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Digital Alchemy - Database management Insource VS Outsource Whitepaper

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http://www2.digitalalchemy.com.au/l/4222/2012-02-02/82slm

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  • 1. To outsource or not to outsource:make the right choiceShould you outsource your marketing database or build and manage it in-house? It’s the questionmany marketers ask themselves. This white paper will clarify any uncertainty you have by helpingyou to explore the untapped potential of your marketing database; examine the key factors that canbe game changers for you and review some of the tools that enable you to make the right choicesfor your business.Challenges of a successful marketing database Database building & management Building 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. “How do you perform the following database marketing functions today?” Outsource only Mixed insource and outsource Database management Marketing technology and support Segmentation and list managment Data mining and modeling Campaign execution/operations Marketing software apps management Email marketing Creative development Campaign planning and design Customer strategy 0% 20% 40% 60% 80% 100% Base: 185 direct marketers who use at least one database marketing service provider Source: Forrester Research, Inc. 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.
  • 2. Database building & management 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. Top Marketing Challenges August 2008 Keeping Data ‘Clean’ and Useful Calculating Meaningful ROIGenerating Enough Quality Leads Creating Quality Content Determining the Best Campaigns Collecting Management Campaign Management List Management Growning Our Email List Improving Email Response Rates Meaningful List Segmentation 0 50 100 150 200 250 Responses Source: ResearchCorpIn figure2, the number one challenge for marketers is keeping data clean and useful. Poor quality data clearly hasan 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. Resource flexibility and agility 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 dept 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.
  • 3. Skills/experience 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. Speed to market Due to the dynamic characteristics of their data, marketers need to act fast in response to an opportunity. It’s often a one-time chance, which means if you lose it, you lose it forever.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 thecompanyNature of the dataMDB is very dynamic and has to be updated frequently while transactional data is historical,likely to remain unchanged and is kept as a recordData 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 SingleCustomer View in the MDB.
  • 4. A typical In-house ImplementationBuilding a database always takes longer and hits more unexpected ‘bumps’ along the way than at firstenvisaged. The project undertaken by your IT and marketing teams will certainly be no exception tothe rule. Most IT departments are good at operating system databases and many can build reasonabletransactional databases, but it is most unlikely that they will have the extensive experience requiredto build a state of the art relational marketing database. For their part, marketing departments oftenlack the time, resources and IT skills. The main upside to building the MDB in-house is the usefulinsight that individual staff can acquire combined with their intimate knowledge of the database’svarious idiosyncrasies and nuances.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 obsolescenceBear in mind that opportunity costs will be incurred while the marketing database implementationis in progress and subsequently if database performance is below the required benchmark. It’s notuncommon for a poor performing system to be canned, even after considerable time and financialinvestment 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
  • 5. Advantages and Disadvantages of In-housingand OutsourcingThe most common strengths, weaknesses, threats and opportunities are identified by simple SWOTanalysis. Strengths Weaknesses Strengths Weaknesses Control of staff and resources IT- Marketing friction High probability of success Limited control over staff Responsible for own destiny Talent/staff sourcing issues Speed to market Long term contractual Access to specialised talent obligation No risk of outsourcer bias Limited domain expertise Established test and measure Risk of static solution processes Opportunities Threats Opportunities Threats Business flexibility Cost overruns Work with best talent in the Buy into yesterday’s platform Technical flexibility Slow time to market market Outsourcer bias Achieve rapid capabilities Poor account team Organisational agility Failed or flawed systems enhancement Find innovative, leapfrog solutionsHow Database Marketing Service Provider (DBMSP)can assist you?The solution and the toolsThe DBMSP has the required software and hardware ready installed. Your implementation is anincremental activity and therefore added to a technology platform that is tried and tested to provideyou with best practice.Subject matter expertA DBMSP has one role in life - to support its client’s marketing activities and drive incrementalvalue from marketing activity. They have a deep and broad understanding of the technology andapplications you are using and invest heavily in ensuring your system is available and working to fullcapacity. As DBMSP are experts in their field, you can take full advantage of the skills and experiencesthey have gained over considerable time and across the varied business needs of their multipleclients.
  • 6. Flexible resourcesA DBMSP can assist you to apply the right level of resourcing by being flexible and allowing you toaccess skilled, experienced resources as and when required on a pay-as-you-go basis. With a servicecontract arrangement, the external provider undertakes to maintain suitably qualified campaignspecialists who can be called upon to meet your needs if departmental resources are not availableor when the work load exceeds your internal capacity.IT independencyA DBMSP can offer you extra IT resources with specific experience. This saves you from relying uponyour own IT department to take care of specialised marketing matters outside their skillset.Keep up to date with new applications using best of breed technologyA DBMSP’s business is based upon marketing technology and up to date techniques, so they muststay abreast of relevant technology and processes in order to maintain their competitive edge in themarketplace. Continuous learning from successive new implementations also flows back to existingclients.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 won’t 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’s particularly important if you expect workload requirements to increase or if you’re seeking to establish a long term relationship with the DBMSP.In conclusion, making the wrong choice between an in-house implementation and anexternal service provider can significantly impact the effectiveness of your marketing campaignexecutions. There may be good reasons why your company chooses not to outsource but more andmore companies are seeing the tangible benefits that are gained by leveraging an external partner’sresources and expertise, outweigh the traditional internal barriers.
  • 7. About Digital AlchemyDigital Alchemy is Australia’s largest dedicated Database Marketing Service Provider. We have alarge and growing pool of specialist resources dedicated to working with our clients to improve theirmarketing efficiency and capturing latent customer value through marketing automation, customeranalytics, and strategic consulting. Our ever-growing client community includes a wide range oforganisations and industries such as financial services, telecommunications, motoring services,automotive, etc. Our proven transformation process ensures the blending of Digital Alchemy’scapabilities in analytics, campaign management, database design, and development and hosting toyour business knowledge. “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 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.”
  • 8. 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>