Business-to-business marketers recognise the importance of wastage in database marketing, but the majority are ignoring one of the key opportunities to address it.
This is according to new research by B2B Marketing in association with Experian, which demonstrated that less than one quarter of B2B database marketers have checked the credit-worthiness of their database prior to a campaign. This is despite the fact that almost 80 per cent described reducing the database marketing risk as either ‘important’ or ‘very important’, whilst 70 per cent describe reducing waste as a ‘high’ or ‘very high’ priority to them.
The most common reason why companies are failing to utilise credit data is because they are ‘focused on more fundamental issues’ related to database marketing. This was cited by 52 per cent of organisations, and is likely to include data hygiene, quality and creative work. Other factors cited included an inability to interpret credit data and a lack of dialogue with the credit team/department.
Missing the bigger picture
Perhaps the most alarming finding was that a significant minority of B2B marketers, who responded to the survey, still do not consider the impact of their activities on the wider business and its financial stability. Twenty three per cent describe themselves as ‘not accountable’ for the conversion of a sale, while 10 per cent did not consider themselves accountable for the stability of the organisation. This failure of marketers to appreciate the repercussions of financial commitments suggests that marketers feel divorced from the broader organisational objectives and strategy, and is perhaps both cause and consequence of the marginalised role that marketing plays in some companies.
This is best highlighted by the survey’s finding that almost 80 per cent have never had any cause to work with their organisation’s credit function. It is not just the IT or sales function that the marketing department has problems co-operating with it would seem, and the level of interaction may increasingly proving to be a significant barrier to growth.
The right customers
Slightly more reassuringly, at least 55 per cent of respondents are aware of their business acceptance criteria. However, this has declined by over 20 per cent since B2B Marketing and Experian conducted a similar survey in summer 2005, suggesting that awareness of the importance of credit data is declining. Another figure that had changed significantly for the worst in the last 12 months is the proportion of respondents who believed bad debt could be avoided by better data-planning. This had declined from 35 per cent to 46 per cent, which may be seen as a surprisingly low figure.
Yet paradoxically, just under 70 per cent said they would be interested in buying prospect data with high-risk businesses removed. It seems that there may be confusion surrounding terminology, but despite this there is ongoing interest in these services.
Perhaps it is the role of service providers themselves to better promote these offerings, and their effectiveness in B2B marketing, in order to bridge the information gap.
Other findings
Methods of credit rating data. For the minority of companies that currently do consider the credit-worthiness of their prospects before mailing, the majority (two thirds) do so through their data supplier, with most of the remainder carrying out this task internally.
Cost of direct marketing. Print and production was found to be most significant cost, followed by use of telemarketing services, postage costs and licensing of data.
Wastage. Just under half of respondents nominated ‘inaccurate data’ as the primary source of wastage in their direct marketing activity. Poor quality leads and goneaways were ranked joint second.
Data pruning
When you consider the high costs of telemarketing and sales visits, it is surprising that many B2B marketers still fail to prescreen marketing lists: wasting resources by contacting businesses that will be rejected for credit due to high risk. Targeting such businesses will often produce a poor sales conversion rate as they often have cashflow problems. The issue of bad debt is a major one: so isn’t it about time B2B marketers shouldered their responsibilities? There is a clear need for a closer tie-up between marketing and credit departments. This is a bigger challenge than it sounds when almost one quarter of B2B marketers don’t feel at all accountable for the conversion of a sale and 78 per cent give no consideration to assessing a prospect’s ability to pay for the products to which they are being marketed. The 10 per cent of those surveyed who feel in no way accountable for the future stability of their company is also worrying. When you consider the potential problems caused by failing to prescreen for credit-worthiness or the ability to honour payment, this makes shocking reading for any company owner. The reasons behind this prescreening apathy are varied. While the 12 per cent who claim no knowledge of how to interpret credit data can be educated, the more difficult obstacle is changing the attitudes of the 52 per cent of B2B marketers who don’t see this as a fundamental issue. Despite this, there is good news. Sixty nine per cent of B2B marketers would want prospect data prescreened with high-risk businesses removed: if only they knew it was available and easy to achieve. Prescreening should be a fundamental part of any B2B marketing campaign, especially when you consider that business failures in the UK continue to rise with 80 companies failing in the UK every working day (according to Experian’s corporate business failure report for quarter 2, 2006). Communication with the credit and sales teams needs to be improved, and B2B marketers should all be aware of and, more importantly, observe their company’s business acceptance criteria (awareness of this in particular has slumped by 20 per cent in the past year). There is plenty of room for improvement, especially for the 79 per cent who have never worked with their credit team on marketing. The cost of prescreening prospect data is very quickly mitigated by the potential cost of recruiting a customer who later cannot pay. Of those who have woken up to the issue since last year, over two thirds have realised how easy data screening can be and we hope that an increasing number come on board.