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Database dependence goes up in down economy

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To take the pulse of the industry, BtoB Senior Reporter Christopher Hosford contacted analysts and consultants to solicit their views on database marketing trends, the pressures database marketing is under because of the down economy and best practices in measuring database marketing performance. Participating in the virtual roundtable were Suresh Vittal, principal analyst at Forrester Research; Ruth P. Stevens, a b-to-b marketing consultant who is on the faculty of the Columbia Business School; Kimberly Collins, managing VP at Gartner Inc.; and Bernice Grossman, president of DMRS Group, and with Stevens co-author of the upcoming book “Business to Business Database Marketing” (Racom, 2010). BtoB: What challenges and trends do you see today for b-to-b database marketers? Suresh Vittal: The challenge is the same as ever: knowing your end-buyer. Of course it may be harder to do for the b-to-b marketer because there can be multiple influencers who play various roles in influencing the buying process. Every analytical strategy has become more important today. Ruth P. Stevens: The typical b-to-b database marketer has had either a limited or confused view of the database as a marketing tool. Part of the reason is that databases as a marketing tool were perfected and taken to where they are now in the consumer world, because that's where the volume has been. Consequently, databases are often underappreciated and neglected by b-to-b marketers. They may think their databases are of poor quality and, so, worthless, or that it's so mundane and workaday that they don't give it the respect it deserves. That goes for the company in general and the marketing department in particular, and certainly the beneficiaries like the sales department. Kimberly Collins: But whether it's 12 names or 12 million, it's still a database at the end of the day. My view is, b-to-b marketers must still have the ability to mine data from all the multiple channels, including sales, contact centers, the Web, e-mail and third-party data providers. BtoB: No talk of challenges, trends and change can ignore the economy. What major impacts are you seeing here? Vittal: An increasing focus on databases. Marketers are forced to pay more attention to the database because media spend is being squeezed and it's now much more about retaining your best customers. There is so much fragmentation of media and audience attention; unless you're relevant, you stand no chance. But databases drive relevance because having a good one helps you understand your audience better. Collins: The trend we've been seeing is, if a company has been on the fence about lead management, they're ready to do it now. We're seeing a lot of walls coming down. Marketing is looking for ways to justify its reason for being, and is very keen to try to work with sales. The economy is probably accelerating this trend. Bernice Grossman: I also see analysis becoming much more important. Putting all your information into a marketing database is more important now than ever before. And you can't afford to go to six different places, or 30, to get all your information on customers and prospects. Stevens: There is an increasing recognition of the value of data in b-to-b marketing. In a downturn, focusing on current customers is always a natural progression. Everyone knows it's cheaper to keep current customers than to find new ones, so the focus on current customers inevitably increases the importance of knowing how to stay in touch with them and analyzing what they bought. I'm seeing some pretty exciting applications using the database to predict customer behavior and identify opportunities. Among consumer marketers, it's called data mining and model building—letting the science drive the business strategy. But even with relatively small data sets, business marketers are doing some cool things; not necessarily building regression models, but using simple profiling about industry categories and company sizes—and using that to look at added products they could sell to their customers. BtoB: Then retention marketing is an inevitable result? Collins: Yes. In an up economy it's all about finding prospects, but now a lot of people are saying they just don't want to lose anyone. That begins with aspects of loyalty and even trigger-marketing. Retention management may manifest itself through whom your most profitable customers are, as well as who's getting ready to churn and being able to devise some loyalty program to head that off. In fact, I would say that nurturing and database management are merging, particularly in the b-to-b world. There is a fine line between a campaign offer and a lead. And there is the segmentation, the science of database marketing. For example, who should get the offer and what that offer should be—the pricing, and all the things that factor in. That's where b-to-b marketers can get really creative because, with fewer customers and prospects, they can do more innovative things. Vittal: I agree. Customer prospecting isn't dead, but it's taking a back seat these days. Marketers can no longer go on an acquisition binge, because they have to be very careful of whom they target and how they spend their budgets. BtoB: Can you provide some metric on the value of database hygiene? Vittal: Now you're asking the organization to make leaps of faith with you. For example, you can't really know what the database drove, but the fact that you had a database that was cleaned up, allowing you to be more efficient with your time, and that your time to market was reduced, and that you're targeting the right people, which saves money because these people are much more likely to convert ... the database has an impact across all these issues. The question is, can we isolate this impact? One way to do this is to measure how you perform before and after you have a clean database. For example, did you reduce your campaign cycle and what was the value of that? Also, look at the amount of returned mail with wrong names and addresses. Can you quantify the value of that plus the lost value in not reaching these people? When you start drilling into these dynamics, it becomes pretty rational to explain their contributions to the database. Stevens: Even though data is extremely valuable for marketing purposes, it's very hard to capture data about customers—and prospects and even harder to keep it clean. Also, businesspeople often change their phone numbers, titles and job functions so fast that data hygiene is just an enormous challenge for b-to-b marketers. The other fact is the difficulty in capturing the data relates to the fact that so many parties are involved in the b-to-b selling process, and those parties—sales in particular—shouldn't be asked to do data entry. You want your sales force selling, not capturing data. BtoB: