Are you sitting on untapped cash? Would you like to leverage the equity you’ve built over the years? Why hesitate to leverage the income potential of something you’ve worked so hard to construct and maintain-- your business’s customer list?
The echoes of the typical home refinancing pitch are intentional. Lenders and list managers both have been accused of emphasizing potential rewards without paying due attention to possible risks. And betting your most valuable business asset, your customer list, is if anything more risky than betting that you’ll be able to cover increased debt on your home.
In reaction, some small to medium-sized enterprises have become very protective of their databases, rightly assuming that they are its first line of defense. They can’t bear to see those customer relationships they’ve worked hard to establish and maintain sent out into the larger merchandising world, to be exposed to possible mistreatment and even misuse.
But there are ways a small business can safely and reliably rent out its database. In some instances, they may profit even more from the new insight into their customers than from the added rental income.
DirectTips talked to Geoff Batrouney, executive vice president of Estee Marketing Group, for some suggestions on deciding when, how and why a small business list might rent its list to others. Based in New Rochelle, NY, Estee has been in the list management business for 36 years and represents 50 clients, including the first one to come through its doors in 1969. Here’s a nuggetized glimpse of Batrouney’s thinking on the question of small business list rentals:
* Any business has to invest in the care and feeding of a customer list, whether that list is put out for rental or not. “It’s got to be updated, it’s got to be cleaned, it has to be kept in a mailable, usable form,” Batrouney says. “You may as well get a return on that investment.” List rental can be a way to start amortizing those unavoidable costs quickly. * Turnabout is fair play, and if you want something—good, clean lists to help you grow your business—then you have to be willing to offer the same for others to use. Most of Estee’s lists state on the data card: “List is made available on a reciprocal basis only.” If someone rents that list, then the company, and many others in the list business, do their best to make sure that the original provider has access to the other company’s list, too.
“That’s the negotiating role of the list manager—to help make sure that you get access to the market,” Batrouney says. “A thousand dollars for renting a list isn’t going to change the life of even a small business. But getting reciprocal access to another company’s list can make a huge difference.”
* When wouldn’t you try renting? If your list has fewer than 5,000 names, you probably shouldn’t consider putting it out for rental. Five thousand is the minimum order most people place, and ten is required for repeat rental business. You should also think twice about renting if your list is tied to some specific offer or even, such as the purchase of an Olympic coin. That kind of expressed interest will be hard to translate into more general marketing—at least until the next Olympiad comes around.
A responsible list manager will tell you if your list is too small or too narrow to be a good rental candidate. “They say don’t ask the barber if you need a haircut, but a good manager can advise you on whether setting up your list for rent is worth your time and his,” Batrouney says.
* Speaking of good list managers, when looking for one, do the legwork, Batrouney says. Ask for references from other clients and from the manager’s financial institution. Find out from the bank how well capitalized the manager is. Remember, that manager is going to be sitting on money that will be coming to you; poor capitalization may mean that pay is slow to come your way.
And ask other clients specific questions about the manager or management agency. Did the company deliver the revenues they promised? Did they take proper care in protecting the client’s list? Was the client given the ultimate “unabridged right of veto” over rentals of their list? Batrouney points out that a good list manager will let the client have final say over any list deals. That client may have a very good reason for scotching a list order: for example, they may be planning on sending out their own offer at the same time, and they don’t want their customers to get two similar offers at one time. “Good list managers accept that they are only service providers for the client,” he says. “It’s their list. If they say ‘no’, we don’t say ‘why?’ We say ‘thank you.’”
* Call in the pros: Once a small business has decided to rent out its list and chosen a manager to make the deals, they should go the extra step and pick a service bureau to execute rental orders as they come in through the manager. Many small businesses try to perform the necessary list work themselves, at a great cost in resources and to often poor result. A good service bureau will take care of the adds, deletes, and suppressions as requested, down to suppressing the original list and serving up new names if a renter comes back for seconds. “It’s just not cost-effective to try to do all that yourself and still run your business,” Batrouney says. “Get a solid relationship with a reliable service bureau, pay the $50 to $55 per order, and take that weight off your back.”
* Renting can be better-than-free research, providing unique insights into your market. If you sell fishing lures and a fly rod company comes back five times to rent your list, you’ve got a pretty good idea what your next product line extension should be—and you also got paid to learn that. While the rental deal doesn’t often give you a deep look into your renter’s results using your list, you can judge their success by their subsequent behavior. “If they come back right away for another list, the offer was a huge smash,” Batrouney says. “If they come back slowly and ask for a price break on the next list, the offer was only okay.”
* Just to be safe, have a list manager decoy your list with a handful of unique, peculiarly spelled names and addresses, and point those addresses to your mailbox or that of someone you know. Should you suspect that your list is being mishandled or used illegitimately, these decoys can serve as telltale clues for tracking malefactors. “It’s rare, but it happens,” he says. “And we hate it.”
* Okay, you’ve got a good list manager and proper service bureau support; you’ve baited the traps for misusers and have confidence that renting out your list could be not only profitable but enlightening. Still, you’ve got a nagging thought in the back of your head that these are your customer relationships, and now you’re about to entrust them to the care of strangers.
Wake up, Batrouney says: “You’re dreaming if you think the customer shops only at your store, or that your names are exclusively yours.” Other companies have the names, and they’re renting them out successfully without jeopardizing their goodwill with these consumers. By agreeing to rent your list, you gain a large measure of control over what offers your customers will see and how they will respond.
In the final analysis, small businesses probably aren’t risking as much as they fear by putting their lists on the market, if the rental is done through responsible parties under a careful process that gives final veto to the providing company. And the rewards—both in income and insight-- can be worth the time and effort.
“On a good day, only 2% of your list responds to the competitor’s offer,” Batrouney points out. “So you’re not giving up any real share of wallet. In the meantime, you’re getting paid on the 100% who received that offer through your list.”
