Prospect data is essential for many marketers, even if they have not been that active over the last five years. As demand returns, David Reed discovers that the supply side has been facing problems - and there could be worse to come.
When was the last time you completed a lifestyle survey? Come to that, when was the last time you received one, either online or by post? The days when data owners routinely mailed the population and captured millions of fresh records and variables every month are long gone.
The new model has been one of lower volume, more focused surveys delivered via branded partner web sites. While effective, the scale of this business is fundamentally different to that which sustained direct mail a decade ago. The rush to email marketing at the start of the Noughties was one reason for the change.
Another has been the economic climate. Fresh prospecting data relies on consumers to be actively buying and responding to offers. Somebody who is in market is typically more likely to be willing to provide personal information during that transaction, even if it will be shared with a third party.
The final big hit came five years ago when the lead generation model landed in the UK. Hard-pressed marketers went crazy for a prospecting model that appeared to minimise their exposure and costs while maximising their returns. Signs of this tailing off are starting to emerge.
“I am encouraged to see the email lead generation obsession dying down,” says Dee Toomey, managing director of Scientia Data. She recalls visiting the American DMA convention two years ago when, “it was mad in the UK at that stage and very bad for us because everybody just wanted to do lead gen. But in the US, it was not a standout thing - it was just another part of the data strategy.”
Her parent company hedged its bets by launching a proposition in that space (Funnel Lead Marketing), but also worked hard to develop fresh data assets and build a new data set based on known transactors. “It is all our own data and we wouldn’t allow it to be used for any lead generation because that ruins your data set. I have seen that happen before. We would not allow it to be used on a purely cost per acquisition basis,” says Toomey. Some CPA activity does take place, but the emphasis is always on properly valuing the data and charging by the thousand records.
A number of rival businesses have followed suit in the last nine months, she claims, slowly choking off one stream of prospect data that has supported lead gen. This has been a tough choice in a marketplace which saw virtually its entire demand side stop dead during 2009. With consumers not spending, marketers had to divert into ultra low-cost channels like email and lock down their prospecting.
With conventional data owners out of the market for high volume data collection and lead generation cannibalising existing prospect data sets, that left just a new generation of online data capture operations. Toomey believes this is creating another set of problems: “They do not have a solid DM background - they are all digital - so they have no idea about speaking to people directly,” she says.
Evidence for the problems this can lead to can be found in issues around data validation at point of capture and the limited permissions which are being sought. Email may be popular with clients, but that does not mean additional targeting data should be ignored which could provide value at a later date. The next data-driven application which marketers adopt may not be apparent right now, but it could require more accurate information than these providers have to offer.
While it might be assumed that the economic slowdown has put a stop to all new data streams, this is far from the case. Toomey says, “we don’t go to Tier One companies which increasingly say they don’t share data with others. But there are many which position it as something within the law and best practice who do share.”
List managers and list brokers have classically sat at the heart of this sector, helping businesses to monetise their asset and bringing new sources into play. It is fair to say that the recession has devastated these suppliers with a collapse of both supply and demand.
Indications of improvements are now showing, however. Just last month, Caspian Partnership was able to bring three new files to market. “There has definitely been an increase in planning for Quarters Two and Three this year,” says managing director Irit Reed. She provides a caveat that, “it is very tough to get people to test new sources - a lot of advertisers are just going with what they know. Testing itself is right down to a minimum.”
That can dampen the likely revenue which a list owner can expect to get from putting a file on the market, since new sources need to be assessed and trialled before they get adopted. This can become a vicious circle in which list managers are unable to realise the income for clients they had hoped for, so fewer new lists get released, providing fewer options for testing.
“Currently, we are seeing a lot of list owners changing their list manager because they don’t feel they are performing,” says Reed. Switching rarely tends to deliver the uplift which list owners are expecting, since nearly all the players are facing the same problems with demand. Nonetheless, they still keep looking for opportunities. “As a list broker, I am always looking for new data for advertisers, but there is very little coming onto the market. There is less mail order and niche lists out there.”
Marketers face their own dilemma when looking for prospecting data. Supply has reduced, which makes coverage and volume hard to achieve. Anybody not familiar with classic direct marketing will baulk at the idea of sewing together a prospect file from multiple niche lists. Instead, there has been a strong trend towards using commercial prospect pools that have been pre-built from known transactors and responders.
Reed argues that, “too much data is going into prospect pools which I strongly believe are not especially effective.” A degree of homogeneity has crept into these transactional bases with increasing similarities in their profiles and performance, rather than the breakout results which they often promise.
