Can Marketers Ever Catch Up?

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Consumers are mastering multichannel marketing much faster than their consumer-marketer counterparts. This should not surprise us. Today's Internet-centric, on-demand world puts consumers in control of all the information needed to make intelligent buying decisions anywhere, anyplace, anytime. And it's mostly free. Here are a few facts:

• Online purchases totaled $175 billion in 2005, up 22 percent from 2004.

• Online advertising rose 29 percent in 2005, topping $12 billion (the Direct Marketing Association estimates 2006 catalog expenditures at $19 billion).

• During an average month in 2005, 83 million visitors launched 2.5 billion searches on Google alone.

The message is clear. Consumers want to initiate the business contact and expect immediate responses and marketing dialogues that are relevant, customized and available in whatever channel(s) they select. They see less value in receiving the traditional outbound "push" marketing messages, except those related to specific, individual, personal events and triggers.

Marketing must move from batch, back-office activity to real-time, interactive capabilities available in all customer touch points.

This requires major changes. Most database marketing systems operating today were built in the 1990s, before consumers fully embraced the Internet and e-mail. These systems don't store Web data. Many were built on proprietary, non-standard technologies. These databases were built mainly to create outbound direct mail and, later, e-mail. The plan was basic: Collect decent data, add some analytics, learn how to segment, generate personalized letters and e-mail and you had become a pretty good direct marketer.

But traditional DM is not what consumers want today. Forrester Research states in a recent report that "Consumers are sick and tired of marketing" as evidenced by its 2004 consumer survey reporting that:

• More than 60 percent block telephone calls, e-mails and/or pop-up ads.

• 68 percent say there are too many ads.

• Only 10 percent think e-mail is a good way to learn about products.

• 63 percent wish they got less direct mail.

• 30 percent use DVRs to skip TV ads.

Despite these consumer attitudes and actions, marketing practices have changed little. Marketers appear unable or unwilling to heed these clear warnings. Under heavy pressure to generate revenue, they continue to rely on a familiar and favorite tactic: Pump Up the Volume.

Marketing spending plans for 2005 were up over 2004 in nearly every channel, from television to direct mail, from catalogs to Internet marketing. In a 2005 Forrester Research study of database marketers, 50 percent reported planning budget increases of 5 percent or greater for direct mail. And for e-mail, 58 percent reported planned increases of 5 percent or greater.

The story is the same in business to business. Blackfriars Communications reported that its recent survey of BTB marketers showed company plans to boost marketing budgets by an average of 11 percent in 2006.

We believe that just increasing the volume of marketing activities won't increase results by much, and it could backfire in the form of lost and irritated customers.

Even through the depressed economy following 9/11, marketers have built e-commerce sites, implemented Web advertising and search marketing programs, ramped up e-mail, deployed Web analytic tools and automated their call centers. But too often these capabilities are added on as projects within individual departments by independent vendors or agencies. This produces more clutter, less relevance and confused customers, along with a falling marketing ROI.

Though marketing is under pressure from customers and CEO/CFOs to improve its accountability, effectiveness and relevance, making progress will be very tough. Marketers themselves know they are way behind.

In the National Retail Federation's 2004 CRMretail Survey, nearly 70 percent of participating retailers said that their CRM initiatives failed to meet their expectations. Among the obstacles given:

• Inadequate internal expertise, 75 percent.

• Limited resources, 75 percent.

• Lack of departmental cooperation, 68 percent.

• Data accuracy and integration issues, 66 percent.

These are difficult issues that won't be solved overnight. But they can be solved, given the right organizational dynamics, budgets, skills and understanding of the critical business processes and infrastructures.

Here's one solution. Many companies plan to look externally for experienced assistance. So according to Forrester Research, 2006 is shaping up as a busy year for marketers and their suppliers, particularly database marketing outsourcers.

Forrester also reports that its research shows that more firms are asking their database marketing suppliers for more strategic help. The demand for multichannel strategy services, storage of Web marketing data and value-added analytics is growing swiftly. Companies also are looking for their outsourcers to integrate data content, e-mail, lead management, fulfillment and production operations support into their services mix. Expanding the service footprint reduces the number of vendors involved in the marketing process and speeds workflow.

These changing demands are causing the leading database marketing outsourcers to operate more like agencies, with account management teams acting as an extension of the client's organization. Gone forever is the old service bureau model.

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