Finding Your Way Through the Mailing List Swamp

by George Duncan

"I would to God thou and I knew where
a commodity of good names were to be bought."
- William Shakespeare, King Henry IV

To appreciate the importance of the list to your overall marketing effort, consider the oft-quoted 40-40-20 rule: 40% of the success of your mailing depends on the quality of the lists. (The other 40% is the offer, and 20% is the creative.)

Shakespeare himself couldn't write a successful mailing if it were sent to inaccurate lists. "Junk Mail," I like to say, "is an offer sent to the wrong person."

Further, the cost of list rental has skyrocketed in recent years, making list testing considerably more expensive. We can no longer throw another 3 or 4 lists into the test matrix just for the hell of it as we once did when lists were $25 per thousand and gas was 32c a gallon.

How many lists are there?

Standard Rate and Data Service, a mainstay of the list marketing industry and publishers of the SRDS Direct Marketing List Source, recently announced some 16,000 lists in its database, available to subscribers who purchase their proprietary software. Dun & Bradstreet's DB Marketplace boasts more than 10 million U.S. businesses on CD-ROM (slice and dice it into as many segments as you need), and Database America's business file touts 11 million companies.

In his landmark guide, The Complete Direct Mail List Handbook (Prentice-Hall, 1988), list guru Ed Burnett estimates there are some 20,000 lists available commercially.

So obviously, there are lists and there are lists, and most mailers have experienced their share of dogs at one time or another. We'll cover some of the basics here, with the caveat that I'm not a list broker, and your best chance of assembling an effective list matrix is by working with a reputable broker. More about brokers in a bit.

Types of Lists

You should be aware of the different types of lists and list compilation methods. They yield substantial differences in results.

House List

This is number one. Your house list will always be your best responding list for the same reason a $5000 political contributor gets his phone call returned: they know you.

Your house list is composed of your customers. They have bought something from you at least once. They can be presumed to be familiar with your company and your product, and satisfied with both.

If you're not aggressively building your house list and maintaining it on a computerized database...maybe you'd be happier driving a cab.

A house list may also consist of inquirers if you're primarily into lead generation -- people who have written or called directly to obtain information. If you're a fund raiser, your house list is your donor file.

Response Lists

A response list is composed of people who have responded to an offer. Preferably by buying something, but perhaps also by requesting information, or business people who have said "OK" to a free subscription to a controlled circulation business publication.

Already you can detect differences in quality here. The person who paid cash for a product is clearly a more valuable prospect than either of the others...unless the business publication subscriber happens to be director of jet engine procurement for United Airlines and you're the jet engine marketing director at GE. Everything is relative.

Actually, multi-magazine publishers like McGraw-Hill, Chilton, Cahners, CMP, and Penton offer large, unduplicated databases of their business/trade publication subscribers as "direct mail buyers" because they said "Yes" to a free subscription and otherwise qualified themselves via a questionnaire. You'll have to decide if you want to consider that a response list. They did take the time to fill out the Qualification Form, and for them, time is money. These companies also offer a variety of marketing tools and services.

A list of similar business people who paid for their subscriptions may be expected to produce better qualified prospects, all other factors being equal. Indeed, that holds true for response lists generally - but then, all other factors are seldom equal. Also, response lists cost more to rent than compiled lists.

Surprising as it may seem, your best bet for selling a bible by mail is a person who just bought a bible by mail. You may have a problem getting hold of that list, however, since the owner likely won't rent it to a competitor. (Although they might trade with you if the list universe is tight.)

In many niche markets, however (especially business markets), the availability of high quantity response lists can thin out quickly which means if you're going to sustain any kind of volume mailing program you'll need to rely on...

Compiled Lists

Compiled lists are those that are assembled from existing data sources, either public or proprietary. They can also be custom compiled from special sources or combinations of sources.

Compiled lists start with phone books from which names and addresses are captured in volume, then spot verified by telephone. White pages yield consumer names (3-line addresses), and yellow pages yield businesses (4-line addresses). R.H. Donnelly/ Metromail is the principal compiler of phone book lists.

Other sources of compiled lists include trade show attendees, automobile registrations, association memberships, product warranty cards, sweepstakes entrants (choose "Yes" or "No" respondents), occupant lists, and more.

Largely because the purchase behavior is missing, or cannot be quantified, compiled lists usually pull at lower rates than response lists -- but then, they usually cost less.

