Customer Databases and CRM

A recent poll by IT firm Cisco showed that, to combat the difficult economic conditions, UK firms were turning their attention to building on existing customer relationships. More than half said they had already introduced customer service improvements in 2009 and a further 42% said they were moving their focus from acquiring new customers to encouraging loyalty from their existing ones.

David Critchley, Head of SME at the UK branch of IT firm Cisco, has been kind enough to write an article specially for the Toolkit to explain the results of the survey and why customer relationship management is so important to small businesses. Click here to view the Cisco UK article.

The bedrock of good customer relationship management (CRM) is an effective customer database that is easy enough for staff to actually use on a daily basis. This article looks at the basics of building a customer database and using it for effective CRM.

What is a customer database?

A customer database is a collection of customer names, contact details and other details (such as when they visited you) that allows you to find out information about your customers and contact them again. It can be a paper system (eg a book or diary) or an electronic system (a spreadsheet or electronic database). The best systems collect information about enquirers (those who enquire but don’t actually book or buy) as well as customers (those who actually spend money with you) as part of the natural process of dealing with and serving your customers.

Why should you have one?

Customer databases are essential for even the tiniest businesses for two reasons:

The more you know about your customers and their buying habits the better you can tailor your products, services, marketing and cash flow
If you’ve got customer and prospective customer details you can send marketing letters or emails – one of the most effective and cost effective forms of marketing

What should you consider?

There are three big considerations when choosing how to set up and run a customer database:

Strike a balance between collecting a lot of information, and ease and speed of use. If your system is too complicated, time consuming or inconvenient, you and you staff will soon stop using it – or you’ll enter information retrospectively and end up with gaps and errors. It is better to have a simpler system, and preferably one that is a seamless part of your day to day tasks, than a complex one which might offer you more options, but is never properly up to date.
How will you keep it up to date and avoid duplication? If your customers’ details change, how easy is it to reflect this in your database so you aren’t sending letters or emails to old addresses or multiple letters and emails to repeat customers?
How will it integrate with your other systems, eg accounts or booking systems, so you don’t have to replicate or cross reference data? If you already use a booking system, accounts package or collect customer data from your website, can you use or integrate with these systems to avoid extra work or extra expense?

What data should you collect?

Exactly what you collect depends on your business type, how you might use the information in the future for either research or marketing, and what information you already have access too, through, for example, you accounts system. Consider the following:

Names	Capture Title, First Name and Surname separately so you can address envelopes to Mr E Smith, but have the letter directed to “Dear Mr Smith” or “Dear Edward”. If you capture the name as all one field, you’ve only ever got the option of sending to Dear Edward Smith.
Addresses	Do you need to capture addresses? If you do, you can send printed marketing through the post, you can find out where your customers come from (which helps you decide where to advertise) and you can do socio-economic analysis from their postcodes (send the address data to a ‘data mining’ company, who will analyse the postcodes and send you a report showing what sort of income and lifestyles your customers have). It may be, if you aren’t ever going to send postal marketing or do socio-economic analysis that you don’t actually need customers’ addresses, but might benefit from knowing which town, area or region they come from – which can be easier and less intrusive to collect for some business types.
Email addresses	Collect these wherever possible, since sending marketing emails is one of the easiest and cost effective ways of marketing. But train staff to take them carefully, or they are useless, and delete any that bounce back or are undeliverable.
Repeat customers	Knowing that someone has visited or bought from you before lets you: a) greet them appropriately and show you value their business b) tailor what information you provide them with before and during their visit c) target them with special ‘loyalty’ deals and send them Christmas cards, notice of upcoming events etc.
What they ordered, booked, bought or enquired about	Recording this helps you to work out what sells best and how you might adapt accordingly. For example you may have lots of enquiries for family rooms that you can’t meet, so may consider adding flexible sleeping capacity. Or you may get more enquiries for Saturday night dinner service than you can supply, so may be able to work out whether increasing capacity would be worthwhile.
Date of visit	Helps you predict levels of business in the future, and choose to send Spring promotions, Summer promotions, Christmas promotions etc to customers who have visited (or enquired about visiting) at those times in the past.
Date of enquiry	Helps you work out ‘lead times’ the gap between enquiring about coming and actually coming. This helps you decide how far in advance to send out promotion letters or emails.
Party type and makeup	This helps you work out what sort of customers you are getting (so you can think about tailoring your services to meet their needs) and lets you select just families, groups, couples etc to send appropriate offers.
Interests	Recording your customers interests, eg walking, cycling, history and heritage, relaxing getaway, etc helps you tailor your product or service, provide them with further information about things to see and do that matches their interests and develop future offers around these themes.
Purpose of visit	Recording whether their visit/purchase is for leisure, business, visiting friends and relatives or to celebrate a birthday, anniversary or other event, allows you to tailor your service in the future and target these customers with themed offers or marketing messages.
Where they heard about you	Ask ALL customers and enquiries, “Can I just ask, where did you hear about us”. Then accurately record the answer. This is the only way to effectively work out which adverts are working for you and which aren’t really delivering results. You may also decide to target customers differently according to the source of the enquiry, eg send marketing emails to those with an internet-based source, and printed materials to those coming from magazines and newspapers or styled according to the readership characteristics of those media.
Contact method	Recording how they contacted you, eg Phone, Letter, Email, Personal Caller, Web Enquiry etc helps you plan your staffing levels and response handling strategy for future ads and campaigns. For example, if you run an advert in the Sunday Telegraph and most people phone, you may want to get more reception staff in, and have more lines available, for the next time you run such an ad, so you don’t lose responses to engaged or unanswered calls.
Spend	Recording what customers spend allows you to target your biggest spending customers and match these against many other detail eg, where they heard about you, what their party makeup is, what their interests are etc. This allows you to work out which are your most lucrative adverts and customers types, and therefore which ones to target in the future.
Would they like to receive information in the future	This is an ESSENTIAL question for all enquirers and customers, irrespective of how they contact you. You should only send marketing information to those that say yes, never share customer details unless you have specifically asked their permission, and you must update this information immediately if a customer changes their mind in the future (eg unsubscribes from marketing emails).

