Prospects still strong despite appearances

With consumer behaviour changing as a result of the recession, prospect data has also changed. But as David Reed finds out, the effects are not necessarily on recency and frequency of purchase – monetary value for marketers has become a major concern.

If your target market is the mass affluent, then it would have been easy to assume that last year saw the size of that market shrink. After all, the country was in the grip of a once in a lifetime (let’s hope) economic meltdown that saw gross domestic product shrink by 6 per cent.

With the housing market frozen and credit hard to come by, then consumers must have been reining in their spending. As a result, fresh data on in-market buyers ought to have similarly contracted. Right? Not necessarily, it seems.

According to a trends analysis carried out by transactional data co-operative Abacus, between August and November 2009, the volume of data entering its Alliance database was just 0.6 per cent down on the same period the previous year. With 700 members handling 500 million transactions worth £20 billion, it is fair to say this is a good cross-section of consumer spending.

Perhaps most surprising of all was that average order value actually rose by 2.7 per cent, from £47.60 in 2008 to £48.90 in 2009. Inflation may have played a part in that, but equally it should be remembered that postal strikes in October knocked back a lot of direct marketing activity.

For data managers looking to get a good fix on the state of the market – and the most appropriate sources for their marketers to use – this presents something of a conundrum. While budgets were cut back, consumer spending perhaps stayed stronger than anticipated.

Harry Wilkes, senior manager, database marketing and lead generation, Lloyds Banking Group (General Insurance), says many of the usual assumptions proved to be no longer valid. “There has been an unprecedented level of change in our group through the course of the recession. To have a baseline for what could realistically be achieved has been incredibly difficult,” he says.

His department sources lead data from three main channels – data capture via in-house microsites, affiliates and traditional lifestyle providers. The first of these produces the best customers in terms of long-term value and retention, but not in the volumes required to meet marketing’s goals.

“I have always found affiliates to be either cost-prohibitive or to result in non-sticky customer types that turn non-profitable down the line,” says Wilkes. That has left conventional data owners as the main providers of mass volume prospect data.

I have always found affiliates to be either cost-prohibitive or to result in non-sticky customer types that turn non-profitable down the line

At the same time, the macro-economic conditions and substantial re-organisation of the banking group have meant a shift in how this data is sourced. “We are now going through an agency to buy across that variety of sources,” says Wilkes. “I would love to manage 15 direct suppliers, because you get the best out them that way, but I don’t have the resources to do it.”

One of the reasons for putting this relationship with data sources at arm’s length has been the way data owners themselves have responded to the recession. “A few have unrealistic expectations of what we can afford for sales and marketing purposes, either because of their own overheads or a perception of our margins.

When we get those proposals, we sometimes go back and propose paying 70 or 80 per cent below the original cost,” he says.

A surprising number are willing to slash their ratecard. Others found 2009 so challenging that they had to be cut from the roster altogether. “We found one data owner in particular who hit problems. When we got the monthly financial reports on our suppliers, they were getting more and more at risk,” notes Wilkes.

Although he does not reveal any figures, it is a reasonable bet that total spending on data by Lloyds Banking Group will have fallen during the last 12 months. Like all financial services providers, it was not a period for business as usual.

It was that fall in investment by previously core clients which led data owners, such as the one Wilkes noted, to run into their own financial problems. Even while the supply of data from consumer activity remained relatively robust, demand from data users softened considerably.

Not that everybody in the supply chain experienced problems. “We quadrupled our turnover and trebled profits,” says John Pooley, managing director of The Data Partnership. His company also expanded its database to ensure that clients still spending on acquisition were able to get the quality and volume they needed.
Pooley says that core data subjects were among the least affected by the recession. “The same sort of person is still filling out surveys – they are older, with a female bias. They have not been particularly affected by the recession and may even have benefited from very low mortgage interest rates, so they have money to spend,” he says.

In January, The Data Partnership moved online in a bid to extend the profile of its database by capturing more young, male respondents. According to Pooley, 70 per cent of the records being gathered this way would not be captured via telephone surveys.

Significantly, his company does not offer any incentive to respond. “The online world has bred the idea of getting something for nothing. A company may pay 30p to get a lead online, so if a consumer fills out ten surveys, that’s half a pack of cigarettes. Are their answers going to be honest?” he asks. Many lead generation sources have a 30 per cent fall out rate because of this approach to solicitation.

A company may pay 30p to get a lead online, so if a consumer fills out ten surveys, that’s half a pack of cigarettes.

