Business marketers should re-examine database marketing service providers

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Database marketing service providers-firms that design, build and manage the customer data infrastructure and make analytical marketing possible-address a growing need among business marketers for outsourced services that combine marketing technology, analytics and operations expertise. Earlier this year, Forrester Research surveyed 49 database marketing suppliers-10 representing 37% of current outsourced relationships, and 39 others accounting for approximately 25% more.

Even in this small sampling, we found the marketing services industry is large and crowded. Hundreds of agencies and service providers specialize in everything from traditional media, such as mail and television, to less mature channels, like e-mail and search. But the industry's media-centric nature is increasingly out of alignment with marketer needs. In today's fragmented marketing environment, quantitative, data-driven customer insight that can be applied across multiple channels must take precedence over the dynamics of any one medium.

Fortunately, we found database marketing service providers taking steps to become more data-driven. These firms focused on technology and direct mail historically. But recent business marketing demand for cross-channel services in such areas as analytics, marketing strategy and e-mail have forced them to evolve. The rewards for suppliers responding to this need are great: multiyear relationships that can range from several hundred thousand to tens of millions of dollars in annual contract value.

However, providers presently underserve the needs of b-to-b marketers. Of the suppliers interviewed, roughly 67% specialize in financial services and retail, yet only 39% say the same about b-to-b. A deeper look at their client rosters shows that only eight out of the 49 claim at least one-third or more of their customers focus solely on b-to-b customer data.

But demand is strong and growing. Earlier this year, more than 40% of respondents to our b-to-b marketing survey reported that they plan to build, expand or improve data quality in customer information systems or data warehouses. In the second half of the year, we expect more suppliers to join such outsourcers as Extraprise, Harte-Hanks, Massini Group and Quaero in servicing this market.

So what should b-to-b marketers look for when evaluating database marketing service providers? Here's our short list of core services:

Technology. Technical services like database design, data management and administration, and support for ad hoc analysis, reporting and campaign management software are the bread and butter of client demand. With systems integration requirements on the rise and interest in real-time customer hubs growing, we expect to see interest in inbound marketing (interaction management). Also, marketing resource management (MRM) software will progress over the next 12 to 18 months.

Operations support. Cost-per-thousand data hygiene services such as matching, merge/purge and support for direct-marketing campaign design are common supplier deliverables. What's hot? Large-scale customer data integration (CDI) projects, as firms look to apply customer insight to functions beyond marketing.

Analytics. Analytical expertise is now a critical decision factor for many buyers. We found demand shifting from the nuts and bolts of customer and campaign analysis to more advanced deliverables like segmentation and lifetime value models.

Data and data sourcing. Data are the fuel for database marketing programs, and acquisition marketing environments are often based exclusively on outside data. As a result, clients look to their database supplier to help them source and test these data.

Industry focus. Many suppliers supply industry-specific data models, report templates and business rules. We found a few that sell data and provide analytical services targeted at specific verticals like health care, telecom and nonprofit government.

Laura Ramos is VP-marketing strategy and technology research at Forrester Research.

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