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DATABASE MARKETING SPECIAL REPORT

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As customer data breaches and identity thefts increase, so does the pressure to find a solution  ¶ This time, the issue is the increase in security breaches of customer data and identity theft. In the past 90 days alone, seven organizations have had data compromised: Bank of America; Boston College; data compiler ChoicePoint; DSW Shoe Warehouse; data provider LexisNexis Group and its Seisint subsidiary; San Jose Medical Group; and the University of California. Altogether, those hits affected 2.5 million customers.

Last month, the Senate Committee on the Judiciary held a hearing on the problem with testimony from the FBI, Secret Service and affected companies, including Acxiom Corp., Choicepoint and LexisNexis.

Industry watchers don't see the pressure to find a solution easing.

"A number of bills-both in the Senate and in the House-have already been introduced in response, and more are sure to come," said John A. Greco Jr., Direct Marketing Association (DMA) president-CEO, in a speech to business marketers in March. The discussions around securing database information deal mainly with consumer information, but "if you're using customer data of any kind, you're affected," he said.

Others agreed. "It's a huge mistake to ignore it," said David Sable, chairman-CEO for Wunderman Europe, Middle East, Africa.

The problem is perceived by many as universal. "The issue of managing and protecting consumer and business information extends far beyond companies in the information industry to any company that is actively collecting and saving customer information," said Krishna Chettayar, assistant VP-marketing strategy at Dun & Bradstreet Corp.'s Sales & Marketing Solutions division.

"Security issues are just as important in b-to-b marketing as they are in b-to-c marketing. Many companies issue purchasing cards to their employees with the authority to buy products and services on behalf of the company," Chettayar said. "Additionally, information about what the company is buying may or may not be sensitive but certainly is proprietary and confidential. Companies expect there to be a fiduciary relationship regarding their information when they buy from another company."

While the DMA supports federal legislation on data security, the ramifications of restrictions could cripple the industry.

"If direct marketers' access to, use of and ability to share data are constricted significantly, direct marketing's future will be compromised significantly," Greco said. "And this is a possibility. After all, any risk-or perception of risk-to consumers' privacy could trigger new laws that could have wide-ranging negative consequences for sales, jobs and our economy."

Greco said recent breaches have only stoked the fires. "Not surprisingly, these stories have unleashed a media and political avalanche," he said.

In the meantime, any solution to the problem could present a conundrum to marketers.

Jerry Cerasale, the DMA's senior VP-government affairs and resident expert in Washington, D.C., said that the customer data at risk are the same data companies use to verify a customer's identity and prevent fraud in the first place.

"It is important to reduce identity theft, but in the same light, the data is needed by marketers to prevent fraud," he explained.

Until legislation is passed, Cerasale said marketers can take steps to better protect customer data, including: continually reviewing and updating security procedures; knowing who customers are; keeping close track of who has customer data; physically securing the place where data are stored; keeping employees well-trained on data security processes; and installing anti-hacking software.

"It's smart vigilance on the part of companies" to prevent data theft, said Wunderman's Sable. "It's less about technology than it is about insider fraud."

targeting stays priority

Along with security issues, target-driven marketing continues to be a top priority, particularly for b-to-b marketers with long selling cycles. Customer and prospective customer data must be mined and analyzed, segmented, employed and then measured to determine success.

Some executives say marketers are starting to get the importance of driving toward a well-defined target.

"Marketers are getting more and more savvy," said Jeff Pulver, VP-marketing at Rearden Commerce, which markets a Web-based services procurement gateway used by businesses including Cingular Wireless, JD Uniphase and Motorola. Pulver describes Rearden's application as a "personal concierge" of business services for corporations. He said database marketing is the "gritty side of marketing" that provides the accountability needed more than ever by b-to-b marketers.

Pulver puts targeting at the center of the company's marketing efforts. Once the key customer is identified, messaging can be personalized.

A campaign to 250 Fortune 1,000 C-level executives and their assistants-a potential power user of Rearden's software-kicked off recently and is already performing well. The direct mail package contains a separate letter and Starbucks gift card to the targeted executive's assistant from Rearden's CEO's assistant, with the message: "With the extra time you will soon have, take a much needed coffee break ... on me." Pulver said the direct approach of "power user to power user" touts how the solution has made her life easier.

Siebel Systems' efforts behind precision targeting have required balancing the data segmentation automation process while ensuring its marketing team can understand and use that information.

"I think the barrier for many marketers is the two factors of automation and simplicity fighting one another," said David Dahlberg, senior director-demand generation services at Siebel. "The [in-house] database expert understands very complex [data] models, but the field marketing managers need to understand the program in order to execute it. We need to be able to communicate what we're doing to both constituencies."

Sarah Stansberry, director of marketing at Accudata America, a database marketing company, said targeting is crucial. "The b-to-b technology solutions space, for instance, is highly competitive," she said. "In order to market to that customer, you've got to target your messaging."

The stakes are high because of the dollars involved. If your potential customer is looking at big competitors to buy a high-end technology solution, and you have a boutique niche solution, you have a strong advantage if you can communicate your benefit effectively, Stansberry said.

According to a joint study Forrester conducted with BtoB, more than half (55%) of b-to-b marketing executives who characterize themselves as aggressive adopters of technology said they planned to build or expand their customer information systems-including addressing data-quality issues-in the next 12 months. Of those who characterized themselves as technology followers, 47% said they would build a customer information system, but only 34% said they planned to focus on data quality. In a separate Forrester study, 37% of b-to-b marketing execs said that was the No. 1 technology theme for their organization.

The promise of precision targeting is not new, but technology advances have made it more of a reality. "I think the marketing applications are getting more mature, and marketers are getting better at how to use some of these applications," Pulver said. 

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