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Gavin Hilton, planning director at WWAV Rapp Collins, believes that “consumers will soon become the vendors of their own data. They will become ‘micro-businesses’ in their own right and what they sell will be information about themselves and their own attention.”

The idea that technology might allow consumers to become ‘producers’ is not a new one. Writers such as Alvin Toffler and Marshall McLuhan were suggesting that developments in electronic devices would allow the consumer to become a producer as far back as 1970. Toffler, in his 1980 book, The Third Wave, coined the term ‘prosumer’ to describe such producer-consumers.

Consumers as producers of UGC
Perhaps the most obvious example of consumers becoming producers is the rise of User Generated Content. Posting videos to You Tube, podcasting and blogging are all examples of consumers becoming makers and distributors of content.
Companies have also begun to understand that in a world where consumers are constantly bombarded with marketing messages, they will have to ‘buy’ potential customers’ attention by providing something in return – hence the rise of so-called ‘free-vertising.’
This involves giving consumers something they value, such as an album track, an amusing video clip, a game or even a free newspaper such as Metro, but instead of charging money, they ‘pay’ by listening to advertising, filling in a survey or by providing attention or information in some other form.

Data power shifts
Peter Mouncey, Hon F IDM, points out another potential problem arising from the growing understanding by individuals of the value of their own data and by their attempts to control access to it more.
As Mouncey – who is currently developing the programme for next year’s IDM Data Summit, at which this will be a key topic -- explains, companies have been used to dictating the sort of data they want to collect and its format. In the future, though, “the data we demand and the data that people feel is important to them may not be the same.”
He also questions whether Customer Relationship Management (CRM) has any future, asking “how can a company impose and manage a relationship with its customers if they are losing control of data in this way?”

Mouncey is not alone in challenging the future role of CRM in direct marketing. An opinion piece in the next issue of the IDM’s Journal of Direct Data and Digital Marketing Practice (JDDDMP) by Alan Mitchell, Iain Henderson and Doc Searls argues that traditional direct marketing cannot cope with a world where individuals have the power to search for, identify and negotiate the purchase of products and services that meet their needs.

The rise of Vendor Relationship Management?
Instead of CRM, the article suggests, direct marketers need to understand VRM -- Vendor Relationship Management. Consumers can now build and use their own personal data stores, choose who to share information with, what they get in return and what those partners are allowed to do with it, communicate with suppliers and the market and generally manage their relationships with existing and potential suppliers.
CRM is one-way and continues to treat the consumer as a ‘target’: VRM is two-way, and is based on “closer, richer win-win relationships with customers,” the authors conclude.

Alan Mitchell says: “The direct marketing profession is only just beginning to realise that personal data is the oil of the information age. It’s a hugely valuable resource that people are going to be fighting over.”
Mitchell argues, however, that if consumers do take control of their own data in this way, then companies that can adapt to this change could do very well out of it. “The irony is, once you accept it, the opportunities are huge. Data that individuals voluntarily disclose about their plans and intentions because they feel there is a real benefit to them is potentially so much more valuable. One the individual is an equal partner in the data creation and sharing process, then we enter a whole new landscape which is so much richer.”

Ofcom consumer research
In April 2008, Ofcom published some research into UK consumers’ use of social networking that underscores this point.

The survey of 2,000 14 to 21 year olds found that:
• 60 per cent of young people put their date of birth on social networking sites;
• A quarter post their job titles;
• Nearly one in 10 give their home address;
• One in a hundred said they put details of their bank account online.
When it comes to basic information that could be used to guess at people’s passwords; 23 per cent post their siblings’ names; 25 per cent of girls put their pet’s names online; 2 per cent put their mother’s maiden name on the web.

But, as David Smith, deputy commissioner at the ICO, said when the youth study was published, “A third of young people have never read privacy policies on social networking sites and don’t understand how they can manage their personal information. But when asked how they feel about websites potentially using their details to target advertising at them or to pass on to other websites or brands, a huge 95 per cent are concerned about this, with 54 per cent caring ‘a lot’ about how their personal information is used.”

