The start of a year is a likely time for mailers to make vendor changes of all kinds, but the first few months of 2003 have seen high-profile file movement among list management companies.
From January to late February, at least 11 files each with 1 million or more names were placed with new list managers, not to mention all the smaller files that have been shuffled around. Well-known list owners such as BMG Music Service, McGraw-Hill, Wenner Media, Columbia House, Hanover Direct, VFW and BusinessWeek made list management changes for one or more of their house files since Jan. 1.
One list professional cited the economy as at least partially responsible for the movement.
“Beyond the normal trends of first-quarter transitions based on year-end performance, we're seeing people throwing up their hands and saying, 'I've got to do something,' and making changes,” said Andy Ostroy, chairman/CEO of ALC of New York LLC. “In the last couple of years we've been in a really precarious economic landscape where income generation wasn't what it used to be, and some companies felt that the turnaround wasn't going to happen at their existing list management company.”
List rental income always has been a profit center for mailers, and in some cases the only profit center, making it crucial to their businesses, he added.
The process of moving a file usually takes months.
“I would have to agree that there has been a lot of movement recently, which is a result of talks that probably started three months ago because that's frequently about how long the process takes,” said Linda Huntoon, co-chair of the Direct Marketing Association's Lists & Database Council and executive vice president at Direct Media Inc., Greenwich, CT.
The tough economy is only one part of why a list owner might switch managers. Aside from performance issues, other reasons include closer synergies with another company's list management portfolio, changes in personnel on either side, a move of the brokerage side of the business or perhaps a promise of increased revenue.
“There is some vulnerability on the part of list owners when a list manager promises a revenue increase,” Huntoon said. “Even if in their heart and in their head they know better, they can be swayed by that, especially after a prolonged period of decreasing revenue.”
That can come into play when there are fewer lists and more competition for them, she added.
Ostroy agreed but cautioned that a list manager who makes promises must keep one's word to keep the client.
“If you want to be the type of list management company that goes out in today's climate and promises the world, you can put on 150 clients in a week, but the problem is you're going to have to deliver,” he said. “I think a lot of companies that have been trying to perhaps keep clients over the past couple of years made promises that perhaps they couldn't deliver on.”
List professionals agreed that over-projecting in any economy was unwise.
“List managers shouldn't really make promises,” said Chris Montana, senior vice president of list management at Mokrynski & Associates Inc., Hackensack, NJ. “We can only give our best judgment on where a list owner's business should be given the circumstances of the times.”
This year's activity isn't much more than in past years, Montana said, “with the exception that a lot of people stayed put in 2001. It might just be that they're more high profile and bigger files so the movement is more noteworthy.”
Most managers will look at usage and identify holes as the basic premise of any proposal, Montana said. Then once a manager gets a new file, the real work begins and they have to enact the strategy to expand use and increase list revenue.
“You can always measure yourself against your competition whether times are good or times are bad,” Ostroy said. And once you prove yourself by winning and keeping files, it becomes easier to attract new clients, he added.
