digital alchemy - database management insource vs outsource whitepaper

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Should you outsource your marketing database or build and manage it in-house? It is the question many marketers ask themselves. This white paper will clarify any uncertainty you have by helping you to explore the untapped potential of your marketing database; examine the key factors that can be game changers for you and review some of the tools that enable you to make the right choices for your business.

Database building & managementBuilding a marketing database is not a one-time event. The database needs to be managed and refined on an ongoing basis. You currently have the in-house resources for a dedicated team to manage, maintain and support the database for the long term, be aware that good DBM specialists are in demand; there is an ongoing risk that key members of your elite team could leave at any time, taking their know-how with them.

Challenges of a successful marketing database

Figure 1 shows that around 50% of US respondents outsource all database management services and another 40%+ outsource at least some of their functions to external providers, whereby 80% of the respondents use external providers to support segmentation efforts, and 78% outsource data mining and analytic modeling driven by the difficulty in finding analytic talent. One prime reason for using an outsourced vendor for database management is the benefit gained from a dedicated and experienced team assigned to specifically look after your business.

“How do you perform the following database marketing functions today?”

Database management

Marketing technology and support

Segmentation and list managment

Data mining and modeling

Campaign execution/operations

Marketing software application management

Email marketing

Creative development

Campaign planning and design

Customer strategy

Outsource only

Base: 185 direct marketers who use at least one database marketing services provider

Mixed insource and outsource

0% 20% 40% 60% 80% 100%

Source: Forrester Research, Inc.

To Outsource Or Not To Outsource: Make The Right Choice

http://www.digitalalchemy.asia



It is essential to identify potential customers by using up-to-date and accurate information. Hence, ongoing data cleansing and National Change of Address (NCOA) updates are vital processes that must be automated in order to cope with the velocity of change in the market.

Database building & management

In figure 2, the number one challenge for marketers is keeping data clean and useful. Poor quality data clearly has an adverse impact on the overall marketing function. Metaphorically, if the data were the foundation of a house, building the house on a vulnerable foundation will jeopardise the well-being of the residents.

Workloads invariably fluctuate, so over time the internal resource requirement is likely to vary between either under or over the optimum level for your actual workload. Additionally, reliance on internal IT resources can be an issue when your IT department is unavailable to implement required tasks such as accommodating new data or enhancing the database. Any delay carries an opportunity cost, especially during critical campaign periods or when unique market opportunities arise.

Resource flexibility and agility

Top Marketing Challenges August 2008

Responses

Keeping Data Clean and Useful

Calculating Meaningful ROI

Generating Enough Quality Leads

Creating Quality Content

Determining the Best Campaigns

Collecting Management

Campaign Management

List Management

Growing our Email List

Improving Email Response Rates

Meaningful List Segmentation

0 50 100 150 200 250

Source: ResearchCorp




Due to the dynamic characteristics of their data, marketers need to act fast in response to an opportunity. It is often a one-time chance, which means if you lose it, you lose it forever.

Speed to market

Marketing database implementation calls for specific skills that create an inverse correlation between capability and cost: the more experienced your resources, the less time it takes for the implementation delivering better results at a lower cost.

Skills/experience

The difference between a marketing database (MDB) and transactional database (TDB)Purpose of usage:

MDB is used by the marketing department whereas TDB can be widely used throughout the company.

Nature of the data:

MDB is very dynamic and has to be updated frequently while transactional data is historical, likely to remain unchanged and is kept as a record.

Data composition:

Transactional data is a subset of MDB which comprises of transactional data, customer’s profile, campaign history, data from third parties, etc. All these components are shaped into a Single Customer View in the MDB.




Pain points may include:

Unstructured stored data

Workload peaks and troughs

Non-alignment between IT and marketing

Unmet business demand for fast turn-around

Complexity of technology and risk of obsolescence

Bear in mind that opportunity costs will be incurred while the marketing database implementation is in progress and subsequently if database performance is below the required benchmark. It is not uncommon for a poor performing system to be canned, even after considerable time and financial investment has been incurred.

Furthermore, there are core technical processes which require in-depth expertise to undertake:

Design and build a customised MDB to meet business objectives

Clean, de-duplicate and manage data and create a Single Customer View

Provide insights and identify opportunities based on customer analytics

Plan and execute communication programs based on the analysis and insights

Measure responses and results and generate reports

A Typical In-House ImplementationBuilding a database always takes longer and hits more unexpected ‘bumps’ along the way than at first envisaged. The project undertaken by your IT and marketing teams will certainly be no exception to the rule. Most IT departments are good at operating system databases and many can build reasonable transactional databases, but it is most unlikely that they will have the extensive experience required to build a state of the art relational marketing database. For their part, marketing departments often lack the time, resources and IT skills. The main upside to building the MDB in-house is the useful insight that individual staff can acquire combined with their intimate knowledge of the database’s various idiosyncrasies and nuances.




