct marketing letters with a database improves your marketing efficiency.

Elements of a computer database

Each element of information in a database is entered into a separate Field. For example, in the case of customers the separate fields might be: First name, Last name, Street address, Suburb, City, Telephone, Fax, and Email.

Keeping fields separate allows you to sort information quickly (for instance, sorting Last names alphabetically). When you've filled in these fields for each customer, you've completed a Record of that customer's details.

A collection of records is known as a Table. You might want to keep different tables for different information. For example, you might want to keep records of all your suppliers in a separate table from your customers table.

A table, or a compilation of tables, makes up the Database. You can instruct the database to extract certain information from a table. For instance, you might want to know whether most of your clients come from the North Island or the South Island. A database capable of relating and extracting information from several tables at the same time is known as a relational database. Simpler databases that can work with only one table at a time are called flat file databases. Most modern database programs are relational.


What you can do with a database

Nearly every business would benefit from a customer database, because it costs you far less to sell more goods and services to your existing customers than to find new customers.

You can use the database:

  • To keep in touch with your customers and build a relationship with them (for example, through a newsletter)
  • To advise them of special offers
  • To sell them complementary products
  • To tell them about new products and services
  • To send information or offers only to selected groups

Such direct marketing tactics are very cost effective because:

  • You're sending the offers to people who have already done business with you
  • You can monitor the results more easily than other forms of advertising (such as newspaper adverts), because you can count the returns
  • You can send out test batches of letters containing different wording or offers, and analyse the results to develop the most effective direct marketing package.


A more focused marketing

A database also allows you to build up a profile of your customers and therefore target your marketing more effectively. For example, an exclusive shoe store uses its database to target the top 20% of its customers, who are repeat buyers and account for 80% of the store's sales.

It has a loyalty programme for this group, offering discounts if their purchases exceed a certain amount per year, and special privileges. These include invitations to preview new fashion stock, or choose items on sale before the general public has access.

Another example is a music shop that uses its database to identify its customers' listening preferences (such as classical music or jazz) and sends them out details of new recordings or complementary products that fit their buying profile.

By understanding more about the 'typical' profile of your best customers, you're also in a far better position to find more like them, through targeted promotional tactics rather than just general advertising.

In addition to generating more income, a good database will also help speed up your business processes through automatic insertion of stored records on invoices, labels, letters, etc.


Capturing the right information

The most important part in starting a database is to decide how you want to use it as a business tool. This decision will determine the basic design of the database. For example, is your marketing age or gender based? Do you need to add extra fields to capture this information?

The balance is always between simplicity and usefulness. Someone has to enter the information, and databases lose their value if they are not regularly updated (for instance, address changes). There is no point in making the task more onerous or time consuming than necessary, but remember that it's very difficult to add information later.

For instance, you may see no immediate purpose in collecting email addresses, but if you decide to start an email newsletter in a year's time, those email addresses become a valuable asset.

A logical approach is to start by considering your database in the context of your marketing strategy. List your marketing tactics. What information do you need to know about your customers in order to turn this list into action? Now look at your management functions. List the ways in which you would like use the information stored in the database for administrative purposes.


Setting up your database

Many businesses use consultants or companies that specialise in designing, setting up (and managing if necessary) their databases. Relational databases are powerful and do require some time and effort to master. It may be more cost-effective and quicker to contract a specialist than to invest time and money in training for you or your staff.

A specialist can:

  • Help you design and set up the database (the difficult part) in an efficient, user-friendly way, and give you some training in its use and powers.
  • Point out uses for the database that you haven't considered, including marketing uses and also administrative uses (automating certain tasks and avoiding duplication of effort).
  • Advise you on the appropriate database software for your business. For example, your computer might have come with 'bundled' database software, such as Microsoft Access, (part of the Microsoft Office suite) but this might not be the most appropriate choice for your particular circumstances.
  • Show you how to create a covering letter, and use mail merge to send 'personalised' letters to hundreds or thousands of customers.


Shoestring databases

If you're on a tight budget, it is possible to create your own database. Many small businesses also use Microsoft Excel to store and sort customer contact details. Others use simple databases such as Microsoft Works or Lotus Approach. Both programs offer tutorials and database templates to help you get started.

For example, a book publishing company successfully uses the relatively simple database program in Microsoft Works to keep a database of its customers' names, addresses and products they have bought. The company uses the database for direct marketing purposes, including mail merge and printing of labels. The company has now begun collecting email addresses of customers as well, with a view to cutting costs in future through an email newsletter. It envisages moving to a more powerful software program in the future, but staff experience with the Works program has given the business a good grounding in the power of databases, at a minimal direct cost.

Another shoestring tip is to remember that most email programs such as Microsoft Outlook or Firefox allow you to add email addresses to an address book at the click of a button. Start doing this immediately for all customers who contact you by email. Even if you switch to more powerful database program later, you can export the address book file to your new database.

In addition, if you use accounting software, you may already have a usable database. For example, customer contact information captured in MYOB Accounting's Contact List can be exported to Microsoft Outlook or an Excel spreadsheet. Many other accounting products (such as Xero) have similar functions.


Respecting the Privacy Act

It is beyond the scope of this guide to cover the Privacy Act in full (see the Resources section at the end for more information). It is important though that you respect its main principles. You're entitled to collect information about a customer for the lawful purposes of running your business (such as raising an invoice or keeping records of debtors), but if you intend using that information for marketing purposes, then you must ask permission from the person or organisation concerned.

It is best to do this at the time when you collect the information. People or businesses are entitled to know:

  • Why you want the information
  • What you'll be using it for
  • Who else will have access to that information.

You must give them the right to refuse to have their information used for marketing purposes. Make it clear that the information is stored securely, and that you never sell databases or mailing lists to other parties.

In general, few people will refuse if you tell them that you will only be contacting them with information that is useful or advantageous to them, such as new products, special offers, newsletter articles that offer valuable tips and knowledge, etc.



Database consultants

Many companies and consultants offer training and advice in computer database management. One of the best ways of finding suitable companies or individuals is to contact businesses similar to yours that use computer databases, and find out who helped them set up their database and how successful it has been for them.

Training opportunities

Other possible training sources include polytechnic courses or adult education classes at local schools. If you own a small business you may qualify for free Enterprise Training workshops. Call an ANZ Business Specialist on 0800 269 249 for details of workshops and seminars in your area or review the training on offer at the www.business.govt.nz website.

Privacy Act and direct marketing

For more information on the Privacy Act, visit the Privacy Commissioner's website www.privacy.org.nz and read or download the Guidelines for Business file.
You can also get useful advice from the New Zealand Direct Marketing Association's website, www.dma.co.nz or phone 06 751 1163.
The New Zealand Marketing Association website also offers useful resources.




Further information:

To talk to an ANZ Business Specialist:
Call 0800 269 249
Visit anz.co.nz/business
Visit your nearest ANZ branch


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