Is Your Database Worth Anything?

In the move from one warehouse facility to another, a family firm in the Northeast trashed a list of about half a million customers it had done business with in the past. To the firm, the list seemed worthless, something it no longer had any use for.

But in today’s highly competitive marketplace, other businesses might be willing to buy or lease those names. Each one could be worth anywhere from 50 cents to $5, depending on the amount and quality of information available, the demographics of the clients and how many times the names get leased or used. Do the math, and you will see that those 500,000 names could bring in as much as $2.5 million, a small fortune by most any standard.

When Nancy O’Reilly, vice president of new business development at Mal Dunn & Associates, a list management company in Croton Falls, NY, told that firm what it could sell its house list for, executives almost fell off their chairs. You can bet they went to their old warehouse to sift through the trash.

Most companies are aware of the worth of their customer database – to themselves, at least. But they may not realize they are sitting on a potential additional revenue source.

The first step in turning your company’s customer database into a marketable commodity is to analyze what you have and how you got it.

For one furniture store chain, it meant beginning with a review of how it chose mail recipients. This review revealed that the chain began by acquiring customer names within a geographical radius around each store and having them pre-screened by a credit reporting agency for levels of creditworthiness. The chain mailed different pieces according to those credit scores. As a result, the response rates as well as the sell-through have proved effective and profitable.

When prospective customers walk into any of its stores, methods are in place to identify which of them is responding to a particular mail piece and to keep track of what they buy, how many times they return and how much they spend. Also, because they have been pre-screened through a credit reporting agency, a Fair, Isaac and Co. score range is available and noted.

Other demographics can be reasonably inferred. For instance, if a child’s bedroom set is purchased, it is reasonable to assign “presence of children” as a demographic selection. These and other demographics are fastidiously recorded and updated.

What all this means is that the chain possesses a database of proven large-ticket, mail-responsive customers that can be selected according to FICO score ranges, date of purchase, frequency of purchase, location by ZIP code and certain demographics.

The next step is how to get it to market. One way is to contract with one of several companies capable of writing custom electronic count/order systems based on demographics, one that can warehouse and update the database and Web-enable it.

In the case of the furniture chain, Web-enabling the list made sense so worldwide access could be accomplished more easily. This evolving industry has spawned several young companies that bring new and innovative technology that is designed to do just that.

From there, it was necessary to select a list management company, and in this case it made sense to select one that had a Web site that already offered other databases of mail-responsive buyers.

The more traditional method would involve contracting with a service bureau and a list management company. The primary costs incurred involve hanging the file at a service bureau. It is at this point that your list is cleaned and made usable. Hygiene is critical to ensure the viability of your list asset.

Do you have enough names on your customer list for it to be marketable? Unless your list is highly active or niche-focused, you will need at least 25,000 to 50,000 last-12-month names for the list to be profitable. Most mailers will test in quantities of 5,000 to 25,000 names.

If you plan to market your database, in what form should you keep it? O’Reilly suggests that any modifiable spreadsheet format with fields of information, such as name, address, phone number, last purchase date and so on would be acceptable.

The more information you provide about your customers, such as lifestyles, demographics, e-mail addresses etc., the more likely you are to have a desirable asset.

Some companies are leery of leasing their databases for fear of the competition soliciting their customers. However, reality states that of the mail-order-responsive universe, there are few unique names in the marketplace today. Your customers, more than likely, are on any number of other lists ranging from home- and business-related publications to catalogs.

Consumers who provide data should be given the opportunity periodically by list marketers to opt out of the marketing process. Companies should let customers know that their names will be made available for direct marketing use. Industry guidelines call for all opt-out requests from customers to be honored.

Industry guidelines also call for list owners, brokers and such to ascertain the nature of the list’s intended use before the sale of that list. Responsible list marketers protect their customers by “bumping” their lists periodically against the Direct Marketing Association’s Mail Preference Service list of people who have said they do not want to receive direct advertising mail. Some go even further and run their lists against do-not-solicit telephone and mail lists maintained by some states. Taking those steps is strongly advisable.

So take a closer look at your own company’s customer database. Can you see value there? Are you looking for additional revenue centers? If your answer is yes, marketing your list may well be worth investigating.

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