To Enhance or Not to Enhance?Should I enhance my file? Clients and prospective clients frequently pose this question to list managers. Whereas segmenting the list to appeal to more specific mailers may appear to be a means of generating additional income, it can easily be a drain on net list rental revenue unless certain criteria are considered.
SRDS presently lists more than 480 "enhanced" lists ranging in size from 50,000 to more than 100 million names. When looking to enhance a file, these criteria must be addressed:
· Cost to append data, including fulfillment.
· Frequency of update.
· Marketability of segments.
· Utility of this data for the house file.
From a rental standpoint, enhancing a list of fewer than 500,000 names is generally not advised, as the majority of segments are too small to market, particularly when any sort of recency is applied. Therefore, we shall consider an active file of 1 million subscribers.
Cost to append. Before a file can even be put on the market, you must provide your entire file to the agency that will be appending the data. Assuming a cost of $3 per thousand for run charges, this will cost at least $3,000 plus shipping. In addition, the initial append process typically will cost $26,000 for a file of this size. Furthermore, there will be updates and royalty charges each time this proprietary data is used for rental or mailing.
Frequency of update. Though it may be appealing to have a universe of 75,000 gardeners, that universe will be of little value if the gardening mailers require three-month recency. In such a case, you would need to update your file no fewer than four times annually, increasing your fixed costs to $52,400 for quarterly enhancement and fulfillment. If the appending agency can simply update the new-to-file names, this can save a considerable amount of money.
The question then becomes, "From a rental standpoint, are there enough mailers for your stronger segments so you can expect the enhancement process to be a self-liquidating proposition?"
Marketability of segments. We have all seen such exotic segments as "10,000 Active Female Scuba Divers w/Allergies."
Such segments may be interesting, but how many mailers will pay for these names? You should have a solid reason to think that a group of mailers who seek these specific segments exists. If you can identify five mailers who typically seek such names and who will re-mail regularly, you stand to generate considerably more revenue than you might if you are unsure that such a mailer even exists.
Next, it is imperative to determine the volume these mailers mail and the frequency of their campaigns. This can help justify which and how much data you append.
Utility of data for house file. A final consideration in determining the potential value of enhancing your list is how effectively you can use this data internally, not solely from a list rental perspective.
Let's assume that you have a potential beer advertiser interested in placing its full-page ad in all issues going to subscribers 21 and older. Does the fact that you can identify the individual subscribers who meet these qualifications enable you to selectively bind that ad? If so, will this bring in the paid advertising? And can the cost of this be passed on internally, thereby generating revenue for the circulation profit center?
Another means of justifying the fixed costs is how you mine your house file. Are renewal and cross-promotional pieces driven by age, presence of children, or are they interest-specific? Will having the appended data let you use your cost-effective house file instead of more costly outside rentals?
In the final analysis, use the "next unit" cost formula, in which the cumulative value contributed per name is greater than present value. By considering the appended data's imputed value to your internal operations, and not simply list rental value, you will be in a better position to make a sound business decision regarding the enhancement of your file.