Mailing lists are compilations of the names and addresses of actual and potential buyers of a product or service. These lists are created by companies for their own marketing initiatives (e.g., lists of all past and present customers), or they are purchased or rented from list brokers—companies that specialize in making list compilations. Indeed, some mailing lists contain information that enables businesses to target very narrow niche markets. It is possible to rent or purchase mailing lists that include the names, addresses, and phone numbers of people in categories as specific as museum curators or people who have recently purchased kayaks (or even museum curators who have recently purchased kayaks).
The importance of the mailing list has been well documented over the past few decades. Indeed, accurate, appropriately defined lists can serve as launching pads for tremendously successful direct mail advertising campaigns. Conversely, poorly chosen lists—those with outdated information or inappropriate targets for the company's advertising message—can cripple a campaign from the outset. "You can make lots of mistakes in direct mail," said Jeffrey Dobkin in Direct Marketing. "You can create a terrible package that no one will open. You can set your price too high—or too low—and people will not buy. You can offer your products at the wrong time…. But nothing in as bad as mailing to the wrong list."
Obtaining and utilizing mailing lists for direct mailing campaigns is a favorite tactic of small business owners because of the relatively light expenses associated with it, but larger companies rely on direct mailings as well. Indeed, direct mail is used by more advertisers than any other medium, and more dollars are spent on it than on any other form of advertising. According to the Direct Marketing Association, direct mail accounted for nearly $40 billion of advertising expenditures in the United States in the late 1990s. Studies also indicated that sales figures for direct mail are continuing to expand at a healthy rate in both the consumer and business-to-business markets.
TYPES OF MAILING LISTS
There are three primary types of mailing lists, each of which are compiled in a different fashion:
RESPONSE LISTS Response lists consist of names and addresses of individuals at home or in the workplace who have responded to an offer of some kind (by mail, telephone, billing inserts, etc.). Because these people are known responders, their names are generally priced higher than those in lists compiled by other means. However, individuals on response lists may have responded to a media other than direct mail (e.g., telephone solicitation) and may not even open their "junk mail." Thus it is important for the small business owner to know what percentage of a list was direct-mail compiled. And always, the business owner's most valuable response list is the "house list" of current and past customers.
COMPILED LISTS Compiled lists contain names and addresses of individuals gleaned from the White Pages and Yellow Pages, often enhanced with information gathered from public records (e.g., auto registrations, birth announcements, business start-ups). A very popular method of list compilation is through magazine subscriptions, since lists of readers provide an excellent means of targeting individuals in specific industries (e.g., Institutional Investor), or within distinct areas of interest (e.g., Fieldand Stream). Lists may also be compiled based on zip code when the small business owner seeks to reach consumers in a particular geographic area or income level (as dictated by the zip code). Credit card lists are also an effective means of list compilation.
COMPILED LISTS FROM RESPONSE MEDIA If a compiler creates a list from a professional association directory, this may be called a compiled list. However the association may well have brought in members via a mail solicitation. Thus an apparent compiled list is actually a compiled list of mail-responsive professionals.
THE LIST TEAM
Small business owners seeking to obtain and/or use a mailing list can turn to a variety of sources to help execute that task:
The List Broker. Many small business owners utilize the services of a list broker when performing direct-mail marketing campaigns. In direct mail parlance, the broker is an agent who rents the prospect lists of one business to another. The broker is paid a commission, usually 20 percent, by the list owner each time a list is rented; the renter does not pay for the broker's service. It is important to note that the broker represents the mailer and not the list owner. Since the broker researches, analyzes, and evaluates the tens of thousands of individual lists available, the broker is a marketing consultant—not just a source of list rentals.
The List Compiler. The list compiler is usually a broker who rents a number of lists from published sources and combines them into composite lists, then rents them out. The compiler performs his or her own individual alchemy on a list, adding overlays and enhancements, and often refining it down to a manageable niche. Most compilers specialize in either consumer or business lists. Large compilers maintain large staffs to verify data.
The List Manager. The list manager represents the list owner just as the broker is the agent for the mailer. The primary job of the list manager is to maximize income for the list owner by promoting the lists to as many brokers and list users as possible.
The Service Bureau. The primary function of a service bureau is constantly improving the lists—a process called "list enhancement." A primary step in list enhancement is merge/purge, the elimination of duplicate names (which can be costly to the advertiser and annoying to the customer). Service bureaus are most commonly utilized in instances where large lists are involved.
The Letter Shop. Mechanically performing a mailing can be costly and time consuming. Thus small business owners often "farm out" their mailings to letter shops. These companies not only address the envelopes, but also mechanically insert the materials, seat and stamp the envelopes, and deliver them to the post office according to mailing requirements.
THE COST OF A LIST
The small business owner shops for a list that will provide the greatest number of responses at the lowest cost. Like most purchased items, lists vary in quality and price-generally, the more expensive the list, the better the quality. The least expensive lists are known as unqualified lists; these consist of a rundown of occupants in a specified geographic area. But many lists—such as a list of another establishment's identified customers—are much more expensive. Other factors can impact the cost of a list as well. For example, lists rented for one-time mailings will cost more than multiple-use lists.
