The State of the Co-op Databases – Part Two

This is another guest blog posting from our good friend, Bill LaPierre at Datamann, a full service list processor.  Please check out Bill’s blog by clicking here.

The State of the Co-op Databases – Part Two

 

For what shall it profit a man, if he shall gain the whole world, and lose his own soul?

Ok – some of you must be wondering why I’m quoting from the Bible (it’s the book of Mark in case you don’t recognize it).  Well, there’s a parable here for the catalog industry. Read on.

I received so many positive comments to my earlier posting on the co-op databases that I decided to change direction. Part Two was going to be about the current state of the co-ops and where they are headed. That will now be Part Three (maybe even Part Four too). Part Two addresses what mailers gave up in switching their circulation so heavily to the co-ops.

 

To quickly recap my arguments from Co-op Databases – Part One, I believe that the co-ops became the dominant source of names in catalogs, not because they performed fundamentally better, but because they were simply more convenient. In addition, traditional list owners erected barriers to allowing use of their own lists by other mailers, which forced mailers to embrace the co-ops even more. Finally, the list owners were aided in this effort by the list managers, who raised prices in a desperate attempt to maintain list rental income, which drove even more business to the co-ops.

 

But what did mailers really give up?

 

I remember a meeting I had in 2003 with a client to review their holiday season circulation plan. I was the mailer’s list broker at the time. The client had given me a target of 4.1 million net names in the mail. Using the planning factors they had provided, I was only able to come up with 3.8 million net names. These names were from lists, and segments that I believed were viable, and that were not a stretch for the mailer – and where I knew “risk” in a circulation plan was not welcomed.

 

I apologized to the client for missing his target. He laughed and said “Bill, that’s why we trust you. One of the co-ops was here yesterday. We had given them a target of 1.1 million names. They came in with a plan for over 5 million.  We’d never do that – what were they thinking?”

 

The main thing that mailers lost was trust. One of the things that I am proudest of in my career is not the number of catalogers for whom I helped launch new catalogs. Rather, it is the number of catalog-wanna-bes that I talked out of trying to launch a catalog, or the existing mailers that I talked out of mailing their planned circulation that would have exposed them to too much risk. Yes, it sometimes meant that I walked away from a potential sale – but that’s what a good broker did (and still does) for their clients. That built trust.

 

Arguing with the mailer when he/she wanted to overextend their circulation was part of the job. I still do this today at Datamann with mailers that seek my advice.  (And everyone that knows me, knows how tactful I am at this).  You do what is right for the mailer, not for you or your company.

Are there some brokers that take advantage of mailers – sure, no doubt. There are charlatans in every profession. But the vast majority of brokers with whom I have come in contact understand that if they plan to be in this industry for the long haul, they have to do what is right for the client, even when it means money out of their own pocket.

I was lucky in my years as a mailer that the brokers with whom I worked (first from Mokrynski at Potpourri, and later with Millard Group while at Brookstone) were the definition of the “broker with integrity”. It was part of each of those companies’ culture – and the client/mailer trusted them for it, even when they told you things you didn’t want to hear. Other brokerage firms share that same integrity – that is what allowed the industry to grow as it did.

Do mailers get that same level of push back from the co-ops? Not so much. There is no way to make this pretty, but with the exception of the folks from Wiland, and a few exceptions at each of the other co-ops, almost all of the other co-op account mangers I have encountered never advise a mailer not to mail their co-op’s names. They are there for the immediate sale. It is up to the mailer to know when and how to apply the brakes.

What else did mailers lose? Well, they lost those huge spreadsheets that tracked hundreds of individual lists and segments, each with its own pricing deal, or exchange balance total. They lost the tedious task of ordering all of those segments, and then waiting to see which ones would be approved, which came back on rental, which had no new names. Yes, I know that some of this still goes on, but it is nowhere near the volume it was ten years ago.

Instead, all of that chaos has been replaced by a half dozen selects from each of three or four co-ops. There is no suspense when you order them because they always get approved, and magically – there is always enough new names in each segment to meet your desired quantity (more on this in Part Three).

A lot of industry savvy was lost too. When I was a broker at Millard, one of our clients told one of our list brokers, after the two of them had spent two days pouring over a very detailed holiday circulation plan, that “a monkey could do this job.” Internally, we used that comment as a measure of how little some mailers appreciated not so much the amount of work that went into what we did, but how little they appreciated the accumulated knowledge we had about each list. Brokers knew, and those that are still actively doing circulation plans still know, the nuances of each list. They knew how to tweak it. When a mailer called and yelled that they wanted better names for their next mailing – there were actually some things a broker could do to bring in better names. Try doing that with a co-op. All you’ll hear on the other end of the phone is “let the model do the work”.

As a mailer, you knew what was in your circulation plan and in your mailing. You knew whether you were getting names from a catalog that relied heavily on discounting, or from a catalog that had back order problems (which might impact response to your own mailings). Mailers gave up that knowledge – and it is never coming back – when they switched to the co-ops.

Not only do mailers know little about the composition of the names from the co-ops, they soon learn that their account managers at the co-ops know equally little. “Let the model do the work” becomes a mantra for “I have no clue what names I’m giving you, but what do you care if you get a decent response rate?”

One industry veteran reminded me in an email recently after my prior posting of something else that mailers lost, which is often overlooked in 2013, largely because we’ve forgotten how important it was – list rental income. As he stated in his note to me “what the co-ops don’t offer catalogers is a share of the income generated by them – unlike the 70%+ they used to earn {in commissions} in the vertical list sales market. I have lists that used to generate $1.5 million that now do $200K if they’re lucky. That income didn’t dry up; it went to the co-ops. Volume is volume is volume…and someone is making an awful lot of money on the sale of names…but it ain’t list owners or managers.” Most mailers don’t take that into consideration because they have forgotten that they actually made lots of money on the list rental.

One mailer can’t hold out against the co-ops and expect to retain their list rental income. No list manager can hold back the tide either. That industry veteran’s comment about mailers going from $1.5 million to $200,000 in list rental income is no reflection on his company’s effort to generate list revenue for his clients – it is simply an indication of what happened when 80% to 90% of the list volume shifted to the co-ops. If anything, he understates the problem because many of those companies actually have more names in their file today at $200,000 than they had when they generated over a $ 1million in list revenue.

This is all water under the bridge, and I’m certainly not clinging forlornly to a distant past that is never coming back. I’m simply pointing out, as others like Kevin Hillstrom have done as well, that mailers gave up control of their marketing when they switched to the co-ops for the sake of convenience. Not much of a catalog growth strategy, is it?

For what shall it profit a man, if he shall gain the whole world, and lose his own soul?

By Bill LaPierre

VP – Business Intelligence and Analytics

Datamann

blapierre@datamann.com

802-295-6600 x235