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Experts Size Up Contact Database Growth Strategies to Optimize Response Rates

This is Part 1 of a two part series looking at best practices for managing a contact database. Look for Part 2 in next week’s newsletter.

In order to optimize marketing messaging and generate the leads needed to feed their sales pipelines, BtoB marketers continue to wrestle with the need to “right-size” their contact databases. Industry experts suggest each organization should have a defined set of lead gen goals and demographics in place.

While marketers must tailor goals to their pipeline metrics, email service provider ExactTarget recently offered hard numbers to go on for list growth measurement. “Average list growth is about 35-40% per year after attrition (about 25% per year),” says Morgan Stewart, Director of Research & Strategy at ExactTarget. “However, this takes programs of all sizes and intentions into account. It is unrealistic for programs with very large lists to expect this type of list growth.”

On the flipside of expanding the contact database, marketers also have to manage the cleanliness of their data. Lead generation data goes bad at a rate of 2.1% a month, according to Marketing Sherpa research. “That means almost 25% of the database gets dirty each year,” says Amy Hawthorne, Director of Marketing, ReachForce. “Understanding what is there and what is missing can take teams months and sometimes years to get their arms around. Garbage in, garbage out.  Marketers with older and dirtier databases have to work to clean up their database to increase the effectiveness of their campaigns.”

ExactTarget’s Stewart offers three critical points in the size of an email house list:

  1. Critical mass: the point at which the program starts to pay for itself on a monthly basis. This is achieved when the revenue or number of leads associated with the program exceeds the cost of running the program—taking hard costs (i.e. cost to send email, cost of names acquired, COGS, etc), and soft costs (i.e. content development, programming, oversight) into account.
  2. Capacity: this is the point at which the ability of the company to follow up on leads generated from the program is hits capacity. If you are generating more leads than you can follow-up with, then it is time to slow down your list growth initiatives.
  3. Saturation: generally when lists get very large, this is the point at which it becomes unprofitable to add names faster than natural attrition occurs. Imagine a list with 5MM subscribers. If natural attrition is 1% per month, then that program must add 50,000 people per month just to maintain list size. This point is different for everyone, but it is also an eventual reality every program will face at some point. Stewart says marketers at this stage should focus efforts on optimizing the program through segmentation and personalization.

“Many marketers ‘reverse engineer’ an anticipated response rate to a campaign to figure out the size of list need,” says Chris Golec, CEO, Demandbase. “For example, if I want 100 responses and assume a 1% response rate, then I need at least 10,000 people to mail. Best practice, however, is to identify the most relevant and most accurate data and then mail to that segment.  You can still hit your 100 responses, only communicate with 2,000-3,000 targets, preserve your brand, and save a lot of time and money in the process.”

Although marketing executives need to carefully assess the best tactical measurements for their specific organization, some quantifiers are generally applicable. “List success should always be looked at as a combination of data quality, historical performance, and current responsiveness,” says Brian Hession, Founder & President, Oceanos. “In today’s economy, sales leads and orders are not always the measure of a quality database. With a solid taxonomy, the email channel can be used not only for pure demand creation, but also to build brand equity—setting you up for success in the future.”