If managing data inputs has been an important factor in thriving through a recession, so too has been managing the business itself. Pooley says his company experienced the downturn early when it lost £500,000 in 2008 after a financial services company went out of business.

“That caused us to to tighten up our credit control, so 98 per cent of our invoices are now paid within 60 days,” he says. That client base is also chiefly made up of SMEs, including most of the main charities, who make monthly £5,000 data buys. “That is a good market to be in,” he says.

While some data owners have been doing well, the same is true of some clients. “The mature clothing market saw year-on-year growth of 8.8 per cent,” says Lara Bonney, client services director at Abacus, identifying that recession-resilient group. The clothing category as a whole grew by 5.7 per cent – since this category made up 80 per cent of the spending analysed by Abacus, this represents healthy market activity.

Other sectors were not so lucky, with spending on gifts and entertainment down by 24.8 per cent. Ensuring that the Alliance database continues to offer members a balance between volume, recency and quality has not been easy in the face of such shifts.

On the demand side, Bonney notes that, “a lot of clients battened down the hatches in 2009 to focus on their existing customers. That is only possible for 12 months before it really starts to affect the business, which is why most have sprung back in early 2010. Analysis of our clients shows that they have taken 16 per cent less data on average.”

Supply of data has been another challenge. Offsetting this has been a rise in online retailers, who have looked to catalogues to drive traffic and joined the co-operative to find (and supply) prospect data. High Street retailers have done something similar. “As a result, we are going into 2010 with a database of a similar size to the start of 2009, just a different make up,” she says.

While the economy was busy turning down, business was actively looking at the data it held and where else it could get yet more. As Jon Cano-Lopez, managing director of Ai, part of the Communisis Group, says: “Data is collected everywhere now – that is completely different to ten years ago.”

Data is now perceived as having a value, which has encouraged companies who previously hesitated from putting their files into the commercial marketplace to reconsider. If there was revenue to be made and ploughed back into marketing from a pre-existing source, then why not? “Organisations were more open to that in 2009,” he notes.

Cano-Lopez notes that, “it is not as complete data as where you collect it via surveys, but you do pick up pieces of information that contribute to the overall picture.” His company’s Data Refinery approached is based on licensing multi-source data to identify stable variables and apply confidence scores.

As a result, the company has been able to see the impact on data sources of the changing consumer. One issue has been the way suppliers have looked to beef up their data sets. “An original transaction in a database will now get into multiple data products. We have to sieve those out when we recognise that they have the same source,” he says.

Jon Phillips, UK online marketing leader at Acxiom, says consumers are as much to blame in their pursuit of prizes and money-off. “We are seeing a lot more fraudulent records. When we find a pattern, we create rules to identify it and hold them out of the database,” he says.

With access to Acxiom’s InfoBase Lifestyle Universe, the company is well placed to filter spurious data records that consumers have created just to grab the goodies on offer. If there has been one real impact from the recession, then it is this aspect of data quality which has suffered.

Certainly Phillips says that there has been little softening in demand. “In lead generation, if it works for the client and is at an effective cost, they will take as much as we can get for them,” he says. With some clients still running acquisition programmes as loss leaders, even that pressure on supply prices has been somewhat mitigated.

One of the real problems is finding out whether data has met required targets. “Planners and buyers tend to buy data, say it worked or didn’t and that’s it. They need to get more sophisticated and need to change by giving us proper feedback as to what is working,” says Phillips.

The question of pricing for data has probably become one of the most complex issues through the recession. As data sources have fragmented, but volumes increased, there is now a wide range of ways to buy leads and a significant variation in what it will cost.

“We worked on a campaign for one advertiser who took online data from all channels, offline leads from surveys, brochure requests and telemarketing leads,” says Steve Cox, joint managing director of Funnel Lead Marketing. “The range of pricing across those sources differed by a factor of 15.”

That is a big variation to account for within a single campaign, but points to a client with sophisticated metrics and who is looking at ROI beyond simple cost per acquisition. Cox says different prices are also justified by the level of warmth and interest that different sources will display.

“A consumer who opts in to a third-party email programme, gets an email, reads the subject line, opens it, clicks through and then provides their name, address and other contact details is a considered opt-in. You have to look at each source on its merits,” he says.

Data is available in probably greater volume than ever before. Despite the downturn, it is still possible to get fresh leads on in-market buyers. But if finding data is easy, working out which data to choose – and what to pay for it – has probably never been harder.

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