opinion & response

Aug 01, 2002 9:30 PM  By

Newbie Gives His Props

We just started receiving Catalog Age, and I have to tell you that it’s the most comprehensive magazine serving the retail, Internet, and catalog industries that I’ve ever seen! Every issue is full of valuable information, especially for those of us just getting started in the catalog sector.

Keep up the good work.
Mel Ronick, president
Stacks and Stacks

HAVING HIS SAY

Andy Ostroy, chairman/CEO of list firm ALC of New York, sounds off against list exchanges:

Nothing in life is free, they say. Why, then, do direct marketers, particularly catalogers, place so much strategic emphasis and financial reliance upon list exchanges? Why has the average circulation plan become prisoner to this mammoth beast?

I’ve spent years decrying the logic of list exchanging, a process that has taken the decision-making and creativity away from marketers and shifted it to the pencil pushers in accounting. I’ve yet to meet a marketer who can logically explain the true bottom-line advantage in exchanging vs. renting lists.

Exchanging owes its existence to the issue of expense — that being, let’s show as little expense as possible. While nothing is truly “free,” most marketers like to believe that the lists they obtain on exchange are free. Of course, that’s not the case. But it is a direct result of what I’ll call selective ledgering. This is a process in which a company opts to recognize one side of a ledger but not the other. We obtain a product but do not attach a cost to that product. Therefore, the product appears free!

The problem gets magnified when companies benchmark this allegedly free product, or list, against those that have a cost. The result? You guessed it: When analyzing performance, the “free” list wins. And these results are erroneously driving so many circulation and marketing decisions right now.

Everything has its cost, including lists. When you exchange with another mailer, you forgo rental revenue that would’ve been generated. Some mailers will exchange 5 million, 10 million, 15 million names a year. On rental, the company would stand to earn an average net of $85/M, or approximately $425,000-$1.275 million in income. But when exchanging, this income is forfeited. Where is the entry for this loss in revenue?

Most alarming is the mantra “I can’t use that list unless it’s on exchange” — the prevailing thought being that the list performs acceptably only if there’s no cost attached to it. But what if we did allocate a cost — specifically, the loss in income from the other side of the ledger? Does this list “perform” differently as a result? Does the profit per order decline dramatically?

Countless times we see quality lists being passed up simply because they’re not able to be acquired on exchange. Some of these lists might in fact perform as well as, if not better than, their exchange counterparts if only the economic playing field were level. My fear is that exchanging has become a crutch and an extremely shortsighted strategy.

What’s more, the time to monitor, reconcile, and maintain exchange balances — and then to use this information in the marketing process — is monumental, which is why our firm now earns the same fee whether we process rental or exchange orders. And how many marketers compare the actual cost of the lists they’re exchanging with to their own to see if the base price and selection surcharges are comparable? We often see a difference of $15/M-$40/M or more in one file vs. another, further evidence that exchanging may be an economic and strategic liability.

I generally close my argument against exchanges with what I call The Spiegel Factor. The general merchandise giant has had for years a strict rental-only policy. Is Spiegel behind the times? Is it remiss in not capitalizing on one of the industry’s greatest secrets — that some lists can be had free?

I tend to think that Spiegel has known all along what many marketers have admitted to me privately: There is no intrinsic economic advantage in exchange lists. Simply put, it may keep the accountants happy (and Wall Street, if you’re a public company), it creates the illusion of higher performance — and it’s just too darned difficult to trash the whole contribution model and start over.

Soap to Keep You in the Pink

General merchandise mailer The Vermont Country Store is using its product-development acumen to help raise awareness of breast cancer. The Manchester Center, VT-based marketer has created a triple-milled rose-scented soap engraved with the breast-cancer awareness symbol, the pink ribbon. The Vermont Country Store is selling the soaps in boxed sets of three for $8.85 in its catalogs, on its Website, and in its Weston and Rockingham, VT, stores. The company will donate 25% of all sales of the soap to support breast-cancer research, education, screening, and treatment programs for those without ready access to healthcare.

Bean’s Big Birthday Bash

It seems like just yesterday that Leon Leonwood Bean was building a better duck boot and selling it through mail order, but it was actually many decades ago — nine, to be exact, as of this month. And to celebrate its 90th anniversary, L.L. Bean is throwing itself a barn burner of a party sure to shake up Freeport, ME. The events planned for Aug. 2-4 include concerts by Livingston Taylor and the Tommy Dorsey Orchestra, a hot-air balloon display, fireworks, and the unveiling of a 14-ft. sculpture in the shape of — yep, you guessed it — the cataloger’s signature Maine hunting boot.

Like Christmas in July

A Catalog Age staffer received the Late Summer ’02 edition of the CitySpirit.com women’s apparel catalog at home in early June. She was interested in a sleeveless black-and-white sweater, until she read the copy block, which advised, “Reserve now for mid-July delivery.” Since the notice was in the original copy block, as opposed to an overlay or a dot-whack message, we’re sure City Spirit had a good reason for doing this — advance warning of quality-control problems or of manufacturing or shipment delays — but we’re not sure how the strategy worked. Given that by mid-July the mailbox is already overflowing with fall/holiday catalogs — not to mention summer sale books — many customers likely felt it was a tall order to have to wait more than a month for such a seasonal item. Our staffer, for one, decided to pass on the item.

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