The most telling moment in this year’s DIRECT List Roundtable came when Steve Roberts of Edith Roman Associates Inc. complained that dot-commers who knew nothing about direct mail were known to order 2 million names for a test. Although that defies all known logic, list executives chimed in with quips like, "That’s a good order" and "Have them call me."
Are list managers that hungry for business? Apparently so, judging by remarks from the 12 people on the panel. They griped about consolidation, reduced mail schedules and the general caution that now exists.
But they refuse to admit defeat. They talked about what they’re doing to find new business, and how some firms are actually mailing more aggressively.
They predicted greater consolidation in the field, and reported that smart list managers are diversifying into various other media.
Some argued that they have to change the way they do business. One suggested that payment terms for rentals be changed from the standard 30 days to the time of the invoice.
Finally, they slammed the Direct Marketing Association and other trade show producers for scheduling conferences on top of each other, and for not providing audited attendance figures.
The participants, who included CEOs, presidents and principals from both large and small list firms, were as follows:
Rich Baumer, president, VentureDirect Worldwide, New York>BR> Al DiBlasi, vice president of marketing/co-founder, MetaResponse Group, Deerfield Beach, FL
Ralph Drybrough, CEO, MeritDirect, Stamford, CT
Steve Dunn, president, Mal Dunn Associates Inc., Brewster, NY
Dave Florence, chairman, Direct Media Inc., Greenwich, CT
Leland Kroll, president, Kroll Direct Marketing, Plainsboro, NJ
Ryan Lake, CEO, The Lake Group, Rye, NY
Linda McAleer, executive vice president/principal, Millard Group Inc., Peterborough, NH
Chris Paradysz, president, Paradysz Matera & Co., New York
John Papalia, president/CEO, Statlistics, Danbury, CT
Susan Rice Rappaport, president/COO, American List Counsel Inc., Princeton, NJ
Steven Roberts, president, Edith Roman Associates Inc., Pearl River, NY
DIRECT: What is the state of postal mail right now?
DUNN: I don’t see that volume of mail overall has dropped. Certainly, there are industries that have reduced the amount of mail. I can’t think of a single publisher out there who’s having fun this year.
BAUMER: The economy and increases in costs continuously force the mailers to be more creative, meticulous and judicious in how they do business. Some of it is good—it’s called Darwinism. In our space, we see mailers moving toward integrating postal mail with other media. Most mailers can’t walk away from direct mail. They have to find a way to make it work.
MCALEER: Certain segments are dramatically down. The consumer publishing folks that we all work with are down. Are their businesses going away? No. Our catalog clients seem pretty bullish on what’s going on right now in spite of what the forecasters say.
RAPPAPORT: You had a big influx of mail that was supporting the Internet launches. That’s gone away.
KROLL: We’ve seen some decrease in the seminar and self-improvement sector. But we’ve also seen people looking at integrated campaigns.
DIBLASI: The ad agencies we work with are embracing direct mail to augment their activities with space. And we’ve seen an increase in people looking toward combined e-mail and postal lists, closed-loop marketing. Apple Computer is doing some things where they want to telemarket and mail and e-mail all around.
KROLL: It’s also the best time to test new lists and new selections. There’s a tremendous opportunity to break through cost savings, and deals are being made which we haven’t seen in any time in recent history.
BAUMER: We’re finding that some of our clients are risk-averse to testing at the moment. They’re going back to what worked, and mailing house files more often. And when they do go for a new list, they want more precise targeting than they ever had before.
LAKE: The issue with the testing is that people have less money to spend. They’re asked to do more with less than they had only a few years ago, and that’s been the struggle for us. People have less, they’re going back to their house files more often, and they’re going back to their tried and true. If anything, they’re cutting back on the volume that they’re mailing as opposed to increasing the volume.
PARADYSZ: The economics are forcing people to be more creative, and smarter about how they spend their money. But it has to be done in the context of return on investment. After two years, or a year and a half, of pretty tough profitability for clients, it’s tough for them to justify going back and carpet bombing or building market share at a time where there’s much more scrutiny of the bottom line.
