Sure, size is nice. It is vital for a company creating a customer database or a loyalty scheme to build up critical mass. But that can’t be the only barometer for the success of a customer relationship programme – nor can it be the main goal.

We had Sainsbury’s joyfully announcing last month that the number of people in the Nectar programme had increased by more than one million in the previous 12 months to 16.8 million – which it claims is more than Tesco Clubcard or Boots Advantage. And I applaud Loyalty Management UK for its success at giving Nectar the kind of heft that can benefit all its partners in terms of yielding a rich mine of customer information that can be fed back into marketing programmes.

The people running Nectar or any other loyalty scheme just have to make sure they collect the right data to provide the kind of insight needed, and then see to it that any company or business unit tapping into the database can make effective use of it. Because the true measure of success when it comes to building a customer database is, at its most basic, that the information can be leveraged to help stem customer churn and bring in new people who are then going to buy from a company on a regular basis.

A loyalty scheme can do that itself with its rewards, from attracting new members who hope to collect enough points to cash in on a benefit down the road at some point to keeping those already signed up happy with appropriate offers and perks. But few can succeed just on that basis. They need to have the right kind of data and be able to dig into that. This requires intelligent structuring. It is of little benefit to a company to simply have records on huge numbers of customers. Knowing what they spend, where they spend it and what they spend it on is the next step – and uncovering what will enable a firm to encourage value-creating behaviour. 

So firms building large customer databases really need to use the data to target the right consumers – those who will stay loyal, who have the most value, who will increase their spend, and who won’t cost more than they spend – and make sure they are hitting these customers with the right offers.

All of this takes insight and analysis. Companies growing their customer databases can’t just take a build-it-and-they-will-come approach. They have to put in the work and use their records to determine what type of customer each one is and which ones they need to focus their marketing budgets on – and then use that information to retain the good ones and attract lookalikes.

Companies also have to make very sure that they are not wasting their data – ie failing to use it to gain insights and inform their marketing initiatives. Collecting data and then failing to use it can, in fact, turn off consumers. This is a real risk when the team operating the loyalty scheme or running the CRM database and the marketing department are different. All too often, a marketer rolling out a campaign will fail to communicate with or cross-check their data with the loyalty or CRM team – an oversight that has the potential to alienate the consumer and destroy goodwill that has taken time and investment to build.

Recent research we conducted revealed that 65% of consumers surveyed said that, even though they had given companies personal details and preferences, over the past year they were still getting offers from these firms for products they would never buy. And 58% said several companies had sent them special discount offers to become a new customer despite the fact they already were clients.

Customers today expect the firms they deal with to know them and to be joined up in their one-to-one communication activities – whether those are direct mail, email, mobile or telephone. With the right data pulled together from loyalty programmes and other sources within organisations – such as transactional data, delivery details and credit records – a company can raise its marketing to a higher level, enabling and improving efforts to:

• Cross-sell and up-sell
Having a 360-degree view of customers’ purchasing history, predilections, behaviours and communication channel preferences makes selling new products and services or moving them up to a higher spending bracket much more straightforward.

• Determine event triggers
Identify opportunities to engage with the consumer by making an offer tied to a milestone such as a birthday, or an action such as moving house, or the crossing of a spending threshold.

• Create promotions
Knowing which offers customers have previously responded to and understanding which promotional activities encourage a particular individual to buy a product or service can help keep them engage with a brand, raise their spend levels and increase the frequency at which they are purchasing.

• Improve direct marketing
Having a complete picture of customers and an understanding of their preferences is essential in getting targeting, personalisation and channel selection right. And it helps keep track of the volume of communications sent out to individual customers to avoid overkill.

• Extend customer service
Loyalty and other data can be used to understand customers’ service needs and sell them on the right package.

• Develop joint activities with partners
Multi-vendor initiatives such as package deals and joint promotions require that both parties have a clear idea of who the customers are and what they want and need.

• Inform product development and introduce new services
Having the data to analyse trends can be invaluable in determining what more a firm could provide for its customers.

• Forecast
Looking at who the customers are and their potential can be invaluable in projecting upcoming activities and results.

What matters most in this type of relationship marketing is quality not quantity. Having lots of customers on your database is of course hugely important in growing a business. But having the right consumers on the database and the right information on those customers is even more important – that’s when you can really start to build genuine loyalty and satisfaction.