A company’s database is one of its most valuable assets, but unless it is well defined it can cause as many problems as it solves. Any ill-targeted marketing effort costs time and money, so the arrival of prescreen data on the B2B marketing scene which allows companies to run their databases against credit information is worth its weight in gold.
First on the scene was Experian with a solution called Commercial Data for Prospecting, launched at the end of 2005. Although the prospecting refers to prospective sales, the allusion to gold panning is apt.
According to Nick Frazer, director of B2B marketing at Experian, it takes the bottom 15 per cent of bad debts out of a file, which removes those at risk of going into liquidation or receivership. This gives a massive advantage for ROI. The cost of trying to get those prospects in as customers could be £250 per sales call and a company could see the prospect four times before it is converted into a sale, he says.
So for every bad prospect the credit manager turns away, the cost could be as much as £1000. And then there is the risk of bad debt. A company operating on a five per cent margin would need to generate £280,000 worth of sales to compensate for a £14,000 debt.
Even late payers can cause havoc to the bottom line in a small organisation. Frazer continues, A small business with a £5 million turnover loses £7500 in interest when payments start to come in 60 or 90 days late because it pulls up the average ‘day’s sales outstanding’, and that costs the company.
Getting B2B turned on
Despite these compelling statistics, B2B organisations are still not tuned into the idea of cleaning their lists against financial data and Experian found this was compounded by the name it gave its product.
Frazer comments, We expected it to take off faster. But it went slowly in the first few months because we were aiming it wrongly. Now we refer to it as ‘prescreen’ data, which makes it clear what the service does; and then we realised we needed to engage a clients’ credit manager as well as their marketing manager. Now, when we are talking to the marketing manager about prescreening, we also talk to the credit manager and advise the two to talk to each other.
Market Location’s Risk Locator was launched six months later, which provides a similar service, allowing companies to target potential clients on the basis of their financial record. According to Melanie Smith, marketing manager at Market Location, simplicity is the byword. We have flagged businesses according to their risk rating minimal, low, average and high which allows organisations to move high-risk companies out of their marketing activities, she says.
The service is backed by 10 years of financial data and the model we have created is based on business type, size and location, says Smith. We take into account adverse indicators such as payment trends. For example, when a company moves from paying bills after 60 days to 90 days, it suggests they are in financial difficulties.
Bad locations
Geographical location is also a surprisingly strong indicator. According to Smith, the companies most likely to go out of business are in Hockley (Birmingham), Raynham (Essex) and Wembley (Middlesex), and the worst affected sectors are demolition contractors, Indian restaurants, window-frame manufacturers and pubs. This is partly because companies often deal with local firms and if an organisation is not doing well in one area, that affects the businesses around it, she says. We use data to predict clients’ call cycles and we research these areas more often because there are more likely to be changes. It allows us to update our database regularly. This is particularly useful for companies targeting a certain area or postcode.
The database used to create Risk Locator comes from the Data Resource Corporation (DRC), which bought a 40 per cent stake in Market Location in October last year. DRC was big in credit reports on finance leasing markets and its database (1.4 million businesses) was built up over 10 years through analysing that risk. It was then put to the purpose of weeding out high-risk sales prospects in the form of Risk Locator.
The art of communication
Melanie Smith also emphasises the need for communication between finance and marketing. Running this kind of data-matching helps the relationship between marketing and accounts, she says. Where the accounts department spends a lot of time chasing debt and cash and the company is doing DM, it is advantageous to carry out pre-screening. We tend to focus on marketing but to target accounts directly to put on internal pressure is a good idea.
It is an education issue, says Smith. People are more aware in B2C but until now, the service has never been packaged in this way for B2B. As businesses get more attuned to checking the financial status of prospects, the services will become more detailed, with credit banding, and using it to prescreen will become the norm. I think development will be in modelling techniques.
Both Experian’s Prescreen Data and Market Location’s Risk Locator require data to be sent outside a business’s offices. DQ Global takes its solution Authentic8 to clients, so they can clean their own data.
Martin Doyle, MD of DQ Global, says, We can provide a host of files suppression, enhancing, Royal Mail postal addresses and clients use our technology to compare several sources of data. We deliver bureau capability but into the hands of the user, so they are in control.
Recognising that not all clients may have the capability and resources to use these technologies, DQ Global can also send in technicians to accompany the technology. Companies recognise the quality of their data, says Doyle. It is a precious asset and letting it outside the organisation’s four walls is a risk, especially these days, when data is so easily distributed on the Internet. Our service allows them to match data on-site. We do not yet have a credit data service but are in talks about this and these should come to fruition in the first quarter of next year, he says. Meanwhile, if a company has its own credit data, it can use the data within our advanced matching technology.
Fact-finding
If B2B marketers have problems sorting the wheat from the chaff before undertaking a marketing campaign, IT companies which are selling products through channels have an even harder task because the relevant financial information is so difficult to access. Specialist channel marketing agency Planet has formed a partnership with InfoNow to conquer this problem.
We did not have usable accurate data, says Katherine Laveau, MD of Planet. Because they do not sell direct, vendors have to rely on distributors for sales figures, so they did not have good sales information on channel partners. The best way to get that is to develop loyalty schemes, she says. Through some of the larger programmes, we had started to develop the best quality databases most vendors had seen. Information was captured direct from individuals within resellers and this information validated point of sale data such as sales commissions and general revenue achievement.
Traditionally, POS data has been hard to obtain because it was held in a number of formats.
InfoNow is an American company that has traditionally provided in-depth POS and channel inventory data, allowing vendors to have a single view of partners and customers.
Historically, InfoNow’s offering was for finance and operations within vendor systems, Laveau says. We saw they could tailor their data to allow us to do smarter marketing, so that we could promote a channel marketing database constructed on the purchase patterns and the value of activity vendors are channelling.
Financial data matching is useful to anyone offering a credit line rather than dealing on credit cards or proforma invoices. And it is not just about managing debt risk, the end result is a higher conversion rate: using financial data to clean lists has a direct impact on the bottom line. In the B2B sector, there is little evidence of marketers using non-marketing data (other than financial) to improve how it targets its marketing. However, in B2C this does happen and if other precedents are typical, then B2B companies may also move from financial to other data to define their campaigns. Meanwhile, they are well served by those using credit data to vet prospect lists.
