Lists Brokers Must Try to Make Mailers Profitable
Granted, things aren't as easy as they once were -- brokers and managers alike are being asked to work longer and harder, for fewer dollars. We are often forced to discount our commission structure, perform more research for our clients, provide more reports and function as a true extension of our client's direct marketing or circulation department.
Yes, it's a changing list world out there, but there is one constant. As mailers prosper, we prosper. When they suffer, we suffer. So, while there's nothing wrong in expecting a fair price for a fair day's work, we should focus on what's best for the mailer.
The mailer and the list owner go hand in hand. This is not only because of the obvious reason that most owners are mailers, but because strategies and initiatives that help the mailer will yield long term benefits for the list owner.
Let's take a look at what it means to be a mailer advocate and how such a business philosophy is at the core of the prosperity -- and sometimes survival -- of every brokerage and management company. The most obvious place to look is list pricing.
Being a mailer advocate doesn't mean you believe list prices should be kept as low as possible. Often, it's entirely justified to charge a premium price, just as long as the mailer receives fair value for the price he is paying.
While, there will always be the mailer who wants to negotiate a discount from the rate card, let's not forget that the list price is one component of a mailer's cost in the mail. I know, no great revelation here, but bear with me. A $10/M reduction in a $100/M list price is a 10 percent saving in list cost. But in a $400/M mailing it reduces the total cost in the mail by only 2.5 percent.
Therefore, even a mailer advocate might grumble when a mailer or broker requests the waiving of a selection charge or a nominal reduction in the base price. Will this really have that much of an impact on the success of the mailing? Probably not, but the printing is already paid for and Uncle Sam frowns when you ask him for a last-minute postal discount, so where else can you save?
The key in determining pricing levels that deliver both a fair profit to the list owner and profitable returns for the mailer is to think in terms of value: the intrinsic value of the list to the owner and the value it offers the mailer. While that sounds like the proverbial no-brainer, it requires some thought.
A firm's customer file is perhaps its most prized asset. The decision to make this treasured commodity available was probably made because of the need to obtain the same coveted assets of other companies. List income, while a very pleasant by-product of list rentals, was not the primary motivator. Today, however, with profit margins tighter than ever, list revenue is often the difference between a profitable or unprofitable year. Therefore, to an owner, their list is obviously extremely valuable and their goal should be to obtain top dollar for renting it to other companies, including competitors.
The key, however, is to realize that top dollar is a variable -- it all depends on the value this list delivers to the assorted sectors of the marketplace.
When the Spiegel file was introduced to the marketplace 15 years ago, it was an instant hit. Here was a new, large source of direct mail buyers -- a huge proportion of whom were nondirect mail shoppers that Spiegel had converted. Catalogers rushed to place orders and take advantage of this extremely valuable commodity -- price was not an issue. Fundraisers and publishers followed suit. However, as catalog activity grew at a Herculean rate, the rollouts on subscription offers and donor appeals did not develop. After analyzing a year's worth of usage, it became clear what is so abundantly evident today -- the list was too expensive for fundraisers and publishers. Lower prices were established for these secondary markets -- tier pricing that reduced in-the-mail costs 7.5 percent or more was born, and list owners were able to develop new pockets of usage and revenue from the list rental properties.
Today, it's critical that list professionals realize prices must be reflective of the value derived by the mailer. Computer mailers can pay $150/M to $200/M for computer lists because of the still expanding marketplace -- response rates are healthy, often along with a high average order. In addition, many are attempting to build a customer file very quickly and are willing to pay a premium price for the prized asset of another firm. However, if the list owner expects any activity from companies outside the hi-tech arena (and wants to offer a value proposition to those mailers), he absolutely must offer noncomputer offer prices.
A mailer with a computer offer paying one price and a mailer with a children's apparel offer paying a different (much lower) price for the same hi-tech list is a good thing for all of us. So is a cataloger paying $65/M for a publishing file that routinely sells for $95/M to subscription offers.
Mailer prosperity: That's what's ultimately important for all of us.
Now, if you're wondering about exchanges -- and the nightmarish accounting that accompanies reconciliations, balances and disputes -- that sneaker factory is starting to look pretty good.
Ed Bocknik is the business unit leader for list management at Acxiom/Direct Media, Greenwich, CT.