Executives for a very large largest telecommunications provider, looking carefully at their marketing process, realized they had no true owner of customer information. While some analytic resources had been hired, people working in analytics spent a significant percentage of their time manipulating data and didn't recognize new sources of data, both behavioral and attitudinal, that could affect results. The company had more than 20 different databases and little in the way of true analytics that could help them make predictions. And the average time to market, from concept to program execution, was more than four months—not including time for creative development.
Their solution? Outsourcing many of their direct marketing functions.
In general, marketers are good at managing their operational systems in-house on a day-to-day basis. But the skills used to create day-to-day analyses and marketing platforms are different from those needed to assess the more long-range market. Marketing departments have plenty of talented "creative" types, but they may lack the "left-brain" analytics needed to better understand their customers in today's information-rich, multichannel environment. And critical IT resources are often tasked with a company's financial and operational systems, leaving marketing out in the cold. For all these reasons, the outsourcing of specific marketing activities is catching on.
Many companies already outsource a portion of their marketing function, such as advertising. But businesses are increasingly turning to other companies to handle such core marketing activities as direct-mail management and customer analytics.
‘Employees were no longer saying things like, 'We should drive up the average spend of upper income customers.'’
Four months after the telecommunications provider outsourced its analytics, it had a reliable, consolidated customer database driven by a consistent view of customer behaviors across both wireless and telestrial services. For the first time, marketing could see the total spending across millions of customers. In addition, the outsourced services provider integrated a proprietary segmentation scheme that was customized to include ad-buying information, so the client could look at ad spend across customer segments and ensure that the ads were reaching the right groups of customers and prospects.
Not only was the segmentation used to make ad-purchasing decisions, but also it became the common nomenclature and language of the entire marketing organization. In meetings, employees were no longer saying things like, "We should drive up the average spend of upper income customers." Instead, their conversations were about "shifting 10 percent of marketing expense from the ‘tech-wary empty nesters' segment to other segments."
Time lag
Dedicating critical resources to building a database and developing analytic models is a poor use of your marketing department's capabilities, and it affects your ability to compete. Several years later, one vice president at the telecommunications firm said, "If we had tried to purchase software for campaign management and statistics and spin our own platform, we would be finishing it about now—like our competitor, who is still rolling out their platform in the next year." To her, the outsourced partner provided critical expertise, a proven delivery capability and rapid turnaround that couldn't be matched, regardless of how many internal resources she could have applied to the projects.
Furthermore, many organizations inappropriately discount or underestimate the effort and costs associated with supporting analytic and marketing platform capabilities. An executive vice president at one of the largest media companies in the United States said, "We have been building our customer-value platform for over three years, and we haven't even thought about the support framework, besides telling marketing personnel to call the help desk." Ouch.
After a few discussions, the EVP realized that analytics and true marketing capability require a different support structure, in which marketing personnel and executives can get key questions answered that cross the boundary between marketing questions and date or information technology questions. Even Fortune 100 firms often lack support structures capable of provisioning such a service. As one chief marketing officer of a large consumer-packaged goods firm said recently at a conference, "Shipping and billing will always be the priority of our information technology staff, and as such, we just will never get the response and attention to make us comfortable."
Say a company attempted to build such a support structure in house and bought a database, campaign and modeling tool. It would place itself behind leading thinkers. It wouldn't be exposed to new and innovative analytic thinking and strategies from other firms and industries. With the degree of convergence and globalization that is persistent in American and International markets today, CMOs are increasingly required to tap outside-industry views and approaches. Outsourced analytics providers, like the traditional advertising agencies—can be a much more efficient path to getting where you want to go and staying there.
Some firms may have marketing as a core part of their mission, and for them, building analytics capabilities internally may be the answer. But for a vast majority of the industries and firms, an outsourced provider is a lower risk, offering faster time to market and serving as a strategic consulting partner supporting the CMO's primary goal of understand the industry and developing strategies and tactics that address the industry's needs and competitors' weaknesses.