So far, so good. That’s the prognosis for 2005 for list professionals on the business-to-business side of the fence.
After some rough patches, many B-to-B companies are back in the mail. That’s good for brokerage and management professionals. But still, everyone is working harder, as companies look to their list partners for more than just data cards.
Led by moderator Bob Castle, this year’s B-to-B list roundtable took on a variety of issues, including the role of cooperative databases, how to serve customers better on both the acquisition and retention fronts and the specter of privacy legislation.
Times, all agreed, are challenging.
“As a representative of the list owners, you want to help them establish value and maintain the credibility of our industry throughout the transaction cycle,” said Tim Barlow. “It’s becoming very difficult to do that.”
CASTLE: So how’s business?
LAKE: Business has been very good this year. We’re seeing organic growth from clients who seem to be mailing more and earning a little bit more money for our list owners. There’s no absolutes, but a lot of our clients have seen increases in response rates in their acquisition efforts.
GOLDSTEIN: I’ve really seen a stabilization of the B-to-B technology sector. We’re seeing people who are much more serious in terms of their marketing. There are a lot of big players that are coming back, a lot of smaller mailers that are contributing to a better business environment, so I continue to be optimistic.
PAPALIA: In 2005 there have been some wins and some losses for us. Hopefully, we’ve learned from both and come away a much stronger company. Oftentimes when you take a step back you do move forward. By focusing on our core brokerage and management clients, it’s been a good year so far.
BARLOW: Our business has been generally good, but dynamic. There’s been some significant changes, some of the sectors that are strong now are smaller businesses, [like] the entrepreneur SOHO markets. We’re seeing financial services and some IT as strong. Some of the slowdowns have been in areas like business publishing.
DRYBROUGH: We’ve seen a real significant surge in growth, up 15% over the same period [last year]. It’s a combination of new business acquisition as well as the organic, year-over-year same-client comparisons. We’re happy to see that because frankly, in 2004, most of our clients were reporting improved results but they still weren’t confident enough to start committing to increased quantities in the mail. So we feel very good about ’05 thus far, and believe the rest of the year should be very strong. There’s no reason to suspect anything is going to throw a very good year off the rails.
SCHWEDELSON: You know, I think we’ve found our business to be a little bit harder this year. Not that business is down — we’re doing well, we’re growing, but we’ve seen a big downturn in volume from the very large-scale mailers. In years past, we were able to sit back and have a certain consistency on continuations from some large mailers that would kind of carry the freight with some of our list owners. [Now] we’re seeing a lot of more small to medium-size mailers coming through and the big mailers cutting back fairly significantly. So while we’re doing well, our job has gotten twice as hard to see that growth than it would have been in years past.
MALLIN: We entered the year cautiously optimistic. The first five months have been very positive. Some of the measuring stick for us is an increased activity in [requests for proposals] that we’re responding to, both on the management and brokerage side. But really, where we’re focusing a lot of our energy is in trying to respond to clients’ needs and [going] beyond just individual silos to link information, technology and analytics in a full-service story. It’s pretty clear to everyone in this room that that’s where our clients are driving us — they want more capabilities, more service, more performance from us and they expect us to deliver it in a seamless way.
CASTLE: That can put a greater strain on your business.
SCHWEDELSON: There’s no doubt our clients are expecting a line of services beyond the traditional ‘Here’s a spreadsheet with a couple of lists on it,’ [like] Web-based services, analytics, whatever. And of course, many of them don’t really believe there should be a dollar sign associated with that. And in some respects our commission structures have [allowed] the list community to get a little bit fat and happy over the years, and enjoy being able to offer services without having to provide a lot of the value-adds. So I agree completely with Ed that we are providing a lot more value-adds than in the past. [But] we’re not seeing increased dollar flow, other than helping clients have better success in their efforts and thus getting greater budget spend. It does make the job more difficult, but I think we’re more entrenched with our clients, which is healthier for the business.
BARLOW: That’s a good point. Savings we’re giving clients are not being reinvested in our services at the same pace they have in the past. And that gets daunting, not only because the value-adds don’t have profit margins associated with them, but [because] many of the innovations and savings associated with these efforts don’t come back for reinvestment. You have to go out and re-earn those dollars with additional work and innovations.
CASTLE: The logical extension of that kind of situation is that your overhead can choke you after awhile if you’re not getting money to reinvest in your company. Have you anticipated that? Do you see it as an omnipresent danger?
