High Anxiety

IT'S A BUYER'S MARKET when it comes to mailing lists these days. That's the conclusion we drew from our annual List Roundtable, the most depressing one we've run in five years.

List rentals and response rates are down. What's up is the number of promotions being offered to goose the market.

At the same time, some mailers are having trouble finding the right lists. Financial mailers are hemmed in by new privacy regulations. Low-end catalogers have lost access to many good promotional files.

Meanwhile, managers and brokers continue to quibble about the sales and ordering process. Brokers complain about having to make extra calls to reach someone with negotiating authority. Managers gripe that sometimes brokers have junior people call, too.

But this year's panelists are a persistent lot, and all are hopeful about the future. Except for the Lake Group's Ryan Lake, who was making his first Roundtable appearance, all have survived similar downturns.

And we have a feeling they'll survive this one, too.

SCHULTZ: How are list sales right now?

MONTROY: It's tough out there.

DUGGAN-JOSEPHS: It is. The spring mailings were in the tank — just awful, from what I've heard from most mailers. But I heard at the Catalog Conference, and from our own clients, that people are not as concerned as they were and we're not seeing the drastic cutbacks for fall that they'd been thinking there would be.

WOODRUFF: Last year, all the catalogers were talking about electronic commerce, but for a great many there was tremendous disappointment in that medium. Also, the legalities of our business are changing, and the attorneys general in the various states are really putting a clamp on creative and promotional lists.

CONTRERAS: I'm concerned about telemarketing offers and do-not-call lists. We're going to see a decline in telemarketing by the financial users in the industry.

COUSINEAU: I think it's still more categorical. Publishing, I would say, [suffered] the greatest impact, in the fourth quarter of 2000, and the first quarter of 2001. Catalogers have certainly seen it, but publishing is definitely the worst. Fundraising is probably the next.

MONTROY: Every time we have an economic downturn, it seems the fundraising market remains strong. I don't know if that's just people figuring if ‘I give five bucks maybe God will be good to me.’

GREEN: Fundraisers are also not as apt to divert funds out of direct mail into other media because it doesn't work for them. We see that market being more stable too.

ODELL: So do you think they're diverting funds from direct mail or are they just cutting back in all areas?

CONTRERAS: They were afraid they were going to miss the boat when Internet marketing started and I think a lot of people really didn't think about what they were doing.

MONTROY: Let's face it, Joy, the whole country was like a bunch of drunken sailors on a holiday weekend.

WOODRUFF: Our industry is a microcosm of the rest of the business community. My low-end catalogers are not having a problem in this economy whatsoever. The only issue they have is finding enough names to mail. That's the issue they're faced with, the availability of those promotional lists that were once very plentiful in our marketplace and are no longer available.

SCHULTZ: What about the B-to-B side?

DRYBROUGH: In November I did a quick phone survey of 15 of our leading mailers to ask them how they were looking to budget in preparation for 2001. Of the 15 that I spoke with, all planned to move ahead with 5%,15% increases — maybe one was a 20% increase in prospecting qualities coming off a tremendous year and a sense of optimism. Today, my assessment would be that very few of those who were planning to increase their prospecting circulation, have in fact done so. Right now, I'm looking at 70% who are doing some kind of belt-tightening and cutting back. In that it would run from a 5% cut to, in one case I know, a 30% cut in circulation. Those I see staying on plan by and large are those that are selling products that appeal to the sales and marketing, motivational, human resources and training categories.

LAKE: Back in '99 there was talk about huge, huge growth rates on the management side. With the recent downturn, you have to be more innovative and you're expected to do more on the brokerage side.

CONTRERAS: Yes, and I think managers have to work a lot harder to sell a file now.

Discounts

SCHULTZ: I remember a promotional stunt that you pulled at Direct Media in the early '90s — offering free list tests. Can't that be done today to stimulate the market?

MONTROY: We took a gamble at doing that when we did it. It went on for, I don't know, six weeks. For the first four weeks it was no big deal. I think the last day was April 30th, and we had to set the computer back so we could do two April 30ths because there were so many orders that came in that we couldn't even process them all in one day.

GREEN: We've never felt that price is the driving force to sell a list. It's a factor, but it's not the main one. A sound rationale for making a good fit is the main factor. But there's much more negotiation than ever before. Every order is negotiated.

WOODRUFF: Twenty-five years ago when I got into this business, it was an old-boy network. People went out to lunch and said, ‘Here, you've got a card, let's go.’ Well, those days are over. My clients don't want me to entertain them; it's not necessary. They want me to bring knowledge to the table and they want me to negotiate on their behalf. And they're feeding me the information that's necessary for me to negotiate intelligently.

