Date: Fri, 19 Dec 1997 04:01:42 GMT Server: NCSA/1.5 Content-type: text/html Harte-Hanks Direct Marketing Article: "How Business to Business Direct Marketing And Direct Response Advertisers Will Succeed In The New Millennium"

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How Business to Business Direct Marketing And Direct Response Advertisers Will Succeed In The New Millennium

By Richard Hochhauser

This article originally appeared in "Direct Marketing", July 1997

Marketing has become big business and the prospects for growth remain significant. In the United Stated alone, direct response sales totaled $1.7 trillion in 1996 according to Economic Impacts: U.S. Direct Marketing Today a study by The WEFA Group economic analysis firm. Another indication of this industry's size in the United States is in the business-to-business direct marketing sector, where there were an estimated 8.8 million workers employed in 1996, a number estimated to exceed 11 million by 2001. The business is strong, and the business-to-business sector is growing at a disproportionately fast pace. Driving this growth are:

  • Outsourcing -- More companies now believe they do not have to do everything internally to be successful and they do not feel they have failed if they outsource work.
  • One-to-One Personalization -- Equipment and techniques have been developed whereby messaging can be highly personalized based on the demographics, psychographics and most importantly, the behavior of prospects and customers.
  • Technological Advances -- The speed and increasingly lower prices of computer hardware make it possible to do more with easier-to-use tools.
  • The Internet -- Recognized as an exploding segment of direct response advertising.
  • Measurability -- The critical success factor in most businesses. Direct response and database marketing allow us to measure the impact on different media and communication approached.

Embrace Change
These factors have many implications for us as we approach the year 2000. The first such item is change and our ability to keep pace with it. To characterize change, let me first share a story about a student I had at New York University a few years ago. He described how difficult it was for him to keep up with so many new things. He was worried about new requirements to be successful in his profession of direct marketing, including the impact of electronic media. He was overwhelmed by the pace of change. I recommended that he think of change as an opportunity, not as a problem and actively participate in the change process. I also told him that to make it work for us, we too must change, and that he enjoy the journey through a world that will be different tomorrow.

Change will bring greater complexity to our lives as marketers. Dealing effectively with change means keeping thing manageable enough to take control of the critical detail, and to focus on the factors that are most meaningful and take action. Taking control of the critical details is a key to success, simply because the details matter. There are lots of details, which is why focusing on the factors that are most meaningful will help keep things manageable. Staying focused will get you most of the way there. You must then be empowered and able to make decisions and take action, because inaction means trouble. "Ready, fire, aim" is far better than the seemingly logical sequence "ready, aim, fire" because you need to take action before it is too late. Here are some of Scott Adams thoughts on how change took hold in our business world. The author of The Dilbert Principle said:

"Change was a very ordinary thing for many eons, but thanks to consultants, change has elevated to an important business concept. It all started with downsizing. Many managers lost their jobs because of downsizing. These ex-managers wisely called themselves consultants because that sounded far sexier than street urchins. As the consultants applied their skills, the phrase they used most often was 'spare change?' It began as a plaintive mumble, but over time the consultants became more aggressive, shouting "SPARE CHANGE!' to a passerby almost as if it were a command. Over time the phrase was shortened to "change" and it developed into a thriving consulting practice . . . I might have some of the details wrong, but I know the story involves consultants asking for money."

Use Common Sense
Another requirement to succeed in marketing is common sense. Common sense goes a long way to keep things manageable. I can tell you from personal experience that the mistakes I have made over the years have generally resulted from ignoring the little voice inside that was saying, "DO IT DIFFERENTLY." Apply this to the people you hire, the people you let go, the products you launch, the service standards you set and where you need to be on the delegation-abdication continuum.

I do not suggest abandoning the rigor required to help you make these decisions. After the rigor, apply common sense. Surround yourself with people who have common sense Hire and promote people who are better than you and just be glad you got there first. That way you will have the time to focus on what is most meaningful, freeing you to take the best possible actions. Having the right people on your side will make your life more manageable.

Understand the Customer Process
If these are the generic suggestion, the real direct marketing solutions start with how to get , keep and grow customers. While these have long been the goals of many companies, the approaches used to achieve them are different today than they were just a decade ago and they will continue to change in the future. The procedures are more complex. They involve statistics, databases, loyalty programs, etc. Once again, I would argue that we need to simplify the complexity of these marketing processes. The example I will use to simplify this concept is the funnel bucket.