FLORENCE: Some of us lose sight of [the difference between house] mailings vs. prospect mailings, or rental names vs. exchanges. I don’t feel that the mailings are down that much. I think the post office bears this out. Every time there’s a consolidation—say, a Fingerhut, R.I.P.—they buy a Bedford Fair, and all of a sudden they’re not renting or exchanging that Bedford Fair list anymore. The consolidations both in business-to-business and consumer have just been overwhelming the last two or three years. And every time that happens, there’s a little bit less money on the table for the list industry. Exchanges are coming up more, use of house lists definitely. I don’t know that any of these things are really going to be reversed. It seems to me once you start rolling down a hill, it’s just going to continue.
DIRECT: So volume is down.
FLORENCE: They’re modeling more, taking fewer names.
DIRECT: Isn’t anybody mailing more?
RAPPAPORT: It goes by segment. We’re seeing [a boost] in gardening and domestics, this nesting thing that’s occurred after 9/11. People are staying home, they’re buying home-improvement things.
DIBLASI: The financial arena is very hot.
RAPPAPORT: I’m seeing more catalogers saying that they have to return to profitability in 2002. Investment spending has a different meaning now.
DIBLASI: We were pleasantly surprised at the catalog conference. There were several individuals—new launches, new catalogs. It’s nice to see that at the conference and that people are taking an entrepreneurial spirit and launching.
PARADYSZ: We went through a period of about a year where we kept waiting for someone to talk about a new project: a launch or a relaunch or something. In the last six to nine months, that activity’s picked up.
RAPPAPORT: I’d have to say there’s more cash out there.
MCALEER: It’s also not just new catalogs coming out, it’s catalogs relaunching. There’s been five or six pretty significant relaunches, so that’s pretty healthy. Green merchandise, or maybe New Age, which hadn’t been popular three years ago.
DIRECT: What about business-to-business?
ROBERTS: Our clients are using this opportunity to gain market share. They see it as a clear opportunity when less people are in the mail. But they’re identifying longer lead time to get an order. Buying decisions are now made through a budgetary or review process, especially for high-dollar transactions. And the review process makes it harder to trace response, meaning that they have to get more sophisticated in match-back processes. There’s a greater need to connect various departments to reach the decision-makers because there’s a decision-making committee now. They’re doing more segmentation, especially by numbers per site and recency. They’re cutting back a lot to the smaller sites and mailing more to the larger sites to get penetration.
DRYBROUGH: In the B-to-B catalog world, which represents probably 80% of our business, we’re seeing a lot of new business prospects coming into our pipeline who we didn’t really see before: people who were operating under the radar screen because they were working almost exclusively with compiled files. They were customers of ABI and Dun & Bradstreet. And in these difficult economic times we’re seeing some of these people looking beyond the compiled files. They read and hear that response lists and reader lists work better for catalog offers, and some of the quantities that they’re mailing are staggering. And the amount of response modeling we’re doing is two or three times what it was three or four years ago. Overall, there’s a general lack of a mindset to invest. There’s a hunkering down, waiting to see. They want to mail more, but the signals aren’t there.
DIRECT: How healthy is the list business itself?
DUNN: We’ve found that list management alone is not profitable if you do the job properly. You have to do other things. More than half my business’s income is now database-related activities rather than straight list rentals and management and brokerage commissions.
BAUMER: And the list manager has to get compensated for that. If you’re bringing a ton of new list business to the table and it’s more expensive for you to do that, you have to make arrangements for the list owners to cover those costs.
DUNN: It costs a lot of money to do all the things we’ve talked about, especially in human resources.
PARADYSZ: From our point of view, we see that list managers of the future are going to be multimedia, multichannel marketers because that’s what the client demand is.
PAPALIA: I think everyone’s position, whatever their function, is more complex now. Mailer, broker, manager, you’ve got to develop partnerships for everybody to succeed.
BAUMER: I find a lot people who talk about integrated marketing don’t actually execute. But if that’s the wave of the future, and I believe it is, then you’re going to have to figure out how to get involved in those things. It doesn’t necessarily have to be merger, although that’s clearly an option.
DUNN: I haven’t seen any evidence of mergers working.
KROLL: Or publicly traded companies working either.
ROBERTS: Yet clearly the clients are demanding more integrated services. So I think there’s a pressure for companies to either supply those services internally or externally.
RAPPAPORT: I don’t see it as a pressure, I see it as an opportunity. A company can stay focused on its line of business or it can diversify.