MONTROY: Every list should be $25 a thousand gross, and then we can all spend more time marketing lists.

GREEN: I don't agree with that. Every situation is different and mailers are evaluating lists not by the data card price, but by their effective CPMs. That's why the one-on-one is very, very key. What we find in terms of our list owners is that they're much more open to negotiation than they used to be. First of all it's a necessity.

DUGGAN-JOSEPHS: They look at you to wear two hats.

GREEN: What they respect is when a mailer comes to the table with hard data that says, ‘Here's why I'm asking for this.’ Nobody wants to respond to the squeaky wheel. We get orders from certain brokers or certain mailers where it just stands on every single order regardless of the quantity of the list, whether it's a test, net-net.

WOODRUFF: And the deal is never good enough.

DUGGAN-JOSEPHS: I have noticed, though, an awful lot of promotional e-mails from list managers offering deals: Free tests, commissions on selections for the month of May…

WOODRUFF: As a broker, I don't find commissions on selections at all entertaining to me. First of all, it's very hard to manage internally. Suddenly you've got this special order that needs special attention and you've got a formula in terms of how your system works, how do you feed it back. It becomes problematic.

SCHULTZ: What about the mailer? Wouldn't they question the broker's integrity?

MONTROY: That was my immediate reaction when I confronted it. Oh my, what would someone think that all of a sudden I'm recommending this list?

CONTRERAS: You need the recency and the product.

COUSINEAU: Well the whole structure of commission is an inherent conflict of interest, with the higher level cost of the list and the commission.

DUGGAN-JOSEPHS: It's the age-old question. As brokers, the mailer is our client and the list owner pays us.

WOODRUFF: Right, and the broker and the manager are diametrically opposed to each other.

MONTROY: I had a list owner pose a very interesting question to me last week, which was: How do you feel about saying brokers should be 15% commission? I was really kind of taken aback because I'm used to being beaten up on the other side. What's you're reaction to that?

WOODRUFF: Years ago there were a lot that only gave 10%.

MONTROY: But I'm saying this is someone who was traditionally at a certain level.

WOODRUFF: Well, that's a quick fix and that was done to get more of the overall percentage.

GREEN: We have recently taken on lists that were enhanced, some of the last holdouts that were at 10%, and we moved them to 20% and we fought hard with our list owners to do it. We [had to persuade them] that you're probably not going to experience a lot of attrition from your core users. But in these tough times, we have to be out there with everything in our toolbox to get you new business. If you think 10% commission isn't an impediment, you're wrong.

DUGGAN-JOSEPHS: I don't think there's any single, truly unique way out there. If you have list A and B and they're similar and this one's 15 and this one's 20, the 20's definitely getting the order.

E-mail Lists

ODELL: Has the privacy issue affected mail at all?

WOODRUFF: The privacy aspect has changed the nature of the data dramatically, in the insurance market in particular. That sector of our business is really being impeded by all the privacy issues and whose data is allowable and how much data you have. That whole world has changed very, very dramatically.

ODELL: Has it affected volume?

LAKE: It's affecting us in terms of fax numbers. Some people just pull them off completely because they need permission to.

SCHULTZ: What about e-mail lists?

MONTROY: E-mail lists or the lack thereof.

LAKE: There's more and more every day.

DUGGAN-JOSEPHS: Are there any that work?

MONTROY: Yeah, there are a couple. Actually, they turn me off but the same kind of principles apply to e-mail lists that apply to everything else.

GREEN: A lot of the e-mail lists that are out there you never use in the postal world. I agree with Ryan. There are more and more, but for lack of a better term, I'll call them branded e-mail lists that are the e-mail component to a responsive postal file that are coming onto the market.

DRYBROUGH: Yes. But you hear about a 50,000- or 60,000-name 12-month e-mail list, and people realize they have an asset to monetize there. But they're worried about the privacy issue. I wonder how many great mail order buyer lists were on the market in 1950.

MONTROY: There weren't, Ralph. When I first started, there were not a lot of direct response lists around and for those that were around, it was like a very sotto voce thing: I'll exchange for yours if you trade me mine. I think the same thing is happening in the e-marketing world. We're starting to see people exchange e-mail lists rather than having them available on the market.

GREEN: I agree. What we're seeing is third-party relationship e-marketing so that rather than push a message to somebody else's customers, you have that marketer push that message for you to their own customers. There's revenue sharing that can be derived, and it gets around the privacy issue quite handily. We're actually seeing that the response rates are better than they are on a cold e-mail push.

