Ruth P. Stevens Articles and Columns: DIRECT Magazine

September 2007

What B-to-B Marketers are REALLY Doing with Their Databases
By Ruth P. Stevens and Bernice Grossman

When it comes to database marketing, you might think that B-to-B marketers lag behind their consumer counterparts. Guess what. You need to think again.

Turns out, the range of database applications in B-to-B is as broad and creative as B-to-B marketing itself. In fact, B-to-B marketers are doing everything with their databases that you can imagine.

Wondering about this subject, we conducted a survey of 192 business marketers in June 2007, to identify how they are using their databases.

The results were eye-opening. First of all, the range of applications is as broad for B-to-B as it is for consumer.

Second, the number one database marketing application reported by our sample was prospecting, which we take to mean pre-sale cultivation of suspects and inquirers. With long sales cycles and complex buying processes, it's fitting that marketers would use their databases to nurture and build pre-sales relationships.

Not Your Father's Consumer Marketing

But it's completely contrary to the behavior of consumer marketers. They don't do prospecting from their house files. In consumer, there's little sense in importing rental names when it's much easier to mail the name one time, and import the customer response.

But in B-to-B, the sales cycle is long, and the definition of prospecting is somewhat different. In fact, prospecting means nurturing an inquirer to the point when that account converts. A process that can take time, and many touches. And is really worth doing from a marketing database.

Why B-to-B is Different

But it's understandable that many observers believe that B-to-B database marketers lag behind their consumer counterparts. Just look at the realities of the B-to-B marketing environment:

• B-to-B files tend to be relatively small, which can limit the ability to do split testing and data modeling.
• B-to-B data degrades more quickly than consumer, leading to more uncertainly in analytical operations.
• Business marketers tend to use one-off campaign strategies, rarely setting up the kind of controlled campaign programs that support ongoing data-driven testing and analysis.
• B-to-B data is complex and harder to work with.
• B-to-B files tend to contain incomplete records. For example, products might be shipped to an address called "Loading Dock," and a billing address might refer to "See Judy in Accounting." A modeling challenge, to be sure.
• Much of the data design and architecture has focused on consumer data, at least so far.
• Many B-to-B firms still have trouble closing the marketing loop—connecting campaign touches to revenue results—so ROI analysis can be spotty.
• Firms that distribute through third parties—resellers, distributors, agents and the like—may have extremely limited access to transaction data at the end-user account level.
  

How the Survey was Structured

Our survey asked six questions:

• Do you have a B-to-B marketing database?
• If so, where is it managed?
• If in-house, what kind of database is it?
• What do you use your database for?
• What industry are you in?
• How many employees are in your company?

Key Findings

Where is the Database Managed?

Only 6% of respondents said they did not have a database. Of those with a database, the vast majority (86%) maintain it in house, and 14% outsource its management. This finding is what we expected, given that business marketers are so focused on creating and nurturing a sales pipeline. Furthermore, because the B-to-B sales cycle is long, and involves many parties on both sides, connecting to the in-house operating system is often essential to tracking the effectiveness of marketing campaigns.

When we looked at the data based on company size, we noticed that larger companies (1000-9999 employees) were somewhat more likely (91%) to maintain their databases in house. But the largest companies (10,000+ employees) reported the same level of in-house management as the average. So we cannot say definitively that size matters in the question of out-sourcing the database.

Legacy System Versus Modern Database

Of those who manage their databases in house, 41% are using legacy systems and 59% claim to have a flexible database designed for querying and campaign selection.

In this arena, size does matter: Companies with 1000-9999 employees reported using legacy systems at a significantly higher rate (57%) than the average. Companies with more than 10,000 employees, on the other hand, reported significantly lower use (25%) of legacy systems.

So it appears that smaller companies are using newer tools. Everyone needs robust systems for campaign management and closed-loop results reporting. Large companies are either building robust systems in house, or, if they run into the inevitable problems marshalling resources internally, are throwing up their hands and seeking outside solutions.

When companies consider the "buy versus build" decision, they frequently find that it is more economical to buy externally and bring the system in house. This is especially true in the case of CRM systems.

Database Usage

Prospecting was the leading application reported by business marketers, a finding that no doubt surprises consumer database marketers, who rarely find it profitable to bring prospects into their databases. This is because prospect lists are typically rented on a one-time basis, and are easy to rent as needed for acquisition campaigns. In B-to-B, however, a prospect name takes much longer to convert to a sale, and the value of that customer tends to be much higher. So business marketers find it effective to move prospects along the sales cycle using database-driven communications.

Perform data hygiene/record deduplication

Other observations from these results:

It's no surprise that nearly half (45%) of respondents said they use their databases for campaign response tracking and analysis. Most B-to-B campaign responses come in without key codes, so data matchback is an important tool for campaign tracking.
The fact that 61% of respondents say they use their databases for inquiry management reflects the criticality of pipeline management in B-to-B.

The relatively high rate (45%) of profiling is probably a result of the high cost of a sales call. Marketers seek to segment customers and prospects by potential, to reduce unproductive use of sales resources.

We are concerned that only 31% of B-to-B marketers seem to be focused on data hygiene. The volatility of business data, and the opportunity cost of missing or incorrect contact information requires constant vigilance and aggressive maintenance.

We are gratified that so many modeling and analytical techniques are in use among B-to-B marketers. At the same time, the relatively low rates of model usage reflect the difficulty of campaign replication in most business marketing situations. Since campaign conditions change so rapidly, modeling is less used to predict campaign results, and more for understanding the nature of the customer file..

Applications by Company Size

This table lays out the top three database applications reported by companies of various sizes. Where there was a tie, both applications are listed.

Prospecting, profiling, querying and campaign selection were consistently reported across companies of all sizes. Large companies appear to place a higher value on data hygiene and are more likely to perform segmentation. We suspect that the importance of data export among large companies is reflective of their ability to pay for off-site data hygiene whereas smaller companies may have to rely on their sales force to correct data errors.

Applications by Industry
The top three data applications sorted by the top industries participating in the survey.

While all industries named prospecting as an important focus area for database marketing, technology firms reported an unusually strong interest in this application. Manufacturing companies placed the highest value on inquiry management; perhaps the maturity of the industry means that each lead needs to be treated with special care.

Firmographic Profile of the Sample

Services, IT and manufacturing were to leading categories among our respondents. Company size, as reflected by number of employees, was fairly evenly spread.

Conclusion
Our research shows that B-to-B marketers are using their databases in a wide variety of ways, with particular concentration on prospecting, campaign target selection, contact/inquiry management and querying. We would expect sophisticated modeling applications to continue to grow in the sector. Clearly, customer information and marketing databases are an essential element of the B-to-B marketing toolkit.

Ruth P. Stevens consults on customer acquisition & retention, and teaches marketing to graduate students at Columbia Business School. She is the author of The DMA Lead Generation Handbook, and her new book is Trade Show and Event Marketing, now available at Amazon. Reach her at ruth@ruthstevens.com.

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© 2008 Ruth P. Stevens
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