You know the four functions of a good marketing database, but can you achieve all four on your own? If not, outsourcing might be the answer.
The specific benefits you may gain from outsourcing your database marketing solution depend on your situation and goals. Generally, however, the benefits fall into 10 well-defined categories.
1. Sophisticated Use of Customer Data
The ultimate goal of database marketing is to use customer information to communicate a company’s brand value and optimize customer relationships through dialogue and experiences over time—all the while balancing the need to drive revenue and profits. This is today's database marketing in a nutshell, and it is designed to make more relevant and effective communications with prospects and customers within and across all channels. Within most companies, however, few marketers have a deep understanding of technology, and few technologists understand the nuances of marketing. An outside consultant specializes in exactly that convergence and knows from direct experience how to use customer data to facilitate sales, service and marketing, as well as better brand experiences for each customer. The expert can ensure that marketing employs proven practices from the outset to realize rapid and measurable marketing results.
With most companies, few marketers have a deep understanding of technology, and few technologists understand the nuances of marketing.
The typical in-house build for a fully-implemented, custom database marketing solution takes approximately two years. The typical outsourced solution takes six months to nine months to deploy into production, and some require as few as 120 days. For many companies, this fact alone is a compelling reason to outsource. Given the value of time in a competitive market, the impact of running high-powered database marketing programs twelve months before the competition is difficult to overstate. Return on investment, as well as branding, acquisition and retention efforts, all stand to benefit tremendously from the advantage that such a head-start potentially offers. Outsourcing also generally provides greater assurance that once the project is finished, it will work properly and produce the results desired, as it will be built by experienced specialists using leading practices.
3. Total Cost of Ownership
As illustrated in this comparison, an outsourced database solution often costs less to implement and requires less up-front capital. There are also hidden savings; for example, a company’s internal staff, both marketing and IT, will not be diverted from their core responsibilities.
4. Better Use of Internal Resources
Implementation, along with the ongoing maintenance of a database marketing solution, can consume a great deal of company time and resources. It is important for a company to ask if it can afford to invest valuable, often-scarce resources on building a complex solution such as a customer database. Even if the company’s staff has exceptional database expertise, they will still need to learn the nuances and issues surrounding these complex solutions. As noted in an article by the Database Marketing Institute:
"It takes to study the available software packages (there are scores of them) and to install and learn to use the ones chosen. When the database is finished, it will not work as well as one built buy some experienced service bureau that has already built dozens of them, and has a trained technical staff whose only work is building and maintaining marketing databases."1
5. Focused Responsiveness
By outsourcing to a consultant, service provider or combination, marketing receives the attention it needs to ensure success. Unlike an internal IT department that is likely to have many competing priorities across the organization, an outsource provider is focused exclusively on the customer database and on how it will meet the needs of the marketing organization and wider enterprise. In addition, the provider’s staff normally has expertise in the marketer’s industry, so it understands the changes that need to be made and can implement them more quickly and easily. Meanwhile, the internal departments can focus on other tasks that are a better fit for their priorities, skills, and experience.
6. Outsourced Risk
As with any technology-enabled project, a considerable risk to consider is technology obsolescence. The shelf life of the technologies and applications needed for the database likely are no more than five years. By outsourcing the database marketing solution, the burden of keeping current with technology and applications falls largely on the supplier, whose costs are spread across many clients and reduced by its focused expertise in this field. Additionally, the complexity alone of the project increases the likelihood that a project may not be completed as envisioned, or that the finished product will not meet expectations. A specialist provider is able to leverage experience and best-practice knowledge to minimize problems and ensure success.
7. Improved Security/Compliance
Companies are rightly concerned about the risk of having their customers’ personally identifiable information (PII), sensitive personal information (SPI) or their own proprietary information end up outside their four walls. With privacy and security so vital to all data-based marketing activity, an outside provider that has built many such solutions may have more expertise in the area of security, especially concerning customer information. Today's database solutions must have privacy and security built into their design and application—not as an afterthought. The database marketing specialist understands how to ensure legally and ethically compliant practices and implement the latest encryption technologies and other security measures, as well as how to train users to adhere to leading security practices. This is an essential, core capability of a provider's business. Indeed, several database service providers already are entrusted with employee payroll, web form registration, privacy suppression management, and other vital applications that respect personal information.
8. Ongoing Support
As a new system is put through its paces for the first time, the people using and managing it will inevitably identify areas where changes (sometimes critical) are needed or rapid improvements are required. Will the internal technology, training and leadership resources be in place to guide teams through this complicated process smoothly? In most cases, the answer is no. And what about six months down the road, or next year?
An effective database marketing solution is much more than a one-time project; it is a continuing marketing operation that requires ongoing technical support. Companies that choose an outsource option benefit from support tailored to their needs and budgets from providers focused specifically on the customer database, its design, its enabling technology and the various needs and objectives of its internal users.
9. Improved Business Agility
A company that builds its own database marketing solution may find it costly and time consuming to change direction. Adding support for emerging marketing channels and new data sources, modifying the key performance indicators, or developing new dashboards and reports are a few examples of the changes that may become necessary, yet even small adjustments might require people and financial investments. By outsourcing, a company shifts most of the burden of change onto the provider, who is equipped and ready to change and respond to client demands.
10. Knowledge Management and Transfer
An internal build is a costly way to gain expertise and knowledge of database marketing. An outsource approach, on the other hand, allows for a smooth transfer of knowledge from experts who have direct experience in best-of-breed solutions to internal users who seek or have a need to know. Many outsource providers have a formal process for ensuring that knowledge transfer takes place according to the client’s wishes and needs. This process may include incorporating the company’s internal staff in the build process, implementing a formal adoption or on-boarding program, scheduling training sessions, and establishing ongoing mentoring initiatives.
An internal build is a costly way to gain expertise and knowledge of database marketing.
If even a few of these 10 benefits are relevant, you may want to consider outsourcing your marketing database. The degree to which to outsource, however, will vary depending on each company’s situation.
Check out my next post on the four options for outsourcing and tips for success.
1 Hughes, "Database Marketing Has Arrived," Database Marketing Institute (April 22, 2007)