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Insights from the Evaluation Process
By Jim Wheaton
Principal, Wheaton Group
Original version of an article that appeared in the
May 2001 issue of "Target Marketing"
In 1986, I participated in a comprehensive evaluation of service
bureau capabilities. Last year, I was asked by a direct marketing
client to do the same. In the interim, I worked for a service
bureau for close to ten years.
I wrote a Request for Proposal for my client and received nine written
responses. The participating service bureaus represented the
complete spectrum, from the largest organizations to a couple of
regional niche players. Ultimately, we interviewed four companies
and invited three to participate in a test job.
Similarities and Differences — 1986 vs. Today
fascinating to witness the changes that have transpired in the intervening
fourteen years. Data and reports, for example, generally are
now transferred electronically, and often in the form of Word and
Excel documents. However, the evaluation also confirmed a
long-standing impression of mine that, in many ways, the service
bureau world is stuck in a perpetual time warp.
Processing, for example, generally is still performed on mainframes,
and some of the record matching algorithms are basically unchanged.
More importantly, many service bureaus have not fully confronted
the challenges of today's dynamic database marketing environment.
Often, account people operate as reactive order takers rather proactive
strategic partners. Generally, these individuals have never
been direct marketers, and often view their assignments from a very
narrow processing perspective.
Typically, whenever an account person encounters a job request that
cannot be handled by off-the-shelf application software, he or she
forwards it to the service bureau's standalone programming
department. Invariably, the programmers have even less exposure
to direct marketing than the account people. Often, they are
also faced with a large backlog of programming requests. The
lack of grounding in direct marketing, combined with of an overwhelming
workload, can make it difficult for them to complete their assignments
accurately and on time.
Methods of Differentiation
Some service bureaus have differentiated
themselves by enhancing their merge/purge algorithms to such an
extent that they are able to squeeze a couple of additional percentage
points of deliverable, unduplicated records out of the raw names
and addresses that they process. During the evaluation,
for example, one well-known firm introduced us to a separate specialist
for each major merge/purge function. Throughout the presentation,
the focus was always on the small fractions of improvement that
could be had by placing one's business with this service bureau.
This approach, however, can be likened to carefully shining a rotten
apple. I recently chatted with a direct marketer who uses
this same service bureau for its merge/purge processing. When
I noted that his vendor has the most sophisticated merge/purge software
in the business, he responded that the quality of the algorithms
is irrelevant because his account manager is an unthinking button
The direct marketer added that he would gladly trade a couple of
percentage points of scrubbing prowess for a company that would
act as a truly proactive and innovative data processing partner.
All in all, he is disenchanted with this "blue chip"
service bureau, and is looking to make a change.
The Need for a New Paradigm
The direct marketer's complaint
is very similar to what I have heard from other clients of this
— and other — service bureaus. It is apparent
that many such firms have evolved to optimize the processing of
standard, batch, direct mail jobs. However, they are not adept
at responding with creativity and innovation to one-off, ad hoc
requests; requests that are the norm in today's demanding, ever
changing database marketing environment.
Many service bureaus have become large, unwieldy battleships.
There is a shortage of nimble PT boats. These are the firms
that recognize that, when it comes to data processing, there is
a solution to just about every problem; and that often it is just
a matter of mixing and matching available applications software
with a dash of creative thinking and custom programming.
Consider a modestly sized, pure-play cataloger. As such, it
works with a service bureau that focuses on small catalogers, and
whose capabilities have evolved over the years to match the needs
of that market. Recently, an unusual opportunity arose that
required a sophisticated distance analysis. Without revealing
confidential details, the project required: 1) multiple distance
calculations from each customer's residence to specific, physical
entities scattered across the country, and 2) the creation of intricate,
distance-driven analysis files.
This is a type of project with which retailers, and retail-oriented
service bureaus, are very familiar. However, it generally
has no application to small, pure-play catalogers. Therefore,
the aforementioned catalog-oriented service bureau did not possess
the files required to do this type of work.
This would not have been a problem, except that the service bureau
took about a week to definitively conclude that it was not equipped
to do the work, and then made no effort to find a creative solution
— to, for example, locate a subcontractor, or secure temporary
access to the needed files. Instead, the response to the cataloger
was that · it was on its own.
As a result, the cataloger had to scramble to find another service
bureau to perform the necessary distance calculations, so that an
independent consultancy could produce the analysis files.
