Shifting Alliance: Is Abacus still delivering a strong response for catalogers?

There are rumblings that the Abacus Alliance isn’t serving up the response it once did, and that its decline is forcing some mailers to reduce their slice of the cooperative database.

However, this is hard to document because most catalogers refuse to speak for attribution. The primary on-the-record critics are list brokers, who have little love for the co-op despite recent efforts by Abacus to provide them with financial incentives.

Those who would speak on the record and off, however, describe how the Alliance’s performance has slipped during the past six to 18 months.

Marsha Pandora, circulation manager for cataloger Cuddledown of Maine, says that Abacus’ Alliance and Experian’s Z-24 databases are “still working well enough for us to continue to use them, but they are not working as well as they have in the past.”

And at least one large mailer dropped out of the Alliance last spring because of declining response, according to a list brokerage source. (Because the Alliance dropped out of the Alliance last spring because of declining response, according to a list brokerage source. (Abacus Alliance is a larger and more widely used database which has drawn more comment than Z-24.)

Defenders of the Alliance

Abacus does have its defenders. Many participants agree that the database continues to be a vital part of their circulation plans, producing large quantities of prospective names at an affordable price.

“Our dilemma, quite frankly, is getting names,” says Jeff Parnell, CEO of London’s Eximious, which reports less than $10 million in annual sales. “We need the Alliance to work. We depend on the Alliance and have a vested interest in making the cooperative work.”

New mailers, too, are in Abacus’ corner. Lillian Vernon is now testing the co-op for the first time, and a major club mailer is considering testing it as well.

Chris Dice, president and chief operating officer of Abacus Corp., concurs that while the Denver company does not track response database-wide, evidence indicates that Abacus provides a “very nice lift” for participants. A new analytic group, he says, provides a forum in which participants can share results.

“Our participants mail to the same households that are often represented when [participants] rent a [traditional] list as well,” Dice continues. “But we’ve got a lot of anecdotal evidence that, participant by participant, our results are substantially above outside [traditional] list rentals.”

He adds that if a mailer does approach the Alliance with a response issue, it will be addressed immediately.

One large cataloger reportedly found that the two top deciles, or best performing names, showed a decline in mid-1998. But when it tried several levels down, it experienced comparable slippage.

An executive for the company, who prefers to remain anonymous, reports frustration that the names are falling off “so much more than traditional list rentals,” but counters that the database continues to provide a huge pool of prospects.

While list fatigue and mailbox glut are of concern to all mailers, catalogers say they are particularly worried by it. And many blame the decline in response on overmailing to the same multibuyer names.

Although Abacus’ Dice says he doesn’t believe the company tracks the number of mailings per name, an analysis of one frequently mailed slice of the database found that “yes, they get a lot of books, but they have remained profitable. Multibuyers are going to get more books because RFM works.”

Stuffed holiday mailboxes were an indicator that the RFM criteria were hard at work. And by some accounts, perhaps working too hard. Cuddledown’s Pandora says she received 10 to 20 catalogs per day during the height of the holiday mailing season. Rosemarie Montroy, executive vice president of Greenwich, CT’s Direct Media, which actively tracks catalog mail volume, says she was averaging 40 catalogs per day and on Nov. 27 received 53.

Explains Montroy, “I can imagine a consumer, who has no idea how this industry works, being overwhelmed by the volume of mail.”

Pandora adds that catalogers and other list owners that market their files also perpetrate list fatigue and overmailing.

“I’m contributing to saturation,” she says. “I think it’s a group effort.”

Client Challenges

Jeffrey Kelley, senior vice president of list management for Millard Group Inc. of Peterborough, NH, (which manages Z-24) says that several catalog customers have reported declining performance on Alliance models. One large catalog client, he says, which used the Alliance for 20% to 40% of its circulation plan, dropped its use to between 3% and 5% last year. It successfully turned to traditional lists, Kelley asserts.

“[Mailers] are not finding a lot of new names using the Alliance], and response rates are falling off on those models,” he says.

Kelley believes it may become harder to convince large mailers to maintain their loyalty to Abacus in the face of reduced performance.

“There will be a challenge to maintain these databases if large mailers decide there is not an advantage to participating and pull back,” Kelley continues. “Abacus is only as strong as the participants that put their names in.”

Reacting to declining response rates from Z-24 itself, Cuddledown’s Pandora says she recently suggested some changes to the model. “The bottom line is that if you can’t find a way to make the names work, you’re going to stop using these [databases] and that’s not what these companies want,” Pandora explains.

Continued Growth

Dice says that he is not aware of any participant pulling out because of falling response rates. Participants do go “inactive” for a variety of reasons, he adds, including financial problems or the selling of a title. The fact that the company continues to grow – Abacus Alliance comprises more than 1,200 catalogers and added about 200 such titles last year – testifies to its success, he says.

Dice says the Alliance, launched in 1990 and peaking between 1993 and 1994, accounts for about 7% of the total market for lists and data for the catalog industry.

Certainly, some catalogers will never participate in large cooperative databases, preferring to protect their customers’ names. “Your biggest asset is your own house file,” one large cataloger says. “If you don’t protect it, and you just put it out there for use and anybody can do anything they want to with it and you have no control, that’s pretty shortsighted thinking.”

Other catalogers have expressed concern over the Alliance’s reporting structure, which many term the “black box.” Participants can block competitors from renting, but they do not have a list of who participates, can’t decoy the files and do not get a report on who rented their names. “It makes it hard to work with [the Alliance] and to make suggestions to fully understand what is going into the process so you can try to get the most out of it,” Pandora says.

Dice counters that “the lion’s share” of participants insist on a blind pool from day one.

Z-24, however, publishes its participant list and offers quarterly reports to clients detailing which companies have rented their names.

Adversaries

Linda Huntoon, president of the New York brokerage division of The SpeciaLISTS Ltd. in Weehawken, NJ, says that last spring, clients reported declines of up to 40% in response rates. She says that some clients are “reducing dependence upon Abacus because they’re uncomfortable with results.”

The adversarial relationship between many brokers and Abacus is no secret. Brokers say they devote tremendous energy to list rentals for clients from the co-op but receive no commission from the data giant in return.

“[Abacus] does as much as it can to keep us out of the mix, and when it does that the mailer suffers,” Huntoon explains. “If Abacus could find a way to work with brokers, the mailers would benefit because then we would all be working with the same information to come up with better solutions [for mailers].”

Extending an Olive Branch

Two years ago, Abacus initiated a partnership program offering brokers a financial incentive to bring new catalog titles or companies to its co-op database. If a new participant signed on, the broker received 20% of the first year’s revenue. Twenty-five brokers have joined the partnership, of which 60% actively participate, Dice says. He adds that the program has averaged 35 new Alliance participants annually.

In a more recent move, Abacus met with less success when it approached several brokers – including Princeton, NJ’s American List Counsel and 21st Century Marketing in Farmingdale, NY. Abacus offered similar incentives to the brokers to facilitate its business-to-business participant base, according to Karen Crist, who is vice president of the Alliance’s business-to-business services, located in Broomfield, CO.

Steven Jones, executive vice president and partner of American List Counsel in Corte Madera, CA, says that the “final terms related to the financial package were not satisfactory. We gracefully bowed out.”

David Schwartz, president of 21st Century Marketing, says his firm “could not resolve the [financial] terms of the agreement.”

Jones estimates that the margins for brokers in the catalog environment have been reduced by “well over” 50% during the past five years because of mailers taking names from the Alliance instead of traditional files.