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In the previous chapter we discussed how marketers increasingly rely on carefully targeted direct marketing to reach and — ideally — elicit some type of response from prospective customers. Let’s assume you have used your segmentation exercise to identify the appropriate demographic targets for your campaign, and you want to contact them via direct mail or telemarketing. The question you now face is, Where do you get the names and contact information for these individuals? And at a price you can afford?
Two of the less-glamorous but critically important tasks in marketing are acquiring and maintaining the names and contact information for the people you want to sell to. The very best marketers know that data are gold. Lists of customer names and contact information allow marketers to make phone calls, send postcards, and transmit email and text messages. Databases store these lists so they can be reused or mined for new insights.
This is not a fad, either. Some of the earliest practitioners of direct marketing invested in technology to help them get better results. Lester Wunderman, the father direct marketing, was directly involved in the creation of a European computer data center for Ford. We will discuss the tasks involved in building, using and maintaining lists and databases in this chapter.
Data Strategy
A data strategy is simply your plan for collecting, purchasing, maintaining, and using data for marketing purposes. Significantly, some marketers use the term in a limited sense to mean the list names they select, as in “What’s our data strategy for the holiday sweater promotion?” This use of the term is too narrow, in our experience, because it fails to take into account the key aspect of building and maintaining a good database.
Sophisticated organizations have full-time staff whose entire job is data strategy. Even small organizations, however, can execute an effective data strategy by using hosted marketing automation tools, such as Marketo, and the services of marketing database service providers like Harte-Hanks or Epsilon.
Although the specifics of data strategies can vary from company to company, all effective strategies include certain key components, which we list below.
Data Collection – defining the types of data to be collected about prospective and existing customers, including demographic, psychographic, and contact information; sales and service call records; purchase history; and even analysis of their Web clickstreams. Deciding what information you need and how to collect and organize it is a lot of work.
Data Maintenance – maintaining data quality, creating processes for sharing data, integrating the data with marketing and sales applications, maintaining customer privacy and complying with privacy regulations, and defining ownership or governance of data.
Data Selection – deciding whom to target for a new program or campaign. Data selection is probably the most fun part of the data strategy. It ranges in complexity from pulling basic contact information from the marketing automation tools to analyzing data such as past marketing performance and purchase history to generate optimal results. Some data strategists try to predict results based on past performance.
Don’t confuse data strategy with database marketing, which is simply direct marketing using databases of customers or potential customers to generate personalized communications.
Creating and Obtaining Marketing Lists
For the purposes of this chapter, we will define a list as a subset of a database. Both contain prospective or existing customer names, contact information, and a range of demographic and behavioral attributes that werediscussed in Chapter 3. Lists are created by pulling a set of customer records that match a certain set of attributes from a database – for example, all women between the ages of 25 and 35 with a median income over $100,000.
An organization can collect names for its database one by one from its marketing activities, or it can purchase a list from a third party. In some cases, organizations share lists if they are co-marketing products or services, or if one company is a reseller for a larger company’s products.
Buying and Renting Marketing Lists
Lists, also referred to as marketing lists, can be purchased from a number of sources. Selecting where to buy a list is an important decision, with cost, quality, and even legal ramifications. (We discuss the legal aspects of the use of lists and databases at the end of the chapter.)
Although companies employ myriad strategies to acquire customer information, most companies need to rent or buy lists at some point. Collecting names one by one may not yield enough data to work with. Remember, most marketing programs generate response rates of 5% or less. So, unless you need only a handful of leads, your database will need thousands of names, at least. B2C direct marketing campaigns in particular may need tens, even hundreds of thousands of names to hit their target. Going further, purchasing lists of names is often a necessity when a company is entering a new geographic area or is selling a new product. Finally, as databases age and contact information becomes less reliable over time, companies typically purchase new names to keep their database current.
There are a number of well-known and legitimate marketing database service providers, such as InfoUSA, Harte-Hanks, and Epsilon. Many of these companies also provide additional services, such as direct mail fulfillment (producing, addressing and sending out mailers or catalogs for you) and managing email marketing campaigns. Another valuable source of lists is magazines, which commonly offer lists for purchase. In fact, selling lists is an important component of their revenue model. Magazines can be particularly valuable because they target a certain demographic or specialty, which increases the likelihood that the prospect is interested in what you are selling. A final source of lists is self-service online databases that are designed for easy access via a Web browser. Prominent examples are Hoovers on Demand and Jigsaw. Marketing and sales people can use these databases to create their own lists.