At the very top of the funnel are suspects who need to be turned into prospects and then converted into customers. This is the GETTING CUSTOMERS part of the diagram: some call it customer ACQUISTION. In the process of getting a customer, a filtering device in the funnel serves as the INFLUENCER. In B-B marketing, customer acquisition is often influenced by someone in the organization. While in the bucket, the goal is to turn the first-time customer into someone who wants to continue to buy. This is accomplished through cross-selling and up-selling. This is the GROWING part of the diagram.

Once the customer buys more items and spends more money, the goal is to sufficiently satisfy him/her so that he/she will become a loyalist and even recommended you to someone else. This is accomplished by creating a relationship with the customer, also called RETENTION. In this funnel bucket analogy, retention means that the customer does not fall out the bottom of the bucket. But some will, so both retention and acquisition are critical to your success.

Know the Customer
As you can see, the center of this discussion is the customer. Customer focus will be even more important in the future than it is today. While it should be a way of life for everyone in business it often requires a reminder. Ironically, this is particularly true of companies that have a strong market share, are doing well, are exceeding the growth of their peer group and have a lot of new product introductions with many more in the pipeline. It is ironic precisely because customer focus is what put these companies into a leadership position in the first place.

Sometimes success breeds overconfidence, and if that goes uncorrected weak brands will fail and strong ones will weaken. Michael Bloomberg, who is successfully building a business information company, was quoted in a recent issues of The New Yorker as saying. "If there's one thing I worry about in my organization it's that we're going to think we're smarter than these other people."

Identifying and defining the customer are important issues in direct marketing. This too, is getting more complex. When selling takes place through various channels, even when the channels are direct, it is often difficult to understand who is buying and who influences the buying. This is where the action will take place in the future, and both marketing databases and sales automation tools need to deal with these issues. Both will help you identify the scope, depth and nature of the relationships you need to understand in order to market and sell effectively. Both of these tools will simplify the way you go to market.

Following the RFM Model
Business-to-consumer direct marketers have been dealing with the "scope" issue for quite some time. That is: Recency, Frequency and Monetary value (RFM) information plus some added data about the product or service purchased, "Depth" is usually information that relates to market share and is key to understanding the importance of a customer.

Sometimes this information is provided by appending data from lists, sometimes via a sales automation approach and increasingly through the overlay of survey information onto a database. The manageable "nature" of these relationships is unique to the B-B environment. For example, the contact may be a site or multiple contacts across various sites, some of which are outside the organization. Outside influences will increasingly mean key supplier partners and consultants.

The site issue is complicated. Consideration must be given to the parent company, the core business and the division within a core business to assess the buying process.

Sales Automation
Unlike marketing databases, sales automation is an area that has yet to come of age, and I predict that it will be a key tool for tomorrow. It will make life simpler. Whether we are talking about a direct sales force of the user of a direct medium, sales automation can package and summarize information which will provide real guidance on how to handle each customer. This is so important because there is an extradodinary amount of information, but it is often lost as a salesperson goes on to the next conquest, gets promoted or leaves the company. There needs to be a systematic way to get information about suspects, prospects and customers into the knowledge base of the company. The way to do that is by having the sales representative record information and transmit it back to the company. That will allow salespeople and sales management to be more effective by:

  • Sharing like information about customer situations
  • Identifying logical products or services to emphasize
  • Providing guidance on how much effort to devote
  • Helping to create a contact strategy
  • Measuring current methods with the goal of improving them

So here is another example in which there will be more information, but packaged in a simply enough way to utilize effectively. And it surely takes into consideration the fact that the details matter.

Relying on Databases
The future of direct marketing will rely on sophisticated databases. They will perform complex tasks and make it easier for direct marketers to do their jobs. This will be accomplished in various ways:

  • With tools that deal effectively with the multiple site and multiple customer issues.
  • By using many of the same techniques currently used in business-to-consumes marketing such as statistical modeling, event management and geographic interfaces.
  • With desktop systems that are not encumbered by a centralized system that prioritizes closing the books.
  • With information that is real-time or close to it so that people can take advantage of current information.
  • By processing that takes place in minutes, not hours, days or weeks.

The Changing B-B Database Marketing Environment
In B-B database marketing, the quality of the list is more problematic than in the business-to-consumer world. Consumer data updating is accomplished by NCOA and overlaying lists. In the B-B environment, NCOA will describe a companies new address but say nothing about the status of a particular employee. The changes that take place in a business environment are many times greater that those observed in the consumer world.

Telemarketing is a wonderful tool to use to update information and the opportunity exists to add critical data elements by asking the right questions in addition to merely verifying who holds what job. The telephone medium, inbound and outbound, will become more important in the future. However, I believe that inbound will be used mostly for new business acquisition and customer service, while outbound will be used for appointment setting, tele-nurturing (increasing lead quality) and verification. Cold selling will be less of an option because privacy will be more of an issue at the business level than it is today.