ROBERTS: The pressure is on those companies that can’t provide that, but it’s an opportunity for the companies that can. And then there also are mergers that can work.
RAPPAPORT: If you do it right. If you don’t, it can be a disaster.
BAUMER: If you have complementary services, where you can leverage each client’s relationships, then you have a chance for it to work.
KROLL: The list industry has always been entrepreneurial. They’re wonderful people who have great talents in markets and sectors that I think would get buried in a large organizational structure.
PARADYSZ: But mergers need to be done for the right reasons. I would defer to Dave’s comment. It’s on their Web site, and it’s something I think the industry forgets: The mailer drives the train here. But many mergers were done for stock market reasons.
BAUMER: The other question is: Can the industry support not only the companies represented in this room, but all the companies in our business? Ultimately, there’s not enough business to chop up among all those firms, and it will force consolidation of some kind.
PARADYSZ: It’s inevitable. It happens in every other industry. Sometimes we as an industry think we’re isolated from the business world.
BAUMER: I’ll give you an example of things that don’t necessarily bring dollars into the list business. We have clients who are building their own databases online on the Internet—large databases in a short amount of time—and maybe the list business doesn’t see that happening.
PARADYSZ: Until the list comes on the market.
ROBERTS: But I would be very, very wary of any list that’s collected over the Internet because they have no history of responding by mail. We don’t know about the address. When you do an NCOA, something like 50% get kicked out. The lists that are built through the Internet should be Internet-related lists. They should be e-mail addresses that you can verify.
RAPPAPORT: It’s like technology lists in the ’80s that came through registration and warranty cards. The Internet is now an emerging medium, requiring the specifics of hygiene and address configuration.
BAUMER: Some of those lists I’ve seen, they pull great registration information that’s complete and accurate and those work. And I’ve seen some that are crappy.
MCALEER: There’s also a lot of new lists coming on the market now that are completely different, which are from consumer publications and consumer catalogers, and they know what they’re doing.
ROBERTS: That’s much higher-quality stuff.
KROLL: Steve, some of that mined data is truly unique information that couldn’t be obtained through any other source. There’s some great telecommunications data, great server and high-speed data, some great data elements that can be applied.
DIRECT: What about list pricing?
MCALEER: One of the negative things we’re seeing is blockade pricing. Clients are going in and demanding flat pricing across all lists, all segments, and I don’t think that’s smart marketing because each list has its own set of P&L dynamics. And we’re finding this with a lot of people who are just coming in flat out and saying, ‘We want to go to a 30-net, I don’t care what list it is…’
PARADYSZ: The irony is that the clients have gotten much more sophisticated. I’m not sure, and I hear this often from list managers, whether the brokerage community is being sophisticated in how it’s asking for those types of pricing arrangements.
DIBLASI: If they’re providing the facts and they’re saying, ‘Listen, we need this pricing so we can make this work,’ list owners are certainly more receptive to rolling up their sleeves and working on it.
PARADYSZ: Someone said to me, ‘If it looks like a nail, I’m going to use a hammer no matter what the situation is.’ And the fact is, not every list is created the same.
DIRECT: What do you do to make up the loss of rental revenue when big mailers like Fingerhut disappear?
BAUMER: We turn to our list owners and say there are ways to create incremental revenue streams outside just postal mailing lists. Some are obvious—an e-mail list, an insert program, blow-ins, bind-ins. Further, we help them sell sections inside their magazines. We help them with a host of online lead generation. We help them sell online inquiries. Any way we can create them, incremental revenue streams are a plus. In light of the fact that it may not be possible to reverse the trend of list rental revenue declining to some degree. Another thing I think all list owners are asking of us is that we can’t sit around and take orders anymore. You have to create new mailers. We mentioned some of the ones where there’s attrition. Maybe it’s the list manager’s job to find new mailers for that list. That’s an expensive proposition. It’s something list owners have to recognize.
KROLL: There’s also a whole educational process. List brokers are being bombarded every day through multiple channels, and it’s a matter of being an expert in all these different fields. There’s so many different dynamics that the brokers just shut down, in a sense. As managers, we have to recognize our sales force is, in fact, the brokerage community. And an educational process in training them how to utilize the data properly and how you disseminate the data to the brokers so that they can promote the files to the clients, ultimately the mailers, is key to our business.