COUSINEAU: But we're also talking about using the Web for acquisition. The Web site is a powerful tool for the existing house files.

ODELL: What about exchanges on the traditional side?

CONTRERAS: Promotions are becoming an issue. Years ago, you had very similar files — sure I'll give you 20,000, you give me 20,000. Now mailer A wants to offer $25 off on orders over 100, $50 or free shipping and then you've got list owner B saying, “Well I'm going to offer this on my book and there's going to be a problem.” So the only way they're going to work out the exchange now is if the person who's requesting to use their file lets up on some of their promotions.

DUGGAN-JOSEPHS: I've seen that come up this year. I think the spring mailing is the first time where it really started big, where what's going in the mailbox has to be competitive with the offer on the Internet.

WOODRUFF: I agree that apparel catalogers have been really hit hard by having a competitor of their local department store in the mailbox with their 20% off coupons every other day. The department stores have become highly promotional and they can't compete against that because the department stores can mail every other week. Even it it's Wednesday, 20% off.

DUGGAN-JOSEPHS: The department stores are multichannel, so every department store is every cataloger's competitor now, where it didn't used to be that way.

WOODRUFF: And what riles me about that is that at the cash register retailers are requesting your e-mail and home addresses, as much information as they possibly can. And yet our hands as an industry are tied — we're not allowed to ask for all that information.

DUGGAN-JOSEPHS: They used to have the luxury of just using a credit card and doing a reverse append, but with the privacy issue, that's out the window.

DRYBROUGH: You can ask your customer for that information. That's what the department stores are doing.

WOODRUFF: I'm talking about from a prospecting point of view, that our hands are more tied.

Broker-Manager Relations

SCHULTZ: The last time we had the brokers here, we heard a lot of griping about list managers and the ordering process. How do brokers feel today?

WOODRUFF: The people in this room who are list managers know that I'm on the phone all day long. If my staff doesn't get the answer that's necessary from the manager they deal with, I call that person's supervisor and say, ‘This is what our client needs. You give us this or a deal that's close to it, and you'll get the order. Or you will not get the order.’ The sad thing is that it requires two or three levels of conversation to get to that point. However, the list manager has a list owner that they answer to and that is part of the process. I don't answer to that list owner, they do.

GREEN: Technology has so dramatically compressed the amount of time that we all have to deal with a request, whether it's comp or orders. It's really put a strain on your ability to train that quickly. One of the questions we try to get a handle on at ALC is what is the standard? If you call at 10 o'clock in the morning and you have counts that have to be generated, what's acceptable? Should we be back in one minute, 10 minutes, two hours, the same day? So the compression of the time makes service standards really bad.

MONTROY: The way that we're all structured is that the least experienced person is the one on the firing line in the management side of the business.

GREEN: It's difficult, Rosemarie. I agree with you. We've done a lot of experimenting at ALC along the lines of what you're saying, But what we found is that senior brokers have an assistant call and request basic information. So what we try to train is how to bump the calls up appropriately and to train our people to say, “That's out of my realm of expertise, I need to give you my manager.”

DRYBROUGH: Right. When I was doing brokerage, I don't believe that there was a lot of trouble getting to the right answer reasonably quickly and with fairly good accuracy. What I always objected to were these inane phone calls from a list manager who'd done utterly no research — several of those a week, easily. The thing that bothered me the most about list managers in general was the lack of preparation and cold calls.

GREEN: There are a lot of managers who come from a quantitative orientation rather than a qualitative orientation. There are companies — ALC is not one of them — where the people are required to make X number of phone calls. That doesn't ensure that they're going to be smart, targeted calls.

LAKE: I agree with that, unless we're having the experienced people making those outgoing calls rather than people who don't know the business that well. It's like, “I made my 30 phone calls today, I'm done.” And you made 30 meaningless calls.

DUGGAN-JOSEPHS: It is such a two way street. If you have an untrained person calling the manager, don't expect to get a great answer. It's up to each of us, whether we're the manager or the broker making the call, to make sure that we individually have our own staffs up to the level that we want.

WOODRUFF: Right. And I think before the natural list managers had Web site availability for data cards and reusage information and those kinds of tests that a broker does, that makes it much easier for us to go in and retrieve information and feel that it's valid, accurate information, where years ago we were on the phone calling to validate the hotline counts, to validate the usage. For example, demographic enhancement on a data card. It's great that the data card says it is demographically enhanced, but what does that mean? What if we have a client that wants presence of children? We have to call to find out if there's presence of children on that list. I see this business becoming more self-service with the Internet. I can go in and retrieve data the way I want to retrieve it. But wouldn't it be great if I could go into Direct Media's Web site, or ALC's Web site, and say give me all of your lists that have the presence of children on them?

