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Why an Investment in a Sophisticated Relational Database

Including CRM Software Is Advantageous in the

Industrial Equipment Industry

Joelle Connors-Ennis
West Virginia University
January 23, 2011

Summary

This paper is designed to inform

the reader of how using a relational

database is advantageous in

developing overall business strategies

and marketing strategies.

Importance is given to Customer

Relationship Management

(CRM) and why this is especially

significant to a business-to-business (B2B) marketer of industrial equipment. Additionally, this

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paper will examine how revenues could increase and how customer and employee retention and

satisfaction are positively affected by using CRM in a B2B environment.

Background and Problems

The company, a business-to-business marketer of industrial equipment, has historically

utilized face-to-face selling and other traditional marketing channels. The firm has a Web site

that is little more than an online brochure, although it does have a Web response form to generate

leads. Total sales last year were in the $25 million range. The firm sells in North America which

includes a small customer base in Mexico. Currently, the only database to speak of is antiquated

at best and is merely a spreadsheet. Moreover, most customer-related information is retained

only in the minds of the reps who service them.

This paper will show how using relational database and CRM software is a worthy

investment that this firm should consider. This paper will examine what market segmentation is

and how to effectively use it; how databases work and why they are imperative to retaining

existing customers and attracting new ones; and finally what CRM is and why it is important to

the firm’s posterity.

Proposed Solutions

Segmentation

Market segmentation is a strategy devised to attract and meet the needs of a specific

subgroup called a market segment; and should be homogenous (whereas members are similar to
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one another), heterogeneous (whereas the members are different from the members of other

segments) and sizeable so it can be profitable. (Spiller and Baier, 2010). For the industrial

equipment industry, market segmentation could be illustrated as shown in Figure 1 below.

A segment will display five key attributes including measurability, accessibility, response

differences (how they respond to marketing messages), durability (lasting) and profitability.

(WVU, 2011). Segments can be designed based on the criteria of demographics, geographics,

social class, psychographics, behavior, geodemographics (suggesting that people who live near

one another have similar traits). (WVU, 2011). Products and services are targeted to the select

segments rather than to the total market. Product differentiation (designing products or services

specifically for the needs of certain market segment), therefore, is ideal for the firm’s industry

and specific customers’ needs, as shown in the illustration above. This firm could design

products and services with specificity for each segment and precisely target customers.
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Database Marketing

Databases are extremely important in direct marketing for several reasons (WVU, 2011):

 Many direct/interactive marketing databases exemplify the 80/20 rule, where as

few as 20 percent of the customers provide up to 80 percent of the sales and
profits.
 Customers with different needs and purchase profiles can be segmented so that
promotions can be tailored to meet their needs (as seen in Figure 1 above)
 The attributes of a firm's best customers can be identified and matched with
prospect files to help companies make decisions about where to go to attract new
customers.

Database marketing focuses on putting data about all current, previous, and potential

customers in a form where each piece of customer data can be related to all other pieces of data

called a relational database. (Hughes, 2009). Since the basic purposes of database marketing are

to help acquire new customers or retain current ones, “Relationship marketing” is another way to

describe database marketing. (Hughes, 2009). Using software tools such as an enterprise data

warehouse, data mining uses statistical and mathematical techniques to extract knowledge from

the data contained within the database; which allows us to use the results for strategic business

plans. (Spiller and Baier, 2010). When communications for customers are personalized, a lasting

relationship can be built. The best way to create such a message is by gathering information

which is then stored in the database. Database marketing consistently increases sales by

affording us the opportunity to use control groups to test the information.

One way to obtain information about the customers is by building a Web site with cookies

for one-to-one marketing. This is a common practice on many B2C and B2B Web sites and is

based on the user’s behavior. An example of this is when a Web site asks the user to create a

profile or register with the site. Every time that user returns to the site they are greeted with

something like, “Hello, Debra.” The database makes purchase suggestions based on Debra’s
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purchase and browsing history.

A recent Marketing Management Analytics and Financial Executive International survey

found only around 7% of financial managers are satisfied with their company's capability to

measure return on marketing investment (ROMI). (Johnson, 2009). Therefore, by effectively

understanding and utilizing relational database marketing, marketers can create a plan but more

importantly set goals and test the results.

