DM News' Essential Guide to Lists and Databases: List Marketing 101

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A direct marketing strategy includes several elements. Missing any of them affects the quality of the entire program and greatly reduces your chance for success. These elements include:


· Understanding your target customer.


· Establishing a brand image that differentiates your business from the competition.


· Having the right offer, at the right price, at the right time for your customer.


· Effective list and promotion planning.


When list marketing became a viable business strategy more than 25 years ago, list selection was relatively simple because the variety of lists and the number of selections were limited by today's standards. A list professional often had to persuade a company to put its names on the market, either for rental or exchange. Now, this income has evolved into a significant bottom-line item.


Competition has grown stronger, the number of new lists has declined and many lists are smaller in size. All of this makes negotiations tougher, and many mailers find that they have to broaden their horizons to open new areas of opportunity. The need to integrate all their marketing across each channel - direct mail, Internet, insert media, radio, etc. - also has become more evident.


Brokerage versus management. A list broker represents the mailer. With their expertise, brokers research the available universe and recommend the most appropriate lists to target your product to the right prospect.


A list manager, on the other hand, represents a specific list owner and assumes responsibility for the marketing of the company's list for rental purposes. This involves liaison with the brokers, clearance of the mailing piece, processing and billing of the list rental order and other activity.


Brokers and managers are crucial to your marketing process, and they work closely together, even when they work for competing list companies.


List selection. List selection is the key to direct mail. Presenting the right offer to the wrong prospect is a prescription for disaster. In the current multichannel environment, list selection has become even more important. In addition to the traditional recency-frequency-monetary selections, we now can use enhanced demographic selections, channel-buying preference and other data barely imagined by marketers 25 years ago. Let's see how this affects the two basic types of mailing lists:


A response list is generated by demonstrated response to a direct marketing offer such as a magazine subscription, a catalog or Web purchase, or a donation to a charitable cause. Now, however, a marketer often can segment by purchase channel or choose from a multitude of age, income, gender, lifestyle and other data to target closer.


A compiled list is generated from publicly available data and is not derived from a direct marketing purchase or other transaction. Demographic and lifestyle variables as well as self-reported DM activity often enhance compiled lists. These lists can vary based on the quality of the initial data and the range of enhancements applied. It's always wise to ask whether the data are inferred or directly applied to each name.


Compiled lists often are the best way to reach a narrowly defined market, such as for children's offers. Selecting households with a demonstrated presence of children greatly increases response to a children's magazine or merchandise offer. Home décor and home furnishings mailers also make effective use of compiled lists targeting new homeowners, often with a minimum home value.


With the range of data now available, it's even more crucial to ask a series of questions during the list planning process:


What is the source of the names? Did they originate from a direct mail transaction or an online purchase? E-mail marketing or paid search? Space ads, insert media, radio, etc? DMers use multiple customer acquisition programs. The more we know about the composition of the list, the better use we can put it to for our offers.


How is recency defined? Is it by the most recent Web transaction or the most recent direct mail transaction? For example, in the case of a merchandise buyer file, a consumer whose last transaction was online may exhibit very different purchase behavior from one who last purchased via telephone.


How is monetary value defined? Make sure you know how dollar segments are calculated. The most common methods are cumulative, which includes total lifetime purchases of that customer; average purchase, where lifetime purchases are averaged together; or last purchase. A high-end mailer might specify that dollars be segmented by average purchase or last purchase amount. This serves as a powerful additional qualifier.


For compiled lists, what is the source of the data? It's crucial to know whether the attributes are individually applied or whether they are inferred from things such as where the person lives. This is especially true in terms of household income and home value. Obviously, the best-performing compiled names will be those where the data are individually applied and derived from multiple sources where possible.


List modeling has come a long way in the past five years. Technology advances have let many marketers and list owners apply regression modeling cost-effectively, and often the model can be developed in days, not weeks. List modeling can improve the performance of response lists and make compiled lists a productive part of many more direct mail campaigns.


List models can take several forms: response models, which are developed after in-the-mail testing, are the most productive but can be extremely expensive to implement. Profile models are less expensive and often provide results that are more than acceptable.


ZIP modeling, perhaps the simplest of all models, can be among the most productive. It always surprises me that more mailers don't use it. A good ZIP model can boost performance 15 percent to 20 percent in the higher segments. This should be a part of your list plans.


For all of these advances, however, list selection remains as much an art as a science. Ensure that every list and list selection meet these criteria: demonstrated direct marketing activity; demographic compatibility with your customer; affinity with your product and offer strategy; and acceptable recency and/or frequency of purchase.


The closer its affinity to your offer, the better the list should perform. One important tool in deciding whether to use a given list is who else has mailed it. The more the list's usage resembles your offer, the better your chance for success.


List planning means integrating a host of original-source, purchase, product, demographic, channel preference, modeling and other data into a well-rounded strategy for each list. If this sounds a bit complicated, it is. But the effort pays off. Effective segmentation and testing will let you mail more names more cost-effectively and increase your business faster. Your list broker will be happy to be a part of this process.


For a PDF of DM News' Essential Guide to Lists, Database Marketing & Data Services, click below:


http://www.dmnews.com/pdffiles/listguide.pdf


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