Should You Rent Out Your Customer List?

About 10 percent of all consumer catalogers and an estimated 25 percent of business-to-business catalogers don’t rent or exchange names with any outside companies, according to a leading list-management company.

This month I’ll discuss the different aspects of putting your No. 1 company asset — your customer list — on the rental market. Caveat: I believe it’s healthy and necessary for a catalog company to rent and exchange names with others — providing the proper controls that govern the use or unauthorized use of the names are in place.

Consumer catalogers that don’t rent their lists often rationalize this practice by saying they’re protecting customers from getting unsolicited mail. They also think their valued customer names don’t appear on other lists. But these customers are proven mail-order buyers, and in many cases, are active and responsive catalog shoppers. As catalog buyers, their names most likely already reside on several other lists and probably on one of the cooperative databases. So while these buyer names are proprietary to your catalog offering, these same customer records probably also appear on many other outside lists.

Before the advent of cooperative databases, you could, to some degree, protect and/or reduce the amount of mail going to your customers by not renting your list. But since these co-ops have grown, there’s a strong likelihood that the very customer names you think are proprietary to your catalog are being rented frequently by other mailers. Indeed, the co-ops have changed the way mailers look at the list rental market.

In times past, you’d have difficulty obtaining lists if you weren’t willing to rent your own file. This mindset has changed since companies are hungrier for list-rental income to boost their bottom lines. Not renting or exchanging names can and does impact the universe of lists available to you for prospecting. Therefore, the growth of your catalog company will be limited if you’re unwilling to rent and/or exchange names with others. Think of it this way: If your list works for a particular mailer, chances are their list will work for you, too.

Consider the Facts

• Typically, more than 95 percent of a cataloger’s customer names already reside on the Abacus Alliance cooperative database.

• You’re the one who decides with which companies you’re willing to rent and/or exchange names.

• You’ll approve every mail piece that’s sent to your customer list. If it’s inappropriate, or if the offer is too competitive, you can turn down the request.

• Several studies have shown that a customer list that’s used by others performs better for the list owner over time. In fact, companies that have tested how well buyers (whose names are rented) perform have “flagged” names three ways: names to receive all list-rental offers; names to get only non-competitive offers; and names to get no outside offers. These tests generally are conducted during a two- or three-year period, and the names are “frozen” over time.

In all cases, the results show that the names receiving all offers, including the competitive offers, responded best to the company’s own offer. The worst-case scenario from the studies I’ve seen shows there was no effect on the response rate to one’s own offer if they rented their files. In more than half the tests of which I’m aware, the names that are rented actually perform better!

Conclusion: Active mail-order buyers are among the best buyers on a customer list.

Expected Income

It doesn’t matter if you have an apparel file or a hard-goods list; the real difference seems to be in the file size and availability of selects. The more opportunity there is to impose select charges, the more money a list owner will generate. This applies more to hard-goods mailers than it does to the apparel market.

Obviously, the size of your 12-month buyer file from one period to another has a direct impact on the amount of list-rental income you’ll generate. For example, if your 12-month file decreases from one year to the next, your list-rental income will do the same.

Typically, list exchange vs. rental ratios tend to vary. But for consumer files, exchanges seem to average about 40 percent. (For the most part, b-to-b mailers do very little exchanging.) It’s easy to accumulate large list exchange balances you’ll never use, so limit exchanges to only those lists you want to use for your own prospecting purposes. If you won’t mail a particular list within a reasonable time frame (say, one year), request that the order for your file is for rental and not for exchange, even though the mailer requested it.

Be Protective: Seven Steps

1. Always screen and approve who wants to rent your file. Try to make this decision based on your customer’s point of view, and eliminate inappropriate offers (based on your own definition).

2. Try holding back some of your housefile for a time period. Some companies hold the best names from their 30-day hotline buyers.

3. Use The Direct Marketing Association’s (DMA) Preference Service suppression files for every mailing you send. This will eliminate those mail-order buyers who don’t want their names rented or exchanged. For my clients, this is standard operating procedure, as it is for most reputable catalogers.

4. Exchange on a name-for-name basis using the same selection criteria (i.e., last three-months, over-$100 buyers). And don’t let your exchange balance get out of whack.

5. Impose a mail date restriction if you feel it’s necessary. Don’t let a competitor use your file prior to mailing your own catalog. Be sure your book is in the mail first.

6. Only rent or exchange with companies willing to share their lists with you.

7. Seed your list with decoys. Subscribe to a decoy service such as Hauser to be sure the company using your list has used it properly and that it was used only once.

The Co-ops

If a cataloger doesn’t rent or exchange its list, should it join a co-op database? Does doing so void the catalog’s privacy policy?

The co-ops don’t actually rent a particular customer file. They use the transactional data (i.e., buying history) in combination with the transactional data from other contributors to the database to build models. As a practical matter, most of the names a co-op selects from mailings have purchased from several different catalogs. The Abacus rule on modeling excludes any household that has made only a single purchase from one of its Alliance members. So unique names aren’t selected for someone else’s model and use.

Privacy: The New Paradigm

Always comply with The DMA’s Privacy Promise guidelines (visit: www.the-dma.org/library/privacy/privacypromise.shtml). These are business practices intended to protect consumers’ privacy. Compliance is a requirement for DMA members, but I encourage all catalogers to follow them. It’s important that we self-regulate our industry to minimize legislation.

Companies also reaffirm their compliance with DMA guidelines each year as part of the annual membership-renewal process and re-confirm or appoint a new compliance contact person. If you’re a b-to-c marketer who rents and/or exchanges lists, you must give your customers notice that they can choose not to have their contact information rented, sold or exchanged. Following is an example of the correct wording that should appear on your order form:

We make our customer list available to other companies so they may contact you about products and services that may interest you. If you do not want your name passed on to other companies for the purpose of receiving marketing offers, just tell us by contacting us at _____________, and we will be pleased to respect your wishes.

And on your Web site, provide notice about your information-sharing practices. If you send unsolicited commercial e-mails, provide notice to customers and prospects in each solicitation of both in-house suppress and “opt-out” procedures.

Stephen R. Lett is president of Lett Direct, a catalog consulting firm specializing in circulation planning, forecasting and analysis. He can be reached at (302) 541-0608 or by e-mail at www.lettdirect.com.