With all the focus on revenue, are we finally seeing the long-awaited alignment between marketing and sales? Collins: When I think of b-to-b, I think more about database marketing as a way to empower sales, have sales receive these leads and be able to know that a lead is of high quality. You could say this is an example of marketing reporting to sales. But from a strategy standpoint, how do you mine that insight of customers and prospects in the database? Marketing doesn't just want to send over a list to sales without finding out how something did, to refine things. It's closing the loop with feedback from sales. It's very important for both marketing and sales to come together and be aligned. One thing we're seeing more of is distributed campaign management, where marketing creates an internal list and sends it to sales, which then can opt in to make a campaign. Here, sales decides on executing the campaign. It bridges central marketing and field marketing, giving the field the ability to localize and personalize the program. Stevens: In this sense, you're doing database marketing by using nondirect response communications. Maybe you can use your database to identify your top prospects, creaming off the top 20% most likely to be responsive to a sales call. So even though it's a sales call and not direct marketing, the database becomes essential in narrowing the field and targeting the audience more effectively. Of course, you hope to hell you can get the salespeople to tell you later what happened. BtoB: What about measuring the results of a database marketing campaign? Grossman: If it's the response to an offer to buy something, then frankly my ROI will be how much money I made. Response rates aren't good enough. I will tell you that the response rate for buying jet engines isn't the same as for selling printer ink. Ultimately, the only thing that matters is I spent this much money and I made this much money. If you're talking about leads, it's a little different. But you still want to understand the value of the lead. Vittal: Marketers' biggest challenge is measuring results. In our recent “State of Marketing Technology Adoption Report,” 60% said their big challenge is the need for metrics and the general lack of tools to support ROI justification. There are two different considerations here. First is measuring the ROI of the program, and second is measuring the ROI of the database itself. Measuring a program's ROI is rather straightforward: You consider the cost of the program, which includes the cost of the people, material and technology. And at the other end is the return, the revenue the program generated. This could be quite easy, with clear calls to action, and assigning a portion of the conversion to the program. But what about the ROI of the database itself? That's harder to prove and articulate, but there are things to think about. First, you want to decide about the innate value in cleaning up the data, organizing it into a single spot and creating a single version of the truth about your customers and channels. As a company, you have to decide what the value of that is, the program that's run off the database and the customer strategy and segmentations you run off it as well. The database is contributing to all the programs you run and every activity that marketing drives. BtoB: Database marketers have more channels than ever to consider. What is the opportunity here? Vittal: Marketers are very concerned about creating and improving a multichannel customer experience and [about] the need to build or expand a customer information system. This last touches directly on marketers' need for solid databases. But since the marketer has little or no chance of influencing that through traditional channels, knowledge of your audience becomes more important than ever. Taking it further is having a thorough knowledge of that audience's social profile, which I believe will be the next big frontier for marketers. They'll want to track interactions and social behaviors, and that will impact the profiles of their customers in their databases. Grossman: Before you decide on the right channel, however, and whether one is good or bad, just ask the customer. You can simply ask how he or she would like to be communicated with about products and services. People will actually answer that question. My position is, you learn from your customers. As for direct mail, the answer to that question is a four-letter word starting with the letter T: test. A certain logic does tell me that an online message will do better for a product that's offered online, but I wouldn't presume to know that answer. Testing will give the answer to you. Likewise, the only way to know how to communicate with somebody in manufacturing as opposed to agriculture, or a big company versus a small one, is to test. BtoB: Speaking of channels, e-mail shows little signs of slowing down and social media is burgeoning from a low base. How are e-mail and social shaking out for database marketers? Collins: E-mail is growing as a channel, of course, but marketers aren't being very smart about it. They view e-mail as cheap and thus overmarket to customers with it. People talk a lot about targeted marketing to customers. They say, “We used this well-targeted list and identified all these people,” but then they ruin it by adding in 10,000 more names and end up spamming these people over and over again. Clearly, one way to differentiate yourself today is to send e-mail a little less often. And the great thing is that you can marry content to the recipient. It's bringing science to the art of marketing to make the message pop. As for direct mail, we've been talking about its death for 10 years, but we still open up our mail at home. It all comes down to the right channel at the right time with the right offer to the right customer. If I have a b-to-b prospect, I might just send them something to drive them online to know more about my business. If I send them that trinket and monitor what they do online, I'll get more information to nurture. Vittal: Ideally, you'll want to track where your customers are—where they are online, on Twitter—and what those social conversations were about. But this is another challenge: For example, often when that customer phones your call center, the center has no memory of his previous activity. It becomes an integration exercise that's rather complex. But if you're getting a volume of traffic in the various channels, you have no alternative but to do this integration. And I agree that, while direct mail is set to decline about 8% this year, in some circumstances direct mail can be the perfect medium. Catalogs can become an event. And “transpromo”—essentially direct mail included in transactional statements—can be extremely relevant [to] and versatile [for meeting] your needs. Overall, marketers have more channels in which to communicate.
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