One of the database tools will be for the senior managers of the company. The will want a decision support tool that links to spreadsheets and graphics. They will want to answer questions or deal with issues concerning:

  • What is driving the performance of the company?
  • How does current month data compare to prior month?
  • How does this data compare to the same month last year?
  • What is the most probable case for the future?
  • How will that vary if assumptions change?

All of this must be in an easy-to-use "senior management proof" package. In addition, the results must come quickly as this audience is not particularly patient or forgiving.

Going the Outsourcing Route
Another element of marketing success in the new millennium is outsourcing. I have been told be a high-tech company executive that the ratio of employees to outsourced people doing that company's work was 3:1 in 1995 and by 1997 that ratio has reversed. Most companies are increasing their reliance on vendor partners to perform a wide range of job functions previously done internally. In 1997, Lou Gerstner said that IBM's strategy hinges in large part on its 45,000 business partners worldwide. This implies that an important management skill requirement is shifting from managing the work to managing the outsource partner doing the work.

Part of this management challenge is getting the vendor partners to work with one another to support the common client. Ray Noorda, former chairman of Novell, referred to this as "coopetition." The stakes are pretty high for the vendor partners who are being asked to share their competitive advantages with the competition. Harte-Hanks was involved in a situation where we were pushed too far by a client. Ultimately we refused to share source code with a competitor, even though a good client asked us to do so. Managing those conflicts is where the action will increasingly take place.

Here are some of my suggestions for selecting the right outsource partner:

  1. Choose the best company at a particular function.
  2. Do not worry about putting too many eggs in one basket, but make sure that basket is sturdy.
  3. Use only the most professional organizations.
  4. Partner with companies whose values are similar to your own.
  5. Go with partners who go where you want to do business.
  6. Make sure your partner wants to be measured.
  7. Seek companies whose processes are efficient.
  8. If your partner interfaces with your customer, make sure the partner's approach and tone is consistent with your own.
  9. Test the waters to determine whether your partner is willing to share some of the risk, but make sure you maintain your fair share as well.

The new paradigm of more outsourcing is one way to deal with a changing world by making things more manageable. Outsourcing means someone else's livelihood depends on doing the rights things and doing them correctly. And you have to deal with only a handful of key issues or metrics. You have more time to focus on what really matters to the company's and your success. This additional freedom buys you the ability to take action, particularly since the outsourcing should provide you with more and better information than you were used to getting from your internal departments.

The Exploding Internet
But what about the Internet? It is already a major force. I believe there will be many changes in the world of the Internet. Here are my prognostications for the year 2000:

  • There will be an increasing "pull" aspect to marketing with many of the information and buying requests initiated by the customer.
  • There will also be a growing "push" dimension in which highly personalized and targeted information and offers will appear on your computer screen, watch or television set.
  • Privacy will be redefined in the new millennium: there will be control on how we get and use information on the Internet.
  • One thing will surely be the same as with all other media, the Internet will be supported by advertising.
  • The Internet will selectively replace other media, but history will repeat itself, as every new medium has wound up, co-existing with the old ones.
  • The information vs. Commerce argument will become moot because both will thrice on the Internet.
  • International business is growing rapidly and the Internet facilitates that growth.

Marketing is being redefined with the buyer initiating many of the initial contacts. This form of "pull" marketing was first seen in the response management business. Initially, inbound telephone calls were a trigger for some type of marketing activity. Today, particularly in the high technology industry, that initial contact is increasingly via the Internet. And the response is also often via the Internet. Where other media are now being used, it is likely that the Internet will replace or supplement them. For example, if a response is currently fulfilled by mailing a four-color brochure with technical specifications, it is only a matter of time before this is delivered to an e-mail address over the Net.

The B-B Marketing Innovators
It is business-to-business direct marketers who are leading they way in the use of new media. In 1996 The Direct Marketing Association commissioned a study on how direct marketers are impacted by the new electronic media and how they can capitalize on interactive technologies. The study, entitled A DMA Management Guide: Marketing in the Interactive Age, was conducted by AT Kearney and is currently being updated and expanded. It includes an analysis on how new media is being accepted in the business-to-business environment. In short, it demonstrated that not surprisingly the B-B community has been the innovator in the adoption of many new media technologies. The study also found that B-B use of new media has the potential to reduce or eliminate organizational costs for both the seller and buyer. My suggestion for the next study is to identify how these new media must make our lives more manageable.

Reprinted by permission.


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