Direct Questions, Direct Answers

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We recently convened a roundtable of leading practitioners of b-to-b direct marketing. The event, held during the Direct Marketing Association’s B-to-B Marketing Conference last month near Phoenix, provided insights on many topics, including how these experts are spending their budgets, using e-mail and CRM, and balancing the dual goals of customer acquisition and customer retention.

Roundtable participants were: Jere Books King, VP-worldwide marketing communications, Cisco Systems Inc.; Michael Faulkner, senior VP-segments and affiliates, Direct Marketing Association; Robert Stagno, VP-worldwide demand generation, IBM Corp.; Kim Howard, online b-to-b marketing manager, Iomega Corp.; Gerard Broussard, senior partner-director of media analytics, OgilvyOne Worldwide; and Barry Kessel, exec. VP-global account managing director, Wunderman. BtoB Editor Ellis Booker and Senior Reporter Carol Krol moderated the discussion.

BtoB: How has your spending on direct marketing changed in the past six months? What’s your prognosis for the coming year?

Broussard: There seems to be a leaning toward more e-mail. That trend really started last year.

Kessel: I see a real increase in outbound calling. I call it “dialing for dollars.” It’s an intrusive medium, but I think companies like it because you get immediate feedback and immediate dollars coming back in. Even though it’s the most expensive medium and potentially the one that’s most damaging to long-term relationships, it gives you the quickest return.

King: Spending is relatively flat, but the shift is absolutely toward online. We’re seeing a lot of success lately with much more customization of e-mail based on more specific targeting and segmenting, but also some interactive techniques where people can receive materials from us and look at products online in a three-dimensional, interactive manner.

Stagno: There’s been a shift to the interactive medium, but not so much from a spend standpoint. We have much better integration with our traditional advertising, direct mail and all forms of telemarketing. I think we’re actually improving the way that we integrate the things that we do as opposed to any pronounced shifts in mix.

Faulkner: The old mediums don’t go away. Dollars are shifted, but the total dollars don’t grow. E-mail, for example, is obviously the big one, and the issue now comes to saturation. E-mail saturation has achieved a level where it now has public policy implications. Not only are you competing for the attention of your customer; you’re now competing for the right to do the business and not be interfered with by legislative or regulatory initiatives. The industry does have an opportunity that we missed with both direct mail and telephone, and that is to set good standards and guidelines and benchmarks for e-mail.

BtoB: What keeps you up at night?

King: The return of capital spending by our customers. Fewer cus-tomers have fewer dollars. The challenge on us is to get a higher yield for the programs we’re doing and increase targeting and segmenting.

Kessel: Clients are shying away from innovation. Because there is less investment in innovation, it’s going to be harder to break through. People are now retrenching, rather than making that R&D investment in marketing that might really drive the next breakthrough that could propel and differentiate.

Broussard: I want to amplify what Jere said before. The return on investment and how the individual channels contribute to what you’re trying to achieve in a campaign keep me up at night. It is the single question that we get asked most often by our clients. And in order to be able to answer the question, you have to spend money.

Stagno: Two things keep me up. One is that in an environment with extreme cost pressure and flat market growth in technology, the only way to gain revenue is to grow share. That means that you’ve got to steal and acquire customers from competitors, which is more costly. So cost pressure is pushing us into focusing on retention-based activities, and yet, in order to grow share, we have to go and acquire.

The second thing is the breadth of our skill base globally to execute these sophisticated marketing concepts. Try exporting a breakthrough idea to some of the countries that are just emerging in terms of direct marketing or database marketing skill.

King: We’re setting up “centers of excellence” around the world so that we can have a collection of highly skilled individuals who under-stand database analytics, who under-stand ROI models, who under-stand the new rich e-mail and interactive and integration of programs.

Howard: We’re doing the same thing. Our global centers have become a lot more focused in recent months. But again, it’s the same dilemma of being able to tap into a skill-set that just isn’t there.

Stagno: I would add one more thing. We took a similar approach to building centers of competency. That’s worked well, but we’ve reached a point now where the country teams are the teams that have to actually execute. Talking about a “Europe-level” capability doesn’t extend deeply enough for us.

BtoB: CRM is a much-maligned tool. What’s the problem with CRM?

Kessel: CRM and data management in general is owned by IT staffs. It lived inside the manage-ment of an IT or an IS group, and the marketers didn’t really have control of it. People saw [CRM] as a magic bullet, and frankly the expectations were too high. The amount of investment in labor and intelli-gence into it to make it work was underestimated. If you don’t re-engineer your systems or your marketing thinking, it isn’t going to help you.

King: ERP was a promise of “intergalactic” knowledge about your business, and now CRM is the promise of “intergalactic” knowledge about your customer. That doesn’t mean you shouldn’t strive for increased knowledge and market intelligence.

Stagno: Tools and systems do enable quantum leaps in improve-ments. But if you think about some of the capabilities that exist now, it’s not a tools problem. It’s a practitioner’s challenge. CRM becomes a big challenge, particularly in b-to-b. IBM for many years never organized its information for marketing pur-poses. We organized our systems to process an order and to send it to a shipping dock where someone signed it, and that was the name that we captured.

