The dot-com boom created new business for list vendors in 2000
THE DOT-COM EXPLOSION helped create a banner year for the list industry – at least according to DIRECT’s 2000 forecast survey.
Over 75% of the respondents reported that they mailed to rented files in 2000, compared with 64% in 1999. And many of these mailers were newcomers.
“The dot-coms created an infusion of cash into the list business by renting millions and millions of names to drive traffic to their Web sites,” says Jay Schwedelson, vice president of Worldata/WebConnect in Boca Raton, FL.
Traditional mailers also rented names as they searched for online customers. And last month’s postal rate increase and the looming threat of another in the near future had mailers bulking up their volumes to beat the hike.
And will the boomlet last? Not likely, experts say.
The mini-boom continued for well into the year, even though the death spiral for many dot-coms began last March. Many online firms scrambled to show impatient investors that they could reel in customers, and continued to pour money into acquisition efforts. This kept list rental revenue flowing. But as the year wound down, many dot-coms closed their doors.
“I don’t think we’ll see the volume or the numbers this year,” says Robin Lyons, senior vice president at Uni-Mail List Management in New York.
And here’s another complication: More mailers used outside files, they expected to rent fewer names. Only 43% reported that they would increase mail volume to outside lists last year compared with 58% in 1999.
Response Rates A respectable 2% response rate to outside files encouraged many firms to keep on mailing. That figure has remained unchanged for three years.
“That’s good,” says Kathy Duggan-Josephs, president of D-J Associates in Ridgefield, CT.
Duggan-Josephs cites the increase in the number of selects available, better targeting and a change in tune about sharing with competitors for the solid run in respectable response rates.
“More mailers are exchanging with the competition,” she says. “And if you’re considering [exchanging names with] a direct competitor, those names should work well and will bring your overall response rate up.”
And what about house files? The percentage of respondents that expect to increase mail volume to their house files dropped from 60.2% in 1997 to just 42.4% in 2000.
Experts say shrinking universes and a lack of new names and fresh sources have taken their toll on house lists. In addition, all-out efforts to reactivate customers may have reached a plateau.
“Mailers may have taken [reactivation] to the point of saturation already and if they don’t have new offers they’re reached the point of abuse to their customers,” says Duggan-Josephs.
Dakin Farm’s mail volume to its own list has remained constant for two reasons, according to Sam Cutting, president and owner of the Ferrisburg, VT specialty foods firm. For one thing, the firm’s business strategy is to break even or better. Why the modest goal? Because the firm has reached capacity at its plant, and brings on only “a couple of thousand” new buyers each year.
“We’re being cautious and we’re mailing as profitably as possible,” Cutting says.
Meanwhile, response rates to house files dropped from 7% in 1997, to 5% in 1998 and then to 4% in 1999. The good news is that respondents expected those numbers would creep to 4.7% last year and then up to 5% by the end of this year.
Not surprisingly, the use of e-mail is on the rise. E-mail was used by 42% of respondents last year, a 14% increase over 1999. Those numbers are almost certain to go still higher.
“There isn’t one major company that isn’t e-mail marketing to their house file,” says Worldata/WebConnect’s Schwedelson.
And as the use of e-mail rises, so do efforts to obtain permission to send e-mail. For example, the percentage of respondents reporting that they have opt-in lists rose from 3% in 1999 to 12% last year. In contrast, those maintaining opt-out files dropped to 14% last year from 34% in 1998.
The number of available opt-in e-mail names – estimated at well over 100 million – is also fueling marketing efforts.
“The dot-coms were the initial drivers in making e-mail lists available,” Schwedelson says. “But now traditional direct marketers are bringing files onto the market in record numbers. It’s becoming much more widely accepted to have your e-mail list on the market.”
Experts say that an estimated 6% of overall budgets are currently being diverted from traditional to interactive marketing efforts. “We’re only seeing the beginning of it,” says Reggie Brady, vice president of strategy and partnership for FloNetwork in Toronto.
Dakin Farm has diverted 20% of its traditional marketing to Web marketing and is matching that amount with new money, Cutting says.
“It’s hard for traditional marketers to come with a whole separate incremental budget for Web marketing,” he adds. “It’s going to be taken away from list rental and space advertising but we think it’s worth the investment because we believe we’ll be better positioned as an e-commerce site in the future.”
In another finding, respondents reported that they expect to spend 15% less on customer retention and 15% more on acquisition.
Complete survey results were reported in the December 2000 issue of DIRECT.
The survey was conducted for DIRECT by the market research division of Intertec, DIRECT’s parent company. It was mailed Aug. 31, 2000 to 1,200 DIRECT subscribers chosen on an nth-name basis. Results are based on surveys returned by 131 qualified participants.
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