COMBINATION TRAINING FOR MARKETING AND
INFORMATION TECHNOLOGY PRACTITIONERS
JJ van der Walt Abstract
Key words:
During an investigation into the application of Database marketing in the financial services sector of South Africa it is found that institutions put either Information technology experts or Marketing experts in control of database marketing. Experts from one area seldom express insight into the needs and specific requirements of the other. To employ an expert from both areas leads to rivalry between them about their different views of database marketing. It is also an expensive option. Training of a single person in both areas is a more acceptable option.
Marketing training; Information Technology training, Combination training
Marketing and Information Technology are two distinct fields of study with normally no link between the two specialised areas in the learning content. During a research project on Database Marketing in the South African Financial Services Industry, done in 2002, clear indication was found for the need for a training programme accommodating both these areas of expertise.
The research project was done to determine to what extent database marketing is practiced (if practiced at all) in the Financial Services Industry of South Africa. The study focused on the application methods used by the financial institutions and the problems that the institutions experienced during database marketing campaigns.
To clearly understand the problem at hand, a discussion of the theory behind the application of database marketing is necessary.
Database Marketing is essentially a unique way in which businesses build long-term business relationships with customers/clients (Roberts, 1997:27). Detailed data of individuals are captured in a database, processed into information and based on this information, businesses customise their products to individual needs and tastes (Chaffey, Mayer, Johnston and Ellis-Chadwick, 2003:218). The customisation can be done on request of the customers/clients of the financial institution, but in most instances the institution develop customised products or services and approach the client with an offering that should (in theory at least) satisfy the needs of that specific client.
According to Van der Walt, Strydom, Marx en Jooste (1996:362) database marketing exploit computer technology and sophisticated analytical techniques in combination with direct marketing to aim the marketing effort at a specific consumer segment. This statement explains
1.
INTRODUCTION
the need for an understanding of computer technology as well as of marketing principles and practices.
From the above paragraphs it is clear that three areas of concern serve as a background to the study. The first deals with marketing the products and services of the institution by exploiting the information in a database, the second is the development and maintenance of the database itself and the third is the information management processes to ensure proper information for the needs of the institution.
2.1 Marketing by means of a database
It is important for financial institutions to make use of all marketing tools to gain that illusive competitive edge in a very competitive financial services market. Database marketing is such a tool that can support the marketing function of financial institutions (Chaffey, et al 2003:218). Before embarking on the very expensive operation of building a comprehensive database financial institutions should take note of the fact that a vast amount of recourses can be wasted if database marketing is not implemented according to a set of guiding principles.
One of the main principles of database marketing is the total commitment of the institution to individual customers/clients (Tapp,1998:6). Breaking down the total market into segments is the wrong approach to database marketing. Although the customers/clients may be segmented according to discriminating factors, it still represents a group of people with a common identifier. During database marketing customers/clients, as individuals, are identified first and because of practical considerations can be grouped together, but if possible contacted on an individual basis (Clayton,1998:43).
It is therefore necessary to be in possession of intimate details of customers/clients so that the selection of specific customers/clients can be based on those details. This detail information also serves as the basis for customising the institution's offering to customers/clients (Shepard, ed. 1995:14). The customisation of products and services to the needs of individual customers/clients should lead to enhanced customer satisfaction and a higher degree of loyalty amongst customers/clients. It also eliminates “junk mail', since it focuses on known needs of customers/clients. The advantages would ultimately lead to a competitive advantage to the institution applying database marketing.
A warning to institutions which wanted to go this route not to penetrate the privacy of their customers/clients. At the present moment South Africa does not have the stringent privacy policies of the USA or Europe, but invasion of privacy can harm not only the database marketing campaign but also the image of the institution.
2.2 Development and maintenance of the database
In the case of database marketing, the captured data are stored in a centralised database. The database must be developed in such a way that it supports the marketing function to enable database marketing to take place effectively (Palmquist and Ketola,1999:29). Marketers need specific types of information to support the marketing function (Kerr, 1993: 28). Financial statements are not of much use to marketers as such. Marketers need to know how prosperous a certain segment is, for example.
If the business consists of several branches, as is the case in the financial services industry of South Africa, a fully integrated database should be developed (Table 5 no 5.4). To be able to serve the client as an individual, all information about that specific client should be available to all personnel of the institution at all times and at all service points. If a client applies for a service at any of the remote service centres of the institution, the frontline personnel should be able to view the profile of the client in real-time and be able to serve that client immediately and effectively, with all the necessary information at hand (Ortiz, Bridges and Rutledge, 2002: www.quaero.com). The database must immediately be updated and the new data captured during that specific transaction must be available to the institution to enhance further marketing efforts, such as a personal letter of thank you or an offering containing supplementary products.
