As I consider the end of my time as chair of the Direct Marketing Association’s List and Database Council, which comes to a close Oct. 30, it’s interesting to examine the changes in the list business since I became an officer of the operating committee five years ago.
At that time, we were in the middle of the “dot.bomb” as some call it. Twentysomethings were telling list professionals that the list business was obsolete – some even used the word “dead.” Some of us chuckle that we’re still here while many, if not all, of them are gone – though we would never say dead.
Before we pat ourselves on the back and sink back into complacency, it’s important to think about whether we really understand the changes occurring in our business. There’s a chance we will fulfill those prophecies if we don’t.
This week’s List Vision is full of topics illustrating those changes. However, I want to focus on an issue that won’t be addressed at List Vision. We can’t think of a way to put it in a session, but it needs to be discussed.
Like so many others, the list business consists of two components – the users and the suppliers. In our case, the users are the list owners and mailers, and the suppliers are the list managers, brokers and service bureaus. Certainly there are other components, but these are the players discussed here. The suppliers evolve parallel to the users, and, though each depends on the other, the users generally take the lead.
Remember that our business was initially, and remains to a great degree, entrepreneurial. Until 1960, there was a lot of capital with which to build a business. As the business grew slowly, so did the processes. The model was brand new and made a lot of money for those who turned their creative spirit toward this innovative marketing practice.
Every technology advance brought new opportunity. Consider the effect of the rapid expansion of computers on just the simplest parts of our business – maintaining a house file or processing orders. Think of what the explosion of the credit card industry did. In 1960, few had a credit card as we know it, and those who did never would have used it to buy anything as personal or frivolous as a dress or a book.
Now consider the ability to make a profit during those years. It grew right along with the industry. Huge businesses developed with lots of margin for everyone. The spring DM/MA conference was held in exotic venues like Hawaii. Attendees were top management of both the mailer/list owner companies and the list management/brokerage companies. Most of what went on at those conferences was networking and comparing of stories about everyone’s most recent successes. Those of us working in the trenches didn’t attend, but we aspired to the time when we would be there.
Somehow, that hasn’t come to pass. Many of those “big guys” no longer exist. Mysteriously, profit margins began to decline in the early 1990s. At first, no one noticed – the payrolls were still hefty, the conferences elaborate. Who can forget the famous Doubleday parties or even the Direct Tech parties of the early ’90s? But gradually we saw mailers reduce their marketing staff and turn to their vendors to fill the gaps. Vendors, in turn, looked to automation to fill in for the staff that they no longer could afford, even though they were being called upon to do more. All of this was necessary because the margins on both sides of the business were eroding quickly.
Now we’re halfway through the first decade of the 2000s, and it’s time to look at our businesses and determine how and whether they will continue. Many list owners and mailers can’t access their own databases effectively because they haven’t made the investment in technology. Many depend on their vendors for important and basic knowledge and services that should never be entrusted to people outside of the marketing departments of their own companies.
On the vendor side, where are the new, aggressive, hardworking and dedicated list managers and brokers? List companies mostly have cut their training programs and lowered the qualifications of people they hire in order to keep up. In many cases their margins – think about the list managers working on 10 percent of the final base cost of the names they manage – haven’t remained strong enough to run healthy businesses.
Service bureaus have been hard pressed to keep up with the technological developments of the past 20 years. How many still ship data on tape reels, and which of them have made true advances in the merge/purge process?
We need to adjust the business model that evolved in the early days to fit today’s business climate. We need to examine how we market our products to today’s consumers. We need to consider what is a fair price for goods sold and services rendered. We need to make the investments into our respective businesses that allow the businesses to grow – not just to keep up.
It’s past time to take control and change to fit the needs the consumers still have. There really is a chance that if we don’t, we will fulfill the prophecies of the dot.bombers, and that would be a tragedy.