LAKE: Each company has to make a determination about what it wants to handle in house and build internally vs. what it wants to outsource. From our perspective we have technology partners that are building our databases, things of that nature we have for our clients. As far as printing and mailing, those are outsourced functions, because for us to assume that kind of overhead without knowing the revenue potential would be [a mistake].
CASTLE: Ralph, in a lot of ways your company has actually moved out of the traditional brokerage situation. Can you talk a little bit about that?
DRYBROUGH: Today, more than 80% of our brokerage services are fulfilled out of our cooperative prospecting database MeritBase, or private databases. As such, MeritBase is a relatively fixed expense, and we have really not had to add any significant staff in a couple of years to our administrative group. We have over 100 clients now who are actually mailing all or exclusively from MeritBase.
CASTLE: Deb, your business is in a bit different situation, isn’t it?
GOLDSTEIN: We have an unusual model — I like to think we have the best of both worlds because we are a list company like everybody else in this room, but my charter is essentially to break even. My mandate isn’t necessarily to make a profit, so I can spend more in terms of infrastructure and technology. I’m supported by a large publishing company — but I also do have to support myself by commissions just like everyone else. It’s unusual, I’m a hybrid in this industry. My charter is definitely to serve IDG, but we’re a list company and I have to keep my clients and work in that framework just like everyone else.
CASTLE: Do you feel business databases are providing a new model which will surpass standard list rental?
MALLIN: I don’t think they’ll supplant it, but I do think it would be naive to say it’s not an important list strategy that marketers are asking us to develop. There are various iterations of [databases]. But I think it’s beyond cooperative or public databases. There’s also private databases being built for mailers, basically taking that concept and building something exclusively for a particular mailer. I see that as a bigger trend. It still requires having the skill to select lists that will be part of that activity but it does take it to a different dimension: building the database, mapping the data, shaping that whole strategy. Individual list orders always will be part of the mix.
CASTLE: Except for files like MeritBase that are selectable by list, the sense of company identity is being lost.
SCHWEDELSON: I can certainly understand and agree with the private databases for the very large-scale mailers, and I see that as a growing trend. And it does benefit the mailer to mail through cooperative databases in some cases. But there’s a big, important player we’re forgetting: the list owner. What we’re seeing is that some of our list owners that have very strong, name-brand lists in their niches don’t feel they’re getting their fair share of the list rental dollars when they’re participating in co-op databases. We’re seeing the start of a migration [out of the co-ops] by some of the more branded lists that can stand on their own, and will generate orders from the same mailers that mail through the cooperative databases. I think the co-op database as it stands today will look very different a few years down the line, but the private databases are going to get more sophisticated.
LAKE: I would agree. From the list owner’s standpoint, it’s not necessarily the best to participate in these cooperative databases because of the net-net pricing and unpredictability of revenue, although some of our list owners have made a very big profit from participating [in them]. But I don’t think it’s for everybody and your list manager needs to constantly monitor usage from co-op databases. From the mailer’s perspective, we have clients that we’ve built private databases for and they mail from them successfully. We’ve also tested cooperative databases, specifically helping clients mail from a data warehouse that’s open to a small group of list brokers. This is a great tool for some, but we have had brokerage clients where the expected cost savings went away because they had to order lists outside the data warehouse and do a second merge/purge. In these cases the net-net pricing wasn’t enough of a cost savings to support the cost of that additional merge. Even the pulls across the database — pulling by job title or SIC across multiple files — in many cases don’t work because we’ve omitted all the continuation lists that do work.
CASTLE: Historically, private databases have been the province of companies with large marketing budgets. Is that still true? Are there midsize companies using private databases? Is it economically viable?
MALLIN: The building of a private database is still something that’s the domain of the larger mailer that has the wherewithal to do that. Some of the mailers that don’t have that budget will avail themselves of a cooperative database.
SCHWEDELSON: You also won’t get the list owners to participate in a private database for a midsize mailer, because they just don’t feel it’s worth their investment. So you’ve almost got to be ‘somebody’ to get the right list in. It gets to be a how-big-is-your-brand type of game.
PAPALIA: The client is expecting us to make a recommendation, but there’s no set answer for any client. It’s constantly evolving. What’s correct today is outdated tomorrow.