Data mining techniques are extremely important to the financial services industry to supply a complete profile of the client to the frontline personnel (Chen and Sakaguchi, 2000: 67). See table 5 no 5.1 - 5.3.
2.3 Information management
Information management is a specialised task and include not only the capturing of data. The main function of information management is to supply specific information to marketers which is important to market the products and services of the institution. The data should therefore be processed into information and presented in a suitable format to support the marketing function of the institution. Examples of such information are presented in table 5 no 5.2; 5.3; 5.5 5.8. Information technology experts normally manage the database. These experts main concern is to get input from the environment, process the input into a format suitable to develop financial statements (Table 5 no 5.9) and present it as output to whoever needed it (Nash,1993:218). These outputs are in most cases not suitable to market the business's products or services effectively.
Ortiz, et al (2002: www.quaero.com) list the following components for real-time marketing referred to in paragraph 2.2:
• Legacy data islands; • Data warehouse;
• Data marts for marketing, analytics and/or web activity; • Operational data store;
• Modelling and recommendations;
• Customer Session Object Middleware which contain Customer Session Objects; • Abstracted Connection library; and
• Touch points
These technology elements emphasise the need for an information technology expert to be in control of information management. Only some of these technologies will be elaborated on. Data warehousing and data mining is key to information management. According to the Data Warehousing Institute (www.dw-institute.com) the main objective of these above-mentioned techniques is to provide a smooth entrance to information (data that are specifically processed to support decision-making). In the process of changing data to information, the data is cleaned, scrubbed, maintained in appropriate data stores and mined for specific relationships.
Data modelling is another area that needs further discussion. Data modelling is making use of data mining techniques to manipulate data (Table 5 no 5.2 and 5.3). Some of the results of data modelling include comparisons and contrasts of customers/clients on their individual characteristics and gives an indication of which characteristics are most highly correlated to the offering. It can also support decision-making by predicting the likelihood of specific actions by the client and grouping together of customers/clients with similar inclinations (Ortiz, et al, 2002: www.quaero.com).
3.1 Data collection
The research universe was defined as all of the locally registered banks and insurance institutions in South Africa. The research focused on the total universe. From the 119 questionnaires sent out, a 32 per cent response was received. A special and successful attempt was launched to ensure that all the major financial institutions participated in the research as indicated in Tables 1 and 2.
Table 1 Market share of some of the banks that participated in the research
KPMG banking Survey 2001
http://www.kpmg.co.za/Modules/Library/detail.cfm?libid=153&year=2001)
*Total percentage represents the percentage market share of the institutions mentioned in the table out of the total of all South African Financial Institutions
Table 2 Market share of some of the long-term insurance Institutions which participates in the research
3. RESEARCH METHODOLOGY
Institutions Investec Old Mutual Sanlam *Total % Premium income % 9 22 19 50 Payouts % 8 27 25 60 Institution ABSA First National Standard Bank * Total % Investment s by institution % 26 28 22 76 Credit cards % 20 21 23 64 Lease % 20 30 25 75 Advance loans % 18 19 19 56 Mortgage % 30 10 15 55 Total assets % 21 18 19 58KPMG Banking Survey 2001
http://www.kpmg.co.za/Modules/Library/detail.cfm?libid=153&year=2001
* Total percentage represents the percentage market share of the institutions mentioned in the table form the total of all South African Financial Institutions.
It is therefore concluded that although only 32 % response were received, it is representative of between 50 % and 76 % of the financial business in South Africa (percentage depending of the type of business).
3.2 Questionnaire
A structured questionnaire (containing ten sections) was designed to elicit as much data from the selected respondents as possible. The sections covered the following topics:
• General Information • Marketing • Database • Database information • Data processing • Database manager • Administration • Technology • Individual contact
• Database marketing campaigns • Senior management perspective • Success of database marketing 3.3 Processing
Responses from the participants were processed by making use of the Statistical Programme for Social Sciences (SPSS). Frequency tables were drawn up and evaluated for significant deviations. Hypothesis testing was done by means of Chi-square tests. In the event of a finding of a p-value of less than 0.1, the nil hypotheses were rejected and it was accepted that a relationship exists between the factors tested.
4.1 Problem statement
Role ambiguity exist between database managers and database marketing managers and where only one of the two is appointed, emphasis is placed on the area of expertise.
