List owners for years have wrestled with the challenge of how to increase list rental income and overall list usage.
Selectivity has been the key to achieving this; however, recency, dollar and gender have long remained the primary selects most consumer lists have made available. Demographics and lifestyle selects were reserved for larger lists, generally 500,000 or more, and the list owners needed to have deep pockets based on the high cost to identify and update this information.
The tide seems to be turning. More list owners are experiencing growing competition from other consumer lists, in addition to compiled lists and cooperative databases that are offering significant selectivity. Lists without a broader range of selectivity are losing ground in this competitive marketplace.
Mailers are looking to increase response and average order while keeping circulation at bay. To achieve this, mailers are turning to lists that offer more selectivity to accurately pinpoint customers most likely to purchase rather than customers more likely to respond. To meet this need and continue to increase their list rental income, list owners with file sizes of 175,000 names or more need to work with their list manager to determine if their files are good candidates to be enhanced and what markets could benefit from adding enhanced selects to their files.
Data enhancements. You may be a better enhancement candidate than you think. As mentioned before, most files that were enhanced in the past needed to be large because the hit rates (i.e. the percent your house files match the enhanced data elements) were generally low. In addition to the hit rates, the cost also was prohibitive.
In recent years, competition between data providers, better data-mining techniques, increased technology and cleaner house files have brought the hit rates up and the cost factor down. In most cases, this allows list owners with 12-month file sizes as small as 175,000 names to benefit by enhancing their files. They walk away with a relatively strong universe of names across a broad range of enhanced variables to be sold, thus generating increased list rental income. On average, we are seeing hit rates range from a low of 35 percent to a high of 70 percent. However, the percent a list owner can expect will depend on the following:
• List hygiene. The cleaner the file, the better the hit rate. Need I say more?
• Enhancement type. Actual data supplied as an enhancement source will bring the hit rate down; however, it will provide more credible information and is likely to increase response. Inferred data supplied as an enhancement source will increase the hit rate, but, in most cases, it will lower response.
The cost of adding lifestyle and demographics varies greatly but is now within reach of most list owners. The overall cost will depend on the enhancement type and the data provider.
• Minimum revenue commitments. This is generally reserved for data providers, which also act as the service bureau for the list rental orders.
• Data exchange programs. Some data providers will offer an exchange of data in lieu of setup fees or royalties. Simply put, the data supplier benefits by adding product or source of names to its database, while the list owner generally provides data about purchasing history and buyer characteristics.
The type of enhancement product you use (actual or inferred) and the cost structure you choose (data exchange or royalty base) depends greatly on the needs and comfort level of the list owner. For the most part, the setup fees and royalty charges will be more than offset by the increase in list rental business generated on these selects, provided you have an aggressive and sales-oriented list manager. In addition to the increased list rental income enhanced select will generate, the list owner will learn a whole lot more about his customer through the detailed information provided by the data supplier.
The main issue that can arise when adding any selects to your file is the fear of cannibalization by your current users. In other words, by offering more targeted selects, your existing users will take a more focused select to boost results. This will yield a smaller universe of names sold. This is a valid argument. In most cases I have not seen usage go down, and in some instances it increases because the more-focused selects yield better response, giving the mailer the opportunity to use the list more frequently.
The key to determining what you should make available is to understand your current list business, what sales potential each new select offers you, and what, if any, downside you can be exposed to. You should also do the math and research the cost of adding these selects to your list rental file. In the end, the increased selectivity on your file will deliver increased overall sales.
Mailers who could not previously use your file, due to differences in merchandise offering or demographics, should now be able to find a segment of your list to use. There may be the need to test and re-test, but in most cases mailers will find a pocket of names that work and roll out. Over time these additional selects have the capability of increasing your list sales bookings by 25 percent to 50 percent, depending on the demographic and lifestyle selects that are made available.
I strongly encourage list owners to discuss the benefits of adding enhanced selects to their files. Identify whether adding age of adult or children, income and dwelling type will drive more usage to your file. Also, identify whether lifestyle selects such as hobbies, sporting or gardening interests, contributor or investor information will have similar impact. I’ll take bets that in most cases nine of 10 list owners with limited selectivity on their files will identify true benefits to adding this information to their list rental file. n
Chris Montana is vice president of list management at Mokrynski & Associates Inc., Hackensack, NJ.