This week’s question: In the past year or two, some mailers have been willing to discount their list prices to stay in the mail. Will this continue or do you see things stabilizing at all?
Our current panel features Lisa Formica of FMI Inc., Jackie Kern of Main Street Direct, Jeff Kobil of LDS Group Inc., Lee Kroll of Kroll Direct Marketing Inc., Chaim Lazar of Net60 Llc, Kraig Prange of Acton International Ltd. and Adrea Rubin of Adrea Rubin Marketing Inc (Would you like to be considered to be a member of our roundtable? Contact Larry Riggs at [email protected].)
Lisa Formica, president, FMI Inc.:
As with anything, the market determines pricing. With demand lower, naturally prices will decline. As the economy improves and companies begin marketing efforts, the demand for lists will increase—and as demand increases, so do prices. Lists with little or no value will of course still suffer from low demand and low prices.
Jackie Kern, managing director, Main Street Direct:
Given that spending on direct mail has declined dramatically, it’s no surprise that the prices of lists have fallen as well. If you look to history for examples, you’ll see this is a consistent business pattern: Gas and oil companies battled it out with price wars during the slump of the 1970s and airlines drove fare wars in the recession of the 1990s. Likewise, in the last two years, nearly every industry has engaged in some sort of competitive pricing as a result of the recent economic downturn. However, when you look at precedent, what you’ll also see is that when these industries eventually stabilized, only the weakest players were eliminated. And those companies that did endure actually benefitted once economic recovery began.
Jeff Kobil, Co-CEO, LDS Group Inc.:
Initially affecting the catalog business, the growth of publishing and fundraising coops is affecting traditional list rental income. As a publishing mailer, how can you ignore being able to select coop modeled names at pricing ranging from $75 per thousand to $87 per thousand without select charges? And with more exchanges, traditional rental lists fall to the bottom of the plan unless pricing is adjusted. Personally, I believe prices are still too high, particularly in the area of tiered pricing and selection charges. For the most part, publishers have a difficult time making catalog files work and vice versa. Fundraisers have a difficult time going to non-fundraising lists. I don’t think the tiered pricing levels that have been established are really low enough. And select charges? Let’s not forget that select charges are not covered by negotiated nets and that extra $10 to $15 per thousand really increases when you consider true list costs per thousand when evaluating results.
Lee Kroll, CEO, Kroll Direct Marketing Inc.:
Unfortunately, there are very few touchpoints where a mailer can realize any significant savings or the ability to negotiate better terms. Mailing lists have been perceived by some as a commodity and as a result their value and price structures in many instances have collapsed. As an industry we should look at how we can improve the performance of data, and not just try to beat everyone up in order to get the lowest possible price where few result in being happy with the results. The online community has developed a wide range of performance-based pricing structures. Perhaps the offline community should also consider performance-based pricing scenarios as an alternative to having no activity on a file.
Chaim Lazar, president, Net60 llc:
I believe prices will start to stabilize. However mailers will be more aggressive with securing lower nets, meaning net guarantee-to-pay for names actually used. This will allow mailers to only pay for clean names they do not have yet after the merge purge.
Kraig Prange, president, Acton International Inc.:
Although I have seen a few promotions touting list discounts for U.S lists, I have personally not experienced this with our contacts, our clients or in the international list marketplace. The margin in list rental sales, all the way around is small by any business-model standard. To discount a list seems unproductive. Either the list fits the mailer’s criteria or it does not. Lowering the price does not make a list more viable. If discounting becomes widespread, it is just another signal to list brokers that we need to provide alternative list media with coordinating services.
Adrea Rubin, CEO, Adrea Rubin Marketing Inc.:
The economy in 2009 was a disaster for customer acquisition in most sectors. Mailers pulled back marketing spending and marketed to their existing customers, causing a decline in list rental revenue. As a result, list owners did offer deeper price discounts to offset the list rental attrition. Traditionally, reduction of list prices was based on volume and not economic factors. The decline in the larger financial services mailers accounted for a significant loss of list rental revenue and started the downward spiral. Discounted list base rates, waived selection charges, lower re-use pricing, and payment based on actual mailed net volumes were offered last year to bring mailers back in to files that once were core continuations. I believe we are beginning to see the light at the end of the tunnel. Financial services firms are starting to mail again. There has been a return to data testing and prospecting. However, I don’t believe we will return to the glory days of the past.
Network
