Managing Your Data for Greater Profitability

What is the connection between data management and profitability?

There are actually a couple of important connections between data management quality and profitability.

The first has to do with containing costs. Having a world-class integrated marketing database helps keep your 1-to-1 marketing costs lower by eliminating record duplication across channels. This not only helps you avoid the waste that comes from record duplication, but it removes the negative impression created when customers receive multiples of the same communication.

The second link has to do with marketing effectiveness. Having your data integrated and organized properly will enable more accurate analysis. Getting a complete picture of each customer’s history with your company will then lead to improved personalization, which is the single-biggest change that can be made to enhance the effectiveness of 1-to-1 marketing. Personalized communications will yield response and conversion rates that are much higher than single-version communications—as much as two or three times higher.

What is the most common stumbling block to high-quality data management?

The most common problem is failing to recognize that marketing data management is a highly specialized area of expertise and that general technology skills will not be enough to do the job well. The assumption that internal IT resources will be able to do as good of a job as external experts is the biggest stumbling block, and it leads to multiple problems. This assumption is often made by senior management and procurement staff who have little knowledge of marketing and IT details. A marketing database is not just another database (which is what IT will claim)—it has very unique requirements that are not found elsewhere in the organization.

“Poor data quality is the #1 reason that CRM projects fail.” – GARTNER RESEARCH

Here are the two most common problems that stem from assuming that internal IT is up to the task of high-quality marketing data management:

Poor Data Integration:

If your organization has multiple consumer databases (e.g., e-commerce, call center, POS), then even the most basic questions can be difficult to answer. Many companies create data warehouses that contain all of this data, but they fail to integrate it into a clean, consolidated customer view. Through proper integration, transactional data such as campaign receipt and response, purchase history and demographics associated with an individual can all be kept in one place, creating insight into campaign and financial performance. Beyond basic reporting, marketing will now have a platform to run increasingly advanced analyses to inform investment allocation, identify up-sell and cross-sell opportunities, drive segmentation and align appropriate message and offer strategies.

Insufficient Tools:

Even if you have your data properly integrated, you will not be able to maximize profitability without the right tools, including those for reporting, analysis and marketing program execution.

Not having the right reporting and analytic tools makes the development of customer insights difficult and time-consuming, which limits the ability to leverage those insights. (Sure, you can till the field by hand, but then you won’t have as much time to plant the crops.) You really will need two types of tools: one that enables you to build reports and dashboards and another that provides the ability to do statistical analysis and predictive modeling. There are many options on the reporting/dashboard front, from enterprise solutions such as Hyperion, Cognos and Business Objects to more economical low-end solutions. By looking for options that have a proven record in marketing and that are easy to use, you can keep the effort contained within marketing and not need to devote internal IT resources to execute.

In terms of statistical analysis and predictive modeling, SAS and SPSS are the most well-known. However, there are numerous other software packages available now—and many intended specifically for marketers. Tools such as Alterian and smartFOCUS have been designed to assist non-technical and non-statistician marketers with the process of developing statistical insights very rapidly.

Having the right tool to help execute the marketing programs is critical. You will need a tool that can support multiple channels (e-mail, direct mail, SMS) and that allows for customer behavior to trigger a message. As in the reporting category, there are enterprise solutions, such as Unica and Aprimo, and lower-cost options, including Conversen and Neolane. Keep in mind that you don’t necessarily need all the bells and whistles to create more effective programs. The most important features are cross-channel integration and the ability to personalize
the messages.

“More than two-thirds (67%) of respondents said customer database/data mining will be a priority in 2010.” – KPMG 2010 SURVEY OF RETAILERS

If my data is in rough shape, how do I get started?

Quality data management takes time to implement—often, the data being captured in the source systems (e-commerce, POS, Customer Service) is not of high quality and needs significant cleansing and standardization work. This is the first area to focus on, and you will need the right tools in place to be successful.

Standardization:

In the first phase, data should be cleansed and standardized. Addresses are then matched against the USPS database to ensure deliverability and accuracy, and bad names are suppressed. It’s also advantageous to ensure that the data conforms to USPS standards, as this can save additional marketing dollars by qualifying mail for postal discounts.

Merge/Purge:

This is a vital and complex step where records are matched and then merged into unique individual and household records. This process is incredibly valuable, as multiple records are consolidated into an individual record in order to reduce duplicates, which will save money while enhancing the customer experience.

If you are not required to use internal resources, outsourcing this work will generally provide you with a superior solution—but it can be expensive. Most marketing database providers will charge a minimum of $25K to $30K per month for managing a marketing database. Fortunately, there are some providers (like Agency 180) that can manage your data much more economically on a per-program basis.

The best first step is to consult with an expert. Even if you end up having to work with internal resources, an external expert will help you both evaluate what needs to be done and craft a plan that keeps missteps to a minimum.