If Drew Eginton gets his way, junk mail will cease to be junk.
Eginton's Dulles company, MarketSwitch Corp., has developed software products that can predict customer behavior and help companies figure out, mathematically, which customers will give them the best return on their marketing investments.
Eginton, 42, started MarketSwitch three years ago with a partner and $2.5 million of their own money. He hopes his software will help businesses deliver the long-sought vision of "one-to-one" marketing, which is customized for individuals based on consumer and market data.
Last week, he took a step closer to that vision by landing a distribution deal with Exchange Applications Inc., the largest provider of marketing campaign automation software. Boston-based Exchange agreed to pay MarketSwitch a seven-figure sum upfront to use MarketSwitch software in its products.
Most people "use Kentucky windage in marketing decisions," Eginton said in a recent interview, holding up his index finger like an old-time farmer figuring out which way the wind is blowing.
Often, he added, a 99 percent failure rate is considered successful in a direct marketing campaign. To Eginton, the marketing field is in dire need of the same "analytic rigor" used by the financial services and other industries in deciding where to spend their advertising money.
Eginton--who, despite his slight intolerance for the nonquantifiable, was a humanities major at Oberlin College in Ohio--founded his first company in 1983. The son of an Iowa City newspaperman, he used a precursor of e-mail to link congressional offices with media outlets. He sold the company in 1987.
Later he became president of a software development firm, founded by Loudoun entrepreneur Shane Chalke, that developed software for the insurance industry. Using complex algorithms, the software was able to predict "seemingly unknowable behavior" by finding patterns in scads of data.
Eginton left after four years, when the company was sold in 1995, to work for an insurance company in Winston-Salem, N.C. After turning that company around and orchestrating its sale, he began working on the idea for MarketSwitch: to give the consumer marketing industry a quantitative tool analogous to the one Chalke had developed for insurers.
Although other products can simulate consumer behavior, MarketSwitch's software has a twist.
For example, when a credit card company wants to test a new service, it makes a pitch to a small sample of customers. Based on who responds positively, the company uses software programs that can "look" through its larger customer list and determine who else is likely to buy. The software program then would rank those customers based on how much the company would have to spend to attract them vs. the probability that they would buy.
But if a company has several offers it wants to test and does not want to bombard any one customer with more than two offers, someone would have to work out a campaign by hand after generating an initial lead list. MarketSwitch's software, however, can account for multiple variables--even millions--and process the results within hours. So a company can plug in various product offerings, marketing channels (direct mail vs. the World Wide Web, for example) and customers.
"They have solved a mathematical problem that no one else in the world has solved," said Hooks K. Johnston, managing director for FBR Technology Venture Partners LP in Arlington. Johnston's company invested $2 million in MarketSwitch in March.
"He had actually presented here . . . when his company was in an earlier stage, [and] we had passed on it," Johnston said. "We wanted to see more progress on the product."
When Eginton came back, FBR was convinced and provided a quick cash infusion just as his seed money was about to dry up, Johnston said.
Now, Eginton will have to convince potential customers, including software manufacturers and Fortune 500 companies, that his product is better than other programs that predict behavior.
MarketSwitch's product is finely tailored, said Paul Krieg, an analyst at Legg Mason Wood Walker Inc.
Other companies are trying to elbow into that market space, among them Austin-based Trajecta Inc. But for the most part, Krieg said, MarketSwitch is ahead of the curve.
"He has a very unusual challenge," Johnston said, alluding to the myriad new technology products that often are overhyped. "People are skeptical because many people make outrageous claims that aren't true," he said. "We have to go through that phase where some respected market participants buy it."
Eginton does not seem worried. He is enamored of his products, developed by several PhDs who, he points out proudly, have published several hundred papers among them. And he waves off questions about the uneasiness some people might feel in having their psyche penetrated by corporate America. Corporations that abuse the information will be punished in the marketplace, he said.
Besides, he added, MarketSwitch just does the math. Consumers don't want their time wasted with pitches for products they would never use. "We want intelligent proposals," he said.
Asked where he expects his 33-person company to be in a year, he reaches for a thick stack of spreadsheets, turns to a chart and moves his finger along the rows of numbers. "A year from now, we will expect to have a revenue run rate of $12 to $15 million, a company valuation in the low nine figures . . . and a total staff population of between 80 and 90."
He makes these predictions in his spotless office on Powers Court off Route 28, with a brand new pair of K2 skis standing in the corner to remind him of the vacation he keeps meaning to take.
Johnston, of FBR, said Eginton is the "rare" combination of experienced and mature manager who "doesn't require so much coaching." Eginton is known for consulting his board of directors--of which Johnston is a member, as is local technology heavyweight and Northern Virginia resident James Rutt, of Network Solutions Inc.--only when he has several solutions of his own to offer.
"He's clearly hard driving," Johnston said with a chuckle. "I've never been to his house, but I'm sure it's very neat."