Opacity about the sources of data makes it almost impossible to check their claims of uniqueness. But these aggregated sets do help to fill in the coverage of the UK consumer base and at least have the benefit of being based on known buyers.
Not everybody in the list industry has faced the same pressures. “We’re fairly healthy on both demand and supply fronts,” says Lynn Stevens, managing director of Lloyd James. She argues that the aggregated transactional files play an important role. “Data owners don’t capture as much as they used to, but that is made up for by the transactional pools. We are not seeing any decline in freshness and recency - there are good volumes for 0 to 6 month data.”
Niche lists and mail order publishers are tending to follow a business-as-usual approach by keeping their data in the marketplace, says Stevens. What may be opening up is an opportunity to exploit the gaps which the downturn has created, she argues. “There is less volume in the letterbox, but that is starting to change. I see more direct mail than I used to,” she says.
With email response rates often below target, there is more willingness to use channels which have historically been reliable. But one disruptive factor is the continued availability of email lists offering massive volumes at unlikely prices. “There is a challenge from the sheer number of operators, but their quality varies massively. I hope people are staying away from data offers that appear too good to be true,” warns Stevens.
The source of these data sets is often questionable, with a lot of website scraping (especially for B2B files) which naturally limits the level of permissioning on this data. Any unsolicited email or telephone marketing message requires an explicit opt-in, so advertisers who are unwary about this aspect of the prospect data they use could find themselves in real difficulty.
If Stevens is optimistic, Rosemary Smith, managing director of RSA Direct, takes the reverse view. “List broking is currently in poor health and that is the general feeling in the marketplace,” she says. While there are signs of planning being carried out for campaigns later this year, they often do not materialise, she reports.
“Client behaviour is timid at the moment and they are mailing their own data and not going out to prospect. A lot are still in love with email, but it is proving hard to make work as an acquisition channel because of poor response rates. They are not doing themselves any favours by ruling out particular channels as part of their marketing mix,” says Smith.
She does see signs of a growing willingness to pay a premium for better quality data for use in lead generation, but price is still the top priority. That continues to fuel the demand for dodgy email lists. “I hope no big brand gets caught out by using them. The level of supply is frightening - we get two or three offers per day of supposedly opted-in email addresses. I feel very sorry for those people who are applying proper management to their email data and who have to charge more as a result,” says Smith.
At Experian, director of strategy and propositions Colin Grieves believes that the core requirement for prospecting data remains the same. “There is clearly still a need for organisations to recruit and acquire new customers. That is never going to go away. Recently they have been using more digital channels to do that, so the overall volumes are not what they were five years ago,” he says.
For his business, this has created an expanded requirement for data in terms of where it may ultimately be used, be it social media, mobile or even digital television. “Our data is used to target online display advertising by media owners, for example,” says Grieves.
The ability to link pieces of data acquired and deployed across multiple channels has become an ever more valuable capability for Experian as a result. As a consequence, the data sources it uses to build a prospect pool of UK adults has also changed, with less reliance on classic lifestyle surveys and matching against the Edited Electoral Register.
“That has triggered innovation in our approach to data capture and the type of data we look for,” he says.
Green shoots of recovery around prospecting might be in evidence as those companies who have survived the recession realise there are opportunities to go out and build their market share. Data managers which have made it through have also been encouraging data owners to release more files and benefit from the incremental revenue they get as a result.
That is why there are now more transactional prospect pools in the market than before and why list managers are showing signs of confidence. The great unknown is what impact the proposed Data Protection Regulations might have, depending on their final outline. A proposal to make all direct marketing consent-based could prove catastrophic, for example.
“What we really want to do is work with our partners, clients and other organisations to explain to governments in the UK and Europe the difficulties it would create for business. I am also not sure that what is being proposed will really benefit consumers in the long-term,” says Grieves.
One barrier to achieving that goal could be an apparent lack of awareness of the issue identified by Smith: “I seem to be the only person concerned about the effect of the proposals. If the final scenario is that it has to be opt-in, the ability to collect any data for third party use will be seriously impacted because opt-in already is only 20 per cent at best. So list owners are going to lost at least 80 per cent of their turnover,” she warns.
How that would destroy the list industry is easy to identify. What is less well understood is that any company trying to acquire new customers could come to market in two years’ time and find a complete absence of any usable data. Requiring consent in the name of protecting consumers from intrusive data use will end up driving more broadcast, untargeted messaging. That might be good for media owners, but it can not be what Brussels really intends.