BtoB: Is it a case that companies have the data, they just don’t know how to look at it?

Howard: That is the case at Iomega. When I first joined the company, [database marketing is] where I started. I was one of the first people to even focus on that area. Being able to identify the data sources available within that company surprised everyone. They had no idea how many databases we had and what they were doing and what they were collecting, and none of them talked to each other. That is still going on.

Stagno: At its worst extreme, some would say, “I don’t care how much software you sell, you’re not selling my hardware boxes.” It’s a very difficult discussion when the person who is paying for the campaign only cares whether you sell another box.

Kessel: Companies are awash in data. In fact, I find them crippled by too much data. There is so much data because companies, every trans-action, everything that occurs, ends up in a database somewhere. The question is what’s leverageable? What can you take and simplistically use it to move your business forward?

BtoB: Is there something companies ought to be doing with their existing data that many are missing?

Stagno: Two dramatically significant aspects of what we do with our data are scoring and indexing. With a score and an index, you can speak the same language with anyone. If the propensity of a customer to buy storage is [indexed at] 92, you know that that customer is likely to buy storage. Reducing the data down to a digestible, commonly understood set of metrics has been helpful at IBM.

BtoB: What are you using e-mail for currently? How big a part of your overall marketing strategy is e-mail marketing? Are you doing prospecting or simply maintaining existing customer relationships?

Howard: We’re probably focusing more on maintaining existing relationships. I think it has to do more with the economy and what’s happening and what we can actually show ROI for.

BtoB:Does that mean you’re not prospecting?

Howard: No. I don’t mean that at all, especially since just recently one of our major competitors left the market. So we have additional funding right now to really attack that. It’s not that companies aren’t willing to do that if the opportunities present themselves. But in general I would say [there is] more of a focus on retention.

King: We use e-mail very sub-stantially, and we’re using it at all phases of the purchase cycle. It takes on a variety of different forms, from simple to complex, to invitations to promotions to newsletters to white papers to instructional materials.

Broussard: We have a financial client that is just starting to look into doing a little cross-selling and up-selling within their house [e-mail] list. They’re looking at their existing customer database.

Stagno: E-mail is growing in our marketing mix. It’s not in the 50% range. When you think about the diverse portfolio of techniques we use, including events, interactive mail, telemarketing, it’s very difficult to isolate. But e-mail is growing for a couple of reasons. With e-mail, if you get a better response rate and your cost is lower, money is naturally going to flow there. We’re often using the e-mail as a stimulus to an online dialogue. It’s really more of an entry point of an electronic relationship.

BtoB: Regarding e-mail, are we in danger, as Michael said earlier, of “saturation”?

Stagno: How do you define the term saturation? We have customers opt-in. If we don’t have their permission, we’re not talking to them. Are we in saturation in traditional mail? We’ve gotten millions and millions of addresses, we know them all, and we all market using those tools.

Faulkner: It’s saturation when legislators or regulators say it’s saturation. When you have opt-ins, that’s not a problem.

Stagno: Saturation means that some people don’t like that they’re getting e-mail? That’s not saturation.

Broussard: If you cut the word mass out of e-mail, then you have no saturation, because presumably people will respond to the e-mail.

Kessel: It will also reach its own equilibrium where if it doesn’t pay, marketers will stop doing it. You want that to happen naturally rather than have it legislated.

Howard: One of the things that obviously we all do to measure that is not only looking at how many people we’re adding to and growing our list but how many people are opting out. If you’re seeing your rates in that area spike, then you know you’ve got a problem.

BtoB: Is prospecting dead? What economic conditions will send up signals to start prospecting again aggressively?

Broussard: A lot of advertisers are doing both, but more of the relationship is among existing cus-tomers. They have not abandoned going after new people. They might be just doing it a little less often.

King: If we introduce a new product or a new technology area, we are always prospecting because we’re looking for new growth opportunities. Prospecting never goes away. You want to take care of your long-term customers. But [you also want] to expand to some new opportunities, whether it’s a wireless application or whether it has to do with network security or telephony. These are new areas of growth.

Faulkner: From the DMA’s perspective … 60% of the dollars are spent on direct marketing advertising and 40% of the revenue is attributed to lead generation. So somebody’s doing a lot of lead generation.

BtoB: What can companies do to narrow the gap that exists between the direct marketing function and the sales team follow up?

Howard: We completely redesigned our micro sites for lead generation. In the process of doing that, we brought our salespeople in at the ground floor to be the ones to craft the original questions that would lead to the qualifying and the scoring.

Stagno: First of all, speak in their language. The currency of a salesperson is a qualified lead and a win. At IBM we’ve done a lot of work to link the marketing activity to the same sets of goals and targets. Marketing can act as a coverage channel and generate leads and revenue. The second challenge is … the ability for marketing to demonstrate quantitatively its value-add. In planning a campaign, get the sales force’s expression of what a lead is, not what you think a lead is.

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