This trend is expected to continue to rise steeply over the next two years with an overall majority (52%) of businesses using a third party to handle the bulk of their direct marketing campaigns by 2008. The overwhelming conclusion of our research is that companies are concerned about two key factors:- obtaining the necessary campaign management skills and experience in-house; and technology obsolescence.
Another report from Siemens Financial Services from last year shows that ‘technology turnover’ in the UK and Germany is substantially higher than in France or the US, and that technology replacement periods are contracting even further. The combination of technology access and appropriate skills are seen as critical to ensuring technology investments deliver an appropriate level of return through effective, well managed campaigns.
Banks are biggest users of outsourced Campaign Management – with a penetration level of 47%. Long recognised as heavy investors in CRM solutions, banks therefore stand to gain most benefit from outsourcing at least the Campaign Management back-office. Banks have very high customer volumes. Campaigns vary between mass campaigns (e.g. conversions to e-banking, post-merger/
The financial services sector generally has reduced its mailing campaign volumes in the last two years, preferring to focus more on their targeted activities. Research from Group 1 Software tells us that CRM is increasing in importance for banks as their levels of annual customer defection, below the 10% mark just a few years ago, has now risen to some 17.5%. Therefore banks are choosing to concentrate their efforts on attracting expert staff whom they want to concentrate on strategy development, while the outsource provider handles hosting, campaign management, processing and data management, and possibly analysis/modelling support.
Ian Hubbard of CDMS comments, “The marketing department has historically been at the bottom of the pile when it comes to large-scale technology investment, and with the technological advances that are occurring in the marketing space, many companies need to access cutting-edge technology through an outsourced provider.
Others have struggled to keep campaign management in-house because the IT department was unable to provide the technical support for advanced campaign management systems. Despite the step-change in the power and accessibility of database technology, clients that have experimented with their own in-house systems, have found that technology is no substitute for the experience that database marketing companies have developed over the years.”