So How Do Database Marketers Kill the Fly on the Table?

Imagine yourself at a backyard cookout. A fly lands on the table where the family is going to eat as soon as the burgers come off the grill. You've already tried shooing the insect away, but it persists in returning, perhaps in anticipation of the meal. Clearly, you have to kill the fly to get rid of it. You decide to select a tool for the job, and you have the following choices:

* A rolled-up newspaper

* A flyswatter

* A sledgehammer

* A 16-guage shotgun

* A flame thrower

* An F-15 fighter fully loaded with Sidewinder missiles

* A 100-megaton nuclear weapon

Which tool would you choose for the task? Probably either the newspaper or the flyswatter would do the job. The others would do more damage than good if you tried to use them.

Why, then, do companies who want to become database marketers automatically think they must have the newest, most expensive database marketing systems when something more reasonably priced (and probably easier to deploy) might do the job? I suspect that there are three reasons: first, marketing database vendors with advanced technology to sell are very good at marketing themselves; secondly, if IT is involved, there is a natural tendency to gravitate toward the newer and more robust technologies; and third, the publications that serve the industry tend to cover the newest and most advanced tools. This is a good thing, of course, but it tends to make people who aren't on the bleeding edge feel like second-class citizens.

There's certainly nothing wrong with wanting powerful tools that will provide the features you need as your sophistication grows, but there is an immutable fact that is often overlooked in the technology decision-making process: The more you spend on the technology that manages the data, the less money you will have available to spend on the parts of the database marketing process that actually create sales.

The headlong rush into campaign management and customer relationship management systems is a case in point. Unless and until you have a company-wide dedication to a customer-centric approach to doing business, the quick response fulfillment and supply-chain systems required to meet the customer's needs on a timely basis, and the culture required to take advantage of the one-to-one way of doing business, you might do well to consider a less ambitious set of technologies.

Becoming a smart database marketer doesn't always require the investment of hundreds of thousands (or even millions) of dollars needed to build an enterprise-wide data warehouse and customer relationship management capability. The needs of specific companies and even entire industries actually fall somewhere along the technology continuum illustrated below, and an individual company's place on the continuum can change as it gains experience.

Depending on the size of the data feeds, a marketing database can be implemented with a variety of database managers appropriate to the task. Sometimes, Microsoft Access in conjunction with off-the-shelf analytical software can provide all the processing power needed to get to the desired end result. In larger database environments, it will usually be necessary to graduate to the more robust handling capabilities of an Oracle, SQL Server or Sybase database using OLAP (online analytical processing) tools. If online access, advanced query capabilities and complex campaign management are required, that's the time to consider the more sophisticated — and expensive — campaign management systems. These systems usually cost $500,000 or more to launch. Only large companies can afford them.

Fully integrated customer relationship management systems link all activities in the enterprise, not just marketing, to a customer-focused array of technologies designed to deliver a true one-to-one relationship experience to the customer. These systems are always custom built, usually by one of the major consulting firms and integrate all customer touch points and supporting business processes into a single, unified system. CRM systems represent the final step in the evolution of marketing technology, and they're priced like it: The entry fee into this environment is usually $20 million or more.

Outsourcing vs. internal development. In the early 1990s, there was a significant shift in the marketing world from outsourced marketing databases to inhouse development. This movement was concurrent with and mostly driven by the development of new data warehousing technologies. Marketing was always a high-priority probable user of such systems, and IT departments often used the potential to save the money marketing was spending on data management as a primary means of funding the data warehousing initiative.

Sometimes it worked and sometimes it didn't. It's a fact that there have been some spectacular successes; it's also a fact that there are as many failed attempts. Some major data warehousing initiatives have been abandoned altogether. In the aggregate, I believe it is fair to categorize the success of internal data warehouses as “iffy” at best when it comes to meeting the needs of marketers.

In the latter part of the decade, we have seen some slowing of the drive to internalize marketing technologies, especially as more and more businesses return to a concentration on core business processes at the same time they are downsizing internal resources.

The decision to outsource or manage the database inhouse really should be based on three simple criteria:

* Cost — both hard and soft dollars.

* Do you have the resources required?

* Can those internal resources develop the level of specialization and marketing sophistication required to make the investment pay off?

Getting started. Regardless of how the data is managed and the analytical techniques employed, the beginning step is to use data from the company's customer files to drive a “discovery” process designed to identify the strategies most likely to positively affect profitable sales. This process usually involves one or more of the following:

* Appending information from a variety of external sources. This is usually done to enrich the database with needed customer-specific demographic data elements that companies have not collected.

Profiling of the database to develop a greater understanding of customer behaviors, characteristics and/or demographics.

* Clustering the database to provide an easy-to-understand and easy-to-use method of ongoing segmentation for marketing purposes.

* Predictive modeling to identify and rank the customers most likely to buy specific products and/or services. The modeling techniques employed range from multivariate regression and CHAID to advanced neural nets.

It is important that output from the discovery process be delivered with detailed analysis as well as reports. The information must be actionable to have value. This is a human requirement, not a technology component, because it can only be delivered by analysts who understand your business.

Criteria for right-sizing. Resolve to spend as much of your database marketing money as possible on communication with customers and prospects and as little as possible on creating the technologies that will allow you do so effectively. This is a profoundly logical approach to database marketing, and using it as a yardstick will help you make the right decisions.

Decide what you're trying to get done before you talk to marketing database vendors.Getting a clear fix on your actual requirements and sticking to that plan will keep vendor presentations from elevating technology requirements beyond your reach.

Insist on a real-world accounting of the benefits to be gained from internal implementation. If you're being told that an internal system will cost less, be certain you balance that with a clear statement of what the solution is going to provide. Sometimes, cheaper means you'll have less functionality. And ignore IT's traditional “control” argument. If you have a properly-written contract, you have control no matter where the data resides.

Decide in advance how you want to pace your growth and sophistication in database marketing. Technology decisions are often made with an eye toward perceived future needs because no one wants to discover that the system they bought into just a few months ago will not scale properly in the future. But there is a danger in buying too far ahead of your needs. Prices are dropping and they will continue to do so. Just look around at the number of vendors who are offering marketing database and campaign management systems compared to a year ago. The market isn't growing nearly as quickly as the number of vendors in the space, creating a sure bet that software bought today will be less expensive in the future.

Richard N. Tooker is senior vice president of database marketing at DMW Worldwide

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