Consumer databases are grabbing most of the attention in direct marketing at the moment, what with the launch of various retailer loyalty schemes and the move by certain large fmcg companies into the area. But – as database experts will readily admit – the real challenge for them is in creating and maintaining business-to-business databases.
Consumer databases, although large with records sometimes numbering millions, are relatively simple. While they may contain hundreds of fields, they almost always relate to the habits, interests, personal history and purchasing patterns of single individuals. Business-to-business databases, on the other hand, are at their core trying to create an image of the behaviour of companies, not single people.
Nor can marketers rely on the sort of heavy analytical tools such as neural networks which they can use on million-strong consumer databases, because the numbers of records involved are too small – business-to-business databases will usually contain at most 100,000 records, and sometimes only hundreds.
Gerald Chertavian, managing director of business-to-business database specialist Conduit Communications, observes that business- to-business direct marketing is “similar to consumer marketing, in that you’re looking at things like lifetime value, but much trickier. With consumer databases, you only have one buying point to worry about: with business-to-business you have a multitude of buying points.”
With companies, Chertavian points out, you have to identify not just who will be officially buying your product or service, but who advises them on which one to choose; who signs the cheques; and who ends up actually using it.
Tim Pottinger, client services director of the Computing Group, also stresses the complicated nature of business-to-business database marketing, compared with consumer. “With consumers, you know who is going to make the decision. With business-to-business, you have to make sure your communication gets through to the person who makes the decision – but you don’t necessarily know who that person is. It could be a secretary, a manager or the finance director,” he says.
For example, a car manufacturer will want to identify who the fleet controller is at a target company: but he or she may not be the person who holds the purse strings. Having convinced one individual, it may then be necessary to begin again with another. “You have to identify who fits where in the equation. Some have influencing power but not buying; with others, it’s the other way round,” Pottinger warns.
Pottinger also stresses the need for constant updating of records. People change jobs or responsibilities frequently. “Business-to-business databases need much more maintenance and monitoring than consumer databases, and you have to always be tracking who is making purchases. The whole area is one that needs to be handled with a great deal of care.”
Vince Hayes of RR Donnelley Marketing Services, the UK arm of the direct marketing services giant RR Donnelley, says: “Whatever people may feel about the beginnings of a feelgood factor, and whatever the likelihood of a sustainable upturn in the economy, most companies continue to find marketers are realising the need for highly flexible and highly responsive databases, in order to reach an understanding of, and be in a position to manage, the highly complex relationships that exist between suppliers and customers for business-to-business services.”
But a more fundamental problem facing direct marketers in the business-to-business area is the question of where to source data. Patrice Bendon of database consultancy Data by Design (once part of direct marketing agency PPHN, and now owned by RR Donnelley) observes that it is relatively easy for consumer marketers.
For example, a holiday company can buy a list of consumers from a lifestyle company, and analyse it in terms of interests, average price the individual is likely to be willing to pay, and so on. For business-to-business, however, “selecting data from a rented list for prospecting is rather more difficult. Data is readily available on company finances, but data on named individuals and their specific responsibilities is not and job titles are often misleading.”
Bendon says it is well worth companies checking the veracity of their data as they create their database. “As the business-to-business market is smaller than the consumer one, it is often worth the extra investment at the beginning of the process to carry out telephone verification on bought-in lists. The data can be checked and the contact details gained for the individual responsible for purchasing the product. Even the address will need to be confirmed, as in some instances the address on a bought-in list is that of the head office rather than the actual operating unit.”
Mark Scanlon, commercial director of database specialist Acxiom, points out that there is a debate raging over whether databases should be built up from information derived from Companies House records, or whether marketers should have them built from scratch by telephone research.
Scanlon observes: “You can draw parallels with the heated debate going on in consumer database marketing between geodemographic and lifestyle supporters. In fact, both data types have strong and weak applications, and the “Holy Grail” would be a large telephone-researched database amalgamated with one containing Companies House data.”
For this to happen, however, there would have to be a coming together of database vendors with different types of databases. Scanlon predicts that during 1996 a number of joint venture partnerships will be formed which he thinks will improve business data quality.
In addition to partnerships between database consultancies and data vendors, we may also see the growth of links between database users. It would make sense for a consortium of marketers with non-competing products to pool their information-gathering activities to form syndicated databases, or even “data warehouses”. As well as the raw information about names, job titles, number of staff, turnover and so on, such databases could also contain information on response rates to different creative treatments, assuming of course marketers were prepared to share such delicate data. If so, users could profit from others’ mistakes and successes and, in turn, feed back their own experiences.
Chertavian also believes effective databases can only be built up from the marriage of a number of different sources but he says companies should begin by looking at the different data sources they have internally, and make sure they are integrated properly.
“In the business-to-business sector, marketing is something of a misnomer,” Chertavian claims. “You have a huge cost called the sales force. If you concentrate on marketing, and ignore the sales force, you’re losing a major source of up-to-date information.”
The sheer complexity of business-to-business databases, the speed at which the information decays and the effort involved in tracking down the people who matter have in the past slowed down the growth of the area, as Don McIntosh of Data by Design observes. “The slow growth of database marketing in the business-to-business area can be attributed partly to the data complexities, especially in terms of its use for direct marketing,” he says.
He is not the only database expert to believe that companies are slow in waking up to the possibilities of database marketing. Research conducted by NOP Corporate and Financial on behalf of The Business Database (the database division of Yellow Pages) suggests that most companies have yet to take on board the possibilities that database marketing offers them.
Some 76 per cent of the companies canvassed by NOP which use external database firms believe that database marketing is more or just as cost-effective as other marketing tools. But on average businesses spend less than ten per cent of their annual marketing budget on data. Overall, data is expected to be 88 per cent accurate: in reality, it is only 76 per cent accurate. But 27 per cent of data users say they would not be prepared to pay more for 100 per cent accurate data.
Paul John, product manager of The Business Database, believes this shows that suppliers of information in the business-to-business sector are going to have to improve the quality of their data. “Businesses need more information and guidance from the industry to encourage them to realise the potential of data-driven marketing. The database industry needs to shake off some of its complacency and recognise the market for what it is – a discipline which is under-developed and in its infancy as far as the majority of UK companies are concerned.