August 1996
Database Maintenance Planning: The Foundation of Database Marketing
by Kenneth M. Culpepper
Direct Marketing Magazine, August 1996, pp.18-19
Customer databases are constantly changing. Customers' purchasing behavior change several times throughout their lifetime. Integrated database marketing has given marketers the abilities to learn and measure customer purchasing behavior which has resulted in better response rates, increases in profitability and a stronger relationship between an organization and the customer. However, somewhere in all the sophistication, modeling, planning and consulting, the actual delivery of the direct marketing mail piece to the intended customer has been taken for granted.
This article is part one of a four part series on database maintenance planning. Database maintenance planning is a disciplined process that integrates entire corporations and organizations for the purpose of efficient delivery of direct marketing mail pieces. It is an ongoing process that produces perpetual financial benefits of waste avoidance and customer recovery revenue. Laying the Foundation
While recently speaking at the Quantitative Techniques in Direct Marketing Conference in San Francisco, it was my pleasure to talk with several attendees about the major issues in their day-to-day business lives. I wanted to hear first rate opinions from the people who are putting out mailing after mailing, and the issues that they said would help in application of their responsibilities. I heard an overwhelming, "First, we need someone to show us how to integrate all of our business marketing and mail lists for the purpose of keeping clean mailings."
The more I heard this, the more sense it made. These people were excited about all the great techniques and methodologies that we had taught them for better response rates and increases in customer profitability; however, their initial foundation to be better direct marketers was not in place. They needed a Database Maintenance Plan (DMP).
DMP Case Study
This article's example of a DMP is an actual case study of an organization that has sales of approximately $260 million and is a retailer, direct marketer, cataloger, publisher, wholesaler and sponsor of conferences and events. It has three major transactional system databases and several stand-alone databases that combine for a total of approximately 3.3 million consumer customers.
Their problem was like most larger organizations and corporations. There was one large corporate database and other significant databases that were comprised of customers from different transaction systems. The organization was divided into different business units with different marketing and business objectives, but all units used the larger corporate database to mail from. The problem: no one maintained the customer name and address information in any of the databases.
The organization relied on in-house software for taking care of duplicates, standardization and sortation, but nothing was enforcing any business unit to even use that. Furthermore, each business unit did not want to share their names with the others. There wasn't any integration of organizational marketing, mailing or database maintenance for these degrading databases, nor was it desired.
Research
A study of organization-wide mailings and a sample of approximately 600,000 individual names and addresses (25% of database) was conducted of the corporate database. In summary, this analysis indicated that, on average, 39% of the mailings resulted in wasted postage and mail piece production dollars.
Planning and Purpose
Out of the research, a DMP proposed to put the databases into a massive integrated cleanup process which would enable this organization to save an estimated $941,000 from waste avoidance of production and postage in the first full year of implementation. This turned out to be a conservative estimate.
An additional estimated value of $170,000 in sales revenue would be gained from recovering individual customers whose names have been lost over the years. The plan also called for periodic cleaning updates of the databases. In this organization's case, the cleaning updates would initially happen every six months, and estimated an additional value of $92,000 with every update. The DMP involved some centralizing steps that included MIS costs for programming time and testing; however, the financial benefits from reduced waste and increased revenue heavily outweighed the costs.
When the waste and financial figures were reported to upper management, the initial reaction was for each business unit to do its own database maintenance. This option was discounted due the cost and the inability of the present system to track waste avoidance and customer recovery revenue. Additionally, it would have multiplied the cleaning costs four times and customer overlaps in the databases would guarantee a continuation of errors in the future.
The DMP insured incorporating a single set of scheduled cleaning steps instead of cleaning multiple databases individually. The plan based the entire organization's database maintenance on annual volume discounts and minimums, entitling this organization to reduced rates. Overall, the option to do database maintenance organization-wide was the most efficient and cost effective option.
Conclusion
There were three unanticipated benefits that came out of planning this organization- wide database maintenance process. These three benefits are strong characteristics of the implementation of the DMP in any organization: 1) It is usually the first place the wrecking ball comes out and starts tearing down the corporate culture walls, and forces people in the entire organization to work together; 2) It is usually the first time that the entire organization gets a glimpse of the customers being its assets; and 3) It is an initial and perpetual funding for database marketing.
In conclusion, the DMP accurately achieved the savings in waste avoidance that was estimated for its implementation into this organization. In fact, it did better than it conservatively projected and would have been more valuable considering the United States Postal Service's recent classification reform.
Each business and organization is different. There are different aspects of corporate culture to deal with in all of them. Only through the database maintenance planning approach, can a multi-business organization integrate its database hygiene efforts. The next article will illustrate how and where to start this process in your organization.
The reality of direct marketing is that no matter how great a direct or database marketer you are or intend to become, if you are not delivering your marketing communications piece to the intended customer, your response rates and return-on-investment (ROI) for your marketing efforts are leaking precious profitability.