Finding fresh sources of names to mail has always challenged catalogers. Lately, it’s become more competitive as catalogs all seem to mail into a finite universe of buyers.
But catalog list brokers say they’re having some success helping their clients break new ground using tools from non-catalog compiled lists and publication files. Not only is the Internet a research tool for mailers and brokers, but it also is a developing source of new names.
Read on for insights into the state of the catalog list market from five list professionals:
• Steve Mickolajczyk, president, Brokerage Division, Catalyst Direct Marketing;
• Donna Belardi, president, ALC, New York, LLC;
• Steve Bogner, president, NRL Direct;
• Heather Maylander, senior vice president, brokerage, American List Counsel; and
• John Papalia, president, Statlistics.
Catalog Success: Please describe for us the current market for catalog lists.
Belardi: It is very limited. Simply put, there are less and less new catalogs entering the market that are building substantial housefiles, and that translates to fewer new catalog lists for prospecting.
Bogner: There’s a 20-percent cutback on what mailers are sending right now. So they’re ordering fewer lists. This is typical after a postal increase. Even though it wasn’t huge, it was when the economy was sliding, so mailers took it as a sign to trim their mail plans. I suspect some people may try to make it up in the fourth quarter.
Maylander: We haven’t seen a lot of new catalog lists on the market. Rather, different segmentations of the same lists are being marketed. We also have been targeting Internet companies that launched catalogs, and now are offering their names on the market, for example, Red Envelope. But overall the market has been relatively stagnant.
Mickolajczyk: The current market for catalog lists is best described as tight. We’ve reached a point where the barriers of entry to the catalog market, especially market saturation and cost, are high enough that there’s been a dearth of quality new lists coming to the market for a while now. This, combined with the loss of lists from those companies that have gone out of business, has put quite a squeeze on the market. On the positive side, many lists have broadened their usability through additional selectivity and expansion into new product categories.
Papalia: The buzz is that many catalog mailers are cutting back their circulation, so the challenge for managers this year, more so than ever, will be to meet/exceed their list owners’ financial expectations. Consumers’ lack of confidence in the security of Internet sales has, and will continue to, bolster [print] catalog sales. Although they surf the Web and request catalogs, many consumers continue to buy directly from catalogs.
Catalog Success: What’s the greatest challenge for catalogers in terms of finding prospect names to mail?
Belardi: The biggest challenge is getting strong performance at acceptable acquisition rates. The net-outs from mailing lists are continuing to decline, and subsequently, the cost of finding new buyers is driven up. While catalogers are attempting to mail “smarter” using tighter segmentation and co-op database models, as well as exchanging more, they all end up mailing to the same buyers. Response rates suffer, as well.
Bogner: It hasn’t changed: The greatest challenge is that there just aren’t a lot of new lists coming along. But, on the positive side, you have newer tools to work with, more vehicles for making existing lists work—things like using Z-24 to make a magazine file work for a catalog mailing.
Maylander: The challenge has been finding fresh names from new catalog launches, new channels and new markets. Many mature catalogers are prospecting flat compared to last year and thus only targeting their most profitable lists and limiting testing to only sure bets. Unless a cataloger launches a new product line that targets a secondary market, we are left with targeting the same core lists with each mail campaign.
Mickolajczyk: The greatest challenge in finding prospect lists is the same as it always has been ... finding enough high-quality names at an acceptable price. As catalogers’ costs have accelerated, the acceptable level of performance for prospecting keeps rising, with more and more lists moving to the marginal or unprofitable categories. The game’s the same, it’s just that the costs—and stakes—are higher.
Papalia: With mailers cutting back on circulation, it will have a domino effect on list universes. Added to this already shrinking universe are the privacy issue constraints—it is going to be an interesting year. Catalogers will be exploring profitable lists—examining new segments rather than tweaking and re-testing marginal lists. The quantity of catalogs being received is watering down results. In other words, the hotline names consist of many multis and not as many new-to-file names.
