January 10, 2006 Allant: A Market Leader Among Database Marketing Service Providers The Forrester Wave Vendor Summary, Q1 2006

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1 TECH CHOICES Allant: A Market Leader Among Database Marketing Service Providers The Forrester Wave Vendor Summary, Q by Eric Schmitt with Chris Charron and Jennifer Joseph EXECUTIVE SUMMARY The Allant Group grew up on telemarketing services, but its primary focus today is database marketing. The company s analytically driven philosophy and business-friendly delivery have earned it exceptional marks from clients: above or far above industry average scores in each of the four areas we measured, including an industry-high satisfaction rating. Its clients did find room for a few complaints, most often around price. Using our reference criteria weightings, Allant comes up a Leader in the 2006 Forrester Wave evaluation of database marketing service providers. ALLANT IS ATTRACTIVE TO MARKETERS SEEKING ANALYTICALLY DRIVEN SERVICES The Allant Group was founded in 1984 as a telemarketing services provider and began offering analytical marketing services in the late 1990s. Today, it operates as a full-fledged database marketing services provider, reporting that managed database clients drove 50% to 60% of its $22 million in revenues last year. The company currently has 15 databases under management; its staff includes many industry veterans. Forrester evaluated Allant s current offering and strategy for database marketing services against approximately 125 criteria (see Figure 1). Across the 10 companies profiled in this evaluation, we electronically surveyed an average of 10 customers and conducted an average of five additional client conversations by phone. We find Allant is a good fit for buyers that want: Analytically driven solutions. In a recent survey, marketers told us that they view customer analytics as one of the two most critical elements of database marketing (the other is data quality). 1 No surprise then that every database provider in this evaluation offers analytical services. However, Allant goes further than most: Its entire approach to service delivery is grounded in a long-term customer analysis and analytics framework based on customer life-cycle management and longterm value. Allant is good at data-focused, modeling-focused solutions. Their motto is accurate. Allant is a great match for our needs. The reports they provide are robust they help us understand our customers and reflect an understanding of the retail business. Headquarters Forrester Research, Inc., 400 Technology Square, Cambridge, MA USA Tel: / Fax: /

2 Tech Choices Allant: A Market Leader Among Database Marketing Service Providers 2 If you want someone to make you smarter about your customer data, Allant has a good bit to bring to the party. Business-oriented delivery. Allant delivers analytical and technology services through a staff that builds intimacy with their clients business. In part, this is due to the company s industry discipline: Allant has won major retail clients like Chico s with value-add services offerings and is taking a similar approach with financial services and telecommunications. 2 Clients gave Allant outstanding feedback across-the-board. Most notably: Every client we surveyed told us they would recommend it to other companies, without reservation. I don t have to explain a lot that s what I like best. Allant gets our business. They are very proactive in terms of raising issues and solutions. If we suggest something wrong, Allant will patiently explain why it is a bad idea. Their communications skills are excellent, and they have been very patient and supportive in terms of explaining the results to our organization. Reliable execution. Allant clients also rate it far above the industry average in the area of operations and execution reliability. Conversations with these marketers demonstrated why: Allant meets their deadlines. If we have errors on our end, they make up for them. For instance, we had data problems, had to keep resending. It ate up weeks of the project plan, and they still compensated and delivered on time. Allant Clients Note The Company s Premium Pricing Companies considering Allant should take into consideration that: The company s services don t come cheap. Despite their overwhelmingly positive feedback, Allant customers did find room for a few concerns. The most common theme was the premium cost of the company s services. We believe this is due to the level of analytical and strategic resources that the company typically assigns to client accounts. Allant notes that it has recently adjusted its pricing model to be more aggressive. They used to do more all-inclusive work. Now I see a whole list of charges. It feels like they are trying to squeeze the cow. Allant is not the cheapest way to go, and I don t care. Growing pains are a possibility. Allant s focus on analytical services which are increasingly in-demand coupled with its outstanding client feedback suggest that the company may well

3 Tech Choices Allant: A Market Leader Among Database Marketing Service Providers 3 succeed at its aggressive growth plans. In phone interviews, Allant s customers expressed similar expectations. While the company s strong industry-orientation suggests that it will take a disciplined approach to growth, prospective Allant clients can ensure against potential problems by locking down service agreements and access to key account staff. I hope they land more business, but if it impacts what they re doing for me, we re going to have problems. Their delivery strategy is very strong, but my question is: As they grow, will we still have access to the top people? To see how The Allant Group stacks up against nine other competitors, see the Forrester Wave evaluation of the database marketing service provider market. 3

