Data Race

As more and more money is poured into in-house marketing departments for customer relationship management, database bureaux are fighting back by offering new levels of support.

If you go to a solicitor for advice on a dispute, there are two possible outcomes. Either the lawyer will say you have a case and it is worth proceeding, or you will be recommended to drop it and seek a resolution without recourse to the law. It is this impartiality – even if you pay to be told not to take it further – which the British profession is prized for, and which tends to differentiate it from the American model.

So why is it that other professional advisers appear incapable of making a recommendation which does not involve buying in their services? Of the 20 computer bureaux which made contact in connection with this article, barely a couple could bring themselves to say that clients may not need to use them at all. While not expecting turkeys to vote for Christmas, it does little for the credibility of database service providers that they can only see one side of the story.

The reality is that outsourcing of customer databases remains the exception, not the rule. In a recent survey carried out among UK marketing professionals by AnswerSets, 86 per cent said they would not outsource their customer data. And while there is a strong trend towards large-scale outsourcing of IT projects, there is an equal and possibly even larger trend towards the in-house implementation of data warehouses and customer relationship management (CRM) applications.

Shaun Doyle, chairman of CRM vendor Intrinsic, might naturally be expected to see the opposite view to the bureaux. What he sees as working against the external service providers is timeliness and cost. To make communications more timely and relevant – particularly within event-driven marketing, where they are triggered by what the customer does – data has to be refreshed rapidly.

“This is more problematic when the database is housed off-site,” says Doyle. “Traditionally, bureau-based marketing databases have been used to support direct mail where the timeliness of the data has not been so critical. With the move towards real-time marketing and the use of the other methods – such as e-mail, voice and text messaging, and the Web – it is vital that the marketing database is refreshed daily or online.”

Together with this demand for speed, the scale of databases is increasing, which makes external suppliers uneconomic.

“There is a move to build universal databases where data is held on prospects, enquirers, customers and ex-customers. In this case the databases get much larger – 40 to 50 million records. In most instances, bureaux price on customer records. The cost of holding large databases becomes prohibitive where this type of pricing structure is needed,” says Doyle.

Bureaux cater for complex needs

The historical view on why bureaux exist at all is that internal IT functions have always been primarily geared towards operational data processing. Marketing needs are often more complex and not of immediate significance to the business. Why run a customer profiling programme before you have processed the payroll, for example?

Substantial investments are now being made on internal systems which will remove such obstacles. But instead of removing the market for third party services, some suppliers believe it will increase it.

HDM Worboys managing director Caroline Worboys says: “As a result of CRM, the marketing has got so big, the demands it puts on internal resources have become too onerous. If it had not got bigger, then we probably would have seen a migration in house.”

Jo Buxton, director of business development at Experian Marketing Services, agrees that the new in-house solutions may not deliver what marketers want. “CRM means speed, one record at a time, taking immediate decisions and scoring on the fly. That is different to what the marketer needs. That is why data warehouses fail and clients come back. When they came to process the data, integrating models and scoring, they couldn’t do it. It is a good idea to lump the data in one place, but when it comes to doing the job, it is a problem,” she says.

This leaves external suppliers with two options – provide the analytics as a service to a mainly internal set-up, or take ownership of the entire IT infrastructure. Buxton says for bureaux versed in direct marketing-oriented activities, the former is likely to be a core market.

“If it does go in house, it is stupid trivia such as preparing files for analysis and modelling which trip you up. Certain things have to be done to simplify the data. If you are briefing the IT team in house, there is a learning gap which we have had five to ten years’ experience to fill,” she says.

HDM carried out profiling work on one bank’s customer database, which was then taken in house.

“That requires a serious financial commitment to the running of it in the marketing department, and the set-up with IT,” says Worboys.

Enhancing data – or simply managing the complexities of addresses and reduplication – has long been a staple of the bureaux, and even within CRM too. Richard Lloyd, director of database marketing services at Dun & Bradstreet Europe, says: “We’re going two ways – developing our desktop tools to give marketers front-end access to their own data, and also building global data depositories where we have got all of a company’s data – marketing, finance, and so on – and we deliver a holistic view.”

In the US, the company already has eight clients who are using this “pumping station” approach. In the consumer market, the Acxiom Data Network offers a similar service. Every individual in the country is assigned a unique reference number. Clients then append this to their in-house files and when they need enhancements or merges, the numbers are sent through the Internet to the supplier and are returned with the additional details.

The other trend is towards outsourcing, often on a global scale. As Lloyd notes: “The trend is that major global organisations are putting out everything, from creating simple Word letters to data mining, using suppliers like EDS and IBM. They still get the tools on their desktop, but they are no longer hung up on where the boxes sit.”

Outsourcing trend is still strong

Arthur Parker, vice-president of business intelligence solutions at IBM Global Business, a division of EMEA, confirms, “the big outsourcing trend is still strong. We run IT for big UK companies, so it is an easy step to run their marketing databases and feed intelligence to the marketing department. If the company has outsourced already, it would be a natural extension. If they have not outsourced, I think it could happen.”

Although this type of extended enterprise approach often looks similar to the existing use of database bureaux, it goes far beyond it. Often it involves the sophisticated analyses and customer insights being developed by third parties, leaving the client free to concentrate on how to use them to drive the business.

“The role of the marketing department changes. You have to define policy, campaign strategies and elements of the offer. You get less into the physical management of the process,” says Parker. Where this happens, the database bureaux begin to take on a lot of the functions which up till now agencies have provided, either out of their planning functions or as part of their strategic offering.

In fact, the primary marketer-supplier relationship may soon be with a bureau, rather than an agency. Omega Marketing Services managing director Hilary Shepherd believes this will help to revalidate the bureau’s role. “In my mind, one of the clear benefits of outsourcing is the client services function – people who understand when the client is working from a marketing perspective and then liaise with the tecchies who don’t hold that view. That is an important asset,” she says.

As well as providing better service levels than in-house IT departments, bureaux also help to cut down time to market. It is notable that the major internal CRM implementations are quoted by vendors as requiring two to four years in many cases. Although they are often only delivering more limited marketing databases, third party suppliers can provide a solution more quickly.

“The average client will find it pretty difficult to get excited about a database that’s going to take that long to become operational, says David Lunn, marketing manager for Crawfords Computing. “Meanwhile, in the market, drastic changes can occur within four weeks – or even four hours – so who can predict what the situation will be in four years’ time?” Not only are priorities likely to have changed, the initiator of a project will probably have left. The average tenure of a marketing manager is 1.5 years, after all.

Despite the trends, it is far from clear whether one model is winning out over another. While British Airways and NatWest have both recently implemented in-house applications to drive their CRM initiatives, lifestyle data owner Claritas this year outsourced its database to Alchemetics in what is probably the largest data warehouse of its kind.

What database bureaux increasingly need to meet is not just a demand for varied products, but also widely differing levels of support and service. From global IT services to simple name and address enhancement, the one-size-fits-all approach is no longer good enough.

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