In-Depth

Unleashing Marketing Success with Data Infrastructure Performance

Data infrastructure can hamstring your marketing success

• By Mike Coakley and Vishal Daga
• 07/20/2005

In today’s crowded marketplace, with an increasing number of offerings chasing a limited number of customers, it’s not surprising that the impact of each dollar spent on marketing has become diluted. For example, in the credit card industry, response rates to direct mail offers for new cards have dropped from more than three percent to less than one percent in the last decade, more than tripling the customer acquisition cost. Is this part of the new operating reality, or can marketing organizations do something to improve the current paradigm?

The answer to this dilemma is effective business intelligence. By fully leveraging data, and being able to do so quickly, marketers can build insights that allow them to focus their marketing efforts on the right customers at the right time. What limits an organization’s ability to do so effectively, however, is data infrastructure performance—the ability of the data infrastructure to cope with exploding volumes of data while providing access to detailed information quickly so that marketers are not encumbered by technology.

Data infrastructure performance can be a bottleneck that limits the type of analyses that an organization can practically conduct, regardless of the sophistication of their analytical applications. If marketers struggle to get answers to their questions, or are limited in the type of questions that they can even ask, their ability to innovate and adapt is diminished. In a variety of industries such as retail, banking, insurance (among others), performance is what impacts the ability of a business to understand the customer and respond quickly. Performance in competitive markets shapes the answers to many questions. Can your organization:

• attract the best customers?
• get the most out of your marketing dollars?
• discover and react to trends faster than your competitors?

With the right data infrastructure, leading organizations are developing more refined marketing strategies and successfully countering the growing noise that is diluting the impact of their marketing dollars. By getting technology out of the way (making it an enabler rather than a bottleneck), organizations can focus on the business of marketing and generate greater returns. What kind of returns? Let’s take a look at examples of how data infrastructure performance can impact a business.

Depth of Analysis

A large direct-mail credit card offering today goes to about 20 million prospects and generates roughly a 0.7 percent response rate. Many of the credit card providers running these campaigns today are challenged by poor data infrastructure performance which results in slow data load times, poor query response times, and limited flexibility in conducting new analyses given the significant IT administrative effort required to maintain the analytics infrastructure. As a result, these organizations have had to limit both the amount of data that they analyze (using summarized data over detailed historical data, for example) as well as the type of analyses that they conduct.

However, with the right data infrastructure, companies can quickly develop more sophisticated models that fully take into account all available customer and demographic data and allow for better understanding and predictability of prospect behavior. By leveraging this knowledge and tailoring marketing efforts more precisely, leading organizations have realized more than a 35 percent increase in yield. Assuming conservatively that a new customer adds about $100 to the value of a business, every 0.1 percent increase in the response rate for a typical campaign adds $2 million to the bottom line.

In addition, as each campaign becomes more effective, credit card providers can be more precise with their prospecting and reduce the amount of mail they send out, further adding to savings. So for a credit card provider that runs multiple campaigns each year, performance provides greater understanding of prospect behavior which results in millions of dollars of benefit.

Speed of Execution

Another dimension on which performance impacts marketing is speed of execution. A typical catalog retailer runs hundreds of promotional campaigns in a given year. Assuming a 10 percent response rate and a $50 purchase event, an average-sized retailer running a campaign targeting 500,000 customers will generate $2.5 million in revenues.

Such a campaign can take several months to launch—the retailer has to go through several steps, from prospect identification to message design. Prospect identification in particular can be cumbersome and requires several weeks of effort depending on the retailer’s sophistication. Many retailers lack proper data infrastructure and have to resort to working with multiple third-party list providers, while others are hindered by the limited capabilities of existing data infrastructures.

With the proper infrastructure, leading retailers can add more refined controls in building these prospect lists, improving segmentation while reducing the time it takes to do so from several weeks to just a few days.

What is the additional impact of speed, apart from the benefits associated with a better response rate? Given an interest rate of two percent, and assuming (conservatively) that a retailer reduces the time it takes to launch a campaign by just three weeks, a retailer will realize nearly $3,000 in additional benefit by collecting revenues faster. More importantly, by reducing the time it takes to launch a campaign, a retailer frees up resources to run additional campaigns. As a result, retailers can accrue benefits in the hundreds of thousands of dollars by leveraging performance and reducing the time needed to launch their marketing activities.

These examples illustrate the impact of performance—the ability of an organization to fully and quickly digest its information—directly on the bottom line. Performance results in a better understanding of the customer, and makes this insight easily and quickly accessible to marketers. If marketers do not have to fight technology and can get answers to their questions faster, they are feed to ask more questions, which leads to new insights.

Performance is not a technology issue. It is, in fact, a business driver with far-reaching consequences. Successful companies leverage performance to focus their marketing efforts and dollars on the right customers at the right time. In doing so, they will stretch every marketing dollar further and achieve greater business impact.