Weighing In on the Catalog Co-op Databases '06

By Matt Griffin

Now an eight-player field, consumer co-ops widen their offerings. What works best foryour catalog?

With five established cooperative databases in the market, and three others trying to make headway in the past year, you might wonder what exactly separates each of these from one another. Whatever sets each co-op apart, the important thing to consider is that constant testing will prove whether the models offered by each company actually work.

"Certainly you have to be willing to test the different databases, and you have to be willing to test different models," says Bob Webb, senior vice president of marketing for multititle cataloger Potpourri Group. "You have to give them a chance to fail or succeed."

Here, we'll lay out for you what individual services or models make each one unique and better suited for different types of mailers.

Abacus Alliance

Introduced in 1990, making it the oldest co-op out there, Abacus credits both its 16-year legacy within the industry and its research and development (R&D) efforts as the Alliance database's defining characteristics, says Casey Carey, senior vice president of Alliance data services for the Lafayette, Colo.-based catalog cooperative.

"We continually make significant investment in not only our products, but the infrastructure and the technologies that support it," Carey says. "We spend a significant share of our R&D dollars just getting better at what we already have."

And one product that's come out of those R&D efforts is FastPath, a prospecting solution that relies heavily on Abacus' ability to leverage the large number of names in its database. The FastPath service asks a cataloger to take 100 percent of its circulation from the Alliance database. This is predicated on the notion that other co-ops and rental lists provide a subset of the names that Abacus can provide, Carey says.

He gives the following example: A cataloger that mails about 6 million names during the holiday season usually gets half of those names from Abacus, and the remainder from rental lists and other co-ops. The cataloger's revenue worked out to $1.19 per book. Using the FastPath solution, that same cataloger was able to mail 6 million names with a revenue per book of $1.24.

Additionally, the FastPath solution includes housefile processing, postal processing, presort, postal qualifications and inkjetting.

Carey cautions that niche mailers still may not find the co-op to be useful with FastPath, because narrow market names don't always make it into the database. Likewise, very large mailers may not be able to get the quantity of names they'd like during the busy season. For those reasons, Carey notes that the solution isn't for everyone.

Prefer Network

A division of direct marketing services firm CMS Direct, Prefer Network differentiates its database by using SKU-level product data, says Prefer CEO Doug Platt.

For each of the more than 1 billion transactions of which Prefer Network tracks, it knows not only the product category of the purchase, but also product specifics such as size, color and style. "We know whether you've bought a Christmas tree T-shirt or an Elvis Presley T-shirt," Platt says.

Such SKU-level data allows Prefer Network to "select names differently," Platt says, giving the co-op the ability to use the same models as other co-ops to select more unique names, sometimes as high as 60 percent net unique names after the merge.

Merchandise data also provides the fuel for DecisionMate, a proprietary research tool that Prefer Network debuted earlier this year. DecisionMate allows catalogers to understand what their customers are buying when they aren't buying from them, Platt says. Showing both market share and wallet share, DecisionMate helps marketers determine in which product categories their catalog is strong, which categories they have room to grow in, and in which categories they potentially could scale back.

Because the co-op requires all members to provide SKU-level transactional data, not all catalogers who want to use Prefer Network's services have been able to do so, Platt points out. Some catalogers opt not to release that data; others are unable to, because they haven't built the appropriate transactional database. In the latter cases, Prefer Network is able to help catalogers create a merchandising scheme that will open the doors to using their database.

NextAction

Somewhat similar to Prefer Network, NextAction uses transactional product data as its primary differentiator. While the data isn't modeled at the SKU level, NextAction uses 40 major product classes with 1,100 product subcategories to locate new product universes for its clients, says its former senior vice president of sales and marketing, Karen Crist, who at press time had just joined Shop.com as its vice president of merchant services.

For NextAction's newer services, it often allows its client to beta test these products for free. "When we create new partnerships or develop new services," Crist says, "we want to develop the best value service and lower the threshold for entry. We know it takes a lot of time and effort to test new services, so if we can make it free and absorb some of that cost, then it embodies that cooperative spirit we're striving for."

One such service that was tested last year and rolled out earlier this year is an e-mail enhancement product. NextAction can cross-reference mailers' opt-in e-mail file with its database and determine which customers should be contacted — and with which specific offer. Using product-level purchase history, NextAction is able to help its clients construct customized landing pages for specific product categories.

Experian's Z-24

The key differentiator for Z-24, marketing services firm Experian's co-op database, is its ability to leverage the more than 3,000 different types of data collected by Experian, says Austin Wright, senior product manager for cooperative databases.

Much of that data, such as hobbies, occupations and ethnicity is self-reported. More data, such as summarized credit information, automobile ownership status and subscription data, comes from Experian's other divisions. Wright says that these types of data enable Z-24 to identify names that often aren't mailed when using transactional recency, frequency and monetary (RFM) models.

Z-24 uses that data not only for its regular models, but also in a list evaluation product that it recently made available to catalogers. Called VeriScore, the product optimizes all of the lists that catalogers mail to — including rental lists, exchanges and other co-ops — by ranking the potential value of each name, Wright says.

