An Appealing Prospect

Fake Manchester United replica shirts were the target of a Trading Standards swoop on Oxford Street in the first week of the New Year. The football club had initiated a complaint about its intellectual property being ripped off which led to the seizures.

It could be argued that the club might just have been looking to divert consumer attention. MUFC has been found guilty in a case brought by the Office of Fair Trading of being in a cartel with shirt manufacturer Umbro and leading retailers to keep prices high. Anybody who bought the club’s shirts in 2000/01 from certain outlets can now get a refund and the club has had to p[ay a substantial fine.

Football shirts and prospect pool data may not seem to have a lot in common. Yet when it comes to protecting the value of an intellectual property, there is no difference. And it is as easy to find data users who feel ripped off over the price of data as it is to find football fans who think they pay too much for shirts.

At the heart of both issues is the way in which third parties build prospect pools. For data owners, there is a constant fear that their files are either given a falsely low position in the de-duplication hierarchy or that prospect pool operators imply do not pay the royalties which are due.

“Six weeks ago, one of our telemarketing team came in and asked about our costing on a complicated prospect pool job. A competitor had given a price which, if they were paying royalties as they should, would have given them a gross profit of just £80,” reports Jon Cano-Lopez, managing director of Ai Data Intelligence.

While acknowledging the possibility that the price was a loss leader, Cano-Lopez says this is a common complaint. Ask around and you will find a couple of suppliers regularly named as offering impossibly cheap prices. One of these suppliers is no longer able to licence data from two leading providers because it does not pay out the expected level of royalties.

“We have got to do something as an industry. That is why a company like ours would be happy to undergo an audit at short notice,” he says. Ai has one of the largest commercial prospect pools on the market, so it has to be perceived as an honest broker by data owners.

The consequences fro data owners, prospect pool builders and data users of non-compliance with intellectual property rules is higher prices – but only for those who play fair. BT has had to increase the rate for its OSIS file because it has not been getting the royalties it expected and which are appropriate to its cost base, for example.

“The people who do play the game end up having to charge more than the people who don’t, says Cano-Lopez. Surprisingly low prices quotes during a pitch can only mean one thing – royalties are not being paid. But proving a prospect pool operator has done something wrong is another matter entirely.

Data owners are wary about signing up to prospect pools, especially where the proposition is entirely new and doubly so if the data is derived from client-side activity. The Trading Floor faced a particular issue when trying to build its insurance enquirer pool.

“In the early days, there was definitely an issue about setting up the pool and its benefits – trust was the biggest hurdle,” says Zoe Vine, head of data services at the company. “We’re just coming to the end of our second financial year so we have a bit of a track record behind us now.”

To counter this, her company had a culture of openness and transparency about the way it operates and puts data together. A new data owner will be taken through a very detailed briefing about each stage of the process.

Vine says this serves two purposes – demonstrating transparency and conditioning expectations. “If somebody has a file of 30,000, only 17,000 may make it into the pool, because 10,000 may be internal dupes, 3,000 goneaways and deceaseds,” she points out.

When the royalty cheque arrives, it is important that the data owner does not feel let down. Prospect pool owners may also9 be able to provide tips on ways to improve data quality and value, for example by using online PAF verification at point of entry.

One of the biggest concerns for data owners is that a prospect pool may take a variable off their file without paying for it. Vine says: “We have data ownership rules which we fully share with our suppliers. We give them scenarios for everything that might happen.”

Each prospect pool involves sophisticated matching and merging rules. Recency ought to be the most heavily-weighted factor, but it is easy to believe that cost is given prominence.

Just how those rules are drawn up and applied is the intellectual property of the prospect pool operator, so they are very unlikely to give too much away bout how it is done. That leaves the sense of a black box approach in which explanations about individual decisions can not be given.

That should not preclude being able to provide proofs of how much data has been used and the revenue it has earned, however. “It doesn’t just come down to trust,” says Annette Holmes, managing director of Prospect Swetenhams.

“There is a way of establishing an audit trail because data owners are concerned about their revenue and people may think they’re getting ripped off, but they don’t know how to prove it,” he says.

Her company sits on both sides of the issue as a data owner, with sources such as Market Monitor, as well as a prospect pool operator with its Business Universe. That has driven an emphasis on correct business practices. “We’re trying to establish a process that should overcome those questions,” says Holmes.

That means detailed reporting of how variables have been picked. While critical to establishing trust and proving royalty levels, this approach does have other consequences – for example, if a data source that routinely sits second in the hierarchy becomes unavailable, the selection programmed needs to be over-written to look for the next available source.

“The reason we are doing this is data quality. We have long-term relationships with end clients. Our aim is to develop their return on investment over time as we refine the model. That only works if the data quality is right,” she says. Unless data owners are earning revenues that allow them to invest in data quality, everybody loses.

Tri-direct has adopted a similar approach. “The client has to report on exactly how they have ended up using the data and what they put into the pot to get to that,” says data director Barry Leeson-Earle.

His company requires a double verification from data users. The client must sign-off on a report about the volume and source of data used, while the mailing house must provide a certificate for the final mailed volume. “Clients have got be willing to sign that off and they take it very seriously because it could be used as evidence in court,” he says.

Getting data users to accept the principle of this process was not difficult, although implementing the process can present challenges. Keeping track of the incoming data sources, the hierarchy used and the way different variables are picked off each list is a more detailed requirement that has been place of them.

Nonetheless, it is critical if data owners are to continue to provide their data and invest in its quality. “They have to be happy in the way their data is being used, so we have put this process in place to ensure they can follow the trail. If they have a q2uestion, they can audit us and the end client,” says Leeson-Earle.

As individual suppliers start to adopt solutions to the question of trust and royalty payments, it should create the impetus for change across the industry. Getting agreement on a common standard is unlikely, but it could make open books and audit trails the standard. Something certainly needs to be done because the current fear and uncertainty is not productive or conducive to data quality. With all other aspects of direct marketing becoming more closely accountable and auditable, data will have to follow suit.

“Unscrupulous practices have been going on for years in various forms and largely as a result of the growing pressure to pay less for data,” says Lisa Neville, operations director at EDM Media UK. “We are in an environment where data processing and manipulation is becoming increasingly sophisticated, while at the same time response rates are down compared to what they used to be. The natural reaction is to do anything possible to reduce the cost per response.”

She adds: “The truth is that data owners know very little about what happens to their pooled data. And sadly it’s inevitable that working practices are subject to unscrupulous behaviour because of some obvious market factors. However, it’s something that can be and needs to be changed.”

Data owners have the ultimate sanction by withdrawing their datasets. They are often unwilling to do this because it reduces their revenue. When those revenues do not match up to expectations, it can trigger an alarm.

Unfair processing is against the Data Protection Act as it relates to data subjects. Increasingly data owners are demanding that they are shown the same respect, and prospect pool operators will have to respond.

(Precision Marketing - 25th Jan 2008)