The Rise of Co-op Databases
by Alan Weber
Those in direct marketing have always been different from those in other industries because they share data. At some level, every industry measures results and tests products, offers and media. Few industries, however, are willing to share customer data for the common good.
It is not difficult to understand why some marketers are apprehensive about sharing data. Look at the reaction in the general press when Double Click bought Abacus and attempted to combine Web and catalog behavior. The Supreme Court has recently taken away states' rights to sell driver's license and motor vehicle data, a veritable fountain of information for data compilers. Pressure for opt-in has become the norm, rather than the exception.
Despite what appear to be setbacks, many marketers are just now beginning to share data, and re-define the rules for direct marketing.
Follow the Niche
Few companies cover an entire market segment vertically. Most sell only a portion of a string of related products. The sellers of related products would do well to share information with one another.
As companies do a better job of capturing accurate transaction information, they build a valuable asset not only for themselves, but also for other marketers. Savvy marketers are looking for partners with whom they can trade their data.
Several of my clients do most of their prospecting by trading lists in vertical markets with non-competing companies. In each case, few of the lists are on the market; most are too small for a typical "minimum order," and the companies could not prosper without them.
In many areas it is getting easier to find companies willing to share information. The necessity to have good, actionable marketing data is driving many marketers together that before did not cooperate.
In the past few years, we've had the opportunity to be involved with the marketing databases for performing arts groups in more than a dozen cities. Upon reviewing the effectiveness of these campaigns, it is clear that those cities that have shared arts databases can market their services more effectively.
In a nutshell, in cities with shared arts databases, the symphony, opera, ballet and other groups share a database of all the people who have shown an affinity for the performing arts. Anyone not in the shared database, regardless of their demographics, is generally a less likely prospect.
What is striking is that the direct marketing industry, in general, has not been a supporter of the shared arts database concept. Some list brokers and data providers have pushed demographic or lifestyle lists, which is their traditional way of selling. A relative few have seen the benefit to the arts groups of building the shared arts databases, and adapted their own businesses and offerings to fit.
A clear hierarchy for performing arts lists exists from one symphony to another, and any direct marketer can look at it and see why it makes sense to trade names.
One of the keys (for the arts groups) is ranking segments for the merge/purge. There is so much overlap within and between segments that ranking is crucial. A so-so list, if ranked above a better list, could perform better than expected if they have a large amount of overlap. This is particularly true when duplicates are merely eliminated, rather than tracked.
It is relatively easy to make a list with demographic selects that matches a high percentage of the generally affluent performing arts patrons (see inset). However, the value of trade names with a proven affinity for the arts is best shown when demographic/lifestyle names are last in the merge/purge. That is, when those unique demo names are not on any of the other lists. These known "non-buyers" seldom perform well, regardless of demographics.
The point of arts trade databases is not that they work so well, nor that most arts groups are receptive to participating, but rather that those in the direct marketing industry are usually not able to serve this need.
It is much less common for business-to-business marketers to share data than it is for consumer marketers. However, in many b-to-b markets, there are complementary products that are sold by non-competing manufacturers in the same market. For example, one company may sell pesticide for corn, another company may sell seed corn.
In the small, vertical markets where most b-to-b marketers sell, customers and prospects are fairly easy to identify. Tools like SIC code or industry association lists work reasonably well. Co-op data can be used to identify how much a customer or potential customer is buying in a product category.
If the pesticide and seed manufacturers share data, they will have some customers who overlap. There will also be those who bought seed from the one company, but did not buy pesticide from the other company, and vice versa.
The advantage of the co-op database is not only in identifying who is a buyer, but also to determine how much each buys. A farm could buy enough seed for 50 acres every year from the seed manufacturer. Is it a loyal small farm, or a large farm that is simply testing the product? If, by sharing information, the seed company finds the farm buys enough pesticide for 2,000 acres, they know this account has high potential.
Co-op databasing becomes easier when the manufacturer has Electronic Data Interchange (EDI) data. EDI data are something a manufacturer may require re-sellers to provide on a periodic basic. EDI data is an electronic listing of who bought that manufacturer's products and in what quantities. EDI data are a common requirement among b-to-b sellers in some markets. When manufacturers of non-competing products in a vertical market both gather EDI data, they have the basis to form a solid database partnership.
Many industries could benefit from co-operative marketing databases. If there are several companies that:
• Serve the same vertical market or market niche
• Are not direct competitors
• Have accurate customer/transaction data;
• Will not infringe on customers' privacy by sharing.
Then there is an opportunity for a successful shared data effort. Those who are first to form alliances will have a real competitive advantage over those who don't.
Alan Weber is CEO of DataPlus Millennium LLC, a marketing database consulting and analytical services provider. He can be reached at (913) 432-8311 or by e-mail: firstname.lastname@example.org