Advantages and Disadvantages of In-housingand OutsourcingThe most common strengths, weaknesses, threats and opportunities are identified by simple SWOT analysis.

How Database Marketing Services Provider (DBMSP)can assist you?The solution and the tools

Subject matter expert

The DBMSP has the required software and hardware ready installed. Your implementation is an incremental activity and therefore added to a technology platform that is tried and tested to provide you with best practice.

A DBMSP has one role in life - to support its client’s marketing activities and drive incremental value from marketing activity. They have a deep and broad understanding of the technology and applications you are using and invest heavily in ensuring your system is available and working to full capacity. As DBMSP are experts in their field, you can take full advantage of the skills and experiences they have gained over considerable time and across the varied business needs of their multiple clients.

Strengths

Control of staff and resources

Responsible for own destiny

No risk of outsourcer bias

Strengths

High probability of success

Speed to market

Access to specialised talent

Established test and measure processes

Opportunities

Work with best talent in the

market

Achieve rapid capabilities

enhancement

Find innovative, leapfrog solutions

Weaknesses

IT- Marketing friction

Talent/staff sourcing issues

Limited domain expertise

Weaknesses

Limited control over staff

Long-term contractual

obligation

Risk of static solution

Threats

Cost overruns

Slow time to market

Failed or flawed systems

Threats

Buy into yesterday’s platform

Outsourcer bias

Poor account team

Opportunities

Business flexibility

Technical flexibility

Organisational agility




IT independency

Keep up to date with new applications using best of breed technology

A DBMSP can offer you extra IT resources with specific experience. This saves you from relying upon your own IT department to take care of specialised marketing matters outside their skillset.

A DBMSP’s business is based upon marketing technology and up to date techniques, so they must stay abreast of relevant technology and processes in order to maintain their competitive edge in the marketplace. Continuous learning from successive new implementations also flows back to existing clients.

Checklist before choosing a DBMSP First, make sure that you find the right partner who is experienced and ideally has a background in building marketing databases in your industry or similar.

Clarify your objectives and assess the vendor’s capability and accountability and whether they can provide what you need to accomplish your goals.

Have a look at the vendor’s corporate philosophy and check that their culture will not come into conflict with yours.

Arrange an initial test lab or mini project where possible. This will enable you to evaluate their work first hand, it is particularly important if you expect workload requirements to increase or if you are seeking to establish a long-term relationship with the DBMSP.

In conclusion, making the wrong choice between an in-house implementation and an external service provider can significantly impact the effectiveness of your marketing campaign executions. There may be good reasons why your company chooses not to outsource but more and more companies are seeing the tangible benefits that are gained by leveraging an external partner’s resources and expertise, outweighing the traditional internal barriers.

A DBMSP can assist you to apply the right level of resourcing by being flexible and allowing you to access skilled, experienced resources as and when required on a pay-as-you-go basis. With a service contract arrangement, the external provider undertakes to maintain suitably qualified campaign specialists who can be called upon to meet your needs if departmental resources are not available or when the work load exceeds your internal capacity.

Flexible resources




About Digital AlchemyDigital Alchemy Limited (DA) is Asia Pacific’s leading Database Marketing Services Provider. DA’s team of professionals are dedicated to working with clients to improve their marketing efficiency and to capture latent customer value. Established in 2003 and operating in Sydney, Melbourne, Auckland, Bangkok, Hong Kong, Nanjing, and Singapore, DA has been contributing to the success of an expanding breadth of clients including leading companies in financial services, telecommunications, motoring services, media and other industry sectors.

“This document has been prepared for the purpose of providing general information and should not be relied on in substitution for individual professional advice. Copyright in this document is owned by Digital Alchemy Consulting Pty Limited, and except as permitted under the Copyright

Act 1968, no part of it may be reproduced by any process, electronic or otherwise, in any material form or transmitted to any other person or stored electronically in any form without the prior written permission of Digital Alchemy Consulting Pty Limited.”




Reference Cited“How firms use database marketing services”, Forrester Research

<http://i.i.com.com/cnwk.1d/i/bnet/DBMarketingServices.pdf>

“Marketing Automation Survey: crossing the chasm”, Researchcorp

<http://www.pinpointe.com/wp-content/assets/Pinpointe%20Report%20-%20Marketing%20Automation%20Survey-08-08.pdf>



http://i.i.com.com/cnwk.1d/i/bnet/DBMarketingServices.pdf

http://www.pinpointe.com/wp-content/assets/Pinpointe%20Report%20-%20Marketing%20Automation%20Survey-08-08.pdf

http://www.pinpointe.com/wp-content/assets/Pinpointe%20Report%20-%20Marketing%20Automation%20Survey-08-08.pdf