Co-ops rebut Libey on 'black box'
Longtime direct marketer Donald R. Libey upset many in the list industry with his comments on co-operative databases in the Aug. 14 DM News, such as referring to membership co-ops as "a blind, black box option."
The president of DM and catalog consultancy Libey Inc., Des Moines, IA, compared this with the "known quantities with open optional selectivity" of list-specific co-ops in his article, "Lists: Black boxes or known quantities?" Membership co-ops availed themselves of DM News' offer to respond.
"Our database is comprised of very active multi-buyers from many retailers," said Natascha Lee, vice president of marketing communications at Next Action, Westminster, CO. "To be included, a consumer must have purchased from three completely different and unassociated retail companies as well as meet recency and monetary minimums."
Ms. Lee maintained that list-specific selections exist in membership co-ops, with consent from both catalogers. List-specific suppressions also are possible, she said, disputing assertions by Mr. Libey.
Next Action also rejected the "black box" characterization, noting that 90 percent of its members agree that they may be mentioned as a participant.
Unlike list-by-list selection, consumer membership co-op Abacus builds its clients' custom models based on performance goals. Marketers can target the category, business size and other criteria.
"The level of customization best illustrates the flexibility and business insights provided by cooperative databases and depth of customer data we are able to apply to our modeling processes," said Chris McDonald, executive vice president and general manager of North America for Abacus, Broomfield, CO.
Mr. McDonald also said a cooperative database based on transactional data pulls in the variables to models that better predict response for greater returns.
Kris Snyder, senior account manager at co-op Prefer Network, Amherst, NH, said that co-ops offer a proven multi-buyer universe for prospecting, attractive pricing, resources for reactivation of inactive customer files and optimization of non-buyer files.
"Think of it as acquiring data intelligence rather than just renting names," she said.
Phil Wiland, chairman of Wiland Direct, Longmont, CO, said co-ops collect more information about a consumer's preferences than any one company can accumulate about its customers. This information makes it simpler for co-op databases to increase the relevance of marketing communications, allowing for more targeted ads.
"[Wiland Direct's] software gives us the flexibility to examine every piece of data we have for every model we build, thus giving us insight to each consumer's preferences," he said.
Mr. Wiland offered these keys to effectiveness: the sophistication of the underlying software that supports the database; power, stability and depth produced by the modeling and model validation techniques used; and the diligence of the cooperative when converting and aggregating the data provided by members.
"From the outset one of our goals has been to open the black box," he said. "On every model, for every member, we list the most powerful variables in the model and reveal their relative strength."
A major question raised by Mr. Libey involved the lifetime value derived from co-ops. Mr. Wiland called lifetime value a much-discussed but little practiced DM discipline.
"I would say that few direct marketers implement a long-term, well-devised methodology and stick to it over time," Mr. Wiland said. "Instead, they do short-term studies or one-time tests that provide some information but don't really track lifetime value."
Mr. Wiland said the industry should pursue longtime value rather than the elusive concept of lifetime value because no one knows how long a lifetime is. Yet long-term value varies by list source.
What if a list produces a strong initial response but does not yield customers who buy again at a high rate? Should the list not be used because the long-term value is weak? Should users vary contact strategy by source so that weak long-term sources get fewer contacts? Would they have the short-term discipline to do so?
Conversely, if a list produces weak initial response but has high long-term value, will a company have the discipline to accept the short-term loss and cash flow issues and wait for the long-term gain?
Mr. Wiland said that the answer to any of these questions is seldom yes.
"Too many people making list selections (and building models) focus solely on initial response rates," he said. "Initial response rates are important, but if initial response becomes the sole criteria for evaluating list performance then it cannot be a surprise that, in at least some cases, long-term value will not follow."
So do cooperative lists deliver long-term value?
"I strongly believe that the answer is not generic," he said. "It will vary from one list to another. It will vary from one model to another. It will vary from one mailer to another. This is why it is essential that companies put excellent systems in place and stick with them over a long time."