Reinventing list firms

Jun 01, 1998 9:30 PM  By

As mailers continue to pursue more targeted names, delivered quickly and on the cheap, list companies, service bureaus, and list compilers will be scrambling to deliver-and some, to stay in business. Many industry watchers believe list companies in the future will be a combination of a service bureau, compiler, list manager, and list broker-essentially a one-stop data source.

Consolidations within the list and database industry have already begun. Witness the April acquisition by Manchester, U.K.-based general merchandise cataloger Great Universal Stores (GUS) of Lombard, IL-based database firm Metromail, which GUS is merging into its Experian database subsidiary. This deal came on the heels of American Business Information’s acquisition of list company Walter Karl. And just two years ago, service bureau Acxiom snapped up giant list firm Direct Media.

Such consolidations are not simply a phenomenon of the ’90s, observers agree. “Consolidations will continue,” predicts Don Mokrynski, president of Hackensack, NJ-based list firm Mokrynski & Associates. “With growing industries, that’s a natural process, but in all my years, I’ve never seen such an influx of investment capital.”

That’s not to say, though, that the list industry of 2001 will consist solely of a handful of giants. There will still be the need for smaller, specialized shops.

“Maybe a larger company won’t be interested in a 50,000-name file,” says Mike Doepke, director of sales and marketing for Des Plaines, IL-based Cahners Business Lists. “It would rather have the multimillion-name Reader’s Digest file because of the large commissions involved.” Because it won’t be profitable for the big players, with their significant overhead, to handle smaller lists, owners of smaller lists and catalogers that need to rent small but highly specialized files will turn to boutique list firms.

Beyond renting and management But even smaller list firms may need to offer auxiliary services in 2001, given the increasing use of cooperative databases. Today, cooperative databases account for at most 15%-20% of the list rental business, according to Michael Berger, senior vice president of list firm The SpeciaLists. But by the turn of the century, co-ops could grow to 40% of list rentals.

Max Bartko, international business leader for Acxiom/Direct Media, says that as more mailers become co-op savvy, they will begin to use a variety of such databases, and the number of co-ops will triple. And while many believe the popularity of co-ops rests in the prequalification of their names-proven catalog buyers all-Bartko says that speed is also a draw. Already some co-op databases are developing “super-recency” programs to deliver names just days after those names make a purchase.

This focus on speed could make magnetic tapes, cheshire labels, and diskettes obsolete. “The transfer of information will be done computer to computer,” says Bernice Grossman, president of New York-based consultancy Database Marketing Resource Services. File transfer protocol (FTP), the electronic transfer of data between companies, is already a reality, she notes.

Paying the price Another reality is “net-net” payment-renters paying only for the names mailed, not for the number of names ordered. Because co-op databases charge on a net-net basis, more list firms are offering it too, and Grossman predicts the practice will eventually become the standard among list companies.

The co-ops, and mailers’ demands for discounts, have also caused list rental prices to flatten after years of steady gains.

“Because of competition, list managers are reducing their fees ,” says catalog consultant John Lenser. “At the same time, fewer names are available to list firms, because the owners belong to the co-op databases. There’s financial pressure coming from two directions.” All the more reason that many list managers and brokers will be “reinventing themselves” and providing services like backend analysis, modeling of names, and analysis of front-end circulation-which in turn will continue to fuel the consolidation trend.

Nonetheless, some list pros don’t see a radically different list industry in 2001-just a better one. “The basic structure of list brokerage and list management companies will be the same going forward,” Mokrynski contends. “The difference is that the brokers and managers will have to be even more knowledgeable and nimble to adjust to the changes taking place.”