0 ExactTarget Survey: Lack of Skills Slows Growth of Digital Marketing

Summary: a new survey from ExactTarget shows that digital marketing is growing faster than database marketing or mass media, and that agencies have a harder time adding digital capabilities than their clients. It also suggests that marketers are moving into digital channels even when they can’t measure their value very well. No surprises in any of this, but good to see confirmation of previous research.

I really and truly was going to drop the topic of moving from database to digital marketing, but then I saw a survey last week from email vendor ExactTarget which reinforced several of my key points. (You can buy the complete survey from Econsultancy. A detailed slide show is available here for free, at least as I write this.) Key findings include:

- digital marketing budgets are growing faster than marketing in general (66% plan to increase their digital budget in 2010, vs 46% planning to increase their total marketing budget). Database marketing channels (email, direct mail and telephone) are growing at lower rates (54%, 27% and 26% plan to increase, respectively), while mass media (television, newspapers/magazines and radio) are lagging the most (20%, 17% and 15%).

Note that these are just the percentage of companies planning a budget increase; the actual average increase in digital budget was 17%. The average proportion of budget spent on digital was 24%, which is higher than other figures I’ve seen, suggesting the respondents were more digitally oriented than the industry as a whole.

- lack of skills is the key impediment to digital growth: lack of staff, company culture and lack of digital understanding were three of top four problems (after lack of budget, which was number 1). Inability to measure ROI and lack of business case ranked only ahead of “other”.

What is preventing your company from investing more money in digital marketing?

40% restricted budget for all types of marketing
35% lack of staff to make most of any digital investment
32% company culture
25% lack of understanding about digital
20% reliance on traditional marketing
16% inability to measure return on investment
9% lack of business case / case studies around digital
7% other

- agencies are more constrained than marketers by lack of skills. “Lack of understanding about digital” was cited by 45% of agency respondents, compared with about 13% of client-side marketers.* My interpretation is that clients can always go and hire a digital agency if they need to add the expertise, while the agencies themselves find it much harder to expand their offerings.


In fact, although 35% of both groups apparently cited “lack of staff” as a problem, they may mean different things. Agencies are probably referring to lack of staff with digital marketing skills. Client-side marketers probably mean lack of staff to oversee digital programs executed by an outside agency.

- The fastest-growing digital channels (social media and mobile) are the least measurable. In fact, there’s an almost inverted relationship between growth rates and measurability. This probably reflects that fact the fastest-growing channels are the newest, with least-established measurement methods, rather than a perverse hostility to measurability.


In this context, it’s also worth noting that agencies felt much more hobbled by lack of ROI and business cases than client-side marketers, and that a very-hard-to-believe 65% said their company measures marketing effectiveness based on ROI. These further reinforce the view that marketing measurement isn’t a top priority when moving into new digital channels.


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* The published materials show total and agency figures. I've estimated values for client-side marketers based on the numbers of respondents reported for the two groups: 648 client-side, 385 agency/supplier-side. This won’t be precisely correct, since everybody didn’t answer every question. Hence that -3% response to "lack of business case" for client-side.

0 Clarifying the Differences Between Database and Digital Marketing

Summary: Database and digital marketing are both data-driven. But they differ in plenty of other ways that make it hard for specialists in one to adapt smoothly to the other. Here's a detailed look at the differences.

Yesterday’s long (or merely long-winded?) post described the different mindsets of database and digital marketers but it was pretty short on differences between the two marketing methods themselves. Today I’ll try to be more concrete.

DB or Not DB

Database marketing is built around a marketing database that contains addressable, identifiable individuals. By “addressable”, I mean there is information such as a mailing address or phone number that lets the marketer contact the individual. By “identifiable”, I mean information is available to link data about the same individual from multiple sources. Addresses are the most common identifiable information, although there are also non-address identifiers such as Social Security Number. Addresses and identifiers are both required: a database without addresses couldn’t be used for most marketing, and a set of records that can’t be linked to other sources is just a list.

The consolidated database is the heart of the database marketing concept. Data from multiple sources lets database marketers make more effective predictions about the best treatments for each individual, and treatments across multiple channels are more effective when they are coordinated centrally. The marketing database contains attributes (age, income, location, etc.) and behaviors (promotion responses, purchases, customer service interactions, etc.). It can certainly include digital activities such as Web page views and social media comments, so long as these can be linked back to a known individual.