Most list owners allow you to customize your list based on specified attributes that are commonly called “selects.” What the selects are and how many you can choose from depend on the database owner. Common selects are usually drill-downs on typical marketing segmentation criteria: geographic, demographic, and industry related. Some database owners also keep track of psychographic and behavioral elements, as well as areas that prospects have expressed interested in learning more about from vendors.
Another option is to utilize the services of a list broker to secure the best lists at the best price. List brokers act as intermediaries between the marketer and the list or database owner. List brokers know which database owners are legitimate, they have a feel for how good the owners’ data are, and they can usually negotiate a better price. Moreover, if the list has problems –for example, an unusually high number of email bounce backs – then the broker can act as your advocate and attempt to acquire additional names or obtain a refund. List brokers buy at a “broker’s discount,” typically around 20% off of the full price of what is called the “base cost” of the list (there are various other set up, select , and transmission fees charged). Overall, using a broker may be slightly more expensive than going to the list owner directly, but their experience and knowledge will save a marketing team time and probably improve results by dint of a better quality or more suitable list.
In most cases you have the option to either buy or rent a list. When you rent a list, the database owner works with a trusted third party, known as a bonded mail house. Bonding is a special form of insurance that holds aside funds in case of theft. Therefore, a bonded mail house is contractually bound to the list owner to treat the list with care and obviously not give the list to the list renter, otherwise their insurance company would forfeit funds and the mail house would likely lose its bonded status. The mail house receives the list from the database owner and the physical mailer or email file from the list renter. Some of the larger database owners sidestep the bonded mail house and provide these kinds of fulfillment services themselves.
Which strategy is preferable, renting or buying? The answer depends on your circumstances. Renting a list has the advantage of being cheaper. In addition, although you don’t actually receive the list you rented to put into your database, you do get to collect and store the names of the people who respond to your direct marketing. However, if you have a finite set of buyers and you can purchase a list that contains all of their information, then it may be worth the price.
Building House Lists
Clearly, marketers have numerous options for acquiring lists. Nevertheless, your in-house marketing database, sometimes called a house list for short, remains one of your most valuable marketing assets. The house list is the names you have collected over time through your marketing activities. In practice, marketers create sub lists as required. Some are longstanding, such as your list of customers. Others are created for a specific need, such as a direct marketing effort targeting a certain type of customer or prospect. Perhaps you want to sell a new product C only to those existing customers who own both product A and product B. The act of creating a sub list based on a set of criteria is known as “pulling a list,” or sometimes just a “pull.”
Marketers commonly acquire names using “lead capture” forms on their websites. Because the respondents have taken the time and trouble to reply, the marketers assume they are at least somewhat interested in the company, the product, or the service.
Permission marketing is a best practice popularized by marketing guru Seth Godin. The idea is simple: you ask a prospective or existing customer for permission to send them additional information. You may ask them if they would like to subscribe to your newsletter when they fill out the lead capture form the first time. Or you may ask if they would like to receive special offers, product updates, or other information. The fact that you ask them and they accept indicates they are receptive to your marketing and better prospects in the long run. Godin terms the practice of those who don’t ask permission “interruption marketing.” Lists built using the permission marketing approach will undoubtedly be better.
In addition, marketers of all kinds collect names at events like trade shows and conferences. Another common strategy is to encourage consumers to fill out warranty cards when they make a purchase. Many consumers don’t realize that the main purpose of these cards to continue to build the manufacturer’s database!
Although creating and maintaining a marketing database can entail more time and expenses than renting a list, house lists consistently outperform third-party lists. The people contained in your database have already expressed some level of interest in your products or demonstrated an affinity for your brand. Thus, creating and maintaining a marketing database not only will spare you the expense of renting new lists, but you will get higher returns you will get on your direct marketing will be higher.
Maintaining Marketing Databases
Nurturing Databases
It is very likely that only a small percentage of the individuals on your house list will be ready to buy in a given month or quarter. That does not mean, however, that you should continue to market only to new names from rented lists. Customers in your database who are not yet ready to buy need to be “nurtured” until they are ready to buy. Creating a nurturing database first requires that you segment your marketing database by those who are ready to buy, those who may eventually buy and those who will never buy.
