Deal Making Chokes the List Business
The mailing list business is at a crossroads. Many companies have filed for bankruptcy, merged, renamed or liquidated. List brokers and list managers are being asked to spend vast quantities of time negotiating special deals.
Often these negotiations are for orders where the mailer's net payment is only a few hundred dollars. That translates to a miniscule gross commission to both the broker and manager.
Where a major mailer is involved, most list brokers now work on 10 percent, and management companies often work on less than 10 percent. More often than not, the list brokerage company has some type of commission split with the list broker who brought in the business.
There are simply not enough net dollars to generate a profit for the list manager or list broker. As long as the marketplace encourages this situation, the list of bankrupt and liquidated list brokers and list managers will grow. And list owners, myself included, will continue to write off huge bad debts.
As a list owner, I face another problem. Almost every order is negotiated. It's not uncommon for me to receive a call from my list manager asking me to approve an order for 15,000 names where the mailer wants the base price lowered by $10/M; and they want a 50 percent net. This is ridiculous.
When I say, "No deal," I open the door to a series of calls. I often get a second call that says, "OK, how about the mailer paying full price on the list, and a 65 percent net?" I may get a third and even a fourth call.
We're all spending too much time on these negotiations. A better formula is needed. I understand that mass mailers are merging dozens (sometimes hundreds) of lists and that some reasonable price has to be charged that recognizes this reality. I also acknowledge that a company that rents a million names is entitled to a better price than a company that rents 25,000. I believe that when a company contracts for a year's worth of hotline names, it is entitled to an additional consideration.
Our company is developing a formula. It is basically as follows. Orders for fewer than 50,000 names will pay base price, with no deals. Mailers will be entitled to a discount of 10 percent on orders for 50,000-99,000 names, a 20 percent discount on orders of 100,000-249,000 and 30 percent on orders of 250,000 or more. A contract for a year's worth of names receives a bonus, an additional 10 percent discount.
The bottom line is that a mailer ordering 250,000 names a month and contracting for a year will earn a 40 percent discount. There are no net name deals, no negotiations.
This might not be the right formula. And list owners have to decide for themselves how they want to run their business. I'm fed up with the constant negotiations. I'm tired of seeing dozens of different deals. And, I'm concerned about the health of our industry.
There's no glory in negotiating great deals on list orders, only to see the list owner, list manager or list broker go out of business. It's insulting for mailers to think they have not contributed to the demise of the companies listed above.
Yes, many brokers have turned "better negotiations" into a blood sport and a competitive advantage. But doing so undermined their industry and their company's future. These are Pyrrhic victories for the mailers and brokers, and must be recognized as such.
Each mailer, list broker, list manager and list owner must make a commitment to the health of this industry and agree to pay a fair price for the lists they use. Otherwise, each of us will have contributed to winning the battle, but losing the war.