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The Customer Database: A Compass for New Clients and Markets

If you're committed to finding new customers or markets, or expanding your market share, then a well-designed customer database is an absolute necessity.

In 1999, the company I was a general manager at was in the midst of a five-year turnaround, where growth was mandated by the owners. I was committed to all three of the above goals, as well as doubling the size of two divisions.

The database I had inherited was typical of most manufacturers' databases. It included the following information:

1. Customer and contact names.

2. Location (addresses of decision-makers and phone numbers).

3. Sales information (revenue by customer and product type).

This kind of simple database wasn't going to give me the information I needed to profile the best customers, explore new markets, develop new products, or create new sales channels. All were primary goals of the five-year plan.

Instead of buying an expensive and generic CRM software program I decided to design my own, using a spreadsheet that would generate the specific data we needed to market custom machinery.

I used Excel because everyone in the division used it. In addition, I wanted the employees to be the designers so we could make our own changes and not depend on outsiders or software codes.

The whole project was completed in one weekend. The time and money spent in developing the new database was repaid many times over, both in terms of additional sales and competitive advantage.

Here are some tips for getting your own customer database project launched:

1. Make sure one person is assigned the responsibility of maintaining and collecting all customer database information.

2. Make the whole effort of gathering the right customer information cheap and easy. The objective is to keep the database simple and economical.

3. Design your own. Following my example above, use a spreadsheet or a simple database program. I like spreadsheets because they have a lot of power, are easy to use, and can be changed and updated by non-programming people.

4. Allow the sales staff the opportunity to design and test the new database. Do not let programmers, accountants, or engineers get involved, or the project will turn into a programming extravaganza.

5. Make it a point to ensure maintenance of the database is as important as processing orders.

6. In the event information gaps exist, hire a telemarketing firm to call each customer and obtain the missing details.

Step 1: Define the headings you will need.

By establishing the correct headings and using pivot tables, you can easily design a customer database that can be used immediately. The following are the exact headings I used to develop our new database in the above example, along with descriptions for each:

• Sales order number. Almost everyone assigns some kind of number to each order.

• Company name and location. A complete address can also be added, but it is important to at least have the name, city, and state, because you will want tables that sort sales and model data by state and customer.

• Sales territory. Assign a code to each sales rep, distributor, or factory salesperson, so you or your client can analyze the sales and profit of each sales channel. These codes are useful when they are connected to sales, product, or profit summaries to show performance in an individual territory.

• Company size code. The size of the customer company, in terms of employees and revenues, is important information, since companies of different sizes require different sales and marketing strategies to reach. Size, in terms of employees, is also used to target accounts and to purchase prospect lists. Use the following as a guide:

1. Very small plant with 25 to 50 employees.

2. Plant with 50 to 500 employees.

3. Customer with many plants in the U.S. and 500 to 5,000 employees.

4. Multinational company with plants all over the world and 5,000 to 100,000 employees.

• Customer type code. To simplify data input, develop a set of codes to describe the various types of customers—e.g., MVC (most valuable customers), OEM (original equipment manufacturer), F500 (Fortune 500 company), MU (Midsize User), RE (reseller), SU (small user), etc.

Different types of companies require different selling and sales channel strategies. For example, agents might handle small customers, while large companies might require a national account team.

• Most valuable customers (the aforementioned MVCs). Research has repeatedly shown 20 percent of a company's customers generally account for 80 percent of sales. Analyzing these customers in terms of indirect costs and gross profits will reveal the most valuable customers, those who must be retained because they are vital to the growth and profitability of the company.

Alternately, it may also reveal MVCs who have poor margins and are hurting the company's bottom line.

• Customers' products. If your client is selling to other manufacturers, it is important to know what products they manufacture. Knowing their specific products will allow you and your client to assign NAICS or SIC codes to the customer and find more customers exactly like them. Which leads us to…

• National Standard Industrial Classification (NAICS) codes. Published by the federal government, these codes classify all products and services. They replaced the earlier Standard Industrial Classification (SIC) codes in 1997. NAICS codes can be found online at

NAICS and SIC codes can be used to generate targeted mailing lists and prospect lists, as well as to determine market size and sales potential. They can also be used to identify customer groups or market niches.

• Model or job. This heading can represent a specific model, a product line, a type of job, a service, or an application. The heading must be customized to fit your business. However you describe your products or services is usually shown in the heading of quotations and can be a simple code or a complex description.

This heading (or headings) will allow you to sort products and services by sales territory, product line, profitability, and a host of other useful ways.

• Total sales dollars booked. This is the total dollars booked on a specific order or job. This total dollar figure might be as simple as a price list item or as complicated as a complete production line.

• Estimated margin. If you do estimates of costs on each proposal or quotation, it's helpful to keep track of the estimated costs so you can compare it with actual cost after the job is finished. This is a very good way to check and see if the prices are competitive and the pricing system is valid.

• Actual margin. This is the actual margin after the job is complete. Most small manufacturers have good sales records but rarely keep summaries of profitability. Maintaining detailed records on profit by customer account, product line, and even product model will help your client make customer selection decisions, change selling strategies, and identify product dogs that should be dropped.

• Booked date and year. This is the date when the order was formally received (not necessarily the date when the order is handed over to the production system). Sometimes the order is booked based on a simple purchase order number, and sometimes companies do not officially book the order unless the hard copy of the contract is received.

• Estimated ship date and year. This is the date confirmed to the customer when the contract and all order information is received.

• Actual ship date. This is the date when the order actually leaves the plant.

• Span time. The difference between the booked date and the ship date is the span time of the order, and is useful in predicting lead times.

• On time. This is the difference (in days) between the date shipment was promised and the actual shipment. This data is used to calculate the percentage of on-time shipments.

• Reason for lost orders. You need to develop your own code for lost orders, but here's a sample: price (P), couldn't meet specifications (SP), lead time (LT), sales rep (SR), superior competitor product (SCP), and unknown (?).

• Commission paid. The amount of commission and the date paid is well worth tracking, because this is a useful administrative tool to keep the outsides salespeople informed. Also, commissions are a large part of the cost of sales, and knowing the total amount of commissions paid versus the success of salespeople in completing all of the sales tasks is valuable and strategic information.

Step 2: Review the benefits—and tables.

Begin by defining the pivot tables of information that will help you in both finding new customers and markets and tracking performance. Give careful thought to what you think you need to know and why the information will help you. If the benefit does not exceed the cost, do not do it.

Besides the benefits described under each of the column headings here are some additional benefits for using this type of customer database.

• Sales trends.

• Product trends.

• Tracking profitability.

• Sales summaries by territory.

• Sales summary by rep or distributor.

• Tracking lost orders.

• Tracking customer defection/retention rate.

• Tracking growth of customer accounts.

• Tracking MVCs by sales/profits.

• MVC profiles for prospecting.

• Determining market niches by SIC, type, and size.

• Tracking profitability of product lines.

• Determining product dogs.

Mike Collins is the author of "Saving American Manufacturing" and its companion book, the "Growth Planning Handbook for Manufacturers." To learn more about the author or these titles, visit