Segmenting your in-house database into logical subsets will make your marketing efforts more productive. The best policy is to divide your list into three categories – active pipeline, nurture and deadwood.. The deadwood includes bad or wrong information, people who have requested to opt out of your mailings, and accounts that don’t fit your target market segments. These data should either be ignored or deleted.
The sales pipeline segment consists of qualified opportunities. Your sales team, partners, or customer service team will deal with these customers. We will discuss what constitutes a qualifies opportunity in the next chapter.
The middle segment is your nurturing database. These are people who fit whatever buyer profile you have defined and have some interest, but are not ready to buy for whatever reason. You should keep them warm, nurturing them until they are ready, with direct mail or eDM pieces that they will find useful and that will move them toward a purchase decision. Although this may seem obvious, many companies waste revenue opportunity by ignoring this critical segment, as well as overspend by constantly buying or renting more expensive third-party lists. Figure 1 below shows the basic structure of the marketing database and how customer names flow in from acquisition.
Nurturing, as we discuss in the next chapter, is a sustained program designed to move leads into the active pipeline. Nurturing is also referred to as “drip marketing” or “remarketing.” The idea is to market to these leads slowly, over time. For example, if a prospect was not ready to buy because your price was too high, sending them an email when you run a holiday price promotion is a form of nurturing that gets to their issue. Some prospects may be waiting for a certain product feature to become available, so you would want to send them the announcement when you release a new version that contains that feature. For big ticket, complex products, you may send them material over a period of time to help educate them so they are ready to buy. How you nurture depends on your buyers and their issues.
Another important aspect of the nurturing database is economic. You have either paid money for the contact information, spent money on marketing programs, or both. Not leveraging this prospect is a waste of existing resources, because purchasing new contacts is expensive.
A company’s existing customers, known in technology marketing as their installed base, should also be nurtured. Good marketing teams look to entice existing customers to buy more., and nurturing is one way to do it, whether an organization is focused on the lifetime value of a customer – how much product they can sell to the customer over the length of a relationship, or the “share of wallet” they can gain from a customer in a given year. Nurturing or drip marketing can be effective in increasing the lifetime value or share of wallet of existing customers. Rather than simply mailing bills and holiday greetings to existing customers, you should send them offers to entice them to make additional purchases. Keeping the existing customer, or installed base, database segment current and using it to generate a new pipeline is a good marketing approach. This is shown in Figure 1 above as the “Nurture 2 Customers” segment.
Progressive Profiling
The process of collecting information about contacts over a period of time is called progressive profiling. The more information your company has for a contact, the better you will be able to target that individual.
One cardinal sin marketers commit is asking prospects too many questions at one time. Doing so will cause them to get annoyed with a telemarketing or sales rep on the phone, and it will likely discourage them from filling out a lead capture form, known as “form abandonment.” In fact, research conducted by Marketing Sherpa has consistently revealed that prospective customers fail to complete 60% of registration forms, with form length being a major factor.
So, how should you approach progressive profiling? To begin with, in the first interaction, you should request only the essential pieces of information– somewhere between three and five. If you are capturing leads via the Web, then you should ask for only the information you need for your next step. For example, name and email address should be sufficient to add these leads to an email nurturing program. Alternatively, you would request a phone number if the next step is to have a telemarketing rep call them.
After you have established contact with prospective customers and elicited their basic information, you can get additional information with subsequent marketing activities. When you send a prospect a nurturing email, make certain to add a few additional fields for them to complete – for example, information about their title, role and responsibility could be useful to a B2B salesperson. Really good marketers make the answers relevant to the offer, in effect customizing the offer based on their response. In this way, the contact sees value in providing additional information. As an example, you might ask prospects how big their company is and which industry it operates in so that you can send them a customized version of a report your team produced. Creating this type of customizable asset requires a bit more effort, but the continued contact engagement and the reduction in abandonment this extra step generates are worth the effort.
Most modern marketing automation systems include built-in tools built in for progressive profiling. They automate the request for additional information based on the information that is already contained in the database record for that prospect, or what particular offer is being made to the contact. Progressive profiling still requires upfront planning about the lead flow, a bit more work on automation, and potentially consideration during asset creation.
