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Database Marketing Solutions: Install or Outsource?
Points to consider in making the right decision.
Posted Oct 2, 2008
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Organizations worldwide spend billions of dollars collectively on database marketing solutions that turn data into business insight, which in turn drives business results. To be successful, these solutions require a blend of technical and marketing expertise. Yet within most companies few marketers have a deep understanding of technology, and few technologists understand the nuances of marketing.

Despite the complexities, there are several reasons why a company would choose to install a database marketing solution on its own. For one, company policy may require that customer data stay behind its four walls. Perhaps more importantly, database management and the skills related to database marketing may be core competencies of the organization.

The decision to install or outsource a solution depends on each company’s internal capacity, resources, skill set, and priorities. Organizations must carefully weigh these considerations. Often, this begins with an examination of financials, including staffing costs, vendor/consulting costs, ongoing maintenance contract costs, and capital expenditures. The financial impact is but one of several important factors. Others include:

  1. Information technology (IT) experience in marketing database design
  2. IT experience in data cleaning/matching
  3. Data security concerns and expertise
  4. Company project management skills
  5. Communication between IT and marketing staff
  6. Ability to support changing marketing needs
  7. Change management skills
  8. IT bandwidth for new projects
  9. Risk tolerance
  10. Budget variability
  11. In-house marketing expertise
  12. Experience applying data for marketing
  13. Privacy and regulatory experience
  14. Business process redesign skills
  15. Database customization required
  16. Technology obsolescence concerns

Organizations should use the descriptors of “high,” “medium,” and “low” to accurately describe the current state of the company for the 16 considerations above. Those most likely to succeed with an installed system have a current state of “high” for considerations 1 through 14, and “medium” or “low” for considerations 15 and 16.

Consider the Four Core Activities

In deciding between installing and outsourcing, recognize that building and managing a database marketing solution is not merely database warehousing. Rather, the solution comprises a complex set of activities that cut across both IT and marketing and involves specialized skill sets.

1. Gathering, cleaning, and maintaining data.
The customer database is in constant flux and fed from myriad sources. Customer and prospect information flows in from every direction, not only from every conceivable channel but also from dispersed locations and -- where ethnic, international, and global markets are engaged -- often in different languages. Data from multiple channels must be provisioned, cleansed, standardized, updated, and maintained on a constant basis. These processes are essential to minimize waste and respect customer preferences for how, when, and if they receive communications. Even a partial failure or breakdown in this part of the process can render the entire database marketing solution pointless.

2. Gaining insight through analytics.
Tapping into “clean” customer data enables marketers to find and apply insights into customers, their preferences, and their buying patterns. Analytics help identify precisely the characteristics of best customers, how much they spend, how and where they like to shop, and what media and offers most likely elicit their response.

Strength in analytics can also drive improvement and integration across marketing activities, channels, and brands. The insight resulting from a contact optimization program can, in turn, be combined with econometric, demographic, and transactional data to develop models that accurately predict the impact of decisions about media mix budget allocations and how each channel is weighted as a means for facilitating customer dialogue. Only through the use of consistent analysis and data mining can an enterprise hope to turn the myriad records and transactions in its customer database into a coherent, useful picture of its customers.

3. Planning and executing customer communications programs.
Turning insights into action involves coordinated customer communications across channels, both inbound and outbound, and ideally across direct and general marketing activities. This is the traditional marketing sweet spot, except that a comprehensive database marketing solution affords decision makers with solid knowledge in order to target the appropriate group via the right channel at the optimal time. Such personalized campaigns lead to increased loyalty and retention adding up to a bigger piece of market share and profit.

4. Measuring response and results.
Database marketing is a closed-loop process. It begins with available customer and prospect information. Then, through sales, service, and marketing programs across all customer interaction points, more information is gathered allowing companies to fine-tune and constantly improve their return on marketing investment. The ability to measure and understand response will arm the company with data with which to effectively personalize communications leading to a better customer experience, increased loyalty, and finally, a bigger piece of market share.

An honest evaluation of core competencies, human and financial resources, and skill sets related to the complexities of database marketing helps companies determine if the best course of action is internal installation or outsourcing to an expert partner.

About the author
Dave LaGreca is chief information officer for Harte-Hanks, a worldwide direct and targeted marketing company that provides direct marketing services and shopper advertising opportunities. Contact LaGreca at 1-512-434-1165 or via email at dave_lagreca@harte-hanks.com. Visit the Harte-Hanks Web site at www.harte-hanks.com.

Please note that the Viewpoints listed in CRM magazine and appearing on destinationCRM.com represent the perspective of the authors, and not necessarily those of the magazine or its editors. If you would like to submit a Viewpoint for consideration on a topic related to customer relationship management, please email viewpoints@destinationCRM.com.

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