The prospects for prospect databases: looking good!

Increasing postal rates, reduced budgets and downsizing are just a few reasons why more direct marketers are turning to a private or shared prospect database to find and build key customer relationships.

Identifying and maintaining lifetime customers is the "bottom line" for direct marketers.

However, like many aspects of the business, this process is both tougher and more important than ever before - and for many of the same reasons. Increasing postal rates, reduced budgets and downsizing are just a few reasons why more direct marketers are turning to a private or shared prospect database to find and build key customer relationships.

Another factor is the need to understand more about who your prospecting efforts are reaching. Yet another is beginning to understand what the "magic number" is in terms of contacts relative to your marketplace. Another way to view this is to know how often you should attempt mailing to any given prospect before it is no longer cost effective and time to admit defeat. And possibly the most important one is how to predict the future value of a newly acquired customer.

Technology advances have made the "prospect" of building a prospect database a more realistic consideration for many direct marketing companies today. Investing in a prospect database can effectively uncover and assimilate this information.

Prospect databases can help 1. reduce costs while in pursuit of deeper marketing penetration, 2. consolidate the efforts of numerous vendors involved in the process and 3. gain better control over the process to establish more precise tracking and measurement mechanisms.

Like most advances in database technology, experience in private or shared prospect databases currently have advantages and disadvantages that should be considered. The advantages are clear and measurable, including cost savings, consolidation and control issues. Depending upon the situation, disadvantages may occur in the areas of hotlists, list owner expectations, decision making and up-front costs.

Costs Will Be Reduced

Prospect databases can greatly reduce or even eliminate merge/purge costs.

* Updates to a database typically are made quarterly. Therefore, the time spent ordering lists, communicating instructions to service bureaus and list brokers is reduced.

* Participants in the database usually are willing to negotiate net name billing agreements. This is especially beneficial to mailers who experience high levels of duplication among similar lists. Selection, processing and tape shipping occur less frequently.

Substantial cost savings are realized in list hygiene.

* Even if a database is updated more than quarterly, CASS Certified coding is valid for six months; therefore, only adds and changes - rather than full file processing required for stand alone merge/purge jobs - need to be processed.

* ZIP+4, CRRT codes and suppression flags all can be maintained on the database.

The marketing/testing costs are lowered.

* Prospect databases enable increased testing ability without concern for the list order minimums typically experienced with individual list orders.

Efforts Will Be Consolidated

Time is gained.

* Managing a number of outside players is increasingly time intensive for marketers. Bringing prospecting efforts into a database environment quickly and significantly reduces time spent interacting with vendors.

* The professionals involved are motivated to work more closely together, functioning as a team.

Team spirit is encouraged.

* Suppliers provide ongoing commitment, rather than the one-time order fulfillment that is the traditional norm.

Change can happen more easily.

* With consolidation, the overlay of additional data, application of model scoring, ease of access for re-mail of more effective segments and last minute supplements to mail quantities are easily implemented.

* All offers are pre-approved by the list participants.

Consider The Disadvantages

The "other sides of the coin" for prospect databases include:

* Hotlists. If they represent a critical source of your acquisition efforts, a prospect database may not be the best choice unless marketers are willing to process these lists outside the database, or to have an update schedule frequent enough to accommodate these lists. The downside: mail them anyway and take your chances with duplication and watch for some additional data processing costs. Revenue benefits could still outweigh these extra costs.

* Expectations. In this type of arrangement, list owners typically expect each marketer will use a much larger portion of their file. Marketers must plan and predict usage six to 12 months ahead.

* Decision making. In a shared environment, all procedural, data overlay and methods of data usage must be agreed to by all parties. It is obvious that decisions that need to be made by a committee present a challenge.

* Up-front costs. Not to be overlooked are initial developmental costs involved that must be understood and supported. There will be a multitude of charges that occur in a stand-alone processing environment that will be eliminated to offset the database development cost. However, these costs can be distributed among the list owner participants in a shared environment, or amortized over time in a private database environment. A thorough cost-benefit analysis can demonstrate how the benefits will substantially outweigh the costs in the long term view.

The "Bottom Line"

Increased acquisition rates of the "right" kind of customer will be the validation of a marketer's decision in the short term. Whether private or shared, a prospect database can be a valuable, cost effective marketing tool.

Debra Arana is director of database marketing service of EMS, Inc. (Executive Marketing Services), a Naperville, IL provider of database development and management, mail processing, data enhancement, modeling, analytical and strategic services and telephone number look-up services. She serves as a 'client advocate' for marketing database development and customization of mail processing services. Arana can be reached at 184 Shuman Boulevard $300, Naperville IL 60563-1258 telephone: (610) 355-3003, FAX (630) 355-4669.