Word of mouse
WWAV’s Gavin Hilton points out that many marketers see social media as a forum for disgruntled customers to post negative comments; and he agrees that “there is now a far greater willingness by consumers to publish negative opinions and to vote against companies – because they have let them down or have business practices they dislike -- with their wallets and with their mouses.”
But at the same time, he thinks social media “is good for direct marketers. There is a big cohort of people who are prepared to share their opinions online. That opens up opportunities for dialogue, co-creation and innovation.”
The challenge for direct marketers, then, is to find ways to harness consumers’ willingness to trade information about themselves and their opinions on products and corporate activities and use it to build value for both companies and the consumers themselves.

The data challenge
Peter Mouncey argues that what is needed is the creation of “an equal partnership, not an unequal one, between the consumer, data owners and their agents. That’s a major challenge for many organisations to embrace, because they will be losing some control over data.”
It may be a major challenge: but data experts agree that it is not one that direct marketers can avoid. They have to come to terms with fundamental changes in the way they interact with customers and potential customers, and that means they have to change their attitudes to data and the way they manage it.

For far too long, marketing has been positioned as a qualitative, right-brain discipline driven largely by creative and entrenched in emotion. This idea was raised during a conversation I had recently with an executive from a major advertising firm. The executive, by his own description, was a "big-idea" man, always searching for the next big thing for an ad campaign that would propel his clients' marketing results to new levels. Like many ad professionals, he largely dismissed database marketing because it wasn't a big-idea business. Many corporate executives also buy into this belief.

They're still committed to the idea that marketing is an emotional practice and not a rational, fact-based one. Marketing in the future will be rooted firmly in both. Fortunately for database marketers, a revolution is occurring that will make the big-idea people take notice. Though several factors are igniting this revolution, four stand out.

One is accountability: the demand from C-level executives to make marketing more accountable for its effect on an organization's bottom line. The desire for more accountability in marketing will grow, and all marketers - including database marketers - will be held accountable for their efforts. Database marketing provides the metrics that demonstrate the value of every campaign.

The second factor is customer management strategy. Companies across several industries, including consumer packaged goods and financial services, are shifting from product-centric approaches to customer-centric strategies that manage the entire customer relationship. Database marketing allows greater audience segmentation and measurement of customer value, which are two drivers of this trend.

The next factor is media fragmentation. As marketing communications become increasingly targetable, addressable and measurable, companies are relying less on mass media channels and redirecting marketing dollars to more measurable, targeted forms of media. This increases the complexity of media measurement and optimization. By enabling both measurable and targeted communications, database marketing will play an increasingly critical role within marketing programs.

The fourth factor is technology. Advancements in the way we can use data - that is, how to leverage knowledge to achieve results - are making the answer easier to know. And as that answer becomes easier to know, more marketers will demand to know it. Many marketers will be surprised by the answer because they will learn that they've been wasting time on the wrong approach. Moreover, they will find that they lack an overall framework and understanding by which they can benchmark their approach and learn from their experiences.

Though upcoming trends are important, the core issue as it relates to information-based quantitative marketing continues to be a matter of what's "knowable" versus what's "doable." That's because many marketers tend to work on what they know. Generally, the things they know today are not the things that will create the biggest impact in the marketplace.

Database Marketing, Not Management Marketers also think that they're doing "good" database marketing. Though there's a lot of talk about good database marketing and the use of data in the enterprise, the proper use of information remains a highly underutilized asset. Many marketers consider themselves decent database marketers, but they don't judge their performance against the right metrics.

The challenge is for the fact-driven, rational marketer to become more relevant to the C-level suite that signed on to the big-idea belief. Database marketers are noticeably absent at the strategic table; instead, they have a seat at the operations table. And if you look inside many database marketing departments, you'll find that most organizations have little or no expertise in analytics, marketing strategy, business intelligence and little true authority.

