Direct had a full house for this year's list roundtable. Considering all the additional responsibilities on brokers' plates, that's impressive. Clients' time and budgets are crunched, and they're looking to list professionals to provide far more than names. These days the average list company also offers e-mail deployment, search engine optimization, data analysis and market research. How list pros charge for these services and make the most of client relationships were hot topics. “It's a delicate balance. We can't just turn on the clock like an attorney,” said Statlistics' John Papalia.
GREEN: We've all expanded beyond management and brokerage. The value proposition for traditional list companies has changed dramatically.
SAMBROOK: Our customers are primarily B-to-B, and mainly high tech, so in many cases it's been the client pushing us to the next level. We've always had to step ahead and deliver content and deliver leads.
SCHWEDELSON: 2008 will be the first year proceeds from services other than traditional list rental will exceed all other revenue in our company, which is pretty amazing. And it's a growth year, too, which in and of itself is exciting.
MASSE: We've diversified our channels and offer ancillary services, but at the core our business remains media brokerage.
ZILLING: Over the years our focus has been database marketing, using list sourcing as the foundation and advanced segmentation to bring in additional data.
GREEN: What has driven this diversification?
BAUMER: The catalysts for all of us probably are similar. On the economic side, we see the costs of acquiring new customers through direct mail. And the reality is our clients demand more services. If they don't get them from us, they'll get them elsewhere. Our customers want to know how they can grow their businesses efficiently. They want to generate leads, acquire new customers and communicate with those customers via multiple media channels. We need to help them navigate all that.
LAKE: Take e-mail marketing as an example. In the late 1990s, you had DoubleClick, 24/7 and other companies that understood the ability to create critical mass — but we understood how to target. It was a natural extension from direct mail into e-mail and we understood how to leverage that model. The new companies to the space had millions of e-mail addresses, but list brokers looked at how to target the best possible lists, as opposed to just having a master file with thousands of different sources, which might not be as reliable.
ZILLING: As more sales happen online, offline response rates are dropping. A lot of our focus has been on developing analytic tools to help us understand opportunities online. We need to get our arms around what's going on the marketplace.
SAMBROOK: The Internet has empowered consumers and changed the way companies market and communicate, as well as the content they deliver and how they deliver it. Our role is to help [firms] nurture leads and move people through the sales cycle. It's a natural fit for our industry. It's like the rest of the world has caught up to what we've been doing.
SCHWEDELSON: Don't you think it's fair to say, though, that our industry has been very much about the tail wagging the dog? We're not soothsayers by any stretch. Our clients really are the ones who can share key information to point us in the direction of where things are going. They're seeing declining rates in some categories, even sooner than we are in certain cases. They say, ‘Can you help us with this?’ We say ‘Sure,’ and then we get off the call [wondering], ‘How do we do that?’ But when we figure out a profitable solution we can share that with other clients.
KERTELITS: I agree. A lot of the growth we've seen is based on our clients' needs. In the nonprofit category a lot of clients have done away with their own marketing departments, so they're looking for outside sources. They call for help, so you become an expert in that area and then you can share the information. Clients are reaching out and saying they want a partnership to take them to the next level.
GREEN: What direction are you headed online with your clients?
BAUMER: Everything we do falls under the heading of direct marketing, even if our clients don't always recognize it. And that's OK. They're looking for a return on their marketing spending. Clients are focused on an action being taken based on an advertisement. And in the online space there are a lot of different ways to accomplish that. Unfortunately, a lot of us in the list industry were late to the game and allowed new players to get in.
MASSE: Our online group actually has evolved from just brokerage to being a full-service agency. This was partly in response to client need. We're involved in all kinds of online media. We've also gotten into online creative development — some of the creative our clients were getting wasn't effective and was [conceived] by people who didn't understand direct marketing. And we've built proprietary software for things like bid management and sales optimization.
