• by Jack Loechner , Staff Writer @mp_research, September 23, 2010

According to the Winterberry Group "Changing Mission of Marketing Data By 2012," U.S. marketers will continue to dedicate a steady $7.8 billion to marketing data and associated services, even while the proportion of those budgets commanded by "digital" sources and applications will more than double to represent 10.8% of the mix, over $840 million in annual investment.

Today, the commercial marketing data industry is in the midst of a full-scale transformation, says the report. Once dedicated almost solely to the aggregation and usage of "lists" for direct mail acquisition programs, it now contends with an array of new demands, rooted in fast-maturing media channels and refocused business objectives that are reshaping the way marketers source, analyze and apply customer information.

The comprehensive paper, researched and produced with the joint sponsorship of Acxiom Corporation and Netezza Corporation, represents a concerted effort to understand and explain the nature of that shift and its likely impact on both marketers and the evolving sector of marketing data service providers.

The current wave of new data investment was initially driven by marketer desire to apply the basic principles of direct mail, embodied by the "right offer, right audience, right time" targeting concept, to underleveraged online channels such as e-mail, affiliate marketing and search. But rapid advances in technology and an explosion of information availability have given rise to a new set of data-driven digital applications that align with a broader array of business objectives and integrate inputs from multiple sources

Among the potential obstacles that are likely to vex users of "integrated data" in the years ahead, one supersedes all others: the still-unsettled question of what standards count as "responsible" with respect to data security, transparency and consumer choice. Marketers overwhelmingly say they want a set of universal best practices in this regard, but rapid technological proliferation and the continuing threat of regulation are raising concerns about their ability to collect and use virtually any online data, especially when that information is embedded with personally identifiable ("PII") elements.

The exchange and deployment of commercial marketing data is managed by a complex, multi-tiered industry that spans a range of institutions involved in the compilation, management, processing, brokerage, optimization and utilization of information for advertising and promotional purposes. Traditionally, the focus of this enterprise was the direct mail channel, supported primarily by list owners and compilers, brokers/managers, hygiene providers and marketers.

The traditional roles of these distinct groups have begun to blur in the face of two key developments: the recession-driven decline in total spending on direct mail, and the rise and maturation of online media as both replacements for and supplements to the roles previously played by direct mail.

Spending on data and related services approximately mirrors the broader shift in emphasis to digital channels. In 2009, for example, U.S. companies invested $7.4 billion in direct mail-related data, hosting, analytics and related services. By comparison, their digital-related data spending (including dollars vested primarily in the e-mail and online display advertising channels) totaled just $410 million, barely 5.2% of total annual marketing data spending.

By 2012, U.S. marketers are expected to decrease their investment in direct mail-related data and services to $6.93 billion (representing a 6.4% total decline from current spending), while more than doubling their digital marketing-related data spending to $840 million.

Digital data spending, however, continues to trail that of its more mature peer channel because of the basic distinctions between mail and online media. Many "offline" data elements continue to be collected, processed and standardized through an assortment of manual processes, ranging from paper surveys to product warranty cards to public records. In comparison to digital sources, aggregated with little or no human intervention at all, these traditional approaches are significantly more capital- and human-intensive, adding commensurate cost.

The current wave of new data investment was initially driven by marketer desire to apply the basic principles of direct mail, embodied by the "right offer, right audience, right time" targeting concept, to underleveraged online channels such as e-mail, affiliate marketing and search.

Since the Internet emerged as a viable consumer marketing platform, "How do we capitalize on the overwhelming potential of the Web?"  has been a recurring challenge confronting advertisers. Consumer attention and marketer investment continue to flow from traditional channels to online media, but incremental performance (and the ad dollars that would follow it) have never accrued online in sums comparable to those generated by print, broadcast or even direct mail.

The first generation of Internet marketers, swayed by promises of "interactivity," "measurability" and "performance," applied traditional direct marketing methods to emerging media that demanded new approaches to data collection, targeting and campaign execution. Marketer intentions here were generally sound, but many ultimately wound up abusing the flexibility and speed offered by the Web, in some cases to highly unproductive ends.

Mark Nelson, senior vice president of the corporate partner program at Nielsen Claritas notes that on those questions, panelists said, the jury is still out. "The industry is really still in the process of determining which data sets are commoditized, and which are worth paying for."

Today, the principal role of established firms hasn't changed much at all. But the emergence of nearly a dozen new channels that may serve as one-to-one marketing levers, and the need to fuel these media with a fresh, robust stream of information, has given rise to a vast new landscape of service providers that are increasingly competing to control content (including data, graphics and other elements critical to campaign execution) and channels (the means by which the data flow from source to campaign execution).

Reconciling the two groups is not easy because the nature of offline data differs significantly from that collected on the Internet:

·      In the direct mail-driven world, the terms "data" and "name-and-address" could generally be used interchangeably; "rich" data sets were those known to be both accurate and imbued with substantial additional information, typically known and inferred detail on demographic and psychographic elements associated with the subject consumer.

·      In the online realm, names and addresses are a luxury that marketers only rarely enjoy. Though some platforms provide a means for collecting specific audience data, far more interest and investment dollars have accrued to behavioral information, the valuable insight into consumer Web browsing activity that reveals much about purchase intent, personal interests and other motives of interest to advertisers.

Marketers are now collecting more information on customers, transactions and other commercial activities than ever before. One prominent study declared that companies aggregated more information in 2009 than in all previous years combined, outstripping the world's combined storage capacity.

Making efficient use of that vast array of data, on the other hand, remains a significant issue. And the problem looms larger virtually every day, as combined data sets grow larger and new execution media (especially those that inform automated online targeting and media buying activity) demand input processing-derived from master databases that may include billions of records-in periods of just milliseconds.

The report concludes, of course, that data is the fuel that drives targeted marketing. And targeted marketing, whether "one-to-one" or "relationship-driven" or just "direct," has long proven to be more impactful than virtually any other advertising or promotional alternative.

For that reason alone, the marketing data industry is almost certain to grow in both size and scope over the coming years. But that growth will force a series of necessary changes in the current data-driven advertising ecosystem, notably including:

• A new cross-channel industry structure
• Expanded reliance on the basic principles of direct marketing, as well as new brand engagement metrics
• A shakeup in the data-driven service provider landscape, driven by deeply entrenched customer relationships and integration of both new and established targeting technologies

Please see The Changing Mission of Marketing Data PDF from Winterberry here.