Outlook: Nontraditional Sources Come To Bat for the List IndustryA soft economy slowly but steadily turning around gives the list industry reason for hope the rest of this year.
Though few significant catalogs or magazines launched in 2003, more unusual files surfaced. Online retailers and marketers are putting postal addresses on the market. Large retailers are offering online names for rent, many for the first time. And coordination is growing between online and offline databases.
"Companies are still seeing it as a smart way to get revenue," said Ed Mallin, president of Walter Karl Inc., Pearl River, NY, a Donnelley Marketing company. "What we're finding is that there are more nontraditional sources coming up to bat."
Mailers reported better response in the second half of 2003, which supports a growing feeling of optimism among list brokers and managers.
"Higher response rates in the past several months should lead to a larger universe of names available to rent," said Ray Schneeberger, senior vice president of list management at List Services Corp., Bethel, CT.
Expect marketing budgets to expand even under the shadow of legislation. Use of multichannel efforts incorporating mail, e-mail and infomercials will grow more prevalent as marketers reach prospects in different ways. Restrictions on telemarketing to consumers at home will dry up a valuable pool of names, however -- almost one-third of those on files. Telemarketers are expected to turn more to mail and the Internet for lead generation.
Meanwhile, online marketing, direct response television and insert media will grow as viable business channels. Leads generated in these ways will bolster traditional mail marketing. It helps that the U.S. Postal Service has kept a lid on costs and is doing so again this year and next.
"Companies have been controlling costs and are generally leaner than they were, so they should be poised to come back stronger in the mail in an economic upswing," Schneeberger said.
Lists born from hybrid marketing are expected to increase as well. Business-to-business firms will try to sell to business-to-consumer lists, and vice versa. Indeed, those lines will blur.
Federal, state and local elections -- 1 million are held in each four-year cycle -- will increase telephone, mail and e-mail list rentals. Politicians exempt from the restrictions of the Federal Trade Commission's national no-call registry are expected to take full advantage to pitch candidates.
Expect more negotiations between companies to expand relationships and offer complementary services. Firms will engage in more base price discussions as well as net name arrangements. A slightly higher base price will offset lower net names.
A Year for Growth
Some list companies, like Walter Karl, predict 10 percent growth this year for industry and self.
"[Last year] started off as a lamb and ended as a lion," said John Ganis, president of list management at Edith Roman, Pearl River, NY.
Indeed, last year turned out better than expected. Postage costs were steady. Circulation numbers rose. There were more mailings in the third and fourth quarters. Extra emphasis was paid on mining customer files. Modeling and analytical services were in demand to maximize customer lifetime value.
For companies like Millard Group Inc., Peterborough, NH, it seemed like publishers fared better in mail acquisition and retention than catalogers.
"It's the over-retailing of America, and the Internet has brought it to just a whole other level," Millard president Ben Perez said. "When you combine that with over-mailing, aggressive e-mail marketing and more tactics on the part of retailers, including adapting multichannel strategies, you can see why catalogers have a daunting challenge ahead of them."
But publishers don't have to adhere to the same punishing seasonal retail cycle.
"A significant portion of retailers' revenue centers around the holidays," Mallin said. "Christmas particularly is a make-or-break season for consumer marketers. Business-to-business tends to be a little more leveraged out during the course of the year."
Despite few new magazines or catalogs in 2003 -- though home décor books did well, echoing a nesting trend -- some unique lists and new selects surfaced. Walter Karl saw an expansion in telephone new movers and new businesses in the Southwest and Midwest. LSC debuted Scholastic's Baby's First Book Club and Englander's Arthritis Advisor Newsletter, among several publishing files. Edith Roman has a new homeland-security database.
In another positive sign, the revived Fingerhut catalog gained the confidence to launch its new file via Adrea Rubin Management Inc., New York. And Millard has brought Time Inc.'s Fortune, Business 2.0 and Sports Illustrated opted-in e-mail files along with the entire Rodale consumer-consented online database.
Interestingly, there were more updates to lists last year. Updated selects included age, upswings in spending, average order information and higher catalog orders. Magazine base list prices seemed stagnant.
"If we see a steady increase in prospecting mailings by both consumer and BTB marketers, then we'll clearly see an increase in the monthly and quarterly hotlines, which obviously helps everyone in the industry," Mallin said.
But marketers should not get carried away. Last year or this one may be better than 2001 or 2002, but they will not equal 1999 and 2000 -- golden, but aberrational, years for marketing budgets.
"I'm not sure it's going to be there again," Perez said.
Fatigue Is a Fact of Life
Indeed, expect occasional rough winds.
Take list fatigue. It is now a fact of life. The slowdown of new major catalogs or magazines last year stunted growth of lists, hurting both mailers and vendors in their quest to find new customers. But that is not a concern for some.
"Fatigue doesn't appear to be a problem as a core group of mail-order buyers choose to shop via mail as it fits their lifestyle and is convenient," Schneeberger said.
A way to circumvent list fatigue is through creative use of modeling to tap into segments. In a bid to diversify service offerings, list firms will look at different lists and media as well as model co-op databases. They will have to mail deeper. Clients already are asking their vendors to find segments or lists that have not been tested in the past. Similarly, marketers finally will have to integrate their efforts. Money spent for three years on testing myriad forms of marketing -- including print, mail, television, telemarketing and the Internet -- will have to bear fruit.
"Many of these efforts were run by different, uncoordinated groups within their companies," Ganis said. "These companies now have great expertise and experience with these mediums and want to focus their efforts in a coordinated fashion to gain maximum exposure and response."
Privacy and pro-permission legislation, however, will continue to roil the waters for marketers, retailers, publishers and list companies.
"Privacy is going to define business moving forward," Perez said.
Evolving legislation brought on by the CAN-SPAM Act, especially a do-not-e-mail list proposed by Sen. Charles Schumer, D-NY, may dampen online acquisition efforts.
"Spam continues to alienate consumers from e-mail," said Michael Mayor, CEO of New York list firm NetCreations Inc. "As a result, some marketers are abandoning e-mail. So, in essence, spam is the only form of commercial e-mail they see. This accomplishes nothing other than to teach consumers that commercial e-mail is bad. To truly counter e-mail alienation, we need to show recipients the other extreme -- the good, informative, convenient, engaging and respectful side of e-mail."
Government often regulates when the market fails on its watch. And this is an election year, a fertile time for populist laws. Direct marketers, particularly those with vested interests in lists, ought to speak louder. Other industries -- such as manufacturing, automotive, travel and labor -- have fared far better in representing their interests to government and community.
"Their interests are visible and do impact what kind of legislation passes," Mallin said.
* Mailers should continue to test, especially out-of-category lists.
* Look beyond list use as the qualifier to test a list. Consider demographics and psychographics as well.
* Revisit tests from a year ago, as files have more selects now that will take lists to the continuation stage.
* Do not make list test ideas based simply on the name of the file.
* Mail deeper on files that have older names available on the market.
* If a portion of the online file is consistently non-responsive, delete it. Do not risk harassing those people.
* Send informative or entertaining non-commercial offers to the online database. Show consumers something other than the sales side. And test audio, rich media and other technologies.
* Mailers should constantly expand circulation to grow the business. Leverage assets. Use co-op databases and modeling.
* Invest in education to improve skills of employees.
* Do not commoditize or discount services. Instead, add value to offerings and bolster customer service.