PEREZ: Our program started as an online advisory/consultancy strategy. We thought [we could assist] our clients by helping them develop Web sites, metrics and a variety of testing components, and drive traffic. Candidly, what we found [they] wanted was help renting and managing e-mail lists,e-mail deployment and e-mail list hygiene.
McCORRY: In addition to traditional media brokerage, we're finding success in digital media partnerships, taking two or three clients and marrying them together where they have a like audience. It opened up clients that [usually] don't rent their list or use e-mail. And that's led to other services, like creating Web sites for them.
BAUMER: I think the other thing we've all done pretty well is monetize assets for clients. In the beginning it was their mailing lists and then their e-mail lists. And now it can be their Web site. We power post-registration. If a client has a Web site where people are asked to register, we enable [that client] to show offers and generate incremental dollars.
GREEN: What additional products do you provide offline?
SCHWEDELSON: We've started brokering offline co-registration. We're working with a lot of B-to-B publishers that need requalification on their magazines. We call people up and ask if they still want to receive XYZ magazine. At the end of the call we insert a question, like ‘Do you also want to receive e-mails from XYZ?’ It's a huge way to drive offline registration. We should have been doing it for the last 20 years, but it didn't dawn on us until we started trying it online.
MASSE: We've developed ancillary services, like doing research to track promotions. We also do ad hoc things, like helping clients with budgets or [requests for proposals].
GREEN: How does this expansion affect your bottom line? Do you charge for these services? Do you bundle them into your current structure?
PAPALIA: The challenge has always been keeping both the company and the client satisfied. We have to work with clients and get in their shoes. We find ourselves developing a partnership with them, talking to them, understanding their needs and feeling their pain, to help develop programs. Then we can bring those ideas back to our company, where we can help other clients.
GREEN: Is it an ancillary revenue stream for your company, or are you just offering more for the same?
PAPALIA: It's a delicate balance. We can't just turn on the clock like an attorney. I don't think you can do that in this economy. However, you can generate more money for your company by creating programs for clients on some sort of standard commission.
ZILLING: We're seeing clients and prospects doing more and more outsourcing. With that, many of them understand there's an expectation they have to pay for [additional services]. Our leverage is that we know direct marketing. If we can show a return on investment, then most of our clients are willing to pay for added services.
KERTELITS: It's whatever makes sense for you, and for the client as well.
SAMBROOK: We tend to bundle things. You pull in different resources and customize a project, and ultimately you're providing a solution for the client.
SCHWEDELSON: What we've found is that in the lines of business we all compete on — traditional brokerage and management — we can't charge more because everybody is undercutting each other. But in the lines of business where we're bundling bits and pieces in different ways, we can get additional charges because we're not really going head to head; we're creating custom packaging.
ZILLLING: Here's an example from our traditional core space: Not charging more for the list but charging more for the information supporting the use of the list. If clients are having trouble capturing good key-code data, match-back analysis can help them understand where their marketing dollars are going. Solid information is valuable and people are willing to pay for it.
GREEN: Does the expansion of products and services provide more opportunity for revenue?
BAUMER: I think it has to — or it has to tie in a client tighter to you. If you're not charging for a service, maybe you could rationalize it as a value-add if you get a longer commitment. We're also finding that as we provide more and more to clients and they notice a larger portion of their budget going to one single entity, they may want to negotiate a lower percentage. That's a natural business tendency and it can be a problem. If you're going to negotiate at all, you've got to get something back.
PEREZ: Our strategy always has been that we want to be as important as we possibly can to our clients. The more we support their business, the more opportunity [we create]. The key is to make sure you're providing real value. Most mailers are going to be looking for a break if they're doing more with you, not necessarily to hurt you but because it's a reality of their costs. Most mailers are looking for quality. And if they get quality, for the most part, they'll pay.
GREEN: A lot of us have employees who have been in traditional brokerage and management for years. How do you get your current brokers to handle these additional services? Or do you need to bring in new employees?
