Listing forward - Multichannel Merchant

Is the list business dead? Or, to put it more politely, is it still serving the needs of multichannel merchants? Some list firms have added modeling services. Many have embraced the Internet. At least one is working in direct response TV. But critics imply that they have not kept up with their clients.

Some even wonder if list companies can survive. Several have been swallowed by infoUSA, and the small independents seem to be struggling. All this may not be good for merchants.

It depends on whom you ask. Two things have hurt the list business over the past 15 years, says John Lenser, president of catalog consultancy Lenser: The Internet and the rise of cooperative databases.

Brokers have learned to live with the co-ops, and a few list firms have started their own. But some merchants are going straight to Abacus or NextAction.

One is Brookstone. Instead of renting the usual 200 lists for its 2006 holiday drop, the gift marketer did all of its prospecting through Abacus (now known as Epsilon’s Abacus Cooperative). The result? It saw high response rates and better ROI.

Then there’s apparel merchant Horny Toad, which plans to mail its first catalog in February. The company plans to bypass rented lists in favor of prospecting via Abacus.

Why did it choose to go this route? Because list rentals are not a good option for so small a niche, says Horny Toad president Gordon Seabury. He feels that it’s better to get a prospect model from a co-op than to pursue unsuccessful tests.

And Bill LaPierre, vice president of catalog brokerage for Millard Group, says he understands this point of view.

“If you go to the list company and rent a few gift catalog lists and select names that are three-month buyers who spent $1,000, the costs of the lists and the services add up,” LaPierre says. “Why spend $232 per thousand through the list company when you can get the same number of names from Abacus for $50 per thousand?”

Indeed, Abacus has from 40 to 50 members who use it for all of their prospecting, claims Epsilon spokesperson Heather Wilkerson.

Of course, that’s not the only reason that rental volume is flat for some firms. Another is the cost to mail a catalog.

Then there’s the Internet. Buyers are coming in through search, Website ads and affiliate marketing.

“Catalogers can acquire prospects online more effectively than they did seven years ago, and they can do it at lower cost than renting lists and mailing catalogs,” Lenser says.

One company that thinks this way is J.C. Whitney. The automotive merchant conducts affiliate marketing and search inhouse “at a lower cost and making a higher profit than if we were strictly renting lists,” says senior circulation manager Todd Brage. “I’m sure that over time, the value of the pure catalog customer will go down, so pure catalog buyers may not be as valuable as they are today.”

Brage concedes that catalog buyers are better from a retention standpoint. But he adds: “We’re doing fine even though we’re not renting many names anymore.”

That, of course, raises a whole other question. Jim Coogan, president of Catalog Marketing Economics, argues that pure Web buyers are non-responsive to catalogs.

And strong online response doesn’t always equate to great lifetime value, adds Jim Calhoun, cofounder of database marketer Daystar Wheaton Group.

DECLINING HEALTH

Then there’s the institutional health of the list business. “The boutiques are small for a reason, because they handle a particular niche,” LaPierre says. “But the large ones need to diversify. For them, the traditional list business isn’t going to be enough to survive.”

What can they do? For one thing, they can offer consulting services. That means helping catalogers with page counts, square-inch analysis, data mining, and media planning, LaPierre continues.

Yes, that would entail a different business model. But there’s no choice. “The list industry, the one that many of us grew up with in the ’70s, ’80s and ’90s, is dead,” ALC’s Fran Green said when accepting the DMA’s List Leader award last summer. “It’s changing and adapting. We’re data integrators and aggregators, statisticians, multichannel marketers, information strategists. We don’t just peddle lists.”

Still, catalog consultants don’t like the idea of list brokers stepping onto their turf. And some challenge their ability to do so. “Many list firms don’t have the staff in place that is knowledgeable enough to consult catalogers on circulation and paper weights,” Lenser says.

That’s not to say there aren’t any great firms offering consulting services, Lenser adds. “ALC has done an excellent job, and Millard, too. But overall, there aren’t many bright spots.”

Lenser even alleges that brokerages are offering free circulation management as a lure to get a merchant’s business.

Not true, counters Geoff Batrouney, executive vice president of list firm Estee Marketing Group. The list broker still gets a 20% commission from the client, and can add incremental charges for services such as circulation planning, merge/purge, and modeling.

“Are there instances when a list broker will get less than a 20% commission?” asks Batrouney. “Yes, there’s a sliding scale tied to the value of the services provided.”

In any event, consulting is not a new activity for list companies. AccuList USA, for one, has been doing it since 1990.

“One reason we’ve been able to be effective is that we’ve hired all our people from the client side,” says president David Kanter. “They’ve been working with print checks and circulation management, so we know what it’s like to take ownership of a project.”

What’s more, AccuList USA has been helping clients with search, and with mobile marketing. The company has even hired an expert in this field: Katherine Sharma, who had worked on online and mobile campaigns in the retail and financial sectors.

MokrynskiDirect, which merged with Millard this summer, has been doing something even more daring: Helping catalog clients with their direct response TV campaigns. Once considered a low-brow vehicle, short TV spots can drive consumers to a Website to get additional information or to place an order.

LaPierre of Millard Group adds that buying time for a two week DRTV test is equivalent to mailing catalogs to a list of prospects. The difference: You’ll know what kind of response you’ll have in just a few weeks. But there’s one wrinkle.

“It’s well proven that people who respond to DRTV are different than mail order customers,” LaPierre says. “The problem though is this: Can those customers convert well as responders to catalogs?”

PAYING THE RENTAL

All well and good. But there’s one thing list firms can provide that nobody else can:

Rental money. J.C. Whitney may be using fewer names. But it still needs a list manager to market its own list. And so does Highlights for Children, which decided this year to have an outside company handle its file. The educational gifts merchant selected ALC after narrowing the field to three choices. And ALC will also provide brokerage services.

“A good list company is up on all the issues in the industry, and can help a cataloger with best practices and list hygiene, and help reduce inefficient marketing,” says Highlights CEO Kent Johnson.

“We wanted a company that could effectively get us the names of people who would ultimately be interested in what we have to sell, and be able to work objectively with our outside vendors,” he says.