KDB urges smart use of customer data

KDB has considered the importance of customer data smartly, especially during a period of financial uncertainty.

Knowing your customers is one of the first rules any good marketer learns.

But during a recession, it is all the more important for companies to know which consumers or business buyers best match the profiles of their most loyal and profitable customers - or simply of those that are willing to spend, given the current economic climate.

When times are good, consumers may be more willing to take a punt and marketers have a certain amount of leeway in their approaches.

For instance, a potential customer may not be thinking of buying a new mobile phone and on the surface may not seem a particularly good candidate.

But if that consumer has plenty of disposable income and few worries about the future, he or she may be enticed to splash out anyway.

However, consumers are now more watchful of their spending and speculative campaigns are likely to have a much lower yield.

With less of a margin for error, it is increasingly important to ensure that marketing campaigns are targeted at the right people.

The difference between a good campaign and a bad one can be determined by the people it targets.

If incorrect or obsolete data is causing the material to be sent to consumers in the wrong market segments or firms to aim at consumers with profiles that are unlikely to produce profitable relationships, the campaign is a failure.

Despite this, our latest study shows that fewer than half the financial decision-makers in key UK firms think that companies in their industry sector are using customer data to drive marketing initiatives.

When asked if, overall, most firms in their sector were able to access and analyse customer data and then use this intelligence in their marketing, only 43 per cent of the finance directors and senior financial managers surveyed said yes.

However, using customer data to inform marketing strategies is vital in the current economic environment.

The findings of another piece of research we recently published found that the vast majority of UK consumers say that companies are failing in their efforts to reach them with relevant direct marketing communications.

The survey showed that only 12 per cent of UK consumers said they are receiving offers via direct marketing that is of personal relevance to them, while 54 per cent said that virtually none of the offers were relevant to them.

The research also revealed that 42 per cent of respondents said most of the direct marketing offers they are receiving come from companies they already deal with.

The fact is that customer data is a tool that is easily at the disposal of most businesses and, when used smartly, it helps them to make sure they are focusing on both existing and potential customers that will help keep up their margins and cash flow in the face of the recession.

The last thing marketers should be doing is wasting their budgets on less profitable customers or those who will not stick around long enough to make the marketing investment that went into gaining their business worthwhile.

Firms should therefore be using customer data to get the most out of existing customers so that they can up-sell and cross-sell additional products or services.

This understanding then needs to be applied to prospects.

Segmentation and modelling techniques can be used to create detailed profiles from the existing customer base of exactly who the right customers are, and establish what they buy, how they buy, how much they spend, and their preferred channel of communication.

This can provide a comprehensive picture of the key customers and should then be used to approach lookalikes - in other words, the potential customers who are most likely to be interested in, and respond to, an offering.

By taking this customer insight and applying it to prospecting activities retailers are able to contact prospects through their preferred channels, at the right moment, and with offers that interest them.

By doing so, they increase the likelihood of gaining long-term customers.

In our survey of UK firms, we found that many sectors were failing to use this insight to gain a competitive advantage.

Sectors in which the use of customer data to inform marketing was seen as weak included: retail with only 38 per cent of the respondents seeing firms in their sector using insight; media and marketing with 36 per cent; and utilities and telecoms with 36 per cent.

But use of customer intelligence is not poor across all sectors - 65 per cent of the financial decision-makers in travel and transport said firms in their sector were making effective use of customer data as did 50 per cent of those in banking.

Hospitality and catering provided the best example of a sector that is making good use of customer insight.

According to our research, 72 per cent of the respondents in this sector said firms were making good use of customer insight in their marketing.

These are sectors in which loyalty programmes and database marketing initiatives, as well as high standards of customer relationship management (CRM) communication, are critical to building strong customer relationships and ensuring repeat business.

Being recognised as a valued customer has an overwhelming influence on the likelihood of a customer revisiting.

The benefits of detailed customer insight are clear: the better you know your customers, the more likely you are to know what they will want to buy.

It allows marketers to tailor their marketing in an informed way - and to target more precisely.

This is increasingly important as public irritation at the nuisance level of unwanted marketing materials means making sure communications are relevant, well-timed and delivered through the right channel is vital.

Companies that want to promote a responsible image and foster customer loyalty will be reluctant to cause tension with customers by contacting them in a way that does not suit them.

Marketing material that is viewed as irrelevant is not only a waste of money - it also leads the consumer to consider the company as being out of touch.

What's more, marketing budgets are being cut just as consumers are becoming increasingly cautious in the face of economic turmoil.

Marketers are therefore under increasing pressure to make their campaigns more targeted in order to increase yield on smaller volumes of marketing and CRM communications.

Lastly, customer insight needs to be an ongoing process rather than an isolated incident, so that businesses can change with their customers.

Otherwise, they will find themselves approaching today's customers with last year's data and parameters.

Good quality data gives marketers a knowledge of customers that is essential to well-targeted campaigns.

As the market becomes increasingly difficult, campaigns need to become smarter if they are to at least come close to maintaining past levels of return on investment.

In the long term, this may be no bad thing.

The discipline imposed by economic difficulties can help to instil the sort of best practice that it can be too easy to ignore during a boom.

Good data habits adopted now will allow marketers to reap the rewards again when the economy recovers.

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