McCORRY: The challenge we've had internally is that some of our senior folks have never had to ask for money for traditional services like brokerage and management. And now the business has changed dramatically, whether you're doing more campaign planning or research and competitive analysis. It's changed the type of individuals we've had working on accounts and the value we bring to the client. Clients are fair. They'll pay for these services, but you have to have a good relationship and be honest with them.
KERTELITS: Clients will now ask what percentage of your time is spent working on their account. They're doing internal calculations to determine if they're paying too much for someone's time. You might be spending 10% of your time and they might feel it's necessary they get 40% because they're that important. It's a sensitive line to walk. Can I charge for a service? Can I not charge? Can I bundle it? There's a lot of things going into the equation.
BAUMER: You need to think about how to deliver a service. Is it through the same channels, sales reps and account managers? Some people can adapt and some can't. In some cases you need different personnel.
LAKE: I agree. I think it's a hybrid. We have clients we do online lead generation for, and we have people who are dedicated to understanding that space. If a broker has been focused on traditional direct mail for 15 years, it's tough to make that broker an expert in [online media] in a short period of time.
SAMBROOK: You need to look for the change agents. You might bring in outside specialists as well. Ultimately, you've got to get everyone internally to move along with it.
SCHWEDELSON: We tell our people, ‘We're going to do this great new thing’ and we get everybody in the company all fired up about it. And then we have five people specialize in it and the other people who thought they were going to be working on the project say, ‘Well, wait a minute. I'm not part of the future? What about me?’ We have ongoing issues where people want to be part of the emerging technology. It's tough to manage.
PEREZ: We've worked with all our salespeople [to make sure they] have some comprehension of the new services so they can at least introduce them to their clients, but we really haven't pressured or pushed them to consummate the sale. Our salespeople can focus on their strengths and we can line it up so each service has an expert.
GREEN: We're talking about an investment in research, technology, personnel and training — and that's not free. Even if we're trying to do it with current staff, there's an investment. What components are needed to change your value proposition?
LAKE: For us, as an independent, it's more partnerships.
SCHWEDELSON: We have [an in-house] e-mail deployment service bureau. That gives us advantages when we talk about what we do.
ZILLING: We have to be strategic listeners and thinkers. Brokers need to be willing to think outside the box and explore beyond what they ordinarily would've considered their comfort level.
GREEN: Are there certain types of clients or categories more willing to expand their relationships with you?
BAUMER: We've grown dramatically by working with certain media on a performance-based model. The list business historically hasn't done this and still doesn't, nor am I suggesting that it should. But there was a time, probably before the Internet, when we looked at television and radio and saw there were not only remnant deals but per-inquiry deals. For us it didn't come to pass in broadcast — but it did in the Internet world, in a big way. Online lead generation is now the biggest part of our business, in part because it's performance based. So it takes some risk off the advertiser.
KERTELITS: Nonprofits are a little bit behind the curve as far as technology goes, so they're still just looking to drive Web traffic and online donations. One thing I find interesting is mobile cause marketing, basically generating leads through your cell phone. You have a call to action sent to your phone and are asked to type in a keyword like ‘donor.’ Automatically, a donation is made on your behalf and is charged to your cell phone bill and you go on your merry way.
RICHARD BAUMER
President/CEO, Venture Direct
FRAN GREEN
Chief revenue strategist, ALC (moderator)
MIKE KERTELITS
Account executive, RMI Direct Marketing
RYAN LAKE
CEO, Lake Group Media
PAUL MASSE
Vice president, ParadyszMatera
OWEN MCCORRY
President, customer acquisition services, ALC
JOHN PAPALIA
President/CEO, Statlistics
BEN PEREZ
President, Millard Group Inc.
ANDREW SAMBROOK
General manager, IDG
JAY SCHWEDELSON
Corporate vice president, Worldata
MARK ZILLING
Senior vice president/partner, Merit Direct
GREEN: Are there any services that seemed right for your companies but just didn't work?