Known multibuyers are ranked highest, due to their obvious propensity to buy. Single and two-time buyers are ranked based on the variety of statistics in Experian's database. Potential lifetime value is established based on credit data, auto market statistics, and several hundred other criteria, Wright reveals.

With that knowledge, mailers can determine which nonmultibuyers have the highest potential for return on investment. "In the past, if you thought you could get any value out of the singles, you had to mail the entire singles universe, because you didn't know who would be good," Wright says. "VeriScore can identify the singles that will be profitable before you put them in the mail."

i-Behavior

This marketing co-op distinguishes itself by including publishers, online marketers and merchants, club and continuity marketers and catalogers in its database, according to information from the i-Behavior Web site. (i-Behavior executives didn't return calls for comment by press time.) The company claims that this gives a more complete view of cross-channel customer behavior.

Catalogers' Actions

Testing is imperative, especially for catalogers, such as the Potpourri Group, which are members of most of the co-ops, Webb points out. In Potpourri's case, the company always is looking for new incremental names to mail. And as long the database can provide new names, the relationship is worthwhile.

Exhaustive use of the co-op databases isn't for all catalogers. Paul Fredrick MenStyle has scaled back its participation in the co-ops from five to three, remaining a member of Abacus, NextAction and Prefer Network, says Scott Drayer, director of marketing for the men's apparel catalog. He pulled out of two other co-ops because he found he was "getting a good deal of the same names from each of them."

The three databases of which Paul Fredrick MenStyle remains a member still produce common multibuyers and about the same percentage of incremental names. But it's the continued success of those names that has allowed the catalog to keep using those databases. "There's a hole to be filled as far as generating names for Paul Fredrick," Drayer says. "These co-ops do that, considering the small universe of names for men's catalog apparel."

Three More Join the Co-op Mix

Even with five established consumer catalog cooperative databases on the market, other companies feel they have the potential to add something new to the mix. Wiland Direct and ALEXA have both debuted in the past year, while list firm American List Counsel (ALC) launched PerformanceLink just last month. Here is what each of these companies brings to the table:

Wiland Direct

Catalog industry veteran Phil Wiland believes that the existing co-ops on the market have done good work for their clients. But he also believes he may be able to provide a better solution using better technology.

The essential differentiator for Wiland Direct is that the company predominantly uses response models to generate mailings for its clients, says Wiland, the firm's founder, president and CEO. He notes that response models, which measure the differences between buyers and non-buyers based on the results of actual mailings, are harder to build than traditional profile models, which choose names based on the idea that prospects who look like your customers will respond like your customers. Response models typically take more time to create, and thereby cost more.

Wiland Direct, however, has developed an automated system to create response models, which means it can produce these models more quickly and at a lower cost than other co-ops.

And results have been promising. Wiland reveals that his clients on average have seen a Wiland Direct's model perform 43 percent better than all other lists.

Bob Webb, senior vice president of marketing for multititle catalog company Potpourri Group, has tested Wiland Direct's models on eight of Potpourri's 12 catalog titles, and says he's seen excellent results on half of what he's tested. For the titles that didn't see great results, Webb cites the fact that those titles are niche books, and Wiland Direct still is expanding. So he plans to retest Wiland Direct models for those books in the future.

The American List Exchange Association (ALEXA)

While not a cooperative database in the traditional sense, ALEXA gives catalogers the ability to contribute names in their databases to a central repository while still controlling other catalogers' access to those names.

Further, ALEXA doesn't provide models of these names; rather, the company "houses client-specific data files and is meant to facilitate a greater number of exchanges between existing, affinity-based exchange partners," says Jim Harkins, president of catalog consultancy JJH Direct Marketing, who's assisting in ALEXA's launch.

ALEXA's members control their own buyer names and share only their recency, frequency and monetary value data with other catalogers within the association. The company acts as a data processor, fulfilling orders for names based on the information culled from catalog datacards, says ALEXA President Bob Gaito. Any modeling of those names would need to be done by the recipient catalogers or their list brokers, whom Gaito says are more qualified to know their specific needs.

As of press time, none of ALEXA's 35 members had put any of the association's zero-to-24-month buyer lists, consisting of a total of 8.5 million households, in the mail. But Gaito believes that the low acquisition cost, $8/M, will encourage more catalogers to join and test names from the database.

PerformanceLink

As this issue went to press in June, ALC had just launched PerformanceLink, an open-source, 30-million-name, multichannel co-op. PerformanceLink segments data based on much of the information used by the other co-ops, such as transactional and product level data.

Why enter the crowded field? "There's been a huge demand for new name acquisitions," says ALC database project director Mark Hammar. It includes customer data not just from catalogers, but also from magazine publishers, book publishers and other direct marketers. Additionally, the database includes multichannel information, such as whether a particular name or household is likely to purchase via a catalog, Internet or retail channel, he says.

Current database members include both direct marketers and publishers engaged in both business-to-consumer and business-to-business marketing. ALC officials note that this gives PerformanceLink the ability to sort names into high-level and niche areas based on consumer and business demographics, professional licenses, and multicultural data. About half of the database is composed of ALC customers; the other half comes from outside lists.