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Large database firms fill gaps through deals

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Direct and database companies are on a tear, buying up smaller firms in their quest to become one-stop shops for marketers looking to simplify their vendor relationships.

Deals in the past 30 days involving database marketing companies include:

  • Acxiom's purchase of SmartDM, a full-service direct marketing agency.
  • Harte-Hanks' acquisition of Postfuture, an e-mail marketing technology company.
  • Redi-Mail Direct Marketing's acquisition of PPS Medical Marketing Group, a data processing company.

"As we put together our business strategy document, one of the things we recognized was we wanted to provide full, integrated marketing solutions," said Tom Cloninger, group leader-Diversified Industries at Acxiom.

SmartDM was "a nice strategic fit," Cloninger said, because of its concentration on the midtier market. Acxiom has traditionally focused on large corporate clients.

"They already had a business model that was fully integrated, and midtier companies are lining up for a complete solution as opposed to one component of a database solution," Cloninger said.

enhanced e-mail capability

Harte-Hanks' acquisition enhanced its ability to do e-mail marketing for customers.

"We were filling in a capability in the end-to-end direct marketing continuum, part of our continuing strategy to fill in the gaps of the things we don't have," said Dean Blythe, senior VP-chief financial officer at Harte-Hanks. "We believe e-mail is an important channel for direct marketing."

Harte-Hanks had included e-mail in the programs it designs and delivers to its clients, but some of that was outsourced to third parties, Blythe said.

Even before the latest deals, M&A activity had been picking up in the database space. InfoUSA acquired three database marketing companies last year: Edith Roman, a provider of postal and e-mail list services and database consulting; OneSource Information, a business information company; and data processor Triplex. Experian acquired CheetahMail, an e-mail marketing service provider, and partnered with MeritDirect to launch a cooperative database, b2bBase, to gain list management resources.

Single view of customer

Industry watchers say the need for a "single view of the customer" is driving the M&A activity. Database marketers use an average of nine outsourcers for their database marketing efforts, according to Forrester Research, and almost two-thirds (65%) would like to simplify the process by consolidating relationships. However, only 20% of Fortune 500 marketers expect to reduce their number of outsourcing relationships in 2005, according to Forrester's report, "What Database Marketers Think About Outsourcing."

Consolidating is complex because database marketing is fragmented into several areas, including data hygiene, data appending, data processing, data management, list management, analytics, creative, campaign management and fulfillment.

"Data and list providers are one reason the numbers creep up," said Elana Anderson, principal analyst at Forrester. "If I have a b-to-b database marketing program, when it comes to getting the data, I'm going to infoUSA, D&B and Forbes, for example."

Big money is at stake. Database marketers spend a median $3.5 million on outsourcing annually, and 31% spend more than $5 million, according to Forrester.

More than half of the marketers polled by Forrester said that coordinating vendors is growing more difficult. "There's an increasing amount of overlap in the services being provided, so you'll find a list manager who says they'll build a database and execute a campaign as well," Anderson said. "[It] is making it harder for marketers to figure out who they should go to for specific services."

Industry fragmentation has a direct effect on marketers' ability to pool data in order to analyze their customer base effectively. "We work with one of the big telcos," said Luke McKeever, exec VP at Alterian, a database technology provider. "They have about seven service providers, and you've got little silos of people having insight into one customer segment without one holistic view."

To help clients overcome such situations, database companies are striving to become more full-service. "They're struggling trying to figure out how to put this together in a cohesive service offering and how to integrate," Anderson said. "The database marketing service providers have been slow to act."

Anderson said marketers are also partly at fault. "They want to get things out the door," she said. "Short term, they will go with one company [to execute the campaign], but that creates a [data] silo that can't be measured with anything else."

Expanding database scope

Database marketing's scope has expanded with the proliferation of media channels, such as e-mail, and the potential to apply database marketing techniques to them.

That amplifies the challenges of integrating marketing across channels and sometimes multiple lines of business. "Marketers are in the weeds," Anderson said. "We live in a more complex world, with more channels. That causes marketers to say `help' on a strategic level."

Denise Hopkins, senior marketing director for Experian's Business Marketing Solutions group, contends a single customer view is attainable. "We manage the mutichannel marketing: outbound through telemarketing and direct mail, as well as e-mail, and loop it back to the response," she said. "Many companies struggle with that because they manage the e-mail and the postal databases separately and sometimes with different providers. Making all those databases talk to each other is the difficult part." 

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