PEREZ: We've had a market research group for more than 10 years but it never took off the way we'd hoped. We developed a couple of co-op research programs that have been very successful, and that's helped us. But we thought market research would be a bigger part of our business, as clients needed to better understand the environment they were competing in.
SCHWEDELSON: Many years ago we launched a separate company called WebConnect. We believed brokers and managers were going to end up representing Web sites and e-mail newsletter sponsorships the way we represent lists. But it was just something brokers were never able to get their arms around, and obviously, others in the Web space have taken that over. It's sad. I think we had the right intelligence as a group to handle that media, but we didn't jump in with two feet at the right time. It was a major endeavor that was successful for a while but didn't have the life we thought it did.
LAKE: For us it was e-mail newsletter sponsorships.
BAUMER: Years ago, we were the largest cooperative card-pack publisher. That wasn't terribly profitable or easy to grow, so we looked to other opportunities. Most list brokers were very comfortable, both economically and professionally, selling what they knew — lists. Trying to introduce new ideas beyond that black box was pretty difficult. Technology changed the world and the ability to grow and make money in the direct mail business has only become more difficult. As a company we've reinvented ourselves many times over, strictly by economic demand. If you don't listen to your clients, and you don't deliver and expand, they're going to buy those services elsewhere. — BNV
GREEN: What's the next frontier for your company?
PEREZ: One is really old school: alternative media programs. They've done quite well for us. Our clients are very interested. We see catalogers working with each other or publishers, for example. The biggest growth has been in traditional package inserts. Clients were reluctant to monetize this in the past, but now it's become a place to gain revenue. Another area has been e-mail deployment, building products around e-mail hygiene, and bundling those together.
MASSE: Alt media has been a growth area for us too. Part of that has been client driven, as they see some of their other channels not performing as well. The other extreme is on the digital front, where we've had tremendous success building proprietary tools to help clients manage things like bid management and search optimization.
ZILLING: E-mail has been a large growth area for us. The ability to develop tools to consolidate information across channels is another strategic direction we're going to continue in.
MCCORRY: Our focus has really been on data integration, whether it's customers or prospects. We're doing segmentation work on both ends, and then providing strategic direction on how to communicate, whether it's insert media, e-mail or direct mail.
KERTELITS: We're also concentrating on research and analysis and just helping clients mail smarter online and offline.
BAUMER: Two big areas for us are online lead generation and affiliate marketing. But the biggest things our clients are focused on are natural and paid search. Both are affecting their bottom line in a positive way.
SAMBROOK: It's intelligent database marketing, where we're taking more ownership of the process all the way through, managing content assets and helping [clients] optimize those assets, and follow up on leads and rank them. That market is evolving and becoming more complicated. In general, our services are going to increase and become more turnkey-oriented. The risk on the client side will be reduced. You have to just jump in — things are going to change as we move forward and we're excited about it.
SCHWEDELSON: I think one of our focuses is managing expectations for our list owners and mailers. Everyone expects a lot from the channels they're working in, and sometimes those expectations aren't realistic. We need to help clients navigate the emerging channels intelligently and not present a picture that isn't realistic.
LAKE: [We've seen considerable growth] online in analytics, e-mail appending, deployment and list management, and co-registration programs. But we've also experienced significant growth in our traditional direct mail business. For example, 10 years ago we did not do a lot of merge/purge or list rental fulfillment work and today we handle these services for better than 40% of our brokerage clients. We also provide direct mail response analysis and mail planning for more than 35% of our traditional direct mail clients, whereas historically we performed these services for only a select few.
PAPALIA: E-mail has helped us a lot, as have ancillary services like merge/purge. But the bulk of our growth comes from making sure the client sees the little things we do to make sure they're maximizing our services. It's kind of like a hamster on a wheel: We're constantly going. We've found a lot of success by providing our clients with a lot of visibility. That's our job. We can't change the economy, but we can sure as heck try to get as much out of it as we can for our clients. That's the message we're trying to get across. Some listen, some don't. — BNV
