Ensuring Success in Customer Database Outsourcing

The scope of database marketing today, the various skill sets required, and particularly the ways the database intersects both information technology (IT) and marketing are why many organizations choose the outsourcing approach.

In recent years, many companies have sought the expertise of third-party consultants and specialists to build their database marketing solutions. In 2007, a leading provider of technology research, Aberdeen Group found that "more than 85 percent of survey respondents plan to invest in Customer Data Management solutions within the next 24 months." Additionally it found that more than two-thirds of best-in-class and industry average organizations surveyed are enjoying improved IT operations and processes as a result of outsourcing IT infrastructure management functions.

Four choices for outsourcing

An organization essentially has four choices for outsourcing and selection depends on business needs, organizational structure, and capabilities.

1.     Business Process Outsourcing (BPO)-This refers to outsourcing the entire enterprise operation. In the context of customer relationships, this means the entire customer-facing operation, perhaps even the marketing team or call center. BPO may make sense for startup companies that do not yet have the marketing infrastructure and are looking for a fast track to productivity.

2.     Selective Outsourcing-A greater number of enterprises outsource selectively to gain rapid access to database marketing expertise, technology, and support services while keeping some aspects of the solution in-house. The portion outsourced typically includes building the customer database and the services that surround it. For example, some choose to outsource actual customer contact programs, such as campaign management, and tactical programs such as direct mail and e-mail.

3.     Transitional Outsourcing-A third option is to outsource the building and startup of the customer database with the intention of bringing the operation in-house once it is developed and proven.

4.     Hybrid-Using this approach, the organization hires a third party to design, build, and deploy a database marketing solution yet houses the entire operation in-house and ultimately transitions the work to an internal team. This approach focuses on augmentation of internal skill sets and program control while recognizing the need for external help to deliver the required expertise and staffing up front.

A company can also decide to take the entire project in-house, using its own staff and resources to design and build the customer database and create and manage the analytics that drive marketing. This approach is typically attractive for large organizations that can cost-justify the people and technology required and that see database expertise as a core competency of their business.

Tips for Success

In considering outsourcing a database marketing project, it is important to note that a one-size-fits-all mentality does not work. Every company is unique, and so every potential outsourcing project also is unique. However, success nearly always depends on how well an organization considers and addresses certain issues.

Be clear on the goals.

If the decision is to outsource, define the criteria for success and expected return on investment (ROI). Create a detailed list of requirements with clearly defined objectives, schedules, and benchmarks. A consultant might help a company select the right database partner.

Gartner Research identifies three different types of objectives that can be predefined, each with its own set of success measurement criteria:

• Efficiency—focusing on cost improvement, this objective should be measured by cost metrics and service level agreements (SLAs) tied to cost savings.
• Enhancement—emphasizing improvements in operation, this objective is measured by how well new services improve operational effectiveness or the customer's experience.
• Transformation—improving business performance is the goal here, and success is measured by increasing margins, opening access to new customers, or helping manage growth.

A company may focus on only one of these objectives, or all three.

Be realistic about resources.

IT and marketing departments may have the technology and strategic skills to build a customer database, but do they have the time? Do they understand data quality and customer analytics? Are they ready to take on the responsibilities of security and compliance?

In addition, an organization should consider whether the project will divert it from core competencies. Also, consider who will train the marketing staff on the effective use of the technology. Can they support their customers-those in marketing-in every aspect in which they need help?

Ensure provider candidates have the right skill set and experience.

A provider should have proven success, ideally in the company's specific industry. Beyond that, the provider should have the full range of database marketing skills needed to complement the company's resources and support its goals.

Database skills are essential, but in particular specialized skills are needed in handling dynamic customer information including the security issues surrounding that information and the proven ability to capture and clean customer data from multiple channels and sources.

Finally, and perhaps most importantly, companies should look for the extra services that go beyond the database itself to provide customer insights that lead to effective action, such as campaign management, analytics, and results measurement. After all, the biggest driver of database marketing success is customer insight, and that is the real value a third-party expert can provide.

About the Author

Dave LaGreca is a corporate officer for Harte-Hanks, a worldwide direct and targeted marketing company that provides direct marketing services and shopper advertising opportunities. Contact him at 1-(512) 434-1165 or via e-mail at dave_lagreca@harte-hanks.com. Visit the Harte-Hanks Web site at http://www.harte-hanks.com.

[For more on CRM amid the economic downturn, see the February 2009 edition of CRM magazine, The Recession Issue.]

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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