Customer Relationship Management (CRM)

Today’s business climate has seen a paradigm shift in how we relate to and with our

customers. Relationship marketing, or the idea of realigning the organization’s efforts to become

more customer-centric, is imperative to the posterity of the firm. Since the industrial equipment

market is mostly B2B it is necessary for the firm to fully understand the customers’ needs and

wants and how to appropriately communicate with them. While this has always been a

personality function of the field reps and sales team, CRM can help improve these relations

dramatically. CRM is a collection of software tools that allows companies to understand

customer needs and manage communications around all touch points. (Spiller and Baier, 2010).

Organizations are leveraging tools and strategies in their efforts to sustain and grow business-to-

business relationships because the goal of CRM is not merely to establish and maintain a

relationship with customers, but rather to increase the strength of the relationship from

acquaintanceship to friendship to partnership. (Galka, 2011).

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With CRM, companies can lower acquisition costs, increase profits through cross-selling

and up-selling, increase positive word of mouth, and differentiate offerings based on customer

value which leads to greater employee satisfaction and better service. (Galka, 2011). Figure 2

below depicts how the customer-centric environment works using CRM.

Figure 2

Database and CRM Software Recommendations

The firm can use its own internal resources to collect customer purchase information or it

can use external databases. The firm can participate in a name-for-name exchange with a

competitor or in a cooperative database like Abacus. (WVU,2011). Abacus and SPSS (an IBM

company) use predictive modeling to determine who is most likely to buy what in the future

based on past buying behavior and other factors.

There are many commercial vendors offering a range of CRM products. Microsoft, for

example, has CRM software that is specific to the industrial equipment industry.

(Microsoft.com). However, it is advised that the firm shop around and research to find the best
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fit for their needs. It is recommended, that to begin, the firm looks at a comparison Web site

such as Technology Evaluation Centers, which allows the user to compare different types of

CRM software. The user can even search by industry or need to ensure that the software utilities

will best suit the firm’s goals and objectives.

Conclusion

The B2B marketer who specializes in industrial equipment has a marketing problem in

that it has historically utilized face-to-face selling and other traditional marketing channels.

Additionally, most of the information regarding their customers is stored in the minds of the

sales team and field reps. By understanding market segmentation and then using relational

database and CRM software, the firm will now be able to have better relationships with their

customers. To that end, they will see an increase in revenue because customer and employee

retention will be higher than with traditional means. This paper looks at recent writings on the

subjects of relational databases and CRM software as to be as up-to-date as possible and to make

the most relevant and accurate recommendations to the firm.

For a company to succeed in today’s changing business culture and climate, they must

consider a customer-centric approach to marketing and strategic business plans. By adopting and

implementing the software as recommended, this firm will be an industry leader and will be able

to expand into emerging markets ahead of their competition.

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References

Spiller, L and Baier, M. (2010). Contemporary Direct & Interactive Marketing. Prentice Hall,

New Jersey.

WVU P.I. Reed School of Journalism. (2011). Lesson 2: Segmentation and Database Marketing.
Retrieved on January 23, 2011 from
https://ecampus.wvu.edu/webct/urw/lc5116001.tp0/cobaltMainFrame.dowebct

Hughes, A.M. (2009). An introduction to database marketing. Excerpted from The IMC Handbook:
Readings and Cases in Integrated Marketing Communications (RACOM Communications), J. Steven
Kelly and Susan K. Jones (Eds.).

Johnson, G.A. (2009). Make the C-suite believe. ChiefMarketer.com. Retrieved June 18, 2010, from:
http://chiefmarketer.com/marketing-roi/1001-handle-roi-boost-marketing-status/

Galka, R. (2011). Customer relationship management. Excerpted from The IMC Handbook: Readings and
Cases in Integrated Marketing Communications (RACOM Communications), J. Steven Kelly and Susan
K. Jones (Eds.).

Figure 1. Berry, T. (n.d.) Your Target Market Forecast. Retrieved on January 23, 2011 from
http://www.hurdlebook.com/default_Left.htm#CSHID=forecasting%2Fyour_target_market
%2Fyour_target_market_forecast.htm|StartTopic=Content%2Fforecasting%2Fyour_target_market
%2Fyour_target_market_forecast.htm|SkinName=Default

Figure 2. SoftDistrict.com. (n.d.)

http://www.microsoft.com/dynamics/en/gulf/industries/industrial-equipment.aspx

http://relationship-management.technologyevaluation.com/

Dale Wilson.  (2006). DEVELOPING NEW BUSINESS STRATEGIES IN B2B MARKETS BY

COMBINING CRM CONCEPTS AND ONLINE DATABASES. Competitiveness Review, 16(1), 38-
43.  Retrieved January 23, 2011, from ABI/INFORM Global. (Document ID: 1058985001).