For years, the list marketing business has dealt with challenges to maintaining fair costs and equitable compensation structures between mailers and brokers, list owners and managers. Today’s economy, combined with the impact of privacy legislation, shrinking list universes and the erosion of postal mail by e-mail, has introduced a new level of pressure.
Consequently, we’re experiencing pressure not just from external sources, but even from within our own ranks. There is conflict and discord over how to sustain viability and profitability for list brokers, managers and owners without putting ourselves out of business.
One of the latest to sound off was Linda Huntoon (“Rising Fees Are Burying List Business,” Jan. 6). Speaking primarily from the perspective of the list broker, she cites “extraordinary electronic transmission fees,” “unacceptable” file transfer protocol charges and “inflated cancellation charges.”
While Linda may be well-intentioned, I think her focus is misdirected. My greatest concern with her position is the general implication that list managers and owners are extortionists, charging fees simply to make a high profit. That assumption is so far from the truth that it almost bears not addressing. However, what we don’t need are standoffs among brokers, managers and owners, but rather more dialogue, albeit with awareness as to each party’s challenges and costs of doing business.
First, let’s get one thing straight. All businesses exist to make a profit. I don’t think it is right to tell someone what he or she can or can’t charge. That’s the purpose of negotiations. You negotiate toward reaching a fair and reasonable outcome for both parties. No one person can serve as the arbiter in this matter. Let the market decide.
Instead of trying to dictate specific charges, we should focus on achieving standards of fair compensation for brokers, managers and owners, at reasonable costs to mailers. Apart from this tenet, there are the basic forces of a free enterprise system at work — namely, supply and demand. Still, a really horrific situation develops when list professionals start becoming their own worst enemies.
We’ve seen time and again, list brokers, in order to get the business, drop their prices so low that they can’t even cover their costs. As a result, the quality of work and service decline such that they risk becoming even bigger losers, while concurrently giving the industry a black eye. This commoditization of our industry is the first step in our collective “burial.”
And the same thing happens all the time now in list management. List owners recognize they need more and better service, more and better marketing/advertising, more and better selling. Is it reasonable to approach a manager who has grown your business and seek more services with a reduction in compensation?
No wonder I can’t even get a return call from half of the managers today. Their staffs are overworked, and many are poorly trained. I have no doubt that the overall quality of representation is not as high as it was several years ago.
So, who’s to blame? Again, economic factors are at work here. Mailers, feeling the pressure of the recession, rising postal costs and other market conditions, look to get their pound of flesh out of the service provider. They squeeze until they get the deal they want.
Still, we can’t help but think that many mailers are taking advantage of their brokers. Every broker knows that it is more costly to develop a new client than to retain and do business with an existing client. Considering these economics, many brokers succumb to mailer demands, however unreasonable. And who becomes the real winner and who becomes the real loser?
List owners will tell you that all they are looking for is fair compensation from the mailer. Still, in a highly competitive environment, their prices are being forced down and their profit eroded. So what do they do? They start pressuring the list manager to create greater brand awareness, implement new strategies and increase rentals — all for lower management fees.
So, what is the manager’s response? You guessed it. Figure out how to meet the list owner’s demands without incurring greater costs.
It is not unusual for a manager to divert internal resources from active selling to actively servicing the needy client. Long-term gains are sacrificed for immediate gratification. In the long run, the list owner often moves around searching for someone else to do even less of a job at less of a fee and discovers that their once strong and healthy list rental program has become botched. Brand identity and recognition have been sacrificed. The market is confused about the list. Monies are outstanding, and no one is happy.
Are you getting dizzy yet? We are in a diabolically unhealthy cycle. Trying to break the cycle by looking at the small issues or attempting to rewrite basic economics is not the answer. What is required is intelligence and foresight to foster relationships and compensation strategies that create a win-win situation rather than lose-lose proposition. It will require a great deal of restraint on all our parts and no knee-jerk reactions.
David O. Schwartz, President/CEO, 21st Century Marketing, Farmingdale, NY