4.2 Description of the problem
A problem may arise according to Rosenfield(1998: 28) if businesses confuse the marketing database (which should be under control of an information technology expert) and database marketing (which is a marketing programme and as such be under control of a marketing expert).
Table 3
Businesses tend to place both areas of expertise under control of one person who can be from either of the two fields of expertise. The area in which the controller is not an expert, will normally then be neglected and can lead to the failure of the complete database marketing programme. Table 3 above indicated that 40 % of the participating institutions have a database manager without a marketing background. Such a database manager may not realise the importance of specific information in a specific format for marketing purposes.
Table 4: Position of the database manager in the management structure of participating financial institutions
It can be seen that in 60 % of participating institutions the level of database marketing is at a lower level than the national marketing manager. This can be an indication of the view of top management of the importance (or lack of it) of the database manager. In these cases it can be said that the database manager will not have the freedom to manage the database according to his/her expertise, but has to adhere to people in higher levels of the organisation, including the marketing manager.
Table 5: A summary of other problems detected during the research
Problems experienced with database marketing Yes No
Database manager without marketing background 40 60 Marketing manager without IT background 17 83
Position of the database manager Respondents %
Same as national marketing manager 40 Same as regional marketing manager 10 Same as branch manager 10 Lower than branch manager 40
Total 100
5.1 Use database for marketing 38 % 5.2 Creating client profile models 45 % 5.3 Use forecasting models based on database information 09 % 5.4 Databases not integrated for selling 65 % 5.5 Does not measure campaign success 48 % 5.6 Analyse campaign cost per client group 12 % 5.7 Calculate monetary success of campaigns 60 % 5.8 Response on campaigns were for all respondents < 40 % 5.9 Information captured for financial purposes and not for
marketing In general
5.10 Focus on wrong clients/ products In general 5.11 Claim that database marketing plays a strategic role in
marketing 82 %
If only 38 % of institutions are using a database for marketing, it is doubtful whether the database is really playing a strategic role in the marketing of the business products, as were indicated by 82 % of the respondents. The same conclusion can be made from only 9 % using the database for forecasting. In fact, more or less all of the above mentioned problems are indicating to one of the following causes:
• Database does not produce suitable output for marketing purposes
• Database not correctly constructed to supply the necessary information for marketing purposes
• Database is not considered important enough by senior management to spend valuable resources on it.
During hypothesis testing the following relationships were discovered which also emphasises the lack of knowledge in financial institutions between the areas of Marketing and Information technology. If institutions view that database marketing is a waste of resources they will also not be happy with the results of marketing campaigns based on information from the database. This is because either the database is not designed to support marketing or that the marketing manager is not able to use the database to support marketing.
On the other hand, institutions that believe that the database creates value to the institution also measure the success of their marketing campaigns. We can therefore conclude that the more knowledgeable the managers in both marketing and Information technology the better the chances of successful implementation of marketing campaigns based on the information in the database.
Table 6 Relationship testing with SPSS Relationship
Database marketing leads to wasting of recourses and the results of database marketing is unsatisfactory
Database marketing creates value to the institution and respondents that measure the success rate of marketing campaigns
Conclusion P-value is less than 0.05 and indicates that the null hypothesis is rejected and therefore a relationship exist between the two factors
P-value is less than 0.05 and indicates that the null hypo-thesis is rejected and therefore a relationship exist between the two factors N value 21 22 Degrees of freedom 4 4 P value 0.015 0.025 X Test statistics 12.402 11.117 2
5.
THE SOLUTION
5.1 General solution
Schoenbachler, Gordon, Foley and Spellman (1997:5) indicated that there should be a link between marketing experts and information technology experts for database marketing to be implemented effectively. The data in the database should be exploited to provide marketing information. In this regard, information such as factors for more accurate segmentation of the market, identification of individual customer needs, personal information and feedback of customers/clients from previous marketing campaigns must be communicated to the information technology experts. They, in turn, should manipulate the database to provide the information in a suitable format for marketing purposes.
The solution to the problem that comes to mind first is that experts be appointed from both areas of expertise. The position of both in the organisational structure of the institution should be on the same level (See table 4). This in itself, will create its own problem situation. Employing only one person is less expensive than two managers. With one person in control unity of action can be created and it will lead to the elimination of friction between the two managers. However, if one person should be appointed in that position, the person should be trained in both marketing and information technology fields to prevent the problem of emphasising either marketing or the database.
