How to Avoid Contact Rot and Bolster Your Return on Investment

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It is no secret that direct marketers and salespeople have fought a seemingly unending battle against inaccurate data that have led to the inability to reach target audiences and close sales, but the costs of inaccurate data go far beyond the sales force.


Inaccurate data increase costs for the entire enterprise. Though it can be found in sales prospect databases, billing systems or human relations departments, some of the costliest inaccurate data can be found in your own contact folder. Costs associated with "contact rot" can be overwhelming, yet often are overlooked in the business process. A simple cleansing of your contact list can increase productivity, success and profit.


The hard costs of inaccurate contact lists include that of sending undeliverable messages or the inability to follow up with a hot sales prospect. Soft costs often are associated with the time needed for individuals to clean their data and track down the information to make the contact list complete and accurate.


The soft costs usually are not factored into any relevant project, as companies often do not even recognize a problem exists until they use the data. A recent study by The Data Warehousing Institute shows that nearly 44 percent of respondents said their data were worse than expected. And of those respondents, 75 percent attribute inaccurate data to financial losses exceeding $500 million annually.


To put these statistics into perspective, envision a direct mail campaign with inaccurate data of 20 percent (far below the 44 percent highlighted by the institute). Suppose the direct mail is a full-color brochure with additional collateral that costs about $5 per piece. In a 50,000-piece mailing, inaccurate data of 20 percent mean the cost of undeliverable brochures exceeds $50,000 - hardly a small price.


Inaccurate or incomplete contact information is not a new problem, but as more companies and individuals conduct business online, having correct electronic information is more valuable than ever. While direct marketing reports suggest that nearly 2 percent of data for a given business are inaccurate, some e-businesses estimate that only 10 percent of their records are accurate, as incomplete Web forms and privacy concerns result in greater inaccuracy.


Despite the wealth of inaccurate list data out there, plenty of individuals and companies need to develop simple methods to alert customers and prospects to changes in their electronic information. It is vital for certain individuals, whether they are C-level executives at large companies or independent real estate agents, to be able to provide the most comprehensive, up-to-date contact information to their constituents.


Companies have invested millions in customer relationship management and sales force automation tools, yet those enterprises have not taken the initiative to ensure the data in those systems are accurate. In a report published by Gartner, it is estimated that nearly half of CRM initiatives will fail because of poor data quality.


As incomplete data continue to be an issue for companies and individuals, it is no surprise that the list hygiene industry generates more than $300 million annually. Options such as phone verification and data vendors are available to correct inaccurate data, but it is necessary to use a cleansing approach that is comprehensive and automated.


A key component of an automated approach lets the user not only cleanse the data but also verify its existing data. Data verification is an important step to lower costs of data cleansing. For example, if you sent a 10,000-record list to an outside vendor to call, the cost would be much higher than if you had an automated system identify 8,000 of those records as already verified and so only 2,000 records would need to be called.


Phone verification is an in-depth method to ensure you have the most comprehensive data, but it is costly as it is necessary to repeat the process continuously to maintain updated contact files. Also, phone verification offers a one-time solution to bad data, but any process to correct inaccurate data must be ongoing. According to reports, more than 2 percent of records become obsolete in one month, so it is important to develop an ongoing system for data accuracy rather than a one-time approach.


To combat the cost of data cleansing, more software solutions are emerging in the marketplace. E-mail solutions are proving effective to update contact information, and, unlike intrusive phone calls, e-mail puts updating capabilities in the hands of the user. Also, e-mail solutions are available that allow for a peer-to-peer approach, which lets computers communicate with one another and exchange information depending on access rules set up by the user.


In addition to understanding the available methods to update contact information, any solution you choose needs to include these aspects:


o Automated. Though services such as phone verification and information from data vendors are a strong start for data cleansing, it is advantageous to develop an automated system that can produce up-to-the-minute updates and prompt you to conduct an outbound inquiry of contact information. Time constraints are a leading cause of incomplete or inaccurate data. Thus, a system needs to be developed that can be automated so that you do not need to set aside time to conduct updates to existing contacts.


o Customizable. Not every company or individual seeks the same information in its contact database. Some emphasize phone numbers while others simply need e-mail addresses. Develop a cleansing and updating system that can be customized to your company or individual needs.


o Privacy. In today's world of unsolicited phone calls and spam, the method you choose to update and cleanse your contact list must adhere to a strict privacy policy. Not only will you avoid alienating people in your list, but the response rate will be lower if people perceive your requests for updated contact information to be unsolicited. Several firms out there will house contact information in a third-party server, but you need to understand whether those firms will sell your data to another party. Any vendor should explain its privacy policy, and you should be familiar with it before signing on for its services.


o Easy to use. A final piece to better contact management often is overlooked. Whatever method you choose, the process should be easy for the user. Effective contact management is an ongoing process, and the easier you make it for users, the more likely they will use the system. If the solution is difficult, it will not be used to its full capacity.


All aspects of data are vital to a company's ability to turn a profit, and it's important to treat contact data as you would any other form of business intelligence. Your contact data are some of the most important information you have compiled and often are irreplaceable, having taken years to compile.


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