The year of database marketing integration
Given the unprecedented state of the economy and the pressing need to aggressively pursue every sale, the often unsung heroes that make up the backbone of database marketing — lists, database management and data services — may play a more crucial role than ever before in delivering results. After all, the effectiveness of every direct marketing campaign, whether deployed online or offline, is predicated upon the skillful use of these tools.
Despite a rocky 2008, list and data management executives say the coming year offers many opportunities for growth. “We believe there will be a flight to quality,” says Geoffrey Battrouney, EVP at New Rochelle, NY-based Estee Marketing Group. He and other experts say 2009 will be a watershed year for both sectors, and an exciting period during which innovation, consolidation, and integration will separate the strongest firms from the weak.
Database firms move to integrate services
When Merkle CEO David Williams looks back at 2008, he sees something positive among all the relatively dismal economic news: the acceleration of database marketing's evolution. “The wind was at many [database marketers'] backs for a decade,” he says. “Now, they're saying to themselves, ‘If the economic climate or the consumer climate is going to get difficult, I'm going to have to be more innovative, I'm going to have to be more effective.'”
Integration, Williams believes, is the key concept surrounding all of these ongoing efforts. Generally, integration has long been the goal of direct marketing, but to improve cost-effectiveness and ensure results, Williams and other experts say database sector firms must also integrate their services to improve cost-effectiveness and ensure continued strong results. To that end, Merkle has organized a team of 21 executives to work on solutions that would integrate such areas as capabilities, direct mail analytics and Web analytics.
“We've created a leadership organization under the context of integrative customer marketing,” Williams explains. “We're making changes in the way we've organized ourselves. In the same way that our clients are asking their teams to be more integrated and collaborative, we're asking our teams to be more integrated and collaborative.”
Integrating online and offline capabilities is a key to success in 2009, say experts. “We're clearly at a point [economically] where the only spending increases in marketing are in online channels,” says Elana Anderson, VP of product marketing and strategy at Unica. Among the most interesting developments within the database sector, she says, is that online marketers are now asking themselves how they can more effectively engage customers and use analytics to identify the best message.
“All those problems and the data and analytics needed to support the solution are issues that database marketers have been thinking about for 15 to 20 years already,” she says. “All those skill sets need to come together, and consolidation of services and knowledge is moving fast.”
The list marketing sector hopes to stay steady
Last year, the list sector encountered a bumpy road. Geoffrey Battrouney, whose clients include FAO Schwartz, Reader's Digest, and top-tier nonprofits such as Salesian Missions, ticks off a chronology of 2008's economic problems, from the housing market's collapse and rise of gasoline and diesel prices to the problems on Wall Street, all of which affected consumer spending.
“That means house file list universes are going to be smaller now than this time last year,” he says, adding that consumer spending at retail “hit everybody in the pocketbook,” including list management companies: “I saw more and more of our clients aggressively pursuing pricing deals [on lists].”
Kayle Plotkin, VP of business development at Danbury, CT-based Statlistics, says 2008 was a challenging year for the list rental community because of postal rate increases, the economy, and political elections. “Every election year impacts list rentals, but this year it was the political mailers who weren't doing as much postal mail as people expected,” she says. “So, that probably impacted the rental revenues of certain lists that would have been expected to get a much larger usage.”
The lists sector has also seen dramatic growth and evolution in online activity in recent years.
As marketers have shifted efforts to the more cost-effective online channel, demand for e-mail lists has grown significantly.
“I think e-mail became stronger overall [in 2008]; particularly on the b-to-b side, but it also began to develop on the consumer side, in terms of list management and companies utilizing their own in-house databases as well as working towards promotion and acquisition via e-mail,” says Plotkin.
Keeping e-mail lists up to date has always been tough, but in today's economy, it's even more problematic. “With all the layoffs in the business arena, keeping the lists clean and getting to the right person is a challenge,” she points out.
But now that the initial shock of 2008 has worn off, Battrouney says it's time for the list industry to make bold moves.
“The mailer who wants to grow his or her business has to make a few courageous decisions,” he advises. “If you're looking at a softening economy and your business is under threat from those external factors, what you do is expand. You append and cross-append to build your house file, to gather a larger share of wallet at your competitor's expense. Now is when you do it — when the tide is going out, not when the tide is coming in.”
When asked about what the coming year might hold in store for list brokers and managers, the experts say 2009's course is impossible to accurately predict. “Well, who's got the best crystal ball?” Plotkin says, laughing.
But, she adds more seriously, “Many of our clients have a plan A, plan B and plan C, and next month's plan will be based upon what happened in the prior month. It's important for people to know their business well enough to be able to manipulate [tactical] plans according to changes that may occur on a dime.”
Battrouney says expenses for direct mail and catalogs, including expected 2009 increases in paper and postage costs are likely to have an impact on list rentals, but adds these expenses are always a concern. “Nonprofit [organizations] can get a certain [postal rate] increase while catalog-like mail gets another price structure, so we don't know [the impact] yet,” he says.
Still, many list sector companies hope they'll maintain the status quo, regardless of economic craziness or other unforeseen circumstances that might arise over the next year. “Flat is the new up,” saysBattrouney. “If the average number of orders stays the same, which for our company it did in 2008, then that's a good thing.”
While no one can predict what the economy will or won't do in 2009, both list and database sector experts agree that attitude affects outcome. Williams says, “This kind of market tends to have as much opportunity as it does challenges. I think the great companies will actually make progress in 2009.”