For List Brokers, It’s a Changing World

IT’S NO SECRET that list brokers today are overwhelmed. Their business is good, their electronic order entry systems are faulty, their clients are demanding, and how do you work with a list of URLs that have no names or addresses attached to them? It’s not exactly that times are bad – they aren’t – it’s just that they’re confusing.

In times of change, people both complain and thrive. And no one complains as articulately, intelligently and with as much conviction as list brokers – or thrives as quietly. It is of course true that change begets pressure, and the list rental business – like most healthy businesses with bright people running them – is experiencing all kinds of pressure.

It has changed in the following ways, though not necessarily in their order of importance:

1. Order entry systems don’t work as well; brokers are drowning in paperwork; technology very often seems to intensify the problem; and nothing seems to help.

2. While this is happening, mailers want list brokers to connect their networks to mailer networks to facilitate data entry. Problem is, each mailer network is different from every other mailer network, and none duplicate the broker network.

3. Good help is hard to find. Prosperity is killing us.

4. Negotiations are tougher.

5. E-mail lists have arrived. A whole new group of e-mail list brokers upstarts and scalawags, all of them! – has arisen; the established brokers are all starting e-mail divisions; the damned lists are selling for $250 per thousand; and how do we sell them if we don’t even know how good they are?

I’d like to cover these points in greater detail for together they paint a poignant picture.

– Order entry systems don’t work as well; brokers are drowning in paperwork; technology very often seems to intensify the problem; and nothing seems to help. All the big brokers initially installed their order entry systems in the mid-1970s, and things sure looked terrific then! While I won’t go into the technological hoo-hahs of what has happened since, it’s worth noting that if these brokers stuck with their original systems it would’ve been hard, if not impossible, to transfer data from them to new computer systems. Believe me: Things have gotten so desperate for so many brokers in the past five years that whole cooperative commissions have been appointed to solve the problems of data transfer, and – for the most part – pitiful progress has been made.

I get a lot of phone calls about this, and my best advice to these brokers has been to type the central elements of their old orders into the new systems. Type? Are you out of your mind? Sometimes (but not often), fellow direct mailers, the old and elemental ways may be the best ways.

The paperwork problem seemed to have been solved in the mid-’90s with faxes and e-mail. This made everyone’s life happier until it was discovered that a large brokerage house needed two to three dozen fax machines on the premises in order to keep sane. This included incoming and outgoing faxes, ordering-lunch faxes and a few others for miscellaneous purposes.

So a number of years ago, it was discovered that if every executive and his assistants had personal outgoing fax devices such as WinFax on their desks, the proletariat would stop lining up in front of the central fax machines and complaints would lessen considerably. This forced brokers to do what they should have done in the first place put every employee online. Largely this has been accomplished, certainly in the major brokerage houses.

Still, the processing and paperwork problem persists. A reliable, hard-working broker told me the other day that a standard test pattern taking 10 to 20 orders of quantities of 5,000 to 10,000 apiece took an average of 80 hours to fulfill in terms of talking to the mailer, clearing orders, writing them and getting them out the door.

The roots of this problem, however, are much more subtle. As communication and technological problems are solved, the solutions themselves tend to open new opportunities of communication and technological innovation to connect buyer and seller. And these, in turn, create new problems.

So the paperwork and technological gluts may have no solutions after all. They may, in fact, be characteristic of an increase in profits and the need to stay innovative simultaneously. But brokers do go on about them…

– While this is happening, mailers want list brokers to connect their networks to mailer networks to facilitate data entry. Problem is, each mailer network is different from every other mailer network, and none duplicate the broker network. This problem is an offshoot of the first one noted here. Why should a mailer input list-rental data into an Excel spreadsheet when a broker can do it for him? Doesn’t all that information come from the broker in the first place?

