The failed merger between two direct mail companies has resulted in a heated dispute—one that has attracted the interest of the Rainbow/PUSH Coalition, the civil rights group founded by Rev. Jesse Jackson.
Lamont Stanley, President of K.L.S. Direct Marketing, a mailer of co-ops to African American women, has accused Money Mailer, Inc. of “a lot of broken promises,” following the breakdown of acquisition talks between the two firms. He made the charges in a press release last week.
Money Mailer executives deny the accusations, and argue that the differences should be resolved by arbitration. “It was simply a business dispute between two companies, said Clark Beauchamp, executive vice president of sales and marketing for Money Mailer. “We’re just stunned that it has escalated to this level.”
Joe Beasley, Southern Regional director for the Rainbow/Push Coalition, Atlanta, said he plans to write to Kris Friedrich, Money Mailer’s reported owner, to try to resolve the dispute. “Then I plan on following it up with a call and see if there’s some kind of common ground,” Beasley said.
Stanley said he wants back the money lost in the venture, and added that it is a case of “David vs. Goliath.”
It all started last year when K.L.S., a one-man company, was approached by Money Mailer to pursue merger talks, Stanley said in an interview. Money Mailer mails 100 million co-op envelopes a year, according to Beauchamp, who works out of the firm’s Garden Grove, CA office.
The companies agreed to do two test promotions together: Black History Month and Mother’s Day. Roughly 500,000 pieces were mailed for each, going to four markets: Atlanta, New Orleans, Birmingham, AL, and North Carolina.
But Stanley claimed that the Black History Month promotion was premature because “a lot of advertisers’ budgets were already set for the first quarter.” And both sides agree that the co-op, which went out in February, failed to generate sufficient advertising revenue: Of the target goal of $240,000, only $167,000 was sold, $17,000 by Money Mailer, according to Stanley.
“All the work came on me,” he said. “[Money Mailer’s] sales team was told to focus on company’s other direct mail programs to meet their yearly budget. They sold it during their spare time.”
Beauchamp confirmed that the program did poorly, but he differed with Stanley on the reasons.
One problem was that the program failed to attract packaged goods advertisers, Beauchamp said. And while it did draw “a solid base of direct response advertisers,” they did not come in at the necessary price points, he added.
Finally, there was an erosion of the local advertiser base, the most profitable ad segment, from the first mailing to the second, he claimed.
Beauchamp agreed that the firms had “more time to sell the second mailing,” but claimed that “the numbers went down significantly from the first to the second.” And neither mailing was profitable, he said.
Based on this, Money Mailer determined that K.L.S. “didn’t have the kind of potential we were looking for,” Beauchamp continued.
But Stanley also charged that Money Mailer used the wrong list for the Mother’s Day mailing–a compiled file, instead of a direct response list. As a result, he said, some pieces went to single African American men, instead of women, and to apartment dwellers instead of homeowners.
Beauchamp countered that the firm used “exactly the same list” for both mailings. “There’s a margin of error in lists like this,” he added. “I’ve seen nothing to indicate we’re outside the industry norm in that regard.”
Stanley said he lost $100,000 on the test mailings. “I stopped my mailing in Atlanta to do this,” he said. “It hurt me a lot.”
Beauchamp declined comment on other claims made by Stanley. But he remarked, “We’re extremely confident that if we got a call from PUSH, they would find all the steps to be perfectly acceptable within normal business practice.”
He said that the option agreement between the two firms had an expiration date. “All the specifics were laid out in the option agreement, including what we would do in a disagreement,” he said. “The first steps would include arbitration.”
Beauchamp added that Money Mailer has “at least a couple” of senior African American executives.
Stanley, who said he was the “first African American with Val Park in Atlanta,” started mailing his own co-ops in 1997.
Beasley added, “I’ve known Lamont for years. I’ve followed with great interest the establishment of his mailing service. He really was doing very well as an independent operator.”
Money Mailer Bronxville, NY, offers several saturation co-op programs, including one targeted on new movers.
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