Digital marketing does not use a database of addressable, identifiable individuals. It may gather information from one source and even track it over time for the same entity. (Example: Web site behavior tied to a browser cookie.) But unless the entity can be linked to other sources through an identifier, the digital marketer can only make treatment decisions based on information captured in the source channel itself. This is far from useless – behavioral and contextual targeting can be quite powerful. But from a database marketing perspective, the data is frustratingly incomplete.

Addressable Media

Database marketing only works in addressable media: that is, where a message can sent to a specific individual. Addressable media include direct mail, email, outbound telemarketing, and customer service interactions. They can also include digital channels such as Web pages, mobile messages, kiosks and ATM machines, but ONLY where the recipient is known before a message is sent. Thus, a Web page that has identified me because I’ve registered and logged in (manually or via a cookie) is addressable; a Web page that I visit anonymously, even if it recognizes me as a previous visitor from a cookie, is not addressable.

Digital marketing includes many non-addressable media, including paid and organic search, Web banner advertising, social media, and anonymous forms of Web sites, kiosks, mobile (e.g., location-based messages), and the rest. These generate plenty of useful data, such as click through rates, search rankings, sentiment analysis, and page views. But this data and related analysis are quite different from what database marketers are used to.

Prediction vs Reaction

Database marketers have the rich information needed to accurately predict which offers are most appropriate for each customer. Combined with their access to customer addresses, this allows them to initiate effective outbound marketing campaigns and to define static rules for interactive dialogs. Note that in most addressable media (mail, email, outbound telemarketing), the offer must be selected before the customer is actually contacted, and making multiple offers often reduces response. So database marketers have strong reasons to work on making highly accurate predictions.

By definition, digital marketers cannot target outbound campaigns at individuals. They do have opportunities to manage interactions, but often know only what has happened during the current interaction itself. This greatly reduces their ability to make predictions. Instead, they present multiple options and react as people respond. Happily, most digital media are inherently interactive, so this is a practical approach. Since rule-based decision flows are less viable as the number of options increases, digital marketers lean more heavily on self-adjusting automated decision engines.

Message Control

Database marketers directly control the messages they send to each customer. This is yet another factor that helps to justify the costs of building a comprehensive database, running sophisticated predictive models and precisely customizing each message.

Digital marketers have vastly less control over who sees what. Much of their messaging is blind to the audience who will see it, or can only be targeted on limited information about behavior or context. Indeed, some of the most effective and intriguing digital marketing techniques, such as viral campaigns and shareable widgets, rely on distribution that's totally beyond the marketer's control. Social media provide even less control, since the messages themselves are composed outside the company. The net result of all this is to reduce the degree of individual targeting that digital marketers can execute.

Response Measurement

Database marketers can typically capture response to a promotion directly, with a coupon, telephone call or Web click. Even when they can’t, their database still ultimately tells them who bought what, so they can correlate the promotions they’ve addressed to an individual with that individual’s subsequent behavior. The ability to do precise response measurement is yet another factor that lets database marketers fine-tune their programs.

Digital marketers can also measure who clicks on a Web ad, and sometimes can track that person further into the buying cycle. But they don’t know what other promotions or social media that person saw, what else they purchased, who else saw the same promotion but didn’t respond, or who responded through some other channel. All these uncertainties leave digital marketers reliant on indirect measures, such as consumer panels and surveys, which are more typical of conventional mass media. These are approaches that most database marketers would find almost laughably imprecise.

What’s It All Mean?

Database marketers and digital marketers both have plenty of data and the good ones are highly analytical. Both can apply advanced statistical techniques and rigorous testing methods. Both can work to integrate their data and their customer strategies across channels. To some extent, they even work with the same media: in particular, a Web site can support both digital (anonymous) and database-driven (addressable) marketing programs.

Yet despite these similarities and interactions, the two groups work in largely different media, use different techniques and have different priorities. Database marketing is inherently more controlled and precise; digital marketing is more fluid. Good marketers will learn to apply both. But individuals who have specialized in any one area will find it hard to adjust to the other. At a minimum, they’ll need to be conscious that the old rules don’t apply.

Adjustment is even harder for organizations, who will have invested in specialized systems, processes and people to support one technique or the other. This, in my opinion, is why the leading database marketing vendors have not been the leading digital marketing vendors. Which, if you’ll recall, was where I started this discussion.

One final point: there's no reason the same organization or individual can't master both database and digital marketing. That is, although there are major differences between the two, there is no fundamental conflict. My point in these articles is simply that it will take conscious effort to address the differences and fill the gaps that they imply.