List Pros Back Guidelines, Say They Follow Them

Though many list professionals support the release of financial guidelines for the industry by one of their peers, they also said they already practice them.

Direct Media Inc., Greenwich, CT, issued the Pledge of Financial Integrity on Oct. 4. The 10 guidelines urge things such as never commingling list owner money with a list manager’s operating funds and turning around list owner revenue on a timely basis.

The issue will be discussed at the meeting of the List Leaders at the Direct Marketing Association’s 85th Annual Conference & Exhibition in San Francisco, said member Chris Paradysz, CEO of Paradysz Matera, New York.

Though it’s unclear what will come of it, further pressure still could come from list owners and mailers.

“I read Direct Media’s pledge, and I agree with everything in there,” said Fran Green, president of data management at American List Counsel, Princeton, NJ. “Those are sound business practices and have been the guidelines for our industry for as long as I’ve been in it.”

Green was confident that most list firms follow the guidelines. Even so, it doesn’t hurt to revisit the rules in tough economic times, she said. Add in that so many major companies have come under scrutiny this year for accounting irregularities and corporate misconduct.

Another list professional agreed.

“Everything listed in the pledge, we do,” said Fran Golub, senior vice president of list management at Walter Karl, Pearl River, NY, a division of Donnelley Marketing. “We’re a publicly traded company, so we really have to be on top of all of this stuff.”

However, one longtime industry insider was less sure about list firms’ adherence to these guidelines.

“What’s interesting is that list companies say they follow these guidelines — but when one of them goes bankrupt, the list owners are listed among the creditors,” said direct marketing consultant Steve Leighton, who spent 27 years with Fingerhut, most recently as vice president of marketing services, and is currently consulting for the DMA. “I think brokerage firms do commingle funds, but I don’t know firsthand.”

The economy and list firm Alan Drey Co.’s bankruptcy two months ago prompted the pledge, said Direct Media founder/chairman David W. Florence. Though he was aware of no impropriety at Alan Drey, Florence asked, “Who knows who else is on the verge of dropping out and who will get stiffed as a result?”

There are known list companies that do hold list owner revenue, Florence said, but he declined to name any.

Though the issue has been around for years, Florence called on the industry to set up a third-party auditing process for accounting practices, perhaps in conjunction with the Direct Marketing Association. The DMA did not comment on the issue and referred questions to Leighton.

List professionals seemed skeptical of an auditing process but offered other thoughts on keeping the industry fiscally responsible.

“I think list management companies should ask their brokerage clients to sign the pledge, and I think the list owners that they represent should ask them to sign it,” Paradysz said. “This is not a gray issue. It’s a black and white issue. It’s not your money, and that’s not negotiable.”

ALC has voluntarily undergone an audit for at least each of the past 15 years, Green said.

“We have an auditor, and we did that because we thought it gave our clients a sense of confidence,” she said.

However, the only way to mandate that is to regulate, and the industry does not want that, she said.

“I’ve heard some people question whether or not we need to overhaul the accounting structure of our industry, but my answer is no,” she said. “The guidelines that exist are perfect. Live by them.”

Even Leighton said that setting up an audit process would be costly and that legislation would be unpopular and ineffective.

“The direct marketing industry has always prided itself on self-regulation,” he said. “The bad guys are going to be bad guys whether there are laws on the books or not.”

Another list professional said the nature of the list business has safeguards built in.

“The fundamental economic dynamic of the list business that says until you pay the bill for your previous usage on a list we’re not going to ship you new names from that list has kept the mailers paying their bills and the list owners getting their money on a regular basis,” said Ralph Drybrough, CEO of MeritDirect, Stamford, CT. “It is almost a self-perpetuating financial circle.”

Green said that increasing numbers of mailers and list owners request financial information along with new business proposals. And she thinks that makes sense.

“Something like 85 percent of the money that flows through any list company is not theirs,” she said. “Fiduciary responsibility is a crucial part of what we do.”

Direct Media’s pledge contains 10 guidelines. Summarized, they say:

· Keep a separate account for list owner revenue.

· Make timely payments to list owners for non-managed list rentals.

· Pay list owners of files managed in-house within the month funds are received.

· Do not hold list owner payment over pending invoice disputes.

· Check credit of new mailers and do not place orders for those with poor credit.

· Do not place orders for brokerage clients with seriously overdue invoices.

· Help clients transition to new list firms.

· Keep up with outstanding credit and collection for former clients until accounts are settled.

· Use good judgment when requesting prepayment or payment guarantees.

· Be committed to competing and cooperating within the list business for the benefit of the mailer.

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