Outlook 2005: Database Marketing Isn’t The Headache It Once Was

Database and customer relationship marketing are at a crossroads. The larger allocation of budgets from brand advertising to direct marketing is yielding scads of data for storage, tracking, mining and CRM technology. However, data protection laws in the United States and overseas as well as privacy concerns call for more caution. More than ever, sophisticated data marketing techniques and technology are needed.

David Eldridge, London-based CEO of international database marketing services provider Alterian, discusses some of the issues.

What role will legislation play this year in database marketing and CRM?

The recent changes in data protection and the introduction of the do-not-call list have caused many direct marketers to change the way they plan, execute and manage campaigns. It’s now critical that the direct marketer has desktop access to its customer and prospect data, as small mistakes in planning can have costly consequences. Compliance violations not only incur financial sanctions, but also can damage a company’s brand.

Database marketing doesn’t have to be a huge headache anymore, as customer insight tools can be intuitive, visual and simple to use. No one wants to waste money on customers and prospects who aren’t interested in their offering, so the role of enhanced legislation is good for the direct marketer, the consumer and the direct marketing industry. Enhanced data protection laws mean that there is a need for more sophisticated and easy-to-use database marketing solutions that help marketers better communicate with willing consumers. This will assist in removing the “junk mail” label that haunts the industry.

Marketers increasingly will observe privacy regulations on a voluntary basis, even in cases where they technically may be permitted to take advantage of exclusions or loopholes in a given rule. Respecting consumers’ preferences and using privacy regulations as a proxy for multichannel marketing will be critical for productive direct marketing.

What should concern direct and interactive brand marketers in the months ahead?

Structural factors are driving the demand for marketers to make the database the starting point of a growing part of their activity. Eric Schmitt of Forrester Research recently identified a number of these, including structural changes in advertising that mean mass media is becoming less attractive. There also are factors around the adoption of new channels, the explosion of data and an ever-increasing need to demonstrate return on investment from marketing.

Interactive and brand marketers will need to focus on tracking and measuring their activity in response to these trends. It will be necessary to develop the processes and infrastructure to gather, store and manage this data in such a way that meaningful knowledge can be rendered to validate and drive successful marketing activities, whether via advertising, DM, electronic media, catalogs or brick-and-mortar retail.

Where are the new opportunities in this space?

Though midsized organizations typically spend less than their top-tier colleagues, they are at least 100 times more numerous, far less saturated and greatly underserved by traditional database marketing solutions. As consumers demand that relevant and personalized communication be delivered to them, and additional channels of communication lead to greater customer choice, marketers in the mid-market especially need to gain more immediate desktop access, control and exploration of their marketing data.

What effect will the recent spate of mergers and acquisitions have?

The marketing technology space will see heightened activity – consolidation as well as new entrants and expanded functionality from existing players – as vendors seek to expand their reach in linking customer data, marketing activity and the enterprise.

This integrated approach to marketing infrastructure has been termed the “Marketing Technology Backbone” by Elana Anderson of Forrester. As technology becomes a critical factor in marketing because of fragmenting audiences, increasing accountability in marketing departments and the explosion of data, vendors will develop or acquire new capabilities to meet this challenge.

Mergers and acquisitions will remain prevalent in the marketing services industry as marketing service providers recognize the importance of value-added services alongside commodity offerings. An integrated offering is what marketers are looking for but have found it surprisingly difficult to find.

Any trends that will affect database marketers this year?

Recent years have shown an increase in marketing spend into direct and online channels. This has occurred for a number of reasons, including media fragmentation, the growing move from mass to targeted media and that accountability and measurement are now critical to every function of every organization.

This shift has played a role in the growth of organizations that provide database marketing services. More than ever, marketers strive for a competitive edge and need to use their unique customer data. This, coupled with new data protection rules and regulations that require specialists to ensure compliance, means that a larger share of marketing spend has been made available to companies that supply data-driven marketing services.

Database marketers will see themselves rise in importance within the overall marketing organization as it is increasingly recognized that customer insight is the key to competitive edge and not only effective but efficient marketing activities.

What events in 2004 will affect this year’s achievements?

Mergers and acquisitions activity for marketing services providers – such as Simmons/Experian, Alliance/Epsilon, Acxiom/ChinaLoop, MKTG/MarketTouch – signal that companies see the expansion into value-added services from commodity/legacy services as critical to their success. International expansion into developing markets is also important, and the development of true integrated offerings for serving marketers is critical to success over the next several years.

The intersection of increased use of analytics by marketers, acceptance of outsourced marketing services and focus on the mid-market is driving vendors to decrease costs, increase ease of use and administration and [to] develop new standards for truly integrating marketing activities.

Are database marketers benefiting from database and CRM technology spending? Will spending rise?

Surveys and research indicate that spending on database services and technology is rising and will continue to do so into the coming year. This can be attributed not only to the improving economy, but an increased recognition by marketers that CRM and database marketing can provide lift in ROI.

Spending should continue to rise as late-adopting large enterprises and mid-market organizations increase their database marketing and CRM investments. These strategies are no longer “nice to have,” but virtually a requirement for organizations in the face of fragmenting target markets, increased government regulation and the need for analytically focused marketing strategies that deliver predictable, positive results.

E-mail David Eldridge at [email protected]

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