Marketing Buyer's Guide

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1 Knowledge Guide: Marketing Buyer's Guide In-House Versus Hosted Marketing Solution virtualroi May 2009 by: Sally Lowery Online Marketing Manager

2 Marketing Buyer's Guide This whitepaper is intended to address the costs and benefits of in-house vs hosted marketing solutions. Like any IT purchase, there is no right answer for everyone; the needs and capabilities of your organization will dictate the best solution to deploy. "In-house" refers to an marketing solution managed within your own IT infrastructure, traditionally housed on an internal server. A typical in-house system would require multiple servers, bandwidth, IT manpower, and several built or bought software applications. Hosted marketing is typically "Software as a Service". A provider, often referred to as an Service Provider (ESP), will build and maintain the physical systems necessary to serve the needs of multiple clients. The client pays a recurring fee and creates their content, while the provider handles all "back end" operations. In House Versus Hosted Solutions Expense Price will often serve as deciding factor when considering a "build or buy" decision. Though costs will vary considerably from one client to the next, building an in-house solution certainly requires a sizable capital investment. Depending on volume, an system will likely require two to three servers one to manage and maintain the application and one or two others to run the mail server(s) and handle redirects and tracking. The mail server will require specialized software to efficiently send to the lists and the tracking server needs a B.I. (Business Intelligence) tool to effectively read through available data, harvesting worthwhile reports from the send. In addition to physical servers and software, it will be necessary to acquire bandwidth and separate IP addresses. Sending in volume should be done on its own connection, preferably a very fast one, to avoid impairing the speed of the corporate website or internal network requests. A separate IP address (or two) is a must have; should an organization's existing IP hit a block list, their corporate may stop being delivered, or, worse, transactional s (confirming purchases, support requests, etc) may be blocked, potentially driving customers away. Opting for a hosted solution eliminates the maintenance and support associated with an internal solution, but does not eliminate all the cost. Depending on the provider chosen, cost may vary dependent upon the client's list size, volume of transmission, and application needs. Payment terms may range from monthly to an annual obligation. It's critical that a solution address both present and future marketing needs as well as fit into an organization's cost model. Time A major cost consideration is the time it will take to get "up and running". One advantage of a hosted marketing solution has proven to be rapid implementation time. A company interested in deploying a hosted marketing solution can have a fully functional system within days. Businesses with limited resources needing swift execution are often better off with a hosted offering. 1

3 Hiring/Training Providers of hosted solutions utilize proprietary software to create and send marketing messages. At least one member of a client's marketing team must learn and efficiently manage the provider's application interface, loading messages and extracting the proper analytics. Hosting an in-house solution, however, requires the resources of an IT staff. Aside from configuring and testing the various servers, the IT member(s) responsible will be tasked with configuring the SMTP servers and DNS records, and maintaining the proper configuration and credentials to support the evolving authorization mechanisms such as SPF, Sender ID, and DKIM. Successfully delivering elevated volumes of is managed by a team of highly experienced engineers. An organization attempting to handle their own marketing should first verify they have a sufficient level of IT resources to dedicate. The marketing ecosystem is constantly evolving; hosted providers must keep watch over industry changes and continually fine tune their systems to meet the current needs of marketers. Administrators of in-house solutions need to exercise vigilance if they wish to maintain optimum deliverability. Often times the internal system's flexibility and robustness are compromised due to IT staff managing other projects. Capacity The idea of capacity is handled differently among in-house and hosted solutions. Some providers impose limits on the amount of sent messages per month, in which case a reached limit can be quickly alleviated by upgrading the contract; others may charge a flat fee per message, meaning the client's sending limit is determined only by their budget. When an in-house solution reaches capacity, it is sending as many messages as it can, as fast as possible. If more messages need to be sent right away, it is likely time to upgrade the server running the application. Since acquiring and implementing another server isn't as simple as running to the corner store, those time sensitive messages will have to wait. Another facet of capacity is bandwidth. Once an organization gains the ability to send a high volume of messages, it is vital to consider the effect it will have upon their bandwidth. After a message is sent, the server delivering hosted images will experience a considerable spike. If the message is driving clickthroughs to a website, the web server must be prepared to handle the deluge of sudden visitors. Adding bandwidth to mitigate such spikes can be a costly proposition. Flexibility The needs of marketers are constantly changing. An ecommerce site may decide it would like to implement triggered messages or offer a scalable, segmented offering to the customer. Often times the scalability of an in-house solution is limited - these solution features require time and money, negating the cost savings realized by "buying once". Hosted solutions offer a distinct advantage in this regard. Providers strive to improve their product through regular updates and innovation. Users of the service pay the same rate throughout, receiving a cutting edge product for the same price they paid last month, or even last year. Further, if the level of service or deliverability should decline, it is possible to migrate to a new provider without equipment substitutions. 2

4 Deliverability Maintaining a high level of deliverability does not happen by accident. Hosted solution providers employ dedicated resources to ensure their deliverability remains at its peak. Managing an in-house solution presents multiple delivery challenges, as a good reputation can be quickly eviscerated by seemingly innocuous mistakes. An in-house solution needs someone to oversee: Bounce Handling Monitor and react to the undeliverable notifications ISP Relations Develop and maintain working relationships with major ISP's Feedback Loops Work with ISP's to efficiently remove those who mark the message as spam Reporting & Analytics As an marketer, evaluating the key performance indicators of campaigns is essential in leveraging the value proposition of marketing. There is little value in crafting and sending a campaign without knowing the results. The high-end providers offer comprehensive analytics; the application aggregates and sorts the information, displaying a variety of valuable metrics. An in-house solution may provide more flexibility as to which metrics are calculated, but doing so requires separate pieces of software. These applications need to be integrated with the organization's Business Intelligence tool, and possibly with a CRM tool, to deliver the data in a meaningful way. Controlling the application does engender more complex integrations with customer solutions, and the ability to create more customized reports, but there is a trade off in terms of time required for implementation and management. Conclusion While deciding between an in-house solution or a hosted provider can be a challenge, it is essential to consider the hidden costs associated with the building and maintenance of a complex system. marketing providers invest considerable man hours into achieving consistently high delivery rates - running an effective system requires skilled IT professionals with expertise. If the proper IT resources and industry knowledge are available, it is possible to retain flexibility and cut costs by employing an in-house solution. It is critical, however, to ensure that the system has the flexibility to scale as your marketing grows, which can impact the cost savings. 3

5 About virtualroi virtualroi is a B2B digital marketing agency specialising in marketing, delivering optimised solutions to our clients. The agency boasts expert knowledge in all areas of digital marketing, encompassing: (deliverability, design, programming, optimisation and broadcasting) Data (merge, purge, consolidation, standardisation, acquisition and verification) Design (optimisation for deliverability, preview panes, image blocking) Technology (independent broadcast platforms on a fully managed or self-services basis) Consultancy (bespoke development, outsourcing, marketing and support services) virtualroi has extensive experience in delivering integrated digital marketing programs, solutions and technologies. This covers both end-user and channel target audiences internationally. 4

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