How many co-op databases should you use?
There seems to be a question on the minds of many multichannel direct marketers — “How many co-op databases should I use?” This is especially true of marketers who are currently using many, if not all, of the co-op databases as a source of prospect names.
The question is driven by three concerns. First, marketers face a very challenging business environment while simultaneously trying to achieve more with less. This brings into question the time associated with placing and managing the additional list orders, relationships and interactions.
Second is the impact on effective list cost. Even though some of the co-op universes will be incremental, there is generally much overlap between the co-op names resulting in declining merge nets, diluting performance of each list source and increasing effective list costs. This is especially true when a large quantity of names shows up on as many as 4 to 6 of the list sources, a segment of their universe that many marketers struggle to effectively manage and mail. Additionally, since co-op names are by definition multis, bringing in names from many co-ops creates a group of multis, which may need to be mailed differently.
Third, marketers are questioning the return on their data contribution. They are asking, “Am I getting back equivalent or greater value than I provide?” To be sure, the co-ops receive value from the data provided. Each contributor should expect fair value in return. One simple way to evaluate the return is to calculate the ratio of the number of mailed prospect and modeled housefile names from the co-op to the 24-month buyer file count contributed. Marketsmith Inc., a circulation, database, and analytic strategic marketing company, recommends a ratio of 2-3 as the minimum for small to midsize companies. Moving beyond a simple calculation, view the return on contribution in its entirety, including the number of new customers generated, improved housefile performance via models or data overlays and other benefits.
Ultimately, the answer depends on each marketer's situation. A weighted rating system can provide a structured framework for the evaluation and ultimately help answer the question in a somewhat more objective manner. Simply score your co-ops against weighted criteria depending on your specific situation and preferences. Recommended evaluation criteria include performance, universe size, cost, service and intangibles.
Some marketers will say, “The number of list sources doesn't matter as long as each provides an incremental universe meeting my criteria.” In reality, marketers will always be able to find small incremental universes of names that perform. The increasingly important question in today's environment is, “At what cost, and why, if those names can be replaced by fewer, larger sources?”
At the end of the day, increasing in-the-mail expenses, the availability of alternative marketing channels, and changes in consumer preferences are rapidly creating a “new normal” for direct marketing. In response, the tried and true practices of years past — such as using additional co-op databases that do not provide sufficient value — need to be critically evaluated and adjusted.