4 Tech Choices Allant: A Market Leader Among Database Marketing Service Providers 4 Figure 1 The Allant Group Evaluation Overview CURRENT OFFERING Technology capabilities Operations and service delivery Data and data sourcing services Analytical services Strategy services Forrester estimates a DBA-to-managed database client ratio of approximately 1:3. Five database administrators (DBAs) on staff. The Allant clients we surveyed give it marks above the industry average for technical flexibility and responsiveness. Reports that clients primarily use Alterian, Hyperion (Brio), and Business Objects for campaign management functions. Notes that it is willing to develop custom software so long as it conforms to our basic solution suite. Will support transactional systems and is further developing its inbound marketing channel offering and supporting processing infrastructure. The Allant clients we surveyed give it marks far above the industry average for the reliability of its operations and execution. The Allant clients we surveyed give it marks above the industry average for proactively proposing new marketing strategies and tactics. Many of the Allant clients we surveyed identify the stability of our relationship as the characteristic they like best about company, yet a significant number of respondents identified staff turnover as the characteristic they found most disappointing. Notes that data sales account for a profit contribution of and list services contribute approximately (a) 25% of total profit contribution generated by marketing database clients and (b) 59% of total profit contribution generated company-wide. Provides data sourcing services to approximately 90% of managed database clients. Regularly evaluates and tests third-party data sources for clients. Statistician-to-managed database client ratio of 4:3 (excludes staff classified as strategists below, although many of these individuals are also statisticians). Team of 22 statisticians and business strategists (including strategy staff of 10, detailed below). Approximately 30% of managed database clients use analytic services. Average spend on analytical services by managed database clients was $120,000 last year. Analytical services account for 11% of revenue. When we asked what they like best about Allant, a significant number of the clients we surveyed identified their analytical services. Strategist-to-managed database client ratio of 2:3 (excludes statistician staff, detailed above, and support staff). Blended analytical and strategy teams. Core professional services/strategy team of 10 individuals. Approximately 20% of managed database clients use strategic services. Average spend on strategic services by managed database clients last year was $200,000 per year. Expects the average spending on strategic services to increase substantially in 2006 from both existing and new marketing database clients.

5 Tech Choices Allant: A Market Leader Among Database Marketing Service Providers 5 Figure 1 The Allant Group Evaluation Overview (Cont.) CURRENT OFFERING Fulfillment and media services Creative services Industry capabilities Other capabilities Contracts and pricing Notes that fulfillment services are estimated to account for 7% of corporate revenues. Will manage call center providers on behalf of clients. Provides broad telemarketing solutions, including campaign management systems. Provides direct mail postal processing services to 20% of managed database clients. Doesn t offer creative services of any sort. 33% of managed database clients in the retail industry. 14% of managed database clients in the telecommunications and utility industry. 13% of managed database clients in the financial services industry. 13% of managed database clients are B2B. 13% of managed database clients in the media and publishing industry. 7% of managed database clients in the insurance industry. Two managed database clients in acquisition-only environments, and 11 with hybrid acquisition/retention environments. Customer acquisition solution framework includes acquisition strategy and program definition, program design, referral program design, list optimization, program execution and analysis, data management, and insight-driven analytic support. Reports that it manages loyalty programs for four clients. Helps clients design and execute customer market research studies. Participates in market research strategy; leverages partners for execution. Typical contract duration is three years. No exclusivity arrangements in place with any clients. The price range for new marketing database clients is $400,000 to $900,000. Forrester has observed that in competitive bid situations Allant s pricing tends to be above average; the company notes that it has recently taken steps to reduce price.

6 Tech Choices Allant: A Market Leader Among Database Marketing Service Providers 6 Figure 1 The Allant Group Evaluation Overview (Cont.) STRATEGY Corporate strategy Focus Delivery strategy Customer satisfaction According to its Web site, Allant delivers solutions that: - Create and leverage deep customer insights for more predictive power. - Incorporate comprehensive strategic and analytic services. - Improve contact and customer information data quality. - Support fully integrated multichannel marketing needs. - Focus on marketing performance measurement with consultative support. - Optimize each dimension of marketing spend productivity, strategy, and results. The company s vision is centered on the idea that marketing service providers should provide analytical and strategic guidance, not just data processing and other technology services. Forrester believes that Allant s vision for analytically driven marketing services is very well aligned with market needs; we also believe that its disciplined approach to industry solutions and client service make the company well-positioned for growth. One potential issue facing Allant is its ability to manage growth in client accounts, as we have observed other fast-growing database marketing services companies face this issue. Revenue from database clients was between 50% and 60% of 2004 revenues of $22 million. The company is also focused on the sale of telemarketing services, though it is in the process of de-emphasizing this business. We find that Allant s delivery strategy is: - Reliable from an operations/executions point-of-view. - Always well-integrated across the various services it offers. - Highly consistent, in terms of customer satisfaction (which is very high overall). - Rich in analytical guidance. - Generally premium-priced (although the company notes that it is taking steps to reduce costs). Many of the Allant clients we surveyed identify the stability of our relationship as the characteristic they like best about the company, yet a significant number of respondents identified staff turnover as the characteristic they found most disappointing. The Allant clients we surveyed give it marks far above the industry average for overall customer satisfaction. Client surveys rated Allant higher than any other company in this evaluation for overall customer satisfaction.

