If you currently do not have customer database software, run to Amazon now and purchase ACT! by Sage Software.ACT! is a widely used customer contact management software that is perfect for small business owners. I use it daily in my own business and can highly recommend it.

You do not need to be a large corporation in order to take advantage of the power of database marketing. Even a 1-person business can develop an extraordinary advantage by developing a customer contact database and learning how to use it for strategic marketing.

Most all customer database software will allow you to create custom fields. Below, I have outlined several types of custom fields I recommend you add to all your customer records.

Customer Type

Every small business has four distinct customer types they will want to code in their database. They are Suspects, Prospects, First-Time Buyers and Repeat Buyers. By coding these customer types in your database, you will be able to immediately pull out any of these various groups for specific marketing communication programs. Below is a summary of the four customer types.

The Four Customer Types

1.Suspects - During the course of running your business, you may obtain lists of people from business groups, tradeshows, associations, list rentals and other sources. Suspects are people you think may be interested in your products and services but have not made any initial contact with your company.

2.Prospects - Prospects are people that have made some type of contact with your business. Maybe they requested a free report or simply called to get more information on a product or service. A prospect has shown interest in your company but has not made a purchase yet.

3.First-Time Buyers - A first-time buyer has made a single purchase from your company. The goal now is to convert these first-time buyers into repeat buyers so you can sell them more expensive (and more profitable) products and services.

4.Repeat Buyers - Continue to build trust and confidence in your first-time buyers and they will become repeat buyers. By coding this group in your database, you will be able to quickly pull them out for special upsell/cross-sell offers and work to retain and build loyalty.

The big advantage of coding your customer database with these 4 customer types is that each customer type is at a different buying stage. Pull out all your Suspects and offer them something for free in order to convert them to a Prospect. Pull out all your Prospects and offer them something compelling to turn them into a First-Time Buyer. Pull out all your First-Time Buyers and start a program to upsell and cross-sell additional products and services. Gone are the days of marketing to everyone in exactly the same way. With database marketing, you can now market by specific customer type.

Target Market

I highly recommend you add Target Market as a custom field in your database as it will allow you to pull customer lists by specific market segments. The only reason to pass on it is that you have a type of business that is so narrow and focused, that you really have only one or two customer types.

The first step is to actually define your target markets. If you own an existing business, you should already have a good idea of your target markets. If you are a new business, you may need to research just who your target markets are.

By coding your target markets, you can mail special brochures and offers that are very finely tuned to that market. Doing this will help you create the most effective marketing message and focus it to just the right niche market.

Recency, Frequency, & Monetary Fields

These last 3 custom fields I recommend you create are the key to allowing you to put together powerful database marketing programs. Here's a brief definition of each.

Recency

Recency is the term used for the date of last transaction. Why is this important to code? Because the best predictor of future customer behavior is past customer behavior. Customers that are more recent are more valuable to your business than customers that are less recent. Whenever a customer makes a purchase, you will simply go into their record and plug in the date of purchase into this Recency Field.

How do you use Recency in your marketing efforts? Let's say you have 5,000 customers in your database and can only afford to mail 1,000 of them. Simply sort your database by Recency (most recent) and you will have 1,000 customers that are most likely to respond to your promotion.

Frequency

Frequency is simply the number of "transactions" that a customer has made with you since they have been added to your database. Again, the best predictor of future behavior is past behavior. Someone that has purchased from you three times in the past year is likely to purchase again. The "transaction" does not necessarily have to be a monetary purchase. It can be any type of contact that you can reasonably measure such as a web visit, a phone call, a completed form. Of course it definitely includes any and all purchase transactions. This field will simply contain a number that is equal to cumulative transactions.

Your Gold customers are those that are both recent and have a high frequency number. Make sure you work to retain these customers - they are the life blood of your business.

Monetary

This field will simply show a cumulative total of the money spent by a customer. Every time the customer makes a purchase, you will go in and add the value of the transaction to the number already there. Want a list of customers that spent a large amount of money with you? Simply sort your list by Monetary value and you'll have a list of your high spenders.

I hope you take the steps required to code these important fields into your customer contact database. Get an advantage over your competition by using these custom fields and the power of database marketing today.