Hit or Miss

Database targeting is becoming more sophisticated by the day. This makes it all the more surprising that direct marketing (DM) advertisers routinely mail a segment of the population guaranteed to yield a negative return on investment – people who have quit the listed address, or who have died.

Data decay, as the phenomenon is known, is nothing new. However, the problem is growing even as companies are spending vast sums on improving the accuracy of their targeting and building better customer relations. According to data suppression specialists the REaD Group, 84 million mailings were sent last year to people who have either died or changed address, wasting &£46m, assuming an average cost per pack of about 55 pence.

However, these statistics pale in significance when weighed against the sackfuls of marketing material that never reach their intended destination in the business-to-business sector. The worst cases occur among the UK’s largest companies, where frequent office moves and changes in boardroom personnel render about a third of company contact data obsolete each year, according to Conduit Business Information.

Most of the waste could be avoided, and customers spared the inconvenience of having to dispose of mail that was never intended for them, if companies used more data-screening tools. In the business-to-business sector, data cleaning typically involves telephone research. This is a relatively costly approach, but generally the most reliable way to maintain and augment high value contact information.

Consumer marketers have more options from which to choose. These include not only well-known data sources – such as the postal address file, the national change of address file and the electoral roll – but also specialised data-suppression services. The most highly regarded of these is the gone away suppression file (GAS) offered by the REaD Group, which claims to identify over 94 per cent of all home movements and over 80 per cent of deceased people.

Mailing non-existent prospects is so pointless it is hard to see why it is tolerated. At the crux of the problem is the fact that data hygiene has rarely been viewed as a top priority, both by list owners and their clients. Adrian Batt, marketing director of DM agency DMS, says: “List owners are not taking full responsibility for the quality of lists. They want to receive all the revenue for renting their lists, but they are not prepared to spend some of the return on weeding out inaccurate data.”

List owners who fail to update their databases regularly are undoubtedly selling their clients short. But the situation shows a lack of focus on data quality across the whole DM sector as much as opportunism among list owners. Sandra Street, board account director at service brand agency CCHM, says: “DM managers rarely want to be known for sorting data issues. Creative or effectiveness awards are much sexier.”

Poor data hygiene is not simply a reflection of the shortcomings of third-party lists. Some of the most inaccurate mailing lists are generated from internal databases owned by companies, such as financial services institutions, that theoretically have a continuing relationship with their customers.

“When we undertake mailings for our financial clients we often ask how well they have cleaned the data they provide,” says Street. Invariably, the answer is the same: “Because of tight budgets, we cannot afford to clean the data as often as we would like – however, we must get the mailing out.”

DM advertisers might be less dismissive of data concerns if they understood the extent to which sloppy practices were damaging their business. The real problem is that most companies grossly underestimate how much mail goes astray.

Many companies mistakenly believe that by capturing and processing postal returns they are eradicating redundant contact data. However, research has shown that only 28 per cent of the population have ever returned a piece of unsolicited direct mail.

Equally disturbingly, there is evidence that as many as one-third of postal returns are generated by people who scribble “gone away” on the envelope, simply to get themselves removed from an unwanted mailing list. By relying on postal returns, many companies are not only failing to capture the majority of “gone-away” customers, they are also deleting the records of people still living at the address shown on the database.

Slow progress

Attitudes to data hygiene are beginning to change, albeit too slowly. In February the Direct Marketing Association (DMA) will mount a campaign to encourage direct marketers to get to grips with data decay in the consumer sector.

The campaign’s main focus will be the launch of a national suppression file (NSF) containing a database of people who have been confirmed as gone-aways, or deceased, by the REaD Group and the Royal Mail’s National Change of Address File. A separate section will contain an aggregated list of raw postal return data, supplied by lifestyle company Claritas, global information solutions provider Experian, and direct response media independent Tri-Direct.

Combining multiple sources of suppression data into a single national file makes a great deal of sense, and there is no doubt that the NSF will be widely used by the estimated 34 per cent of the DM market that routinely screen their databases. However, the real challenge that the DMA faces is to convince the sceptics that data suppression is not only a necessary aspect of responsible direct marketing, but one which is commercially beneficial too. Delivering that objective requires skilful communication – and an appropriate pricing structure.

Cost benefits

David Robottom, director of development and postal affairs at the DMA, says the NSF has been designed to ensure that users “benefit in real savings”. That is true in principle. Advertisers will have two ways of accessing the NSF – by paying an annual volume-related licence fee, or by engaging the services of a licensed computer bureau. In the latter instance, the bureau will pay a nominal fee of &£500, which licenses them to screen their clients’ mailing lists against the NSF. For every match that is made against the NSF, the bureau will pay a hit charge to the DMA of about 17 to 20 pence.

If the NSF was offered at cost, end-users could typically expect to make a net saving of over 30 pence on every avoided mailing. The big danger, however, is that the licensees will impose a hefty mark-up or, worse still, resort to the more traditional and often prohibitively expensive sector practice of charging on the basis of cost per thousand. “If that happens,” says REaD Group managing director Mark Roy, “the cost benefit to the user will fail to stack up.”

John Wallinger, head of data planning at Craik Jones, would like to see the service offered free. “Responsible users will pay for suppression services. But in an ideal world the list owners would under-write the cost of the NSF and offer it as a service to the industry to encourage widespread take-up.

“It is an issue that the DM industry has to tackle collectively, because everyone’s reputation is damaged when an individual firm bombards a customer with misdirected mailings.”

Wallinger is right to raise the issue of customers’ perceptions. Calculating the financial loss that companies’ incur by retaining out-of-date records on their mailing lists is straightforward. Much more difficult to quantify, but potentially more costly in the long-term, is the damage done to brand image, and beyond this to public perception of direct mail in general.

What is required is an absolute determination throughout the industry to make data hygiene a priority. For end-users that means recognising that regular data cleansing is an imperative which has to be budgeted for, scheduled into the marketing process and implemented, even if that scuppers a campaign deadline.

Raising client standards

Another way of rectifying the problem is to demand more as clients. One of the peculiarities of DM is that it is considered acceptable to sell unusable data. “In any other market that would be considered fraud,” says DMS’ Batt.

The most reputable list owners, such as Claritas, typically compensate clients once the number of mailings returned as “gone aways” or deceased exceeds four per cent. A better scenario, however, would be for all returned mailings to be compensated, irrespective of the percentage level of returns. Not only would that be a more equitable outcome for the client, it would provide list owners with a greater incentive to aim for higher standards of accuracy.

Tackling data decay is a thankless task, but it cannot be ignored. With the threatened withdrawal of the electoral roll for marketing purposes, the industry is on the verge of losing a well-established method of validating contact data. What is more, long-term demographic trends – such as rising rates of divorce and one-person households – point to a future in which the business of maintaining up-to-date records on individuals will become ever more complex.

If DM companies fail to put their own house in order, they will have only themselves to blame should the end result be loss of public confidence and, ultimately, a further dose of regulation.