Why building a customer database is good for business

Updated: 6th May 2021

Shifting your business to the cloud opens you up to a world of new customers. They can come from far and wide to access your products and services. But how exactly are you supposed to manage your new customers without having visibility over who they are? 

The following blog provides you with practical and informative strategies to manage your customers in an online domain. We’ll discuss tips for building a customer database, maintaining your customers’ privacy, and cart abandonment strategies — leveraging cloud technology to transform your customer management. 

What is a customer database?

Think of a customer database as an interactive and intelligent contact list. Your database stores valuable information about your customers, such as emails, demographics, and purchasing history. The database provides visibility over customers who are buying your products or services, while driving acquisition, retention, and development of your customer base. You can make more informed selling decisions, as the most likely future customers are those who have bought from you in the past. 

Why should I build a customer database?

As online sales increase in frequency, making the most of the online traffic will be crucial for driving your business forward. By focusing on building a customer database, you’ll gain valuable insights about your customers to then leverage into sales decisions. For example, you might find that one of your products is particularly popular with the 18-29 year-old age group. You could then look to promote the product with links to buy it on social media where younger consumers are more likely to visit. The database insights will give you a clearer plan for upselling and improving your business performance. 

A customer database also provides an opportunity to build rapport with your customers. You can inform them on product updates, new services, and communicate your strategies to keep them informed. It also offers an opportunity to show your human side, interacting with your customers and showing them that you care. Effective and honest communication leads to loyalty and brand affinity — just be careful not to spam your customers.

How do I build a customer database?

There are a range of different strategies to collect customer information. You can ask customers to set up an account to purchase online for future engagement. Use this to offer a discount or voucher on their birthday, delighting your customers and adding an extra sale at a discounted price. Apps such as Square can store this information when a purchase is made online to sync your data. Utilise sign-up forms and pop-ups to engage with new users on your website. 

You can use your customer list to contact customers at unique stages in the customer lifecycle, using digital marketing applications like Mailchimp. Send electronic direct mail (eDM) to promote a product, service or event using easy-to-use templates in Mailchimp. Sending eDMs is a great way to drive awareness of your business, offering something to your customers in return, while the integration takes care of building out your potential customer list. 

You’ll then need to look into a system to house your customer database. Your customer details need to be secure, manageable, and accessible, so your system should facilitate this. The first piece of the puzzle is a customer relationship management (CRM) software. Hubspot is CRM software that tracks new leads, automates workflows, and tracks email campaigns to customers. You can use this to create an email marketing campaign, and then send communications through to your customer list. This can drive repeat sales and propel positive, human engagement with your customers. 

Cart Abandonment

Let’s have a look at a customer database in action and how it can help with cart abandonment. Cart abandonment refers to when potential customers add something to their online cart, only to not follow through with a purchase. A recent study published by codeinwp found the amount of online shopping interactions that resulted in abandonment to be  69.57% — a huge number of potential sales to miss out on. How can you convert some of the deserters into paying customers using your database?

To set the scene – a new lead visits your site, finds something they like, and adds it to their cart. They set up an online account to store their data for later use, and you offer a discount on their first purchase as an incentive. Suddenly, their neighbour shows up. They respond by closing all tabs. The good news is that you have their email address from when they created their account. So after 20 minutes of inactivity, you can send them a quick reminder to revisit the transaction. Online shop platforms, such as Shopify, integrate with CRM software to send reminder emails automatically drawing the customer back in, saving you the hassle. Once the neighbourly catch up finishes, your new lead checks their emails, returns to your site, and completes their purchase. A new paying customer facilitated by your freshly implemented customer database. 

Privacy

Maintaining the privacy of your customers’ information must be a critical consideration when setting up your customer database. It’s essential to work with companies that have strong data policies to ensure customer privacy from the get-go.

As a minimum, you can ask for consent to store customer data and let them know what you’ll use it for. Transparency is key. Being upfront will increase the quality of your data, with a little human interaction going a long way to cement the relationship. Providing an unsubscribe option at the bottom of your emails will also allow you to watch unsubscribe rates. This will help you share relevant information with your customers.

Make sure to check out the guidelines and requirements in your region to adhere to best practices and avoid potential fines. For example, those operating in Europe need to adhere to the General Data Protection Regulation (GDPR), which has clear guidelines on handling customer data. Customer databases are important — make sure that yours protects and loves your customers as well.

At Xero, we want to make life easier for small businesses, to help them learn, grow and thrive. We’ve put together a learning journey, with free resources on how you can move your entire business online. Check it out for further information on setting up your business in the cloud.