State of the List Industry: E-Mail Price Drop Is a Long Time in Coming

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As we look to the future, we address new issues that threaten the very core of our industry. Let's examine some of the more pressing topics and see who comes out ahead and behind.


E-mail pricing and filtering. A major focus for the list industry is e-mail's evolution as a true prospecting channel. E-mail prospecting has gone from a shining light for marketers seeking increased response rates to a dimming opportunity because of cost and performance.


· Winners. E-mail as a prospecting channel is maturing, and for that we are all winners. This maturation includes the drastic reduction in list rental costs per thousand and the re-emergence of text-based e-mail messaging as a dominant format. These two critical changes will let marketers use e-mail as a prospecting channel for the long term.


· Losers. As e-mail list rental CPMs drop to a level that will let marketers achieve positive return on investment, many list brokers, managers and owners will groan that money is being taken out of their pockets. In reality, this price correction has been a long time in coming and is critical for the long-term viability of the channel. The days of the $450/M business-to-business e-mail list are numbered, and many business-to-consumer marketers are already enjoying 50 percent reductions in cost off rate card pricing.


The other major change in e-mail is the emphasis on deliverability and format. Many newer versions of e-mail client software require additional steps to allow messaging to arrive into a recipient's inbox. Moreover, these e-mail systems are migrating away from HTML as a default format and moving toward a text-hybrid environment. The rationale is to cut down on spam and spyware.


For marketers, many of the best performing versions of their HTML e-mail creative no longer will yield the same results because recipients will be unable to view these messages. As an industry, we will need to help our clients as they navigate these new e-mail waters while they rebuild control messaging for their future campaigns.


The co-op database. In the past two years, use of public cooperative prospecting databases has grown exponentially. Let me clarify the difference between the two types. A public co-op database contains lists from multiple list owners and is used by multiple mailers as a segment of a direct marketing effort. A private prospecting database is used by large mailers who exclusively market through this single source.


Private databases enable better targeting, profile coverage and marketing audience reach into key accounts/targets that often is not profitable for larger-scale marketers outside of the private database environment because of house file duplication and operational inefficiencies.


The use of the co-op model is the growth trend of greatest concern. Growth often is a function of industry acceptance based on performance and awareness. But is that really what's at the core of this emerging prospecting channel?


· Winners. Only a few companies can claim victory in the world of co-op database marketing. The short list includes the service bureau housing the database and the list broker/builder acquiring lists for the database.


· Losers. Unfortunately, the list owners, the mailers, list managers and privacy advocates are weakened because of the co-ops. List owners are the keepers of the fuel for all of these databases. When a list owner participates in a co-op, he instantly sees list rental revenue drop drastically. There is no mystery behind this falloff. The database builder promotes a reduced need for list rental files because he can access the same quality names through the co-op.


This obviously dissuades a mailer from using a list on straight rental and thereby crushes list rental revenue for a list owner. Also, list owners are left in the dark regarding list prioritization within the base, proportionate payment determination or any other significant factor as it relates to list use compensation. Mailers themselves are the next victim. Mailers fail to realize that many critical list rental files choose not to participate in the co-ops.


In many cases, mailers rely too heavily on co-ops, leaving their mail plans without the core lists needed for true ROI. Co-op builders have hundreds of participants and send out long listings of each file in their particular database. The laundry list of files is used to show depth, but in actuality the coverage could be lacking. Often, many of the files listed on co-op participant rosters are compiled universes and private-labeled compiled universes.


Mailers relying on the co-op also face the issue of recency. While many list rental files update monthly, most co-ops update and report only quarterly. Those that update monthly often are not given hotline or active name files for use within the database by the list owners. This causes even more of an issue, as mailers think they may be using a particular file through the co-op but may not be using the best names possible from that list owner. This leaves the mailer at a disadvantage in terms of reaching the new prospects as they become available.


Obviously, list managers lose out because they see only a fraction of the revenue they once enjoyed. Once a mailer makes the blanket statement that "they only prospect through a co-op," the list suggestions from a manager representing a particular file fall on deaf ears. The mailer often is never informed as to what lists have removed themselves from a database or what new lists have come to market that are unwilling to participate.


Privacy advocates are just beginning to grasp the issues surrounding cooperative databases. As they examine how hundreds, if not thousands, of customer files are brought together and used, the questions being asked raise legitimate privacy concerns.


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