All in all, the experience did not endear the service bureau to
its catalog client.
The cataloger ran into similar problems with another project that
required the assistance of the service bureau's programming
department. Unfortunately, the department was swamped with
work and pressed by deadlines. As a result, it took over five
weeks to complete what should have been accomplished in a matter
of days. Throughout the entire ordeal, the cataloger continually
had to prod and cajole the service bureau to focus on the project.
Getting back to the service bureau evaluation, my client was frustrated
with its incumbent bureau — a well-known company with a national
presence — for these same sorts of reasons. There was
complaint about the batch processing that was performed in support
of the regularly scheduled direct mail drops. The service
bureau did a solid job with these. Instead, the frustration
was with the problems that took place whenever it was called upon
to assist in ad hoc projects.
The service bureau did its best to satisfy my client's special
requests. Generally, however, it failed because its employees
were narrowly focused data processing professionals. No one
involved with the account had the database marketing perspective
to provide my client with what it truly needed. Instead, the
service bureau, over and over, mechanically executed the required
job steps. With every inevitable misunderstanding, the process
had to be repeated.
Consider, for example, a request to perform a series of complex,
one-off steps to create files for specialized backend analysis.
The service bureau ran the job multiple times, over many weeks,
before finally getting it right. And the failure was not due
to a lack of effort. However, the request was initiated to
support a data mining initiative, a topic with which the account
team had no familiarity. Working in a knowledge vacuum, it
was difficult for the team to be successful.
Hypothesis for the Current State of Many Service Bureaus
have so many service bureaus failed to fully adapt to the times?
My hypothesis is that it is because merge/purge has been a perceived
commodity for years, and therefore has become a self-fulfilling
prophecy. In such an environment, service bureaus tend to
compete on price. And, all too often, direct marketers get
exactly what they are paying for in terms of quality.
In contrast, the 1986 service bureau evaluation with which I was
involved generated immense industry interest. A co-worker
and I were invited to present the results of our study at a major
DMA tradeshow. Also, the editor of a leading industry journal
sat in on the speech and asked us to publish our findings in what
turned out to be a series of six articles.
By the early 1990's, however, the focus on service bureaus
and merge/purge algorithms had pretty much vanished. The industry
had moved onto other topics such as neural networks and open systems
data warehousing technologies. Merge/purge had become a perceived
commodity not worthy of attention by our industry's movers
Increased Need for Data Hygiene
Ironically, cutting edge
service bureau work is more critical today than it was in 1986.
This is because the quality of the data is worse than it has ever
been. In the 1980's, most direct marketing orders arrived
via the mail. Now, inbound call centers capture the bulk of
the transactions, many of which contain glaring misspellings and
address element omissions. This is particularly true of small
to mid-sized firms that cannot afford to integrate real-time hygiene
technologies into their CRM infrastructure. And, Internet
data presents its own name and address quality nightmares.
Powerful merge/purge software is essential for correcting many of
these problems, so that the information reflected on customer databases
is accurate. Name and address hygiene has significant
ramifications for data mining and quantitative analysis. It
is important to identify records that correspond to multiple orders
by the same individual, and consolidate them into a single customer
Consider the analytical ramifications of two legitimate duplicates
that are not consolidated. During the building of a predictive
model, an actual multi-buyer will appear to be two separate —
and less desirable — single-buyers. Likewise, during
a lifetime value analysis, one relatively valuable customer will
be represented as two not-so-valuable individuals. (The opposite,
of course, will be true whenever an illegitimate consolidation takes
So, what was the most important lesson that
I learned from the service bureau evaluation? First and foremost,
to not get all that hung up about the data processing "bells and
whistles," even if they provide a couple of additional percentage
points of deliverable names and addresses. With the
widespread adoption of electronic data transfer capabilities, the
"bells and whistles" portion of merge/purge work can now be subcontracted
to the largest service bureaus without jeopardizing turnaround times.
This is a development that is complemented by the spread of the
Application Service Provider ("ASP") business model throughout the
Instead, concentrate on what really is important. Look for
a company that will become your valued and proactive database marketing
partner, and one that will rapidly respond to your requests with
creativity and innovation.
Jim Wheaton is a Principal at Wheaton Group, and can be reached
at 919-969-8859 or firstname.lastname@example.org. The firm
specializes in direct marketing consulting and data mining, data
quality assessment and assurance, and the delivery of cost-effective
data warehouses and marts. Jim is also a Co-Founder of Data