GREEN: We're building that now. The other thing we're doing, we are adding the top 25 requested counts on every list. And it can go deeper than that.

COUSINEAU: The same thing is true on the client side, getting them a lot of information makes so much sense — [getting] value-added information to clients faster.

CONTRERAS: From a manager's perspective, I like people to call me for counts because that gives me an opportunity to find out who you're working with, what else can I recommend for you. Sometimes, if everything is there, the broker gets the data card, but I've never spoken to the broker. The order comes in and, well, it's too late now. Their mail date is a couple of weeks away.

SCHULTZ: What are you doing about recruiting and training people?

MONTROY: We have got to spend time training people. We're all at fault because it has become such an immediate business. It seems that we're constantly on a treadmill.

GREEN: I think have to learn from what dot-coms were able to do. It's not so bad and we can do it too. As an industry we don't do a good job of making ourselves look sexy to people who are coming up through the ranks. Before, we were saying, ‘Boy, I want a thankless career.’ We get somebody in and then they go, ‘Wow, this is way more fun than I thought it was going to be, this is way cooler.’ Recently we made a deliberate effort, even our recruitment ads and everything, talking about our role in direct marketing as a larger entity and how the Internet is part of what we are.

DUGGAN-JOSEPHS: The people we're hiring have to be technologically savvy. You can't bring in the kid who just graduated from Danbury High and thinks maybe their parents would treat them better if they had a job and they live at home. They need to get beyond that.

CONTRERAS: Most of the young kids we bring in are right out of school. One of my people just got his MBA. He's been with me for three years. I figured for sure that once he got his MBA he'd be gone.

WOODRUFF: The other side to that is that everyone in this room was mentored. That's the thing that's missing today. It's absolutely critical to have a mentoring relationship with the rising stars.

ODELL: What's the future look like?

COUSINEAU: I believe that there's a lot of growth to the shrinking universe. I think we have to be a lot smarter about house file promotions and multichannel marketing. I think that's going to become the miracle side of the Web. I would have no reason to think that this isn't a growth industry.

DUGGAN-JOSEPHS: The biggest impediment to our growth is the U.S. Postal Service. It's really important for all of us in the list industry to make sure that we stay involved in it and contact our congressmen and our senators and everybody else and let them know the effect it could have on the businesses in their states. We're all in business because clients mail something. The thought that they're going to switch 75%,or 80% of their effort from postal mail to e-mail and we'll be involved in that is ludicrous. I don't see that happening.

LAKE: I think it's definitely still a growth industry. I think it's just a matter of where that growth is going to come from. The traditional direct mail will always be here. There are just going to be different slices. Our growth in the last two years has been interactive, particularly e-mail. On the publishing side, we're going to see innovative ways to drive subscriptions — outside traditional direct mail.

GREEN: I think the future looks extremely bright. We have an entrepreneurial spirit. We've gone through ridiculously tough times and emerged better and we're very quick, I think, to embrace new opportunities. If all we did was trade data cards back and forth, that would cause me concern. But we're not. And I can see this trend accelerating in the very near future.

DUGGAN-JOSEPHS: A year ago we were all afraid of the Internet. It was going to would take our list business away. Look where we are now. We're all involved in it.

MONTROY: I'm from a large Italian family, and when I started in this business it seemed that every one of us was in advertising and marketing. I was the phone who got the phone calls: How would you handle this from a direct marketing point of view? It became part of their perspective, and they began to look at me, the coupon clipper, as the one with that expertise. We're not in the list business — we're direct marketers. It's a measurable business, and it encompasses an awful lot. God only knows what's going to come in the future.

PARTICIPANTS:

Kathy Duggan-Josephs, President,
D-J Associates, Ridgefield, CT

Fran Green, Director, list management,
American List Counsel Inc., Princeton, NJ

Ralph Drybrough, CEO, MeritDirect,
Stamford, CT

Rosemarie Montroy, Head of business development,
Direct Media Inc., Greenwich, CT

Joy Contreras, Vice president, consumer list management,
Edith Roman Associates Inc.,
Pearl River, NY

Mike Cousineau, Co-president,
Paradysz Matera & Co., New York

Carolyn Woodruff, Senior vice president,
Uni-Mail List Corp., NY

Ryan Lake, CEO, The Lake Group, Rye, NY

Ray Schultz, Editorial director, DIRECT

Patricia Odell, News editor, DIRECT