This makes sense – except that when the mailer’s systems are in Mac and the broker’s systems are in IBM-compatible whatever, it doesn’t make sense to anyone but the mailer. Well, shouldn’t the broker adjust? He’s the guy getting the commission! Well, why the hell should he, when his company has a network of four dozen computers in IBM-compatible whatever and a new program has got to be written to accommodate this single mailer? And that, mes amigos, is just the tip of the proverbial iceberg.

The principle stated in the section on order-entry systems holds true here also: Technology begets the desire for more technology. It’s like a huge guided tour to Dante’s Inferno.

– Good help is hard to find. Prosperity is killing us…because every business in the list rental field is growing, and it’s definitely a seller’s market.

And also because of the Internet business, any promising young kid who can read half a book is being lured into a dot-com because he knows – he knows – that being a billionaire by the time he turns 30 is within reach.

Getting administrative and sales help is not quite the same thing as calling a Third World country to get a techie (although that ain’t so easy either). Experienced help is in incredible demand; the players are fighting off the fans, so to speak. Salaries to pay them are – from a management standpoint – often surreal.

Neil Mason, supermaven in the direct mail recruitment business, is very succinct about this. “It’s harder to place people. They know they’re in demand. And to make things worse – dot-com companies are experts at short-circuiting the interview process so that prospects don’t have a whole lot of time to think about what the future of the job really is. Long term, that’s a disaster.”

It’s true, I think, as people are saying, that the Internet industry is in for some kind of a real shakeup. Failing IPOs, lack of profits and the end of hysterical optimism about online business will free prospects.

So the situation may very well get better. But it ain’t none too good now, that’s fer sure.

– Negotiations are tougher. It’s no secret that far more time per day is taken up negotiating minimum guarantees and lower rates in general than was spent on it a decade ago. Well, that’s what mailers have been paying brokers for since time immemorial. But this translates into more salaries to hire assistants to account executives. More overhead. Same commission.

But, in fact, while brokers love to complain about this problem, there’s a quiet, serious recognition that it is the very act of these negotiations that makes brokers so valuable to their clients. It’s an old story in any service industry: Keep fighting for the mailer, and you’ll keep them for a long, long, time.

– E-mail lists have arrived. A whole new group of e-mail list brokers – upstarts and scalawags, all of them! – has arisen; the established brokers are all starting e-mail divisions; the damned lists are selling for $250 per thousand; and how do we sell them if we don’t even know how good they are? This is perhaps the greatest current problem of all. It accompanies all new products in a society that is not used to them. No doubt Adam was faced with it when he scratched his hairy pate and encountered Eve for the first time, or Freud, when he gazed down at his very first id on a couch. What is it? What does it do? How well does it do it? And what does “it” mean anyway?

All the established patterns – of test and response, hotlines, segmentation, using media in markets that are limited in universe and dozens more – all these have been challenged by the Internet. Dot-commers understand this. One can hardly help but understand this – they live with the problems of the Internet eight hours a day. Brokers, most of whom have never made decisions as mailers, have had a hard time comprehending both the vehicle and the marketing problems attendant to it. But they’re getting there.

While they’re getting there, however, a bunch of brokerage firms specializing in e-mail lists have started up. Most of these firms entered the brokerage field possessing only a large e-mail list which they managed, hoping to parlay their property into a larger business. Nothing wrong with that; historically, that’s the way a lot of list brokerage firms started.

And because these new companies knew more about the Net, they had strong technological advantages over the firmly established list brokers. They began to offer auxiliary services such as e-mail design and creative.

As in most commercial situations, the bigger guys on the block started somewhat later, and when they did, freneticism began to reign. It does seem that every day there’s an announcement of a new list brokerage division specializing in e-mail. Naturally, the established players perceived e-mail for what it really was: another marketing vehicle – rich in potential and a great source of new business, but another marketing vehicle nonetheless.

There were some complications, though: If you’ve looked lately at a data card for an e-mail list, the lack of expertise inherent in the data presentation must strike you very forcefully. And the price structures of these lists vary so widely that marketers might very well feel they’re in la-la-land.

Well, it might not be appropriate to laugh at this stage of the medium’s development. Tiger Woods was once a novice, right?