What are your options?

A paper system
Using a book or diary to record information can have advantages, particularly if this is how you actually manage your bookings and orders, because there isn’t any duplication of effort. You can also easily expand the information you collect, by adding in a column or space for where they heard about you, and using an asterisk or other key to denote who is a repeat customer etc. However the big drawback is that using the information is very labour intensive – you can’t use mail merge or email merge programs and you can’t sort or split the data to gain different insights. A paper system is better than no system, but it is unlikely to be as effective or useful as an electronic one.

A simple electronic system, eg a spreadsheet
Using a spreadsheet or simple database is quick, very cheap and you can do it yourself, adding as many rows and columns as you need in order to record the data you think will be most useful. Many spreadsheet and simple database programmes have functions to help you accurately and speedily enter data, then filter and sort it so you get the ‘view’ of the data you want. And of course it is easy to export data, according to selected criteria, for use with mail or email merges.

While these are undoubtedly more useful ways to store the data than paper methods – because you can actually use the information – the big drawback is that entering the data is a separate exercise from any activities you do to actually book in, deliver or bill for a service. And anything which is additional to actually serving customers can get overlooked in busy times. Plus, retrospectively entering customer information is prone to errors, oversights and gaps.

An integrated system
The best customer databases are those that are integrated with a function that you actually do on a day to day basis. An example is a booking system that allow you to add additional information to the customer record (such as where they saw your advert and what their interests are), lets you capture enquiries as well as bookings and allows the import of additional customer records eg from web bookings, customer feedback forms or competition entries. Frontdesk, the region’s preferred online booking system for accommodation, attractions and event businesses, for example has in-built customer database and CRM (customer relationship management) functions.

Many ticketing systems, point of sale systems, restaurant booking and accounts packages have customer database elements. Providing these allow you to capture the information you need, report on it and export it for mail or email merge, these are the best solutions, because the information is captured as part of the act of serving the customer. So before you purchase or set up a separate customer system, consider using or extending a package you already have, or investing in a new software package that does more than just recording customer details.

How to get customer information

For some businesses, such as accommodation and activity providers, getting customer information is easy, because you are required to take their address and contact details for booking or health and safety reasons, and it is a simple matter to ask a few more questions for your customer database purposes.

But for other businesses, like attractions and food and drink outlets, getting customer data is much harder. Most customers just turn up and pay, and there isn’t a natural opportunity to capture their address or email address. So how can you build a customer database? Consider these tips, but in ALL cases make sure you ask the data protection question to ensure they are happy to receive further information from you:

Have a sign at the pay desk that says, “From time to time we send out great offers to previous customers. If you’d like to receive these, leave us your name and email address and we’ll add you to our list”. Make pre-printed forms and pens available, or use a touch screen for customers to automatically enter their own details. Add a few short questions about their party makeup, interests etc if this is useful.
Have a similar sign-up option at your website eg, “From time to time we have great offers. If you’d like to receive these, click here to give us your details.”
Run a competition (both at your business and at the web). Add a few profiling questions, eg party size, interests etc, but keep it short and always add the data protection question so you can legally send them marketing information.
Ask for customer feedback. Have an at table, in room or at exit survey asking for feedback on your services, a little information about them and ask for their address, email etc if they’d like to receive great offers or if there is a prize.

For more information

See the Business Link information on customer databases, which was jointly developed by the Chartered Institute of Marketing
See information about Frontdesk
See Data Protection – using customer data

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