Competing in today's ever changing market
A common theme that we have been hearing of late is that response rates have
been dropping off.
The first and most important question that we ask when we hear this is whether or not the mailer is doing some sort of match back to allocate purchases across all pertinent channels. A high percentage of mailers are doing match back now, which was not true a few years ago, and this has allowed mailers to see the true value of the outside names they are bringing in with their catalogs.
Since we hear that response rates are declining in the industry, it often akes me scratch my head in wonder when I get the notices that a file has increased its rental fees.
My first question is: have the managers found a way to increase the response rate? Otherwise paying more money for names that are responding less doesn't make sense. The fact that the highest price that any of the six co-operative databases is charging $70/M, paying on average $150/M for a list, makes little sense.
Negotiation is part of the broker and manager's job. Lately though it seems that the approach to negotiating is to raise the prices so we can negotiate back to the $130/M rate (if we are lucky) that we had the prior year. When mailers look at their circulation plans, a similarly responding co-op file is going to make the plan because it costs less money.
The use of the co-ops is a double-edged sword for sure; most mailers are in the co-ops, and up to 50 percent of their circulation is coming from them. It is a pool of names at less cost and there are no issues with promotions.
At the same time, list owners are losing rental income and the ability to have a say in what way their names are being marketed by others because more and more mailers are getting their circulation from the co-ops.
Why not establish set pricing to compete with the co-op pricing? In results we have seen from our mailers, the average outside list has a higher sales per book than the co-op name. A major reason many of the co-op databases are so heavily used by mailers in their plans comes down solely to price.
This, of course, brings us to another issue we see with some mailers. They are basing their decisions on whether to use a list or not on the sales per book instead of actually looking at their results at a contribution level.
It is very important to know how much money they are actually making per list, and per segment, in order to decide whether a file stays in the plan.
A mailer must know their catalog¹s true threshold for loss to be able to make an accurate decision. The sales per book does not take the costs into account. When the lists costs are included, it can determine whether or not a file remains in the plan.
The third area that is of growing interest to many of our mailers is the acquisition of various catalogs in our industry by holding companies.
The combination of many of these titles under a handful of parent companies is allowing them to start building their own internal databases, similar to a co-op, in theory reducing their reliance on outside lists.
Mailers are requesting that we stay on top of key relationships where purchases have occurred to be sure we know when or if we will lose access to large amounts of names on exchange.
When getting started on the next round of circulation planning, start the conversation regarding list rental moving in the right direction by getting more list owners to lower their list costs. Also try to expand exchange relationships where you can.
Finally, by making pricing more competitive with the co-ops, mailers will be able to keep specific outside lists in their plans because the cost has been equalized between the lists and co-ops.
Another benefit is that the mailer is able to retain source of the names, which can help in future plans. The list owners, while not getting $150/M for their names, will be bringing in income that otherwise they would not have seen, also allowing the managers to better market the file to other mailers with similar demographics and products.