Catalog Success: Have any new lists come on the market in the past year that have had a major impact?
Belardi: Probably the best new list in recent memory came from Pottery Barn Kids. Also, a whole category of new lists that opened up recently is Internet buyers at postal addresses.
Bogner: The continued success and development of the Z-24 product from Experian has had the major impact on the catalog list industry. It has essentially created something from nothing. It gives catalogers a whole other dimension in which to test prospect names.
Maylander: Many of the new lists made available to the market (i.e., Anthropologie, Bliss Out, Pottery Barn Kids, Pottery Barn Bed & Bath) haven’t had tremendous mail universes. Any viable list with fresh names always will have a major impact for catalogers, since it allows us to mail unique names and rest our core lists.
Mickolajczyk: Probably the biggest impact in my area of concentration has been made by the Pottery Barn Kids file. While it’s been around for more than a year, the file’s growth has been explosive, but the performance level of the list has not faltered. It’s been a real lifesaver to quite a few circulation plans I’ve done.
Papalia: While there’s not necessarily one list that comes to mind, there are several new selections from existing files that do. The ability to select e-mail and e-mail postal address segments is becoming more prominent. Many lists are releasing additional selections that have never been available. Also, many subscriber files are now making the names received from their catalog added value sales available to catalogers, enabling catalogers to mail subscriber files more effectively. And the appending of e-mail addresses to postal records is a new way to reach known computer owners as well as Internet subscribers.
Catalog Success: Are there any not-so-obvious list categories mailers should consider testing now?
Belardi: Certain publishing and compiled lists are being utilized more and more by catalogers. For instance, a file of new homeowners might be appropriate for home catalogers; it’s also a way to avoid those saturated mailboxes since many of the other catalog companies have not caught up yet in the NCOA [National Change of Address file]. Other areas, like the children’s market, are driven by need, and not always by catalog buyer behavior. They can get good response from pre-natal compiled lists, for example. The key to making these lists work is sorting out the good files and knowing what selects and enhancement tools are available.
Bogner: It’s not so much categories that have changed as the types of tools catalogers can use to approach older names on lists that are successful, such as going further back into publication files and compiled lists. Using screening methods like Z-24, each catalog can find unique new sources of names. A woodworking catalog, for example, won’t be overlaying the same publication file as a gentleman’s clothing catalog. So their results will be different.
Maylander: The New Movers/Chadds market still has been successful, especially on new publications, such as Real Simple and Lucky. And, the Internet Buyers at Postal Address has been a new category, but we can’t say it isn’t obvious.
Mickolajczyk: Product selections and lifestyle enhancements can be useful. If the mailer has additional response-driven tools to use in conjunction with these selects, such as ZIP tapes, they can open up new list areas that otherwise were unusable. Additionally, I’m a big advocate of going deeper into successful lists, and not just limiting usage to the most recent “hotline” segments. Older names still can be valid buyers, depending on the market, with the added bonus that they’re not being mailed to as heavily as the hotline names are.
Papalia: Consumer catalogers should be expanding their horizons into the business-to-business marketplace. Today’s economy requires families to have two incomes in order to meet the financial requirements of the lifestyles they’ve chosen. They no longer have the luxury of leisure time at home and are utilizing their lunch hours and commuting time to catch up on reading—not just newspapers and magazines, but catalogs, too.
Also, catalogers should consider testing subscriber files in complementary categories. A good example of this strategy is how several food mailers are using various business-to-busines files we manage.
Catalog Success: What about new/improved enhancements, models or other tools mailers should use?
Belardi: The co-op databases always are something catalog mailers should consider. Experian’s Z-24 has offered its RFM-Plus product as a way to tap into hotline catalog buyers that you can’t yet access through traditional list rentals. Their Circbase database allows catalogs to target true catalog buyers from publishing files, with the overlay of actual transactional catalog buyer behavior.
