Evaluating a Prospecting Database

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Customer acquisition databases can be powerful tools for catalogers that are looking to both improve prospecting response rates and reduce marketing expenses. They also can prove to be difficult to manage and administer.


Most catalogers use traditional merge-purge technology to process outside mailing lists for each major catalog drop. Lists are rented, delivered to a service bureau and matched against each other, as well as to the house file and other suppression lists, resulting in an output of unique rental names for the mailing. As catalog house files grow, the percentage of unique rental names coming out of a merge-purge gets progressively smaller.


In addition, as larger quantities of names are entered into the merge-purge to assure the required output, the quality of the names and, thus, the eventual productivity of the mailing, often suffer. Although larger catalogers can typically extract better net name arrangements from list owners, these are often more than offset by the declining output of unique names. However, because the merge-purge process is the industry standard, it is understood and trusted by the vast majority of list owners, managers and brokers.


The customer acquisition database, on the other hand, represents a considerably different approach to managing prospecting lists. In this case, list owners contribute names to a database maintained at a third-party service bureau. The database may be proprietary to one large mailer or it may be shared by mailers with common types of customers or common product offerings. The mailer pays only for what is mailed. The list owner gets paid every time a name that he contributed is mailed.


The advantages for the mailer are the ability to maintain promotional history by list and individual prospect, the ability to model and profile the names in the database, and the lower cost for each name mailed. The challenges are the costs involved in developing and maintaining the database and the administration of a process that is somewhat unfamiliar to list owners and list managers.


Before we examine the advantages and disadvantages of a customer acquisition database in further detail, it is somewhat interesting to note that the use of these databases has been limited primarily to business-to-business mailers. For whatever reasons, consumer catalogers have not embraced the concept at all. However, with the incredible growth of the Abacus Catalog Alliance and other products that allow consumer catalogers to rent targeted catalog buyer names in return for sharing their house file data, perhaps one of the barriers to use of private databases by consumer catalog companies has been at least partially addressed.


Maintain an Effective Database


To build and maintain an effective prospecting database, it is advisable to work with a list broker and a data-processing service bureau experienced in this area. In fact, the implementation of a customer acquisition database may effectively limit you to the use of a single list broker.


Since names are paid for only when they are used, and an individual name may have come from more than one list, list owners may get paid for half or perhaps a quarter of a name mailed, sharing the revenue with the other list owners that contributed that name. The administration of this billing process would be awkward if shared by multiple brokers. If it is important to you to work with multiple brokers, this issue can be addressed with additional reporting capabilities. But it will take some work to get there.


Another consideration in evaluating whether a prospecting database is right for you is cost. The expense of maintaining a 5- million to 10-million-name database is not inconsequential. And unless you are an aggressive mailer of prospecting names, a proprietary database may be difficult to cost-justify. However, joining in a shared database with five to 10 other mailers can reduce your fixed costs considerably. Using a database will typically lengthen your timeline from name delivery to mailing, perhaps impacting to some degree the recency benefit that most mailers find fairly compelling.


Cost and complexity aside, the greatest challenge of building and maintaining a prospecting database is developing relationships with list owners that will make them comfortable enough to contribute names to your database on an ongoing basis.


Educating list owners on how the database works, as well as how you will use their valuable names, will go a long way. But, ultimately, the list owner must be convinced that working this way makes good economic sense. This will mean making some commitments to the list owners regarding how many names they will eventually get paid for vs. how many they contribute to the database.


Although the challenges may sound daunting, the benefits can be extremely rewarding. The major cost benefit derives from the fact that you pay only for names that you mail. This is equivalent to a permanent "net-net" arrangement for every list you rent. As the percentage of merge-purge unique names decreases, this can be extremely attractive. Additionally, if you are a frequent mailer to prospects, a database - once up and running - can be less of an administrative burden than a continuous stream of merge-purge activities.


The improvement in marketing productivity may be the paramount benefit. You can keep track of when and what someone was mailed. You can also begin to collect data about when prospects convert to buyers in the contact cycle.


Is the first contact the most effective, or do you have to reach someone several times before they choose to order? You can understand when "no" actually means no. Is it after six mailings or 12?


In addition, overlaying consumer data and utilizing statistical modeling against your prospect database can also be highly effective, both in improving response rates and profiling your ideal prospect. Although that last three-month, $50-plus list may work well, all of the individuals on that list are not created equal.


Segment the Prospects


By using a modeling technique against the database you can segment the prospects on that list. Instead of mailing 50,000 prospects one time each, you may find you can mail 20,000 of them one additional time. Or, it may be more productive to mail 30,000 of them once, 10,000 three times and the other 10,000 not at all, for a total of 60,000. Again, let me reiterate the importance of keeping the list owners abreast of what you want to do. In most cases where you use modeling to increase the number of total names used, list owners are happy to cooperate.


If you choose to reduce the universe mailed using a modeling tool, that may be more difficult. You may find that you can share some of the data from the modeling process with that list owner in lieu of mailing additional unproductive names.


Another advantage that accrues from the modeling process is the ability to profile your prospects and identify key demographic or psychographic traits that indicate propensity to purchase. This may help you define future list selects, use compiled lists more effectively, and determine differences in characteristics between your house file and your best prospects. Define upfront with your overlay data provider exactly how you plan to use the data.


In summary, building and maintaining a customer acquisition database is a major commitment in time and effort, and a not inconsequential initial expense. It requires a strong service bureau, a savvy list broker, and an extra effort in building a strong relationship with list managers and list owners. But the benefits, both in cost savings and marketing productivity, can be substantial - paying back those initial investments many times over.
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