Watch Out for the Little Guys

Sure, many of the big players in direct response have embraced database marketing's best practices. They're extending analytic capabilities across all mediums and integrating marketing channels into a single file.

But they'd better watch their backs: Small and mid-tier companies — those with annual revenue in the half-million to million-dollar range — are poised to catch up and may even surpass them, according to David Eldridge, CEO of marketing services firm Alterian, which recently sponsored an industry practices survey.

While money has been flowing into online efforts, the survey reports, spending on segmentation and analysis hasn't necessarily followed. Most respondents anticipate spending more online next year, while only half expect to do the same on the offline side. And even among those planning cuts to their total marketing budgets, nearly all will move money online.

Therein lies an opportunity for analysts. As e-mail's importance grows among mid-tier marketers, databases will need to handle both pre- and post-campaign number crunching. Just over 25% of respondents conduct rigorous analysis of e-mail campaigns.

But limiting analysis to online efforts isn't enough. For a full picture of customers and prospects, database systems will have to merge e-mail and offline information. Around a sixth of all respondents are prepared to do so.

“This is a technical challenge that can be easily solved,” says Eldridge. “But the marketing service bureaus that provide these [capabilities] for offline marketers have been slow to get into this market.” Eldridge believes that by the end of next year, marketers will treat e-mail as a channel in which data analysis is more the rule than the exception.

Why isn't even elementary data parsing, such as recency, frequency and monetary analysis, being applied to e-mail campaigns now? Part of the reason is e-mail's heritage of being treated as a completely separate channel. Pure e-mail service bureaus, Eldridge says, did not initially offer targeting capabilities and didn't benefit from traditional service providers' knowledge of segmentation.

Respondents who haven't fully integrated e-mail and offline data on their databases cite difficulty merging the information; management of online and offline efforts by different departments; data acquisition concerns; and the need for more robust analysis tools as barriers to integration, and therefore stronger analytic efforts.

E-mail's relatively low cost also dampened DMers' enthusiasm for investing in e-mail segmentation and targeting common to offline campaigns.

This is changing. Respondents pointed to higher response rates and the ability to improve customer intelligence across channels as the top two reasons for integrating e-mail with data gleaned from other media, according to the survey. More than half said improving the relevance of their communications was justification for doing this. Cutting marketing costs was dead last, trailing the opportunity to improve brand perception.

“Marketers are waking up to the fact that they can't just go on blasting e-mails,” Eldridge says. “The lack of relevance will damage them. Their e-mails will be blocked, and their brands will suffer.”

But Eldridge sees great potential for the small and mid-tier companies just now getting into the database game.

“They don't have the legacy of a separate department that does e-mail only,” he says, nor do they have the bias of e-mail being a channel that pre-empts the need for segmentation. “It's incumbent on service providers to bring the best practices of each channel [to clients] in an integrated manner.”

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Source for chart information: Alterian

Other Findings

Alterian's industry practices survey also noted that:

• In North America, the highest-revenue companies are using a good deal of traditional direct marketing. In Europe and the United Kingdom, midmarket firms employ it most.
• Firms in the United Kingdom are quite aggressive about moving money from offline to online channels, followed by companies in Europe. The North American market is comparatively stable.
• Only 6.5% of respondents will boost spending on direct mail and e-mail.
• Concerns about privacy or compliance issues and data acquisition were prevalent among European respondents.
• Europeans were strongly inclined to use advanced analytics; North American companies were not.
• E-mail campaigns are likely to be managed in-house (41%) followed by exclusive e-mail service providers (28%) and agencies (14%). Only 9% said general marketing service firms coordinated their e-mail efforts. Many U.K. companies manage their campaigns in house, but they and their North American counterparts also tend to use dedicated e-mail-only service providers.
• Nearly three in four respondents send out fewer than 1 million e-mail messages per month.
  — RHL

Methodology

Alterian polled marketing executives from 250 global DM companies.

• Respondents' annual online DM spending: Less than $100,000 (43%); $100,000 to $500,000 (22%); $500,000 to $1 million (13%); $1 million to $5 million (10%); and more than $5 million (12%).
• Respondents' annual offline DM spending: Less than $100,000 (28%); $100,000 to $500,000 (15%); $500,000 to $1 million (11%); $1 million to $5 million (14%); and more than $5 million (29%).