Maylander: Many mailers are revisiting the Z-24 database with renewed success, and we’ve delved deeper into reviewing existing databases to target customers through their buying habits.
Mickolajczyk: Catalogers should be making optimum use of the cooperative databases like Abacus and Z-24. The database products have evolved to a point where they’re absolutely necessary components of any cataloger’s mail plans. The names are cost-effective, and most of the models have evolved to be stellar performers. I advise clients to take advantage of these products, pre-merge and post-merge. The Cross-Member modeling that Abacus offers has opened significant universes to many of our clients, by finding usable segments of out-of-category lists that we otherwise could not even consider.
Catalog Success: What’s been the trend in pricing of lists? Are owners willing to negotiate?
Belardi: Base list prices have not gone up that much in the past year or two. But the overall amount mailers are paying has increased due to the select charges they’re paying. Mailers now are using more selects to make those lists work for them. With most list owners, there’s some room to negotiate on select charges.
Bogner: List prices haven’t risen in the past few years, but I think list owners are even less likely to raise rates now. With base rates at around $105/M, owners are more likely to negotiate now.
Maylander: That hasn’t changed much; catalog lists still are expensive, and owners haven’t been willing to negotiate unless they want your list in return. We have seen catalogers negotiate more in the secondary market, where income is incremental.
Mickolajczyk: List prices have just about reached what the market will bear, and I don’t anticipate that we’ll be seeing the kind of price increases that we’ve seen in the last few years. I believe list owners are becoming more open to negotiation, since they’re aware of the cost pressures that they face when they’ve got their “mailer hats” on. They’ve also become more open to optimizations and modeling of the files, as they’ve learned the value those methodologies have for their own mailings.
List owners seem to take a pragmatic approach to making deals. If you present a well-reasoned, rational argument and find something in the deal for both sides to gain from, it’s usually no problem.
Papalia: Consumer lists have not experienced dramatic price increases. Most list owners are willing to negotiate somewhat, as they are mailers, too. ... As in any sales situation, a fair price is one on which both the buyer and seller agree.
Catalog Success: What impact has the Internet had on the catalog list category?
Belardi: The Internet is a positive force for the list industry. For catalog mailers, Internet lists bring a new breed of direct shoppers. They bridge the gap between retail buyers and traditional catalog shoppers. More list companies are using the Internet to promote their lists. This can be a dangerous tool, if the cataloger relies too heavily on the Internet for research, therefore limiting contact with his or her broker.
Bogner: It’s become a little easier for list managers to sell their lists via Web sites. But you can never replace the advice of a good broker.
Maylander: The Internet has helped our research division to target lists that are not yet on the market, providing our clients with exclusive use before the competition. The impact of sales has had mixed reviews by the bricks-and-mortar companies. We’ve seen success where the Internet has been embraced as a new channel for business supported by the retail and mail-order divisions. In some companies where cannibalization has occurred, we’ve seen negative impact. ... We feel the Internet won’t take over the catalog business, making direct mail non-existent. Rather it will help to complement the existing business and have more impact on the CRM [customer relationship management] model.
Mickolajczyk: More than anything else, the Internet is about dissemination of information, and that’s had a big impact on the list industry. ... Some people believe the Internet eventually will eliminate the need for the list industry, and in certain areas I believe that’s true. List information will be an easily available commodity, so those brokers who don’t add value to the cataloger’s marketing process won’t survive. ... There will be no reason to pay someone just to process orders. But for list brokers who add marketing expertise and make sense of the ever-increasing options, a bright future awaits!
Papalia: The Internet has enabled brokers to go directly to managers’ Web sites to review data cards, thus cutting their research time dramatically. They no longer have to call or fax the manager, leave messages, wait for callbacks and then request the data card. Several of the list managers’ Web sites also have search engines, which makes it much easier for brokers to do word searches to find lists. I feel the Internet has come a long way, but I don’t believe it will replace direct mail.