Forrester: Database Marketers Gain Influence but Lack Enterprise Coordination

While database marketers see their budgets and influence rising, they say that their greatest challenge is the lack of a coordinated enterprise customer contact strategy, according to a report released Sept. 27 by Forrester Research, Cambridge, MA.

In another report published Sept. 28 by Forrester, the same respondents said they employ nine outsourcers to assist in their database marketing. Most want to consolidate, but few think it would be feasible next year.

Seventy-two percent of the 49 representatives of some of the largest database marketing organizations in North America that were surveyed in June said database marketing is gaining influence relative to mass media advertising within their organizations. But a majority said senior executives still think mass media advertising is more important.

“In line with their expanding influence, database marketers report budgets are growing, too,” said Eric Schmitt, senior analyst at Forrester and the author of both reports.

The report released Sept. 27 found that 59 percent said their overall budget rose this year, with nearly two-thirds expecting another increase in 2005.

Schmitt also said that, when asked to rate the effect of specific marketing elements on results, “nearly 100 percent of our respondents report that customer analytics and data quality have a high or critical effect.” By comparison, “just 57 percent say the same about technology tools.”

When asked about pain points, 59 percent of these database marketers identified the lack of a coordinated, enterprise-level customer contact strategy as their No. 1 challenge.

“It's high time for CEOs to give marketing a voice — if not control over — every customer interaction,” Schmitt said.

However, two-thirds of respondents said they are in the process of centralizing their organization.

“More than half of respondents also cite the perennial tactical challenge of getting campaigns out the door faster and better response attribution,” he said.

The report published Sept. 28 found that the most commonly outsourced functions are data procurement, data hygiene and creative.

“But in this year's deals and renewals, firms will also seek out expertise in marketing strategy, program management, customer analysis and advanced analytics,” Schmitt said.

Thirty-one percent said they spend more than $5 million yearly on outsourcers, agencies, service providers and data brokers, while 26 percent spend $1 million or less.

“Database management vendors and direct agencies have been joined by systems integrators, interactive agencies and e-mail service providers,” Schmitt said. “We believe the industry is entering a deep period of restructuring.”

Schmitt said that when the smoke clears, these outcomes are likely:

· Customer analysis will hold center stage. Most firms that provide outsourcing of marketing databases today combine address standardization services, compiled data sales, printing and postal engineering with database design and management. These functions are commodities, Schmitt said.

“As a result, vendors are investing in customer analysis services,” he said. “Some even pitch the fact that they didn't have a vested interest in an in-house print operation or data source as a differentiator.”

· Winning business models will be centered on professional services. Too many vendors still price their offerings as if access to technology, not people, was the dominant cost driver. This is no longer the case, he said.

“An increasing proportion of industry revenues are labor-based in the form of retainers and per-hour charges, rather than per-customer-record management fees,” he said.

· Standalone e-mail service providers will disappear. Marketers see direct mail and e-mail marketing as more alike than different, Schmitt said. As a result, firms are looking into developing integrated contact strategies across the two media, often with an eye to reducing postal mail volume.

“Yet, with a few exceptions, most notably Donnelley Marketing and Experian, most vendors have yet to lay claim to in-house expertise in both areas,” he said. “We expect this to change, perhaps as better-capitalized outsourcers like Harte-Hanks pluck from the ranks of struggling e-mail vendors.”

Related Posts