BAUMER: But brokers are not the only channel. In our company, we have different people managing different media. You can’t be an expert in everything. And if you’re an expert in one channel, then there’s a lot of media in that channel. When you go out and sell that, I don’t think you can rely on a broker. You have to go past them to the agencies and to the clients themselves.
KROLL: But the bulk of our business is still the brokerage channel.
BAUMER: On the postal side, yes. But just think about it. Those brokers who have spent their lives in the postal mail business now have to go out and learn all these other things—and that’s time-consuming.
ROBERTS: Rich, I would come at that in an entirely different light. I think brokers are the smartest on the planet when it comes to using direct response tools. It’s very easy for a skilled broker to pick up an e-mail list and immediately know how to apply it. The reason why a lot of the dot-com companies failed was because they didn’t really understand direct marketing methods. We had people coming in and ordering a 100,000-name test on an e-mail list. And that’s ludicrous. Statistics show that you don’t have to mail more than five, 10, 15, 20,000 names to get a statistically valid result. But these guys were just throwing the dice, and they’d mail like a million, 2 million pieces as a test. And their businesses would fail as a result.
(General banter follows. Panelists make comments like "Nice order" and "Have them call me.")
MCALEER: But how many of your dot-com orders came in direct? There weren’t many in our company. They came through brokers, and reputable brokers. If the brokers indeed understand the medium, then they’re not doing their job for their clients.
RAPPAPORT: No one is turning down 100,000 names.
PARADYSZ: When we started an online division four years ago, nobody wanted to talk about accountability and direct response. It’s in vogue now.
DIRECT: When do you guys actually consider the revenue as having been booked for the list rental—when it’s paid?
BAUMER: Mail dates.
DRYBROUGH: The list owners require both. They want to see it know when it’s booked, and of course get the dispersal the next day.
MCALEER: When it’s filled.
DUNN: The collections go off on the mail date.
MCALEER: Or in-home date…
KROLL: Maybe instead of saying it was due 30 days from the mail date, we should have it due on the invoice date. It certainly would speed up the cash flow. What other industry allows you to pay 30 days after you use the product? Why can’t we just say, ‘Hey guys, it’s the invoice date,’ and move forward from that point?
DUNN: It’s hard to get the mailers to pay 30 days from mail date.
KROLL: But they are for some of us.
RAPPAPORT: For some industries, the cycle is much shorter than, say, for catalogers, who could be picking lists now that won’t mail until October. It would change their financials dramatically.
DUNN: They can’t afford to just jump—a good cataloger can’t afford to just jump all that cash flow.
KROLL: I’m just putting it on the table. It would help us all. Again, as list owners, they want their money in.
DIRECT: Do you find people are paying on time these days? Has it flagged a little bit? (General chorus of people saying "Yes.")
DUNN: I find more adjustments than I used to, and that’s difficult.
BAUMER: The job of the list manager is to ensure timely payment—whatever that means—on behalf of the list owners, and to have people aggressively collecting. We all work on commissions, and unless we get paid, we don’t make any.
MCALEER: In terms of adjustments, what we’re seeing a lot of adjustments on is in these flat-order database orders that are coming back in with nickels, dimes, dollars being billed, and it’s just ludicrous. Now we’ve gone to monthly billings.
KROLL: We’re sitting making deductions for five names, 10 names, and about 65% of our invoices are ultimately adjusted.
MCALEER: It’s absurd, the paper…
KROLL: For pennies.
MCALEER: You pay for what you mail.
ROBERTS: Why don’t we all get it over and agree to it because we’d all save ourselves a lot of money?
DIRECT: Are clients challenging you more about your financials?
BAUMER: If I were a mailer or a list owner in any way, shape or form working with any of us, I would do my due diligence to make sure that your accounting is appropriate and aboveboard and that you’re fiscally responsible. And we wouldn’t all be here for the length of time that we are and have the success that we collectively have had unless our accounting was representative of that.
MCALEER: Financial responsibility and reporting to clients or future clients—that’s as recent as the last five or six years. Before, a client would come on board, believing that what you were doing was fiscally responsible. Now people want to see modified P&Ls.
BAUMER: That’s in part because all businesses are operating a little differently. The education of the public with Enron and all the other things that happened are forcing more—every guy who buys stock now wants to know what a company’s doing.
ROBERTS: It’s routine. We have it all ready to go in an e-mail.
