State of the List Industry: Some Facts and Fiction in BTB List Land

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I have been a business-to-business cataloger, consultant or list broker since 1973, and throughout these years the mantra that "response rates are falling" has been a constant.


And yet, the BTB mailing industry has grown steadily through this three-decade response rate decline and is bigger and healthier than ever - more players, more brands, more offers, more products and services, more channels and more money at the top and bottom lines. Could it be that the conventional wisdom of falling response rates is just a matter of list source codes that are missing in action?


After all, if rates have been falling all this time, would there even be a BTB direct marketing pulse rate to detect, let alone a response rate?


Let's tee this up to ensure we are talking apples to apples. I'm referring to prospecting response rates at the list level, not customer mailings. I am focused on BTB merchandise mailers, mainly catalogers, many of whom have high average orders ($250-plus) and healthy gross margins (50 percent-plus). Many are willing to "buy" a new customer who has good lifetime value potential, confident in the profits that come with rigorous recency, frequency, monetary discipline.


A little retrospective: In the early days of BTB direct mail, all orders came via the U.S. Postal Service. An order form was filled out, and in the lower-right corner was a list source code, sometimes called a "key code." Thus, all orders had a list source code, and the response rate could be determined knowing how many pieces were mailed to each list source code and how many orders it generated.


However, the early 1970s brought toll-free numbers into widespread use, and poorly trained and motivated customer service representatives were rarely vigilant in asking customers for key codes. The decline of key code capture had begun, and the era of falling response rates was upon us.


The 1980s brought facsimile machines into prominence, but they were typically used in BTB to fax purchase orders that never had a key code, even when they were mailed. By the early 1990s, receipt of the postal order form dropped well below 50 percent of all orders, and key-coded order capture went into a free fall.


By the new century, the user-friendly transactional Web site was ubiquitous, and key-coded orders seemed destined to become a vestige of mail order's "golden era."


For the past 10 to 15 years, the only sources for reliable key code capture have been the well-trained phone CSRs and multichannel match-back processing. In a match-back, uncoded orders from all sources - mail, Web site, e-mail, faxes and phones - are matched against the recent mail files. Individual and/or site-level hits are given the key code credit.


However, tighter budgets and increased outsourcing are putting pressure on deployment of both of these effective remedies. I challenge the BTB mailing community to fight back in its self-interest so that expensive prospecting continuation decisions can be made more effectively with a modicum of knowledge of past list performance.


Still, even without well-trained CSRs and match-back processing, there are considerable buffers. More good, clean, legitimate response lists are available to BTB mailers than ever before. The increased use of list-specific cooperative and membership prospecting databases with demographic and response model selectivity is helping mailers increase customer acquisition per thousand pieces mailed, drive up revenue and expand universe.


Most interestingly, we see a rise in co-op mailers using the abundant selectivity levers to increase the number of "preferred" high retention customer orders, gladly sacrificing order volume for quality customer acquisition. This is response rate deflation engineered to meet a desirable strategic financial objective!


From a pure financial perspective across the business mail industry, what you take to the bank is the total return on your investment prospecting. That metric is higher today than at any time in my 32-year BTB career.


So, enough talk of falling response rates. It is the falling key code capture rate that requires remedies widely available to smart marketers who know it is worth the investment. Meanwhile, the core financials of BTB DM across all channels are a rising tide.


Compiled list bragging rights. Anyone reading the trade journals knows infoUSA CEO Vin Gupta has been quoted widely in ads and articles claiming that his names are better than those from "any other list company." He will refund three times your list cost if infoUSA underperforms any other lists. I hope plenty of mailers take him up on that because his widely advertised challenge appears unconditional. No place in the ads does Vin explicitly exclude response lists, subscriber lists or controlled-circulation lists from the contest.


As Bob Bly, the noted mail-order copywriter, said in a letter to the editor of DM News, "In my 25 years in direct marketing, I can't recall having seen compiled lists work well for mail-order offers."


Around the time Gupta's challenge started appearing in the trades, infoUSA overhauled its pricing structure to the brokerage community, raising prices as much as 300 percent and canceling several longstanding licenses. InfoUSA is convinced that it can sell directly to its ex-broker licensees' clients or through its list broker subsidiaries.


Will this be a serious long-term problem for the list brokerage community? I doubt it. Experian's National Business Database and the Equifax Business Class Database have picked up many new brokerage relationships, and D&B has seen its licensee base expand. Over the past year, MeritDirect has done in-depth evaluations of these compilations, and we find that they are exceptionally well crafted and provide an attractive value proposition with or without comparison to the increased infoUSA pricing.


To the question at hand: "Is the infoUSA database better than the other business universe compilations, as Vin Gupta claims?" As a longtime user of many business universe compilations, the answer is, was and always will be: "Yes, no and maybe." This is because each compilation is engineered and produced differently with multiple sources and timetables affecting content, scope, currency and accuracy.


Knowledgeable brokers have always recommended their clients test segments of each compilation against the others to find the "sweetest spots" for their clients' offers. For example, depending on your offer, you might use D&B for manufacturing and wholesale, Experian for contractors and business services, Equifax for SOHO and infoUSA for retail and consumer services.


Smart mailers will continue using multiple business universe compilations to maximize results and acquisition costs by market segment and to gain access to the millions of unique names that exist on each file.


Shrinking list universes? It's no secret that many response and reader lists have experienced hotline shrinkage as their prospecting was curtailed in the wake of the recession, 9/11 and the anthrax crisis. This past year, however, counts are coming back and, though it may be awhile before we return to the robust hotlines of the late '90s, many more good response names are there for the plucking.


Even during the hotline dearth, the growth of membership databases like Abacus and b2bBase and the extensive selectivity and modeling functionality of MeritBase and the Datawarehouse - the list-specific cooperative databases - have given many mailers deep and productive wells of names upon which to build their prospecting programs. I know of few BTB catalogs following this path that have been truly starved of responsive prospect names when they needed them.


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