Maintaining Database Quality
Thus far we’ve described a number of strategies for effectively utilizing lists and databases. Even the most carefully crafted and executed strategies, however, will generate few positive results if the information contained in those lists isn’t accurate and current. For all kinds of reasons, the quality of your data may not be what you need it to be. Prospects and salespeople may not be great typists, thus introducing spelling and other mistakes into your database. Lead collection forms may not have been created with all the same fields – or names of fields – over the life of the company.. Prospects move on and don’t send you their new contact information. For these and myriad other reasons, you need to periodically clean up your database. If not, then your data, and not your campaign, creative, or offer, will drive down the effectiveness of your marketing efforts. Marketers often refer to the process of cleaning up your database as “list hygiene” or “database hygiene.”
There are five common steps to improving the quality of your database:
- Standardize
- Cleanse
- Deduplicate
- Enrich/Augment
- Validate
The first step is to standardize the format in which your data are represented in your CRM or marketing automation system. In some cases, you need to begin this process by resolving differences between your sales automation and marketing automation systems. How you represent country names – USA or United States – company names – IBM or International Business Machines – and telephone numbers – dashes or parentheses – will make a big difference in the ensuing cleansing and deduplication steps.
The next step is to detect and correct (or remove) corrupt or inaccurate records from your database. This process is known as cleansing. Inaccurate records can range from bad or bogus email addresses or phone numbers to companies that have gone out of business. Deduplication is similar to cleansing. – The “dedupe” step is designed to remove duplicate records from your database. Deciding which of two duplicate records overrides the other, or whether information in the two records should be merged, is a key decision.
Just as your database can contain inaccurate or duplicate information, it can also be missing key information. This information can range from simple things like the prospect’s company address and website, to the purchase history of the contact’s company or organization, to pertinent industry or demographic information. Progressive profiling, mentioned above, is one way to enrich your database over time. You can also purchase additional information from sources like Hoover’s and append it to individual records.
After you have completed the first four processes, the final step is to review all of the changes to your records to validate that they are correct. There are a number of ways to do this, but the most common approach is to compare the updated records to known correct “master data” sources, such as valid zip code lists, company names from sources like Hoovers, product or part lists, and so on.
There are a number of data-cleansing tools and services on the market that will fix common formatting issues, match zip and postal codes to state and province codes, and change the status of a contact based on an email bounce back. Some list renters and database owners offer data cleansing and augmentation for an additional fee, or as a value add of their service.
Privacy and Legal Aspects
As we stated at the beginning of the chapter, how you obtain and manage lists has important legal aspects. To complicate matters, laws and attitudes vary from country to country. Moreover, these laws are changing rapidly as consumers realize how much of their information is out there, and governments respond with regulations to protect their citizens.
Rule #1: If you are purchasing a list, make certain the list owner is legitimate. Inquire as to how they acquired the names and whether they have secured the permission of the individuals to sell their information. Avoid fly-by-night list providers that own names of shady provenance. Although these lists are often cheap, they are probably not well vetted, and the providers might have obtained the names in violation of state or national privacy or consumer protection laws. You want to make certain you are working with a reputable provider of “permission-based” marketing data, meaning data that customers have given permission to the database owner to share their information with other vendors.
Obtaining the permission of individual consumers is necessary to be in compliance with anti-spam and privacy laws. In the United States, the major law governing the use of customer information is the Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act. Signed into law in 2003, the CAN-SPAM Act recognizes consumers’ right not to be marketed to, and it establishes penalties for companies that violate consumers’ wishes. The name of the act is also a play on the usual term for unsolicited email of this type, spam.
Two other widely known laws are the German Federal Data Protection Act, which, among other things, lays out specific criteria on how a name and contact information can be legally obtained; and the U.K. Data Protection Act, which states that data can be used only for the purposes for which it was collected, and only within the European Community The International Association of Privacy Professionals is a good place to begin if you are looking for a deeper understanding of privacy laws worldwide.
A second reason why a company needs to exercise caution in its use of databases is customer sentiment. Even if you have legitimately obtained contact information and permission to market to that person – whether you bought the list or collected the name yourself – people can get annoyed if they feel their information has been abused by marketers. For this reason, it is important to allow for quick and easy unsubscribing — which is required by most laws — and to always allow a customer to “opt out” from further communication.
The most common methods of opting out are to unsubscribe to email communications and to ask a telemarketing rep not to call anymore. If you contact customers after they have opted out, not only will you be annoying them and wasting your time, but you may run afoul of laws like the CAN-SPAM Act. If you are nurturing a customer, then you should consider how often you send him or her information. One effective standard for making this decision is to ask yourself, “Would I be okay with the volume of communications”?
Case Study
{I am looking for a good case study to illustrate, so let me know if you know of one.}
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