Data Banks

Both business and consumer lists, response and compiled, are available in data banks. These are large databases of lists that have been compiled, combined, de-duplicated and enhanced. Enhancing means the files have been overlaid with various types of demographic and psychographic (i.e., lifestlye) data.

Consumer lists can be enhanced with such demographic overlays as driver license data, median age, median home ownership and value, make and value of car, dates of birth of household members, and more.

Where you see the word "median" used, it signifies information drawn from census tract data and segmented by carrier route for households in that route.

Psychographic characteristics include hobbies, special interests, product ownership and more. (Demographic data may show I own an expensive car. But is it a Lincoln Continental or a Porche? The difference may be important to you.) Psychographic data is collected via mail and telephone for inclusion in various "lifestyle" lists or overlays to lists.

SRDS and The Polk Company jointly publish The Lifestyle Market Analyst . As their ad puts it, "You'll find out who owns a dog, who attends cultural events, who uses home video games and who uses a personal computer." The Analyst identifies magazines and mailing lists that target these special interests. They claim to profile 19 million households.

Another primary source of consumer lists is catalog buyers. The Millard Group in Peterborough, NH is a major source of catalog lists, and manages many of the leading catalog and publisher lists. Some large data banks consist of catalog multi-buyers, unduplicated and enhanced with other data.

Business enhancement is more limited. SIC codes and phone number are two key pieces of information most users seek. The SIC code tells us what business or industry the company is in, and the phone number facilitates the call we often need to make to determine the individual's decision-making functions and purchase intentions...or to (hopefully) get referred to the right person in the company.

Other data enhancements include number of employees, sales volume, and various county, city and metro codes.

Among the richest data banks for this kind of information are the business publishing databases mentioned above. McGraw-Hill, Cahners, et. al. puts big bucks into gathering the kind of marketing data mailers seek, and it's usually dependable.

Companies that publish specialized lists like Dun & Bradstreet can add credit information and both Market Data Retrieval and CMG Group provide enhanced school lists.

List Rental Costs

Often, I hear someone say they "bought" a list. You should understand that lists are rented for one-time use only. List owners protect their lists by seeding them with dummy names and otherwise monitoring their usage. Mail a list a second time without paying for it, and you'll be hearing from an attorney pretty quick.

Most lists are rented in minimum quantities of 5,000 names. Some very popular lists double that minimum to 10,000. You don't need to mail all the names you rent, however.

Today, for budgeting purposes, estimate lists at $100 per thousand ($100/M) and you'll be pretty close. Some are more, some are less. Compiled lists may average slightly less, $85-$90/M. High tech lists tend to start at $100/M.

Whatever the base price, special selections can increase that quickly. State selections, male/female, income and other segmentations each add $5, $10, or even $15/M to your base cost. Some negotiation on price may also be possible.

Net Names and Net Net Names

If you're renting a number of lists from one source, you may be able to negotiate a "net names" agreement, paying only for those names that survive a "merge-purge" or de-duplication process.

A "net net name" agreement runs the lists against certain specified screens for bad debt, certain zip code suppression, income and other factors. Usually, you need to be mailing large quantities to make these types of screenings pay out.

Hotlines

"Hotlines" are those names that have come onto the file in the last 30 days or 60 days or whatever, depending on the list. That is, they are the most recent names on the file. Most list data cards will indicate the monthly hotlines available. Because hotline normally pull at higher rates that the core list, they cost more.

If you determine that you can successfully mail a particular list's hotline exclusively, and are willing to pay the premium, that's fine. But beware the "hotline test" where a broker or list owner provides hotline names for a test, where you're going to be mailing the core list. You'll get a skewed result in your test. It would be better in my view, to mail the core list and anticipate a bump in response when you add hotline names later. Including both in your initial test will give you some indicators.

Costs and Testing

As I said in my Direct Mail Costs column, there are certain thresholds one needs to reach in order to have a valid test. Test 5,000 names (one list) and all you'll know when you're done is that was a good (or bad) list. Is that enough for further marketing decisions? I don't think so.

You can expect that only about 30% of the lists you test will pay out, so the more lists you test, the more insurance you're buying, and the more you're learning about your market.

Also, if you go into the mail expecting that the revenue from your initial test will fund the next level of testing, you're likely to be disappointed. You should have sufficient capital to test mail, adjust lists, offer, or creative based on results, remail and remail again before seeing any substantial revenue."Direct mail is a process of gathering information paid for by sales," is another favorite observation of mine. But that doesn't mean fully paid for, at least not initially.