5.2 Specific solution
A three-year qualification is proposed, structured in such a way that the trainee is trained in both the marketing and information technology fields. In addition to the theoretical training, at least six months of experiential training should be added to the theoretical training. In the South African context of tertiary education, a person must select a specific programme of study which focuses mainly on one field of study which makes it almost impossible to qualify in both marketing and Information Technology.
During the experiential training the trainee should work in a business where database marketing is practised. The best way is rotating between marketing, information technology and then in an area where the trainee is exposed to a combination of both areas of expertise. 5.2.1 Contents of the training programme:
Marketing 1:
A general background of marketing is presented. It include the marketing process, the instruments to position the business and the marketing research process
Marketing 2:
This subject focuses on strategic marketing issues. Specific attention is given to the strategic marketing process, general strategies as well as specific strategies concerning product, price, promotion and distribution.
Marketing 3:
Electronic marketing must get specific attention in the first semester, including the strategies for competitive advantage in E-marketing. During the second semester direct marketing must form the major part of the syllabus.
Marketing Research 3
The process of marketing research should be taught here, with some practical assignments as to learn how to implement marketing research.
Quantitative Techniques:
Specific statistical and mathematical studies form the basis of this subject to enable the researcher to process the results of the research projects.
Information Systems 1:
The proposed syllabus for Information Systems 1 should include hardware and software concepts, system concepts, end user computing, database concepts and multimedia and the Internet.
Information Systems 2:
The phases in system analyses and design as well as system tools should get attention here. Information Systems 3
This subject comprises of one semester training in database systems development and one semester project management. Database systems include the functions, different types, design and administration of databases. Project management include requirement analysis, system development, scheduling methods, project organisation, implementation and control. Development Software 1
Design concepts such as Pseudo code, flowcharts, hierarchy charts and report design should form the major part of this subject. It must be supported by programme concepts such as designing true basic applications, selection of control structures, repetition control structures, sequential file handling and report generation.
Development Software 2
Programme design and implementation get attention here. The subject should at least include testing, debugging, sort and merge, inter-programme communication and structured programming in a specific language. Table handling, database concepts object orientation and interactive processing should support the major areas of competence.
Development Software 3
Advance programming form the basis of this subject. It must include writing database programmes, maintaining a database file, creating class modules, designing of multiplier
database application, programming for the Internet and optimising applications.
To implement effective database marketing, both marketing and Information Technology plays a critical role. The appointment of experts in both areas of expertise as managers on the same level can create conflict, mainly because of the misunderstanding of the needs of the other. If one is in a higher position than the other, one area of expertise dominates the other. The solution to the problem is to appoint one manager, trained and qualified in both areas of expertise.
The above emphasises the need for a training programme that accommodates both specialised areas.
Chaffey, D, Mayer, R, Johnston, K, and Ellis-Chadwick, F, 2003, Internet Marketing Strategy, Implementation and Practice, Second Edition, Prentice-Hall Publishers, London.
Chen, L. and Sakaguchi, T, 2000, Data mining methods, applications, and tools, 17(1): 65-70.
Clayton, M, 1998, DeLux offers a new level of market analysis, January, Vol. 7, Edition 1.
Data Warehousing Institute (www.dw-institute.com)
Kerr, D, 1993, Subaro: A two-way street, July/August, 14: 28-31. KPMG banking Survey 2001
http://www.kpmg.co.za/Modules/Library/detail.cfm?libid=153&year=2001
Nash, E.L, 1993, Database Marketing: The Ultimate Marketing Tool, McGraw-Hill Book Co, New York.
Ortiz, Bridges and Rutledge, 2002: www.quaero.com.
Palmquist, J and Ketola, L, 1999, Turning data into knowledge, , Vol 11, Issue 2.
Roberts, M.L, 1997, Expanding the role of the Direct Marketing Database, 11(4): 26-35.
Rosenfield, J.R, 1998, The myth of Database Marketing, , February, Vol 60, issue 10.
Schoenbachler, D.D, Gordon, G.L, Foley, D, and Spellman, L, 1997, Understanding
6.
SUMMARY
7.
REFERENCES
Information Systems Management,
America's Community Banker,
Journal of Business Strategy,
Marketing Research
Journal of Direct Marketing,
Consumer Database Modelling, , vol 14, issue 1.
Shepard, D. (ed) 1995, The New Direct Marketing, 2nd edition, Irwin Publishers, Chicago. Tapp, A, 1998, Principles of Database Marketing, Financial Times/Pitman Publishing, London. Van der Walt, A, Strydom, J.W, Marx, S, en Jooste C.J, 1996, Marketing Management, Juta and Co, Kenwyn, RSA.