Mostly, database marketing is being misinterpreted as database management. Some marketers are beginning to understand the value of quantitative, information-based marketing. But in the holistic view of things, despite the advances in technology and the growth of quantitative competencies over the past several years, the potential of database marketing remains largely untapped.

As with the ad executive, there is always the tendency to jump to the next "big idea" that will get noticed. The current focus in most database marketing departments is on technology and improving operational efficiencies. The problem is that database marketing has never been "the next big thing," which makes it a less intriguing option.

Strategy Over Vision Firms that continue to believe the illusion that marketing is a wholly emotional undertaking must begin to conceptualize new quantitative, data-driven approaches. Too often, the industry is rooted in buzzwords that connote "vision" - customer-centricity, accountability, one-to-one marketing.

Marketers must stop talking about their vision and start talking about strategy. Ask yourself whether you really have a strategy to reach that next step. Do you have a framework in which to understand how you're going to implement against that strategy? Do you have metrics that are being used by the C-level suite? Is your perspective broad enough to be relevant at the strategic table?

It's going to take time before marketing becomes more balanced and database marketing takes a seat at the executive table. The revolution won't happen in any given year, but rather will evolve gradually. This is a decade-long journey. The next several years will bring great opportunities for both database marketing agencies and organizations that embrace quantitative, data-driven approaches. The basic elements to revolutionize marketing are already in place, and there exists a chance for first-mover advantage for those that possess the depth and breadth of competency on which to act.

The days when marketers used customer databases solely as resources to keep consumers’ mailboxes filled with fliers and catalogs continue to fade, according to a new Forrester Research study of 124 companies. But while marketers are getting increasingly sophisticated about using their databases to influence overall company strategies, they could stand to better target their e-mail marketing campaigns.

“The customer database is playing an increasingly strategic role in the organization,” says Elena Anderson, a senior analyst at Forrester and coauthor of the study. “Not only is it being used to blast lots of paper mail and telemarketing phone calls, but it is also being used to find-tune internal marketing” such as search engine marketing.

Anderson says the study confirms that marketers are treating their business more as a science than an art. “Marketing is starting to migrate from what traditionally has been very right-brained creative business plans to more of a left-brained quantitative analytical discipline,” she notes. “With that trend being a key driver, we see firms turning into looking into customer databases to drive insight and strategy.”

But here’s what Forrester considers the bad news: Most companies still have a lot of heavy lifting to do in sifting out their e-mail databases. They are still sending out too much stuff to too many people who are not realistic prospective customers. And Forrester found no correlation between e-mail volume and investment in research on its effectiveness and how well it ties into the rest of a company’s marketing strategy.

“All the e-mails landing in inboxes are driving consumers crazy,” Anderson says. “We need to do a better job driving targeted strategies to monitor customer engagement.”

Among the other findings:
• Direct mail volume is likely to grow 15%-25% in 2005, and companies have set hefty budget increases for e-mail and telemarketing. The average company will send out 112 million pieces this year.
• Databases drove an average of 4.6 marketing activities. Seventy-six percent of respondents said databases influenced their e-mail campaigns, and a small but growing number reported that they helped shape strategies on mass media advertising, search engines, and Web banner ads.
• Marketers are ultrabullish on the Internet and increasingly leery of traditional outlets. Asked to predict which will be the most effective marketing tools five years from now, 81% said the Internet, 77% search engines, and 69% e-mails. But only 17% mentioned print, and 21% apiece said TV and radio.
• More than 40% of respondents said their databases influence corporate strategy. Those in the travel and leisure industries (60%) were most likely to use their databases that way. Those who relied heavily on databases were twice as likely to use what they considered “aggressive” marketing strategy and tactics.
• More than three-quarters of the respondents are using the same databases to power direct mail and two-thirds of them are storing e-mail contacts in the same database.

Of the firms Forrester polled, more than half had 10 million names in their databases, and in aggregate they sent out 10.6 million pieces of direct mail, which represents 9% of the 116 billion pieces sent through the U.S. Postal Service.

