List Buying Guide: List Challenges and Solutions in 2004
Experts encourage marketers to broaden their list horizons.
The constant in the direct marketing world is the need to hunt for viable sources of prospecting names. In the early days of this industry, the variety of lists now on the market didn’t exist; list professionals and their clients would have to talk companies—sometimes competitors—into renting or exchanging names.
As the number of lists on the market grew, it became a great deal easier for marketers to find quality lists for their offers. Now, average response rates suggest that marketers have tapped out every possible list source.
According to a number of top executives at major list companies, smaller universes and no new lists are certainly today’s realities. But, they point out, savvy direct marketers are achieving response rates in the double digits on prospecting campaigns. How are they doing it? By rethinking the way they approach list research to find pockets of opportunity in files they already use and in types of lists they’ve never considered before.
In addition to coping with fewer names, let’s look at three other list challenges facing direct marketers, and get some advice from the pros on how to overcome these obstacles.
Challenge No. 1: Lack of new lists, smaller universes
Solution: Compiled lists, masterfiles and enhanced databases; better use of selects on all file types
While it’s true that hotline files are beginning to grow again—a sign that customer files also are starting to build up—response list sizes still aren’t what they used to be.
And, says Pam Mulligan, vice president of list management at MKTG Services, the few new response lists put on the market in recent months are not making up for overall list shrinkage.
The key to overcoming this challenge, says Linda Huntoon, executive vice president of Direct Media Inc., “lies in marketers’ and list firms’ willingness to change and adapt to the current environment.”
In other words, companies need to step outside their comfort zones and try some new approaches.
One option that seems to be working for a variety of direct marketers is compiled files. In fact, Joann Kropp, president of Walter Karl Inc., reports that she’s seeing compiled files pulling better response rates in side-by-side testing against response lists.
Where compiled files used to be shunned in favor of more highly performing response lists, today’s versions have been souped up for better results. Kropp notes that these enhanced databases offer marketers volume, selectivity—some even overlay transactional data to single out direct-response buyers—and competitive pricing.
She adds that brokers also have invested considerable effort to learn how to make compiled files work for their clients.
Compiled files aren’t the only lists under construction. Marketers who promote a variety of products with similar customer bases are creating giant masterfiles and enhancing them to help list rental prospects find the exact segments of names they need.
Marketers are looking to leverage the customer insights they’ve gained in the past few years while heavily mailing their housefiles, says Tim Barlow, vice president, list services group at Venture Direct Worldwide. This is true of both B-to-C and B-to-B sectors, he adds.
This goal is driving marketers to look beyond multibuyers to find prospects who fit the customer profile but maybe aren’t getting as many offers as the typical, top-tier buyer segments.
Challenge No. 2: Changing list composition due to multichannel shopping
Solution: In-depth datacards and the ability to think past channel/source
A big change that is forcing direct marketers to reevaluate lists that traditionally have performed best for their offers is the rise of the multichannel customer.
The market is challenged by the reduction in pure mail-order names, says David Schwartz, president of 21st Century Marketing. Marketers’ customer databases are being augmented by Internet-sourced names, he explains, and it’s often hard to tell how much of the file might respond better to e-mail than direct mail.
Mulligan agrees that this issue needs to be addressed by list owners and their list managers.
“We have to get more specifics about the multichannel customer onto the datacard,” she says, so marketers can better understand what types of people are on the list and how to effectively reach them.
While list source always will be important, says Kropp, marketers will achieve better results if they focus on list characteristics that point to a strong affinity with their product or service and that help them make offers that will be relevant to prospects.
For example, identifying lifestyle changes like moving to a new house or becoming first-time parents have proven to be much stronger predictors of response than customers’ inferred channel preferences, she explains.
Barlow concurs, advising marketers to evaluate lists with a keen eye for return on investment. Good questions to answer include:
• How much do these customers spend annually?
• How frequently do they buy?
• Do they buy for others in their household?
• Do they place gift orders?
When you can start to shape buying patterns for list segments, you can more accurately target prospects who will perform like your best customers, says Barlow.
While multichannel marketing might be shaking up list research efforts, its existence also presents marketers with the opportunity to leverage multiple channels. A number of companies offer postal and e-mail addresses for their customers, allowing marketers to explore the effects of integrated media campaigns.
Schwartz notes, however, that quality e-mail lists still are pretty expensive, putting e-mail campaign costs in the same ballpark as direct mail costs.
Challenge No. 3: Lower list rental revenue
Solution: File enhancements; participating in private prospecting databases
According to Kropp, marketers are faced with a double-edged sword: While they want to generate revenue on list rentals, they also understand other firms want to get the lowest CPMs possible.
To make your housefile enticing to more marketers as well as help them find more mailable names, Barlow says marketers should consider enhancing their files with demographic, geographic and lifestyle data. This kind of investment can turn a “mundane, flat list into a gold mine,” he explains.
Another strategy that has worked for Venture Direct is to take note of which select combinations are frequently asked for on list owners’ files, and then break these out as individual list segments. Anything you can do to help list brokers and marketers more easily find what they’re looking for, at the right price, will be advantageous, says Barlow.
Another option is to consider allowing marketers to rent your names for use in private prospecting databases. (Private prospecting databases are created from multiple lists or list segments that a marketer uses over time, avoiding multiple merge/purge processes and only paying participants for the names that are mailed.) Kropp notes that she’s seeing more B-to-B marketers opening their list rental agreements to include this tactic.
While participating in private prospecting databases can win you list rental revenue that you might not get otherwise, it also can reduce the number of overall names a marketer ends up using. Kropp urges list owners to carefully gauge the activity they think they might get when allowing their names to be rented this way.
Challenge No. 4: Overuse of the same prospecting names
Solution: Expanding the range of lists tested and giving frequently-mailed lists a rest
It’s been said that the definition of insanity is doing the same thing over and over expecting different outcomes. By this definition, some marketers could be considered certifiable!
If marketers continue to mail the same lists and list segments year after year, Mulligan says, those files that always have performed for them are going to fatigue.
Sound list rental strategies include constant testing of new sources and segments to find additional names that can supplement your staple lists.
Barlow adds that it’s time for companies to stop relying on the copycat list research strategies of yesterday. The market is just too saturated for you to be successful following the list usage and continuations of your competition. Usage is still a good source of test ideas, but Barlow encourages marketers to strive for those real breakthroughs that only come by digging deeper into your own business affinities.