Since the late 1970s, list owners have had to weigh their choices: Do you participate in a mailer's proprietary database, say no and forfeit the list-rental income, or do you hold out and hope the mailer desires your list enough to pay full fare?
Participation often meant that your list was sent to the mailer's service bureau, where it was diced and sliced in a “black box” and commingled with other lonely, unnamed lists only to emerge without identity as data in a database. The proof of your existence was relegated to statistics on a database summary report.
For most list owners, this option did not present a pretty picture. It offered little upside and required great leaps of faith by the list owner that his or her file would not be abused and that rental fees would be reported fairly, accurately and in a timely way. Even in the face of such odds, many list owners chose to participate. Some thought this was the wave of the future and bought into the promise that a database would generate even greater multiples of list-rental income than the “traditional” route.
Still others were building their own prospecting databases, agreeing to reciprocal participation and allowing themselves a better-than-ever shot at mailing at reduced costs.
Whatever the reasons, private, prospecting databases have become an accepted and legitimate tool for mailers. And as the debate lingers, many are professionally managed and have become secure sources of rental income for list owners. Nowhere is this more prevalent than in the hi-tech marketplace. In fact, the most sophisticated hi-tech marketers embrace databases and recognize their importance.
Changing market: In the technology market, the supply of names has changed. There are more lists, but the quantity of quality mail-order buyer names has dropped. This is a result of the fall in software prices — making it less economical for some marketers to use direct mail — as well as the influence of the Internet, modeling and other factors. Now marketers need to seek out new and improved sources of names.
Through databasing, they can access smaller, more focused lists. There is an additional, financial incentive. Whereas previously their adjusted list rental costs may have been $150-$200 per thousand names (allowing for Net name discounts), the database environment can reduce those costs from 25 percent to 50 percent by mailing from a true Net environment.
Market supply and cost factors certainly are an incentive for using databases. The greatest incentive, though, is marketers' ability to mail much more smartly thanks to advanced modeling techniques.
Modeling leads to smart mailing: There are a variety of models that, when applied to databases, facilitate more focused, targeted direct mail programs letting mailers use marginal lists cost-effectively. Modeling can be performed on a host of variables: geography, response rates, type of address — business or residential — and more.
Response rate models rely on the analysis of prior history to identify which potential customers are most likely to respond to a particular offer. Models related to a business customer would include such data as the individual's job description, the business — SIC (standard industry classification) code, annual sales, etc. Consumer models would contain gender, income level, personal status — married, single or family with children. And, of course, transactional data can be used in all models to establish purchase dollar values, frequency of purchase, etc.
Many service bureaus and specialty organizations offer comprehensive database architecture and processing along with an array of modeling techniques. In evaluating the cost of a model, you need to carefully consider your return on investment. Sometimes, an inexpensive model can yield powerful returns. Working closely with your professional list broker can help you select the best way to go.
Maximize your potential: Although it admittedly is a subjective and sometimes self-serving point of view, I believe strongly that you need an experienced broker for effective databasing. Your broker should be able to demonstrate that he or she has strong relationships with other businesses like yours who have placed their direct mail programs in trust with him or her. The broker should have an extremely strong working relationship with a service bureau that can build a relational database, perform the modeling and supply the necessary models and reports.
In effect, databasing requires a strong team approach. At the helm is the broker serving as the database administrator; monitoring and tracking results, handling all negotiations and working with the other team members — the marketer/mailer and the service bureau — to produce the maximum results for you.
Make the commitment: Along with having the right databasing resource, it is critical that a business interested in databasing has total corporate buy-in to the process. There cannot be ambivalence or paranoia on the part of any executive controlling the business's data. A budget should be allocated and management should view its up-front costs as a long-term investment that will pay for itself in more effective direct mail programs.
To obtain the maximum results, management needs to approach databasing with the right attitude. This means due diligence in establishing its needs and the goals of the database and then communicating these objectives to the members of the databasing team (i.e., broker, service bureau).
Management must recognize that databasing is an evolving process and not a case of instant gratification. The best databases are managed strategically with regular modeling. Test models are routinely tweaked to compile the best possible data. With this understanding, databasing can be an extremely rewarding marketing tool.
Although databasing certainly has gained a vote of confidence from many marketers, there are still those who refuse to participate. Those companies, who unfortunately have not kept current with today's databasing policies, are missing a tremendous opportunity to boost their direct marketing efforts, as well as potential revenues that can be derived from the rental of their data.
All databases are not the same. List owners need to use discretion and take the time to understand the differences between programs.
Janine Vosseler is executive vice president of 21st Century Marketing Inc., Farmingdale, NY, a full-service direct marketing media organization.