BARLOW: What we’re really dealing with is another case where we’re pitting the broker against the manager, sometimes within the same company. But more often than not, it’s our competitors — who are our colleagues — who keep this business vibrant and thriving. It’s challenging, because as a representative of the list owners, you want to help them establish the value and maintain the credibility of our industry throughout the transaction cycle. And it’s becoming very difficult to do that. It used to be that the variable was what net-name percentage would be applied. Now the questions are what net allowance is going to be applied, what the base price paid will be, and what running charges will be paid for unused names that had been supplied. All of those are under intense scrutiny by both mailers and list owners. It’s very tough to go to a list owner and say one of your customers is telling him what his asset is worth on the open market. It creates a lot of conflict. It’s a testament to our industry that we’ve been able to keep things on an even keel and growing over the last few years.
CASTLE: Deb, you’re in an unusual position because in effect you’re not only managing the individual lists but a database as well. Have you found ways of successfully integrating companies into your databases? Or are the vertical fields you represent so disparate?
GOLDSTEIN: Actually, it’s a combination of all those things. A number of years ago I decided from a list-product diversity perspective that we would aggregate our lists to create larger master files and databases. What I wanted to do was create databases with less selectability and more quantity, but then also have all the individual files that had a lot of rich data and great selectability. And that’s still the case. And I was always looking at hot technologies and taking those out and creating niche databases. So I really have a combination where I have larger files and niche databases, and try to maintain the brand, integrity and the tremendous flexibility that a qualified circulation offers to a mailer. But purely from a list management perspective, there’s no question that the database model is absolutely essential and that a very high percentage of revenue comes from the entire diversity of databases, whether they’re IDG internal, private or public databases. You have to look at every single avenue to maximize the revenue potential for the list owner.
CASTLE: In the consumer list roundtable (see page 23), there was a lot of feeling around the table that the participation of mailers in co-ops tends to inhibit list revenue in many ways, as names may get overused. Any feeling about that?
BARLOW: I think it certainly has had an impact on reducing — at least from the standpoint of dollar revenue per name — the amount list owners were used to traditionally. Couple that with their acquisition costs increasing, and they look with a jaundiced eye on their list supply partners, particularly if their broker and manager are one and the same. It puts more pressure on the manager to find alternative revenue streams and thus spend more money and shrink the manager’s profit margin. So it has had an impact.
PAPALIA: You do what you’ve got to do. You’ve got to look at the niche segments, you’ve got to enhance some areas of the list. You do everything you can to help your client.
MALLIN: There’s no question that there are times when we’ll sit in a room and realize a certain decision will have a negative impact on a revenue stream. You have to make those decisions, and the nature of the database leaves the advantage to the mailer. To some extent that’s what [databases] were built to accommodate. It’s a balancing act if the list owner says, ‘If I’m not in there, what am I losing?’ vs. ‘Do I stand alone and outside of it?’ It comes back to the fact that certain lists can stand alone because of the nature of the brand, the quality of the data or the business intelligence available. It’s a judgment call — sometimes we make the right decision and sometimes we don’t.
DRYBROUGH: In the B-to-B catalog brokerage arena, I believe the top circulation managers are well aware that the extent they dedicate their circulation to blind-membership co-op databases is the extent they are losing analytical control of lists that work for their catalog or offer. It’s daunting when you consider that on the consumer side there are a number of good-size consumer catalogers that don’t rent individual lists. They’re completely in bed with Abacus and the other four or five co-op databases that exist. But I don’t see that [in B-to-B]. We have many clients using 100,000, 200,000, 300,000 names a year [from co-ops]. But if you’re talking about that as a percentage of a 5 million-name prospecting plan, then you realize the vast majority are still under the control of the key-code analysis and the judgments of the broker and the circulation manager working together. But to dedicate an entire prospecting program to [pulling names out of a] black box is a risky proposition when you really don’t know who else’s names are in there.
Participants
- Bob Castle, marketing consultant (moderator)
- Tim Barlow, vice president, list services group, VentureDirect Worldwide
- Ralph Drybrough, CEO, MeritDirect
- Deb Goldstein, president, IDG List Services
- Ryan Lake, CEO, Lake Group Media
- Ed Mallin, group president, Walter Karl
- John Papalia, president/CEO, Statlistics
- Jay Schwedelson, corporate vice president, Worldata
Network