THE MAILING PROCESS
Small business owners typically rent lists rather than purchase them outright. The reason for this is the upkeep needed to keep lists current. Lists typically go bad at the rate of 2 percent per month—at the end of the year about a quarter of most lists are out of date. Further, the more often a list is used, the less effective it becomes. Thus assuring that a list is current and "fresh" is normally left to the expertise of an experienced list compiler.
Many list brokers prefer not to actually give out a rented list, but instead will arrange to have the pieces mailed through an independent mailing house. According to Agency Sales Magazine, when dealing with a reputable broker there is no need to fear-the broker provides receipts from the letter house assuring that the mailing was handled as agreed.
Successful use of a mailing list is a multistep process:
DEVELOPING A CUSTOMER PROFILE The process begins with developing a profile of the ideal customer. "The more precisely you can define your target audience, the better you will be able to aim your mailing, and the better your response will be," noted Dobkin. This means that the advertiser needs to determine customer motivations, income levels, and other considerations. A precise profile allows the broker to provide a list tailored to the needs of the small business owner. This customization helps assure the highest possible response rate.
FINDING THE RIGHT LIST Once an advertiser has defined the market it wishes to target, it begins the process of culling the herd of available lists to find the best one for its particular campaign. Listings of available mailing lists can be found in advertisements in leading marketing periodicals. Trade and business associations also maintain potentially valuable membership lists. Another good source of listings is the subscription database maintained by magazine publishers, who typically use the services of a list broker to maintain this information.
As the list research and selection process unfolds, small business owners should consider the following factors when weighing the ultimate value of a list:
* How often is the list updated and/or cleaned (a "cleaned" list is one that has been processed by the U.S. Postal Service to flag recent changes of address and remove old non-deliverable addresses)?
* How frequently do people on the list make purchases, and how much do they spend?
* Have earlier customers rented or purchased the list after initial test mailings?
* How frequently has the list been rented by other companies? Business owners should avoid lists at either end of the rental spectrum, for heavily used lists are often played out, while lightly used lists generally indicate poor quality.
* What is the list company's policy on returns? Will it pay for postage on returns or is the company who purchased the list obligated to absorb the cost of mail that never reaches its intended target?
SHOPPING FOR THE LIST BROKER Many businesses utilize the services of list brokers, who vary considerably in the quality of service they provide. Reputable list brokers will provide the list pedigree, which states when the list was last purged, who else used the list, and the success rate of previous mailings. Businesses should find another list broker if discussions reveal that the firm has only sketchy knowledge of list revision and update processes, limited contacts with the list management community, limited knowledge of developments in the industry, or incomplete information on pricing, test, and roll-out potential for lists under consideration. Small business owners should also make sure that their list broker does not engage in the practice of "aging" the money that is paid them for 30 days or more before they make payment to the list management company. This practice enables the list broker to earn interest on the client's money prior to payment, but it can jeopardize the small business's credit and reputation at list management companies.
But while some list brokers do not earn their fees, others can be invaluable in ensuring that their client purchase only top-tier lists and take advantage of changing conditions in the direct mailing world. Indeed, owners of small businesses should recognize that some list brokers may not be particularly interested in adding them to their client base. Small companies that place relatively small list orders (less than two million names annually) will not be seen as a source of significant profit by list brokers. "If you order fewer than this quantity of names from a broker who is doing a good job for you, you are very fortunate," commented Target Marketing. "In general, forget trying to save on broker commissions. If you find a good list broker, count your blessings."
In addition to the above considerations, small business owners should weigh the following when purchasing mailing lists:
Purchase several lists if necessary—"When you are launching a new product that is heavily dependent on direct mail, make sure you have a universe of lists available large enough to support your circulation goals," counseled Target Marketing. "Don't put your trust in a few lists that are obviously good for your product but represent too small a universe."
Look ahead—Mailing houses typically schedule runs months in advance. For introducing a new product or service, improper planning can be disastrous. Thus small business owners are advised to plan ahead, taking into account the list broker's billing cycle: brokers typically bill their customer with 30 days to pay, and will not put out a piece of mail before receiving payment.
Utilize technology—Pioneering list brokers are establishing Internet sites to provide information about their products and services. Although many web sites are merely electronic versions of the broker's printed catalogue, some sites actually enable a small business owner to generate and purchase a mailing lists of up to 10,000 names while online. Internet mailing lists have emerged as another route for small business owners looking to publicize their product or service line.
EXPANDING A CURRENT CUSTOMER LIST
While a rented list can pay handsome dividends, the small business owner's most valuable resource is usually its list of existing customers—this serves as a starting point for any mailing. But business enterprises that are content to rely solely on such a list are courting trouble, say business experts. Indeed, list updating is a relatively inexpensive way of shoring up a company's marketing efforts. The cost of expanding a list can be offset by renting the list to non-competing businesses. An owner may choose to manage the list in-house, or hire an outside list management company. The small business owner also has the option of securing a list brokerage firm to handle the rental process in exchange for a percentage commission, usually 20 percent or so of the total price.