Rising Fees Are Burying List BusinessI've been fortunate to have a career in the list brokerage business for many years. There are difficulties right now, but it is a great business.
It is one of the few businesses where - if you can think of a better way to do something, can explain it and get the approval of the mailer, the list manager and the list owner - you can actually do it! And you can see the results of that change quickly.
But it is imperative that we address some of the difficulties we face today, because some of them threaten this business. I'm going to describe two of these difficulties and hope that this begins a process that, with your help, solves some of them.
The first issue is extraordinary electronic transmission fees. We always have paid magnetic tape fees or cartridge fees, as well as shipping charges on those. Over the years, service bureaus and even list managers succumbed to the temptation to add another dollar or two to the charges.
Eventually, the standard for a tape or cartridge became $20 or $25, though everyone knew the charge was inflated. The shipping charge for that tape rose quickly to around $30 and sometimes was charged for each file, even when all tapes were shipped in one box.
Fortunately, the concerned broker/mailer quickly ended this by requiring third-party billing. Still, if a mailer ordered 300 tapes monthly, the extra cost to that mailer was more than $180,000 a year in unrecoverable costs. That's a lot to have to make up.
In September 2001, a difficult time to say the least, I encountered my first $75 fee for sending a file via file transfer protocol. Since I needed the file immediately because the original tape was held up in the aftermath of the Sept. 11 attacks, I had to accept the charge on behalf of my mailer. I accused the list owner of extortion and was told that it was the service bureau who was charging that amount to the list owner.
I since have encountered this charge many more times, and have been asked to pay $100 for FTP delivery by one or two list managers. One list management company even publishes this charge on its data card.
This is unacceptable, and those charging it need to rethink what they're doing. Not all mailers are list owners, and not all can reciprocate. They are adding to the cost of doing business, and there is no way for the mailer to recoup those charges.
The second issue is inflated cancellation charges. Those of us who know the list business understand the cost of canceled orders. Years ago, the accepted cost of producing the paperwork for one order was well over $25. Varying numbers are out there now, but we know there is significant cost in writing and transmitting an order.
However, let's look at the following scenario. The mailer places 30 orders in a schedule and finds that three must be canceled because of causes beyond his control; perhaps the update is late or the offer is refused by the list owner. Then the update of his best file contains more names than expected - uncommon today, but still possible.
To use those good names, the mailer cancels another order for names that don't perform as well. Finally, the mailer reads his latest results and learns that three of the files ordered are performing too poorly to mail again, so he cancels those orders.
The mailer has canceled seven of the 30 orders placed - almost 25 percent of that mailing. Both the broker and the list manager have incurred the costs of placing those orders and now they incur the additional cost of canceling them. This is an expensive, frustrating part of our business, but one that can't be completely avoided.
Recently, several list management companies have gone above the traditional $50 flat cancellation fee and added running charges of up to $15/M for the base in addition to each selection charge. The result is that the cancellation charge for an order of 30,000 3-month female $50+ buyers can run around $1,460, and that's before the material and shipping charge mentioned earlier.
Just these two small issues are very damaging to our clients and, therefore, to our industry. We need to devise flat fees that cover the costs, but don't contribute to the difficulties.
What we really need is a better means of compensation so some don't feel justified in taking a little "off the top" to make up for a margin that has become too small to support the business.