State of the Co-ops ’08

With mailing costs rising and the economy slumping, will catalog co-op databases remain relevant in tomorrow’s multichannel direct-marketing environment?

The pool of hot names is certainly drying up as the number of catalog mailers is thinning. Witness the passing — or likely scaled-down futures — of the Lillian Vernon, BlueSky Brands, Bloomingdale’s by Mail and The Sharper Image catalogs. Likewise, the number of co-op databases fell to seven over the past year, with American List Counsel pulling the plug on its PerformanceLink database after two years.

This year’s report, with each co-op listed in alphabetical order, recaps what each of them has been up to over the past year and how their existence remains critical for catalogers.

Abacus Alliance
At Abacus this has been a year of self-examination and refinement. The company took a hard look at existing business models to find viable alternatives to “business as usual,” in hopes of easing the pressure many catalogers face. It’s done this by continuing to develop and refine Abacus [ONE], an advanced fulfillment methodology the company launched nearly 18 months ago.

“We’ve taken our core modeling capabilities and added some intellectual property in terms of combining models and fulfilling that universe to our clients,” says Senior Vice President of Cooperative Data Services Casey Carey. He estimates that nearly two-thirds of the co-op’s clients have converted to the Abacus [ONE] platform, realizing an 11 percent increase in performance and a 55 percent increase in available universe.

Abacus intends to serve the lower circulation, niche mailers in its co-op with FastPath, its latest offering in association with data services provider CompuTech Direct. This product provides mailers with 100 percent of their circ combined with list processing. “We call that a ‘printer-ready’ solution,” Carey says. Forty-four clients have rolled out 110 campaigns using the offering.

FastPath is designed to simplify mailers’ businesses by providing them a single list, which allows them to get their catalogs in the mail faster. Theoretically, this results in better housefile and prospecting performance. In addition, mailers gain an affiliation with Abacus parent firm Epsilon and all of its new data resources.

American List Exchange Alliance (ALEXA)
This 2-year-old mailers alliance is slightly different from the other co-op database firms as it operates strictly with list owner approval on an exchange basis. Therefore, the more members involved with the alliance, the more diverse and potentially profitable the lists will be.

“For us, we need to continue to get larger and have more members,” says Mike Hayden, president of ALEXA “so we can offer larger quantity in the universe area as well as more power from the attributes.”

The alliance has been busy over the past year compiling data in new product category selections, including women’s apparel, plus-size apparel, men’s apparel, gifts/collectibles, home décor, children’s merchandise, shoes, garden products, personal care, jewelry and accessories. Women’s apparel, plus-size apparel, children’s merchandise and home décor have proven particularly popular, Hayden notes.

ALEXA also has made a concerted effort to go deeper into mail files for profitable names. “We’re currently a 24-month database of names, but we’re going out into older recencies,” Hayden says. “We’ve been successful going into seven- to 12-month and 13- to 20-month buyers and getting them to work nearly as well as a six-month buyer for our participants.”

Experian’s Z-24
Over the past 12 months, the focus of Experian’s catalog co-op — namely, the origin of multichannel orders — has involved tapping into the database’s compiled demographic files, niche segmentation systems and processing environment to ensure that clients have the best, most applicable contact names, says Denise Hopkins, vice president of marketing and product development.

Experian has put much effort into multichannel response analysis by using matchbacks to help catalogers allocate orders to the channel that actually drove the response. “Customers are evolving,” Hopkins says. “They’re starting to look at the channels that are going to be most appropriate to the consumer.”

I-Behavior
I-Behavior has seen significant growth over the past year, with a current client head count estimated at 1,400. A large portion of the company’s growth can be attributed to its online co-op database, aCerno, as more catalogers seek out responsive and e-mailable names.

The company also recently launched a series of consumer models that focus on propensity to buy, as well I-Q, a predictive modeling tool. The I-Q model has generated a 90 percent continuation rate among clients who tested it, says Keith Johnson, I-Behavior’s vice president of product management.

Like other co-ops that recognize the value of segmenting their data, I-Behavior tracks order channel in its database. “We’re able to identify for different clients whether they’re better off going after multichannel buyers, or truly offline buyers who respond only to postal mail and direct marketing promotions, or those who respond to heavily promotional e-mail campaigns and banner ads,” Johnson says. This segmentation allows I-Behavior to build models that drive traffic to specific channels.

All of I-Behavior’s models, Johnson says, are built to target individuals rather than households.

NextAction
NextAction’s approach this year is to provide fewer names and advise its catalog clients to mail less. “The focus to date has been to look for ways to find more prospects,” says NextAction COO/Executive Vice President of Core Business Services Eric Roza. “The right question to ask now is, ‘How can I more efficiently target prospects?’ One answer here, which is counterintuitive, is to mail a lot less.”

So NextAction is recommending its clients cut back on their circ by 30 percent to 50 percent. The co-op’s mail file optimization product, NextOp, launched this past May, is designed to help mailers determine which names to cut. NextOp leverages NextAction’s analytics engine, Multi-Pass Profilin — which doesn’t use regression analysis, but is derived from likelihood modeling. It contains NextAction’s database of SKU-level consumer purchasing behavior to identify and suppress a large universe of unprofitable names from a mail campaign.

Prefer Network/CMS Direct
This past year, CMS Direct’s Prefer Network co-op database has sought ways to lower acquisition costs for mailers through its FreeMAX8 mail file optimization service coupled with promotional history data. In a paradigm shift, Prefer has altered its focus from identifying unique names to providing the overlapping, best-performing names that are commonly promoted across all the co-ops. These names are provided to mailers at no cost.

This approach is designed to ease a concern among many mailers who belong to more than one co-op: That the same names are constantly mailed, causing low nets.

“We give the service bureaus a suppression file prior to the other co-ops’ selecting,” says Ken Johnson, chairman and CEO. This lets Prefer co-op members acquire the best-performing names all in one spot, significantly reducing acquisition costs. “Catalogers end up mailing the identical names that they would have, while removing the vast majority of duplicates,” he adds. “If we can identify those names, why should the mailer have to pay multiple times?”

Wiland Direct
Wiland Direct has sought to not only provide valuable, responsive names to mailers, but also to provide the data on how to contact those names. With its customer modeling product, the co-op combines rank ordering RFM data and its own data with a contact strategy.

“Smarter customer contact strategy equals more contribution to the bottom line from current customers,” says Executive Vice President of Sales and Marketing Brent Eskew.

“Most catalogers continue to increase circ without an intelligent way of understanding how many times should I contact,” adds Dan Wells, executive vice president of member services. In addition to providing how frequently to contact a name, Wiland Direct steers co-op catalog members to the best channels for given mailings. “We know whether an individual has made that purchase either directly through the Internet or through calling up from the catalog or through a retail store,” Wells says. “And it’s optimizing those three channels to determine what’s the best approach for that individual consumer.”

It’s What You Put In
For co-op databases to remain relevant to multichannel mailers in the coming years, catalogers will need to supply the co-op firms with better segmented and cleaner data than they have in the past. As catalogers continue to feel the squeeze of rising costs, it’s no longer possible to have across-the-board circ policies.

By providing targeted names that are most likely to respond to offers, however, co-op databases will retain their relevance.