Further, if a "break even" analysis shows you need a 10% response in order to succeed, forget it. It probably won't happen. (I was once excited in achieving a 3% response rate for a software client some years ago, only to learn after the fact that he needed at least 10% to stay viable. He was relying on a big hit to fund further mailings.)

Of List Brokers and List Managers

List Brokers have access to all or almost all lists available for rent. They consult with you, determine your needs, and make recommendations. Their fee is paid by the list owners in the form of a commission, roughly 20%. If they sub-rent from "exclusive" list representatives, they split some of that. Whatever the case, the list broker represents you and your interests.

List Managers handle a wide variety of lists. that is, they market them to the list rental marketplace, either directly to you, or through a broker. They represent the list owner in maximizing the revenue from his list.

If you're a relatively small mailer, say 200,000 pieces a year or less, find one broker and give him or her all your business so the broker has a stake in your success. By all means, talk to list managers, too. You can learn a lot about lists that way. And if you can develop a good relationship with the list manager, great! Just don't forget that the list manager has a vested interest in the lists he or she represents. That may work well for you, if the management is large enough to encompass your needs.

It is sometimes difficult to find a broker who will give his or her full time and attention to a person needing only 10,000 names for a test. But they do exist, and they hope your business with them will grow as you grow. When you find one of these, hold on.

List Formats

Lists are provided in several forms: cheshire labels, pressure-sensitive labels, and magnetic tape.

Labels telegraph "advertising mail" to recipients and are the least desirable.

By far the best addressing strategy is to use magnetic tape and direct-address on the order form, (to show through a window envelope), on the top of the letter (ditto), or on the outside of a closed face envelope. (One dm agency I know refuses to take a client who insists on using cheshire labels.)

In some mail formats, you can have personalization in more than one place.

Some additional points to remember when renting and using lists:

Be sure all lists are coded by test panel (or order forms are coded if the record is not on the return piece) so you can record results by list.
Make list selections by "Nth" name to spread your test evenly across the list. (A "tenth" sample would select the 1st, 11th, 21st names, etc.)
Always eyeball the list before you mail. You might even pull some names at random and call them to verify that they are who you think they are.
Remember that the list owner will require a sample mailing piece before approving the list rental. Plan ahead.

List Resources

So where do you find all these great lists? Here are some places to go, at least initially. As mentioned earlier, your best bet, if you're new to list rental, is to work with an experienced broker.

You'll find brokers and other list sources (along with tons of helpful how-to information on direct marketing and list dynamics) listed in several direct marketing publications and on their web sites, including:

Target Marketing Magazine, 800-777-8074 (www.targetonline.com)

DM News, 212-925-7300, (www.dmnews.com)

DIRECT Magazine 203-358-9900 (www.mediacentral.com/direct)

Direct Marketing Magazine, 800-229-6700

Marketing Tools, 800-828-1133, (www.marketingtools.com)

Also check your local yellow pages under Advertising, Direct Mail, Lists; the Manhattan yellow pages; or check with your local direct marketing club or association. There's a comprehensive listing of local clubs in Direct Marketing Magazine. The Direct Marketing Association (DMA) can also provide referrals in your area: 212-768-7277.

An online list broker I've worked with is Greg Bassine, president of DMG Direct, Inc. and editor of Direct Marketing News. Greg is an experienced list broker with a wide range of consumer and business lists available.
DMG Direct, 800-295-5478, (www.dirmarketing.com)

Some other major list compiler/brokers include:

Standard Rate and Data Service (All list sources)
800-851-SRDS, (www.srds.com)

American List Council (all SICs, compiled and response lists)
908-874-4300, (www.amlist.com)

Worldata (Especially big in high tech lists, plus all SICs)
800-331-8102, (info@worldata.com)

Direct Media (Hi-tech lists and all SICs)
203-532-1000, (www.directmedia.com)

TRW (Consumer databases, automobile databases, financial lists)
800-527-3933

Metromail (Consumer databases)
800-527-3933 / 800-541-0524

Database America (All SICs, major business and consumer databases)
800-223-7777 (www.databaseamerica.com)

Dun & Bradstreet (Corporate and Executive databases)
800-624-5669

The Lifestyle Selector (Consumer psychographics)
800-525-3533