List Leaders Raise Idea of Locked-Rate Deals
The issue was discussed when the Direct Marketing Association's List Leaders group met in San Francisco at the Annual Conference & Exhibition in late October.
"What came out of that particular discussion was that probably the single greatest waste of time and energy and the greatest cause of friction are net-name arrangements and the subsequent adjustments that they inherently require -- lengthy negotiation processes and multiple invoices and adjustments on the back end," said David O. Schwartz, list leader and president/CEO of 21st Century Marketing, Farmingdale, NY.
Schwartz coined "locked rate" to describe the proposal, which advocates pre-negotiated deals and eliminates further deductions to do away with time-consuming and costly back-end work generated by list orders.
Currently, orders with deals such as net-name arrangements where the mailer pays for a reduced percentage of the names netted in the merge-purge are subject to all kinds of revisions for deductions after the merge.
"What we're looking to do is to streamline the back-end processing of the orders," said list leader Susan Rice Rappaport, president/chief operating officer at American List Counsel, Princeton, NJ. "We would like to negotiate a rate upfront so that the net rate that we bill at is the payable amount and there are no further deductions."
Of course, list brokers are always looking to get their mailers the best deals, but at least one List Leaders member said that some brokers go too far.
"Oftentimes we're our own worst enemy," said Leland Kroll, president of Kroll Direct Marketing, Plainsboro, NJ. "We are each trying to get market share and the brokers are trying to go out there and get the best deal possible but some brokers ask for nets that they don't even need."
The locked-rate scenario would require front-end negotiation between list brokers and managers with the onus on the broker to show that the requested deal is justified, he added.
"We don't want to do anything to impact the manager or the broker's ability to negotiate. That's how we earn our living," said Linda Huntoon, executive vice president at Direct Media Inc., Greenwich, CT.
However, by looking at merge/purge reports from past orders and working with the list manager, she said, fair rates could be negotiated upfront.
Though Direct Media is interested in the locked-rate concept, Huntoon said that the firm's chief financial officer, Rick Sarli, was looking at problem orders from the past to check the idea from an accounting perspective.
Another question raised was whether mailers and list owners would approve of the concept.
"The truth is that mailers and list owners probably don't care as much about this as the list companies are going to," Schwartz said. "They may not value it, but I can't imagine they'd have any problem with it."
Kroll noted that mailers would benefit from knowing upfront what they would pay and by having brokers less tied up with paperwork.
Rappaport, who has been a champion of this concept for quite a while, said mailers can only gain from this proposition and that the next step is working on negotiation.
Her firm is working to identify its top list using brokerage clients and users of its managed properties. She added that her initial discussions with Millard and Direct Media indicated that they are interested in proceeding as well.
"List companies are caught between a rock and a hard place," Schwartz said. "The rock is the mailer, and the list owner is the hard place. We're just trying to make brokers and managers more efficient."