Lists and Prospecting: Selective Discounting

Nobody wants to pay full price, whether it’s for a car, a coat, or a rental list. And with the economy shakier than it’s been in at least a decade, catalogers are pushing more than ever for discounts. While most mailers bargain hard on all fronts, such as lower nets, volume discounts, and continuations, catalogers say they’re having their greatest success in negotiating fees for selects.

Granted, “you can’t touch” the charges on pivotal selects such as recency, frequency, and average order size, says David Mazzotta, marketing and database manager for Salt Lake City-based gifts cataloger Sundance. Rather, you have the best chance of getting price breaks on smaller, more specialized selects that have limited appeal. For instance, when considering renting the list of a women’s apparel catalog that sells a small amount of jewelry, “I look for half off the jewelry select fee,” Mazzotta says.

“Every time I place orders with my broker at 21st/AZ Marketing,” adds Sundance acquisition analyst Tammy Ganong, “the broker tries to get the select charges either waived or cut in half to get our costs down.” Sundance usually prefers to select buyers of home decor, jewelry, or gifts. “We pinpoint those selects, and most of the time can get the fees reduced,” Ganong says.

Pete Rice, vice president of marketing for Madison, VA-based home and garden products cataloger Plow & Hearth, finds it easier to negotiate select charges when he’s considering ordering multiple selects at once, “simply because the charges add up to a bigger number, with more room for movement.”

Let’s say Plow & Hearth wants to select women with an average order of at least $75 who have made a purchase within the past three months. The select charges could run more than $50/M — on top of the typical $90/M-$115/M base charge. “We’ve found that people are willing to negotiate the incremental select charges, especially if you can commit to some volume,” Rice says.

List owners and managers may also be more willing to negotiate if you’re somewhat judicious in your discounting requests. Silvo Home, a Rolling Meadows, IL-based mailer of home goods, makes sure its broker communicates to the list owner “clearly why we need a discount,” says president Stu Zirin. “We don’t push for discounts if it’s not necessary in reaching our profitability goals. We look at the projected performance of each list individually and factor in the projected net out and all the list costs. If it meets our profitability objectives we take it at that price. If not, we need to negotiate the price down to the point where it ultimately does.”

Rice operates in a similar fashion. “When we provide supporting data that show the need, we are very successful getting deals on selects,” he says. “When you always negotiate selects right out of the box it can sometimes be like crying wolf. Then when you really need a break, mailers may not listen.”

Commissions untouchable

Once you’ve succeeded in obtaining discounts on list selects, you may start looking elsewhere to continue reducing your list costs. One area where you probably won’t have any luck is in negotiating broker commissions, which generally range from 8% to 20%. “List brokers have taken huge hits,” Sundance’s Mazzotta says, “so there’s no more room to ask for reductions in commissions, although we have gotten some in the past.”

Likewise, Plow & Hearth tried to reduce brokers’ commissions in the past, “but the response from top management was that they simply didn’t negotiate commission,” Rice says. “They probably felt that we would not pull business away from them based on the non-negotiation, and they were right.”

Instead of pushing brokers to cut their commissions, most mailers feel they’re better off getting more bang for the buck. While Rice notes that his broker provides “a prodigious amount of extra services, serving as a consultant in a significant way,” Silvo Home considers its broker part of the cataloger’s marketing team.

Silvo requires its broker to get involved in circulation planning, analysis, and strategic planning. “We also look to her for input and her recommendations on the best use of the various co-op databases,” Zirin says. “If I were to staff internally for that position with salary, taxes, and benefits, or even hire a consultant, it would certainly cost more than what I would save in a reduced commission.”

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