DIRECT: Is everybody happy with their trade association right now?
PARADYSZ: For dealing with the states on privacy issues and use tax, I think they’ve been helpful, at least the things that are reported.
DRYBROUGH: We’re all still here.
DIBLASI: I think they did an excellent job of producing information on the anthrax threat.
DRYBROUGH: Bob Wientzen stood up publicly in a very positive, proactive fashion. It was impressive, from a public relations point of view. I believe that much of what they’ve done has been done with a substantially curtailed staff in the past year. They’re probably paddling upstream constantly, and we’re kind of an easy target on issues like privacy for people like Foghorn Hollings.
PARADYSZ: Trade shows are a whole other category. They have a job to do to drive revenue, so they’re doing what’s best presumably for their P&L, not necessarily as a nonprofit trade association to support their members.
RAPPAPORT: There’s just too many shows. Now the shows are two and three and five days long.
ROBERTS: And five days apart.
DUNN: We can’t spend the whole year on the road.
ROBERTS: Edith Roman had to take their booth from Chicago and ship it to New York in a week. When you’re dealing with large booths, it takes a lot of money to do that. Also, I’d like to see them spread it out, make it more receptive to the needs of the exhibitors.
PAPALIA: Well, the other thing is like, for us to do a show, this isn’t just doing a show. To do it correctly, you’ve got to prepare for the show, and follow up, and then you have one after another after another. We don’t do anything wrong.
FLORENCE: I think there are too many of them. When I was on the board of the DMA, I said, how come you have so many? ‘Because we make money on it.’ And it’s on account of this, not as a service to the industry, in my opinion. I understand that there are people who didn’t exhibit at the catalog conference, some major list companies in New York. It’s something I know we’re going to look at, put somebody in charge, maybe just not go to as many of these things, or not go to as many in a major way.
KROLL: I remember years ago when it used to be a minimal cost to send somebody to List Vision. Now it’s hundreds of dollars. We have to go back to having a $100 fee, a $125 fee—make it minimal so entry-level people can come in, get people involved and fill up the room with list professionals and people who are new to the industry. Go back to our roots.
DIBLASI: Trade shows are still so darned important in this age of electronic media and e-mail. What a great way to get face to face and start creating those relationships, and building the existing ones. Sometimes we find we’re divorcing ourselves. I’ve got salespeople saying, ‘I’ll e-mail them,’ and I say, ‘No, call on the phone.’
ROBERTS: How many people are going to attend the shows if they’re so scattered? You can’t go to 10 shows a year, so you have to choose. If the people are segmented in different shows, it means you’re paying more money to speak with less people. It doesn’t make money for us to do that.
PARADYSZ: This may sound like collusion, but we should gather all of our expenses and aggregate them as the list industry and say, ‘Here’s the value of our business to the DMA.’ I would imagine we’re a fairly sizable percentage—enough so that we could make some noise.
KROLL: It’s not just the DMA. Just like in controlled circulation, have the show organizers provide us with some audited statement as to how many people came through at the gate . Not fellow exhibitors, but how many people actually came in.
ROBERTS: It would scare them to death. If it ever came out that there was really 300 people at the Net.marketing conference or 200 people and you spent $70,000 at it. …We should demand to know how many people are really paid attendees to these shows. Can you imagine a publication existing in this world without an audit statement?
RAPPAPORT: But would it really make a difference? You’re at your booth, and you either know it’s productive or you don’t. We know what shows now make sense to exhibit in, and what shows don’t. It’s a business decision. I’m not sure I need the DMA to tell me how many people are coming through the door.
PARADYSZ: Certainly on a basic level…to get something done.
PAPALIA: That would be step one. Work on a yearlong schedule, so exhibitors aren’t put in these situations.
RAPPAPORT: But they’re published. On some level, you know the fall show has 12,000 attendees.
DRYBROUGH: Those are PR numbers.
KROLL: But there’s no impetus for them to come to the exhibit hall. They’re there, moving around somewhere, but they’re not in the hall.
RAPPAPORT: We’re all keeping them in our suites having meetings. On a certain level, we’re our own worst enemy. We’re not allowing people to go to sessions or go to the exhibit hall, because if we don’t have meetings from 8 in the morning till 6 at night with our clients in our suites, we don’t think we’re being productive.
