Does Size Matter in the List Business?

List brokerage and management companies of all sizes are subject to market forces, just as tides rise and fall. In my more than 25 years as a list professional, I have observed numerous instances where former list industry heavyweights such as Greenfield Direct, Listworks, and the Kleid Co. melted down on short notice. Each of them left a trail, much to the chagrin of former clients, list owners, and fellow list professionals.

When list brokers apprenticed in the “good old days,” your master (a senior broker) would tell you “brokers function as agents for list owners.” Our allegiance was to our clients. If we did not receive payment from our clients, our companies were not responsible for their invoices, unless they issued a guarantee of payment. No rookie envisioned a scenario where our clients paid, and our employers reallocated the funds for other purposes.
On the other hand, list managers are duty-bound to promote their managed lists, and send periodic royalty checks. Some of us believe that contemporary list professionals owe a duty of due care and diligence to both clients and list owners. In the case of our clients, we are responsible for screening their lists, negotiating the best possible deals, and remitting timely payment on their behalf. As list managers, aside from compliance with Direct Marketing Association and Federal Trade Commission guidelines, we must also scrutinize offers from reputable mailers, among other matters.

Our industry is facing unprecedented challenges today. Aside from the state of the economy, we are experiencing a paradigm shift away from direct mail in favor of online advertising. Both of these factors should not be dismissed, considering the fact that a number of major list companies went out of business when the economy was much better and e-mail was not top of mind.

Before you finalize your mailing plans for the fall, it might make sense to run a credit check on your list broker to see if they are paying their bills, or have another blemish on their record. If they are looking a little shaky, there is no better time to shop than when the economy is in recession, and mailbox clutter is at a historic low, as is the case today. It was the same story right after 9/11.

The entrepreneurial companies that mailed the month after 9/11 made beaucoup bucks. On the other hand, one of our former big name clients had a terrible post 9/11 quarter, because they chose not to mail. Incidentally, their Web site did not save them because direct mail, as was the case then, remains the primary driver of online traffic. For generating loyal customers, e-mail and cost-per-click advertising play second and third fiddle respectively to tried and true direct mail.

Of course, small independent list companies are also susceptible to economic changes and changing media preferences. According to Standard Rate and Data (SRDS), a publisher that tracks list brokerage companies, there are close to 1,000 independents today. Many privately held mom and pop firms deliver superior service and specialize in various markets, which allow them to compete favorably against their larger cousins. Given the number of recent list industry mergers and acquisitions, it is conceivable that 80% of all list rental activity may be ascribed to a dwindling number of brokerage and management companies. Traditional list brokers are becoming an endangered species, so much for the legendary 80/20 rule.

List industry insiders have confided that one or more of today’s premier list companies may be on the rocks. That issue came up behind closed doors in the List Leaders meeting last fall at the Direct Marketing Association conference in Las Vegas.

Whether your list broker is big or small, ask them how things are going. Sales are down at most companies, with a few notable exceptions. Some of our clients have increased their list rental volume this year, others have cut back. One thing is for sure, this is a great time to take market share away from your competitors, who may be doing less prospecting because they are either relying on former customers or other unproven tactics to sustain them in difficult times.

Last fall, at that same meeting, one of my peers admonished me to save my pennies. I’m not sure if he knew I collected coins. When things were very good for list brokers a couple of years ago, we saved for a rainy day, so we are still around and financially sound. I know several other brokerage company owners have followed the same time honored path. List companies who “paid slow” when times were good should be on everyone’s watch list today. The circle of life in the list business is there for all to see. If your broker has acted responsibly over the years, things are probably okay. No worries.

For those who are planning to expand their mailings this fall, your sales may actually improve, due to less competition in the mail. If your offer is timely, relevant, and value priced, you may do very well, while others are counting their pocket change. As has been the case in past recessions, if you are among those who have reduced your prospecting, you may join the ranks of the unemployed. It’s the same story for reputable brokers. Some of us are still hiring if your “book of business” has legs.

David Kanter ([email protected]) is CEO of AcculistUSA, Ventura, CA.