7 Tech Choices Allant: A Market Leader Among Database Marketing Service Providers 7 Figure 1 The Allant Group Evaluation Overview (Cont.) STRATEGY Technology strategy Industry strategy Differentiators Channel strategy Outsourcing strategy The Allant clients we surveyed give it marks above the industry average for technical flexibility and responsiveness. The company s strategy is to develop and implement enabling technology on which to build solutions aimed at clients business issues. Doesn t develop and sell standalone technology products and tools. Notes that it is willing to develop custom software so long as it conforms to our basic solution suite. Currently has only deployed marketing and customer analysis software from one third-party company, Alterian. Notes that Allant is software and tool independent. We have no contractual, financial, or other allegiance to any one software or approach. Strong industry orientation. Primary focus on retail industry today. Industry-specific solutions and services for this industry. Target industries for include automotive, retail banking, credit card, and insurance. No exclusivity arrangements in place with any clients. Integration of strategic and analytic services into solutions. Emphasis on marketing performance measurement and professional services account management. Retail industry focus and solution set. Teleservices heritage and capabilities. Focus on growth and retention solutions. Comprehensive nature of solutions, solution frameworks, definitions, and structure. Outstanding customer satisfaction. Limited channel partner strategy; typically informal and on a client-by-client basis. Past and current channel relationships include agencies and analytic boutiques. No managed database clients have yet been delivered directly by channel partners (but expects that this may change). Doesn t report any outsourcing arrangements. MARKET PRESENCE Clients Revenues Maintains large (>$400,000 per year) database relationships with approximately nine clients. Approximately 15 managed marketing database clients overall. Revenues of approximately $22 million for calendar year Revenue from database clients was between 50% and 60% of total 2004 revenues of $22 million. Expects contribution of managed database clients to be slightly higher in 2005 and significantly higher in 2006.

8 Tech Choices Allant: A Market Leader Among Database Marketing Service Providers 8 Figure 1 The Allant Group Evaluation Overview (Cont.) MARKET PRESENCE Employees Industry presence Approximately 200 full-time-equivalent employees. No employees outside North America. 33% of managed database clients in the retail industry. 14% of managed database clients in the telecommunications and utility industry. 13% of managed database clients in the financial services industry. 13% of managed database clients are B2B. 13% of managed database clients in the media and publishing industry. 7% of managed database clients in the insurance industry. Go online to download additional in-depth data and scores for this vendor and other vendors included in this Forrester Wave evaluation. SUPPLEMENTAL MATERIAL Online Resource The underlying spreadsheet for Figure 1 is available online. The spreadsheet includes more detailed data and scores for this vendor. The detailed data and scores for this vendor are also available online through an Excel-based vendor comparison tool that provides detailed product evaluations and customizable rankings. The Forrester Wave Methodology We conduct primary research to develop a list of vendors that meet our criteria to be evaluated in this market. From that initial pool of vendors, we then narrow our final list. We choose these vendors based on: 1) product fit; 2) customer success; and 3) Forrester client demand. We eliminate vendors that have limited customer references and products that don t fit the scope of our evaluation. After examining past research, user need assessments, and vendor and expert interviews, we develop the initial evaluation criteria. To evaluate the vendors and their products against our set of criteria, we gather details of product qualifications through a combination of lab evaluations, questionnaires, demos, and/or discussions with client references. We send evaluations to the vendors for their review, and we adjust the evaluations to provide the most accurate view of vendor offerings and strategies.

9 Tech Choices Allant: A Market Leader Among Database Marketing Service Providers 9 We set default weightings to reflect our analysis of the needs of large user companies and/or other scenarios as outlined in the Forrester Wave document and then score the vendors based on a clearly defined scale. These default weightings are intended only as a starting point, and readers are encouraged to adapt the weightings to fit their individual needs through the Excel-based tool. The final scores generate the graphical depiction of the market based on current offering, strategy, and market presence. Forrester intends to update vendor evaluations regularly as product capabilities and vendor strategies evolve. ENDNOTES 1 We surveyed 49 database marketers in September When asked to rate the impact of specific database marketing elements on results, nearly 100% of respondents report that customer analytics and data quality have a high or critical effect. See the September 27, 2004, Market Overview Database Marketers Gain Influence But Lack Enterprise Coordination. 2 The company has been particularly successful in the specialty retail segment. 3 Firms hire database marketing service providers to manage, cleanse, and integrate customer data. In many cases, they also pay for marketing operations, analytical services, and strategy support. To assess the state of the market and see how the leading outsourcers stack up against one another, Forrester evaluated the strengths and weaknesses of top database marketing service providers across 125 criteria. The result: Epsilon is in the sweet spot of market demand. The Allant Group and Merkle aren t far behind, thanks in large part to their analytically led service models. Included in this report is an interactive vendor comparison tool that provides detailed product evaluations and customizable rankings. See the January 10, 2006, Tech Choices The Forrester Wave : Database Marketing Service Providers, Q Forrester Research (Nasdaq: FORR) is an independent technology and market research company that provides pragmatic and forward-thinking advice about technology s impact on business and consumers. For 22 years, Forrester has been a thought leader and trusted advisor, helping global clients lead in their markets through its research, consulting, events, and peer-to-peer executive programs. For more information, visit 2006, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, Forrester s Ultimate Consumer Panel, WholeView 2, Technographics, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each figure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. To purchase reprints of this document, please

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