26 Jul The Pros and Cons of Prospect Databases
Organizations have more information about their customers than ever before, and more data is being generated every single day. Now, companies can pinpoint their customers’ likes, dislikes, and pain points with stunning accuracy.
Prospect databases go a long way in helping you figure out your customers, but you have to build it the right way. This is where many businesses falter. Here’s why you should build your own database instead of buying one and the pros and cons of having a database once you’ve built it.
The Two Ways to Have an Email List
There are basically two ways to generate an email list:
- Purchase an email list
- Building your own email list
When you buy an email list, you work with a list provider to find and purchase a list of names and emails based on demographic information. For example, you could purchase a list of 1,000 emails of “VP Business Development” of targeted industries.
When you build an email list, this involves an opt-in system where someone voluntarily gives you their email and allows you to send them information and updates. This is done by creating a lead magnet, like a video or ebook, and promoting that lead magnet to get email opt-ins in exchange for the lead magnet.
What You Get With a Purchased List
Many businesses elect to purchase a list because they think it’s more economical than generating their own. But that’s not actually the case. To understand why, you have to understand the difference between a prospect and a lead and what happens after you have an email address.
Prospects vs. Leads
Prospects and leads are often confused for the same thing, but they’re actually different, and that difference is critical to understanding why a purchased list isn’t an effective option.
A prospect is a potential customer who has qualified as fitting certain criteria. These criteria usually include:
- Fitting your target market
- Having the money to make purchases
- Having the power to make purchasing decisions
To be clear, a prospect doesn’t necessarily need to indicate an interest in buying to be qualified. All they have to do is meet the criteria. As long as they meet the criteria, you have a reasonable chance of being able to sell to them.
Think of it this way: you could find a customer who fits your target market and can afford your services, but if they don’t have the ability to make purchasing decisions, they won’t buy. This is why you need prospects to meet all the criteria–lack of one could prevent them from purchasing.
A lead is an unqualified contact. Anyone you meet on the street could be a lead since you haven’t determined whether or not they meet the criteria to be a prospect. All prospects start as leads, but not all leads are prospects.
The Process of Conversion
This is where conversion comes into play.
In order to convert customers and make a sale, you have to take them through your marketing funnel. However, marketing funnels are designed to whittle down your potential customers to the customers that are most valuable to you.
The key is interest and finding the right fit.
When you approach your marketing funnel, the gap between a prospect and a lead is huge. Remember, all prospects have a reasonable chance of buying from you, but not all leads will become prospects.
If you take a list of leads through your marketing funnel, you’re going to waste precious marketing time and resources losing a significant chunk of your leads. These leads would have been whittled out anyway once you qualified them, but you could have saved yourself a lot of effort by not trying to put those leads through your funnel in the first place.
Purchased List vs. Building Your Own
With that in mind, let’s revisit the idea of purchasing a list versus building your own.
When you purchase a list, you get leads. Those leads may or may not be interested in your product or service–you won’t know until you start prospecting them.
When you build a list using a lead magnet, the people on that list have already expressed interest in your product or service by exchanging their email address for your lead magnet. And that means that they’re far more likely to convert in the future.
Earlier, we said that many businesses think purchasing a list is more economical. That isn’t actually true. Think about it–when you purchase a list, you have to figure out which of those leads will become prospects, and thus which ones are actually worth the money you spent on the list.
You have no way of knowing how many customers will be worth it. It could be three-quarters. It could be only half. It could be just 25%. Then, when you have those leads that were actually worth the money, you have to spend additional time and money taking them through your funnel.
Building your own list allows you to skip that step entirely by focusing solely on prospects that have already shown themselves to be promising. Plus, lead magnets are relatively easy to produce and put out in the world.
Pros and Cons of Databases
Now that you know why building your own list always trumps buying one, let’s talk about the pros and cons of a prospect database for your overall marketing strategy.
Pro: Collect All Your Data
Every person generates data. That data says something about you. It shows where you live, the areas you frequent, when you spend money, what you spend money on, where you spend your time online.
With more and more businesses migrating online, they don’t have face-to-face interaction with prospects that they once enjoyed. The problem is that customers and prospects want businesses to anticipate their needs.
To do that, you need to know your prospects.
A prospect database gives you the opportunity to collect all of your data in one place. This allows you to turn prospect data into actionable information rather than playing a guessing game.
Con: Keep Your Audience in Order
However, in order to make sense of your prospects, you have to view your data in some kind of logical fashion.
A prospect database can be helpful in this regard, but you have to know how to organize your database properly.
The only way to do this effectively is to take a tech-oriented approach, which means that you need to have experts on hand. This also makes database marketing a costly approach, since you have to build a significant infrastructure to efficiently manage your prospect data.
Pro: Leverage Data for Smart Insights
If you have your infrastructure in place, that data is no longer simply data. It’s a way to understand your customers on a deeper level, which means that you can leverage it for smart insights and actionable recommendations.
More importantly, a prospect database combined with business intelligence gives you the opportunity to see your biggest customers and identify what prospects are most valuable for you to cultivate.
That way, you can focus on the customers (and potential customers) that will generate real value for your company instead of wasting valuable time, money, and effort on prospects that won’t convert.
Con: Preparing Data for Insights
That said, a lot of customer data simply isn’t ready to be processed when it’s first collected. Data can only generate insights if you can put it in context.
In other words, the existence of a prospect database full of information isn’t enough. You have to be able to prepare the data and put it in the right context to get genuinely useful insights.
This means that you need data experts who can make sense of seemingly endless information. You also need a sufficiently robust infrastructure to support their efforts and the sheer volume of data required to gain a comprehensive understanding of your customers.
Strengthen Your Marketing with Prospect Databases
Whether you have a prospect database or you’re considering whether a prospect database is the right choice for your business, we know how to make your marketing stronger than ever.
We understand the power of video and how you can leverage video marketing tactics to cultivate your most valuable prospects. If you want to find out more about how video marketing fits into your larger strategy (and how to make your video marketing strategy more effective,) we can help.
Click here to find out more about creating an effective video marketing funnel to pair with your prospect database, or get in touch to find out how we can use video to complement your marketing strategy.