Retail and financial services companies each accounted for 32% of the respondents, with the manufacturing and travel/leisure sectors accounting for 11% each, and the remaining 14% scattered in other industries.

Regardless of the industry, you can be certain that someone is out there scheming to take away your customers. Those without a strong loyalty strategy are left vulnerable to competitive tactics for gaining share of their customer's wallets. Yet many companies put off developing this important component.

A common excuse is, “We don't have the budget for all the infrastructure and start-up costs.” While this may be true, it's unfortunately based on the misguided belief that loyalty strategy equals loyalty cards and the legion of associated costs. The reality is that a structured rewards program is only one of many tactics that can be used to build customer loyalty.

Genuine loyalty creates an emotional bond that makes your company the first choice in the hearts and minds of your customers. Developing this tie requires a comprehensive understanding of customers — and what drives their behavior and forges their perceptions. The starting point is always customers and their data.

Valuable customer information can be found in several places throughout your organization, including existing customer databases, Web site interactions, product registrations, ATMs and kiosks, rebates, surveys and third-party demographic data.

An in-depth analysis of your current customers and their behavior will allow you to identify and prioritize your business needs; determine the customer behavior required to meet those needs; profile high-value and high-growth potential customers; and create behavioral motivators that will appeal to those customers.

There is no single magical tactic that will drive customer loyalty. It's typically the result of a combination of initiatives that may or may not require a structured loyalty card program. Examples of some other tactics follow.

Personal Service
This is a loyalty-building approach that's utilized across multiple industries from retail to financial services to sports franchises. It takes the form of personal shoppers, relationship managers and personal account representatives to provide individual attention to high-value and high-potential-value customers.

Benefits: Builds loyalty of high-value customers; provides competitive differentiation.
Requirements: Strong employee loyalty and buy-in. Comprehensive training is a must.
Caution: Be careful to ensure that loyalty is being built with your company, not with your customer's primary point of contact.

Needs-based Marketing
This tactic centers on providing relevant communications to your customers. It is based on the general consensus that if you speak with people about topics relevant to them, they will respond more favorably.

It's all about using customer information to place the right offer in the right hands at the right time. For instance, understanding where your customers are in their life stage can provide direction on needs, perhaps even before they realize the need. Likewise, incorporating purchase history and other indicators of preference will let you focus on promoting products and services to evoke the best response.

Benefits: Greater response to targeted offers; competitive differentiation.
Requirements: Timely access to customer data; overall understanding of key customer metrics.
Caution: Be careful not to broaden the target audience to meet specific mail or e-mail quantities. Mailing more doesn't necessarily equate to generating more revenue.

Cause-related Programs
Partnering with a charity or giving back to the communities where you do business is typically well received by customers. In fact, research has suggested that a large percentage of consumers would switch brands to support a social cause. An example of a cause-related program would be the contribution of a percentage of sales to local schools.

Benefit: Reinforces a positive brand image.
Requirements: Internal altruistic attitude; establish monitors to ensure follow-through on commitments.
Caution: Negative brand image could result if the program is perceived as solely self-serving.

Co-Marketing Partnerships
Forging alliances with non-competing businesses allow both firms the flexibility to make exclusive promotional offers and provide access to information, products or services that competitors cannot. Co-marketing partnerships also present an opportunity to acquire new customers through cross-promotional activities within your partner's customer database.

Benefits: Strengthens customer relationships; presents co-funding opportunities; competitive differentiation.
Requirement: Successful partnerships meet the needs of both companies.
Caution: Limit partnerships to a manageable quantity. Too many can dilute the overall impact on customers' perceptions and behavior.

The reality is that every single customer touch point is an opportunity to build loyalty. Recognizing this and using it to strengthen the relationship with your customers will go a long way toward building loyalty — even if you don't offer a rewards program.

Vicki James is director of strategic consulting services at NuEdge Systems, Brookfield, WI.