Database Technology: Vastly Improved - Brief Article

It's easier and faster than ever to mine and manage data. But it's not always inexpensive. Here is a forward-looking primer on building and maintaining a database.

Rich Hanson is a recent convert--to the value that a marketing database can bring to a publishing organization. Last year Hanson, controller of Stamats Communications Inc. of Cedar Rapids, Iowa, invested in a system to bridge the data stored in the company's circulation files with what it was aggressively capturing through methods such as surveys and list rentals. This year, the $18 million b-to-b publisher launched a fifth magazine, based on an unfulfilled niche that circulation director Kim Leonard spotted when analyzing readership trends. Impressively, 1999 company revenues were nearly 25 percent higher than last year.

Hanson says that he can't put a number on how much of that cashflow growth is due to his investment in database technology as opposed to a strong economy and motivated sales staff. But "advertisers are buying our magazines to get to an audience," he says. "And the better you can communicate who that audience is, the better your chances of booking a sale."

Sounds like a winning proposition, you're thinking. But what's really involved?

Magazines' relationships with their customers have long been the envy of the marketing world. Unlike many other businesses, magazines don't usually have to stalk their customers to get a picture of who they are; that body of information begins with subscription files. And with the emergence of the Internet, it is far less expensive to communicate, push and capture data about readers. Given the many opportunities to understand and act on people's affinities and purchasing patterns, the advantages of creating a database are enormous.

Affordability

In the past, truly dedicated commercial marketing databases were priced out of the reach of many publishers. But today, a host of vendors offer services and systems that allow businesses to mine and manage their data. Most promise better and faster access. And as the technologies have matured and hardware prices and data storage costs have plummeted, some products' prices have gone down. According to Stamford, Connecticut-based Gartner Group, it cost approximately $12 per megabyte to store data 10 years ago; today, it ranges from less than 20 cents to 50 cents, depending on the engineering involved.

But while database technology has gotten faster, the basic functions that can be performed haven't really changed much. "Having an effective database is not really even about technology. It's just a matter of applying thought processes to a standard merge/purge program that you can enhance and overlay, adding demographics," says Toni Nevitt, president of Livingston, New Jersey-based AdVantage Marketing. "And it doesn't have to cost a fortune."

It costs about $100,000 to $250,000 annually to maintain a one-million-name database, figures Leonard Weed, owner of DirectTrix, a Boulder, Colorado, database consultant. That calculation doesn't include various consultative services, such as an implementation team and analysts. So how do you assess whether your needs warrant that kind of investment?

Faster access to data

Technology has indeed increased the speed at which you can access information that's housed on databases, largely because of the way the information is now delivered. Most service providers offer live Internet connections, so clients simply need a standard Web browser to access data. Hallmark Data Systems of Niles, Illinois, for example, converted its database hosting from e-mail and FTP transfers to a Web browser at the beginning of 1999. As a result, getting a basic count that might have previously taken between 20 seconds to two minutes now takes about two seconds, according to president Raymond Miller. Because the Web isn't tied to any file format or platform standards, it's an ideal medium for this type of interchange.

And other industry-wide moves-such as the migration toward open, client/server systems and relational formats-have made databases much more efficient and accessible beasts to work with.

Outsourcing the project

Options for maintaining databases on-site as well as in-house abound, but one caveat is that most are not designed specifically for the publishing industry.

Because of the time and expense involved, most publishers don't build truly dedicated marketing databases on their own. Most outsource the project to service providers. Even consumer giant Conde Nast's 20-million-name warehouse is off-site (with Acxiom) says GN database director Isobel Osius. "This was a large, complex undertaking," she notes, "and we really didn't have the in-house capabilities."

Time Inc. built its original in-house system in 1990, says Pinchas Ben-Or, former director of consumer marketing. But he cautions that, unlike most publishing companies, Time Inc. has the necessary resources and economies of scale.

One trend among some of the larger vendors is to bundle products and services that include topnotch software and analytical tools from other vendors. For example, Experian, a marketing services provider based in Schaumburg, Illinois, recently released Intravue, which features a popular statistical tool, consultative services, and access to the stable of lists belonging to Experian.

Many fulfillment houses also host services, and some, such as Centrobe Inc., are also rolling out customized packages. While Centrobe and Experian both declined to offer a price range for their new offerings, spokespersons at each company say that both are designed for larger organizations.

If it sounds like there's much less to choose from for mid-size publishers, that's because it's true. Cheryl Rowen, director ofdatabase services for Communications Data Services Inc., is working with several software providers to develop an alternative to the current pricing model. Instead of the fiat license agreements that most offer, she suggests incremental pricing-for example, based on the number of leads generated through acquisitions campaigns. "There's a huge market for software developers to come up with a cheaper solution, and I'd like to partner with them," Rowen says.

In one interesting marriage of publishing-specific needs, a Markham, Ontario-based company, Brauch Database Systems Inc., combines fulfillment and database management in a single, in-house package called Affinity. Stamats Communications is a Brauch client.

Still a tough sell to some

Many agree that magazines pioneered the concept of customer relationships. But compared to other businesses, magazine customers have a low lifetime value --$150 to $200, says Time's Ben-Or, when you factor in low pay-up rates with today's deeply discounted subscription prices. So typically, a database is still a tough sell within many publishing organizations.

Unlike many other expenses, it's difficult to quantify the return on investment that a database delivers. So a publisher with a variety of goals--beyond, say, merely selling lists--is more likely to realize return on investment.

Preparation is the key to making a database work, experts agree. That starts with deciding what your objectives are and clearly articulating them to the service providers you're considering as partners. Much of the existing information that any magazine compiles on its customers comes from fulfillment, so it's important to find a company that understands and can work with the fulfillment cycle.

Getting up and running

You might expect that larger companies with greater financial resources and more data to justify this kind of investment have an easier time getting database approval. But that's not necessarily the case. "It becomes a very scary thing," confirms one circulation director at a large b-to-b company. "You're talking about getting very fragmented systems--for example, individual files from individual sales departments--and bringing them into one common repository." And in this hot mergers-and-acquisitions climate, the circulator adds, the cost and time involved in standardizing an organization can become an "exponential nightmare."

Rights and access are other issues that publishers should think about before this project can begin; "free trade agreements" across departments can seriously dilute marketing plans. For instance, if marketers in different departments each identify the same segment of the company's files as prospects, then those customers are barraged by simultaneous direct-mail campaigns--perhaps for similar products that are likely to be branded with the company's name. This is more likely to fatigue lists and irritate recipients than generate sales. Another point to consider is that some staff might be reluctant to immediately share information that they worked hard to obtain--e.g., a new list that a circulator bartered the shirt off his/her back for.

As Toni Nevitt points out, a database can only be as good as the people who use its analytic tools. Her advice: "The database is the means, not the end."

Before building a marketing database...

As recently as five years ago, it was almost impossible for many publishers to build their own dedicated marketing databases. Now It's feasible--but still challenging. Here's a brief checklist of areas the experts say you need to think about before taking the plunge.

* To make your investment work, your marketing team must be prepared to spend more time behind the desk, thinking tactically. Can your staff handle that mindset change?

* Before talking to vendors, know your short-and long-term objectives cold.

* Determine your needs upfront. For example, are there online needs? How many people within the organization will have access? What will you use your database for (e.g., list rental, cross-selling)?

* Magazines have unique database needs that not all vendors understand. Find out whether prospective vendors have worked with publishers before. Get references.

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