Lists: Behavior Matters Most

Early in my freelance copywriting career, I was hired by The Bradford Exchange to launch Plate World, a magazine for collectors of limited-edition plates.

Started by J. Roderick MacArthur, son of John D. and Catherine T. MacArthur (as in the foundation that bears their name and the people who made zillions selling mail order life insurance), the concept of The Bradford Exchange was to create a kind of stock exchange for collectors’ plates. It persuaded collectors that if they bought plates at the issue price, they stood a chance of making money in the so-called Secondary Market, which is pretty lucrative with some plates’ values growing from $45 to $995 in 20 years.

The plate-collecting business is instructive and directly related to the challenges of catalog acquisition. Plate collectors are from every income level and geographic location. Their only commonality is collecting, which makes prospects hard to come by.

As I delved deep into the business of plate collecting, I discovered a large segment of these folks are in the lower socioeconomic strata living in trailer parks. Their mobile homes are lined from floor to ceiling with hundreds of dollars worth of colorful clown plates designed by Red Skelton, the sad-eyed children of the Keanes, itsy-poo figures from the House of Hummel and endless iterations of Disney, Norman Rockwell and The Wizard of Oz.

Run Bradford’s customer analysis through the Claritas PRIZM Clusters, which relies heavily on geographic information, and you’re looking at “Rural Industria,” “Mines & Mills,” “Norma Rae-ville,” “Rustic Elders” and “Grain Belt.”

Mail a collector’s plate offer to lists that match these geo-demographics, and you’d lose your shirt, no matter how powerful the offer. However, a good collector’s plate offer sent to any of the 1.3 million collectors on The Bradford Exchange list or Lenox Collections’ 526,000 would be surely worth a test—regardless of the gender, age, income, locale or presence of children.

This is the reason Danbury Mint and Franklin Mint, major issuers of porcelain collectibles, do not rent their lists. I would guess that neither Lenox nor Bradford are very likely to rent to any of their competitors; hence the endless space ads for collectors plates and other collectibles in Parade, TV Guide, freestanding inserts in Sunday newspapers and other down market media.

The Darling of Catalog Acquisition: Abacus Direct

Tony White, founder of Abacus, came up with a brilliant scheme: Persuade catalogers to give him all their transactional data for free and then sell it back to them. The drill: Hand over your buyer file, and the database wizards at Abacus will perform analytic alchemy to determine the key characteristics of your best customers. Abacus then will match those characteristics across its massive database of more than 3.5 billion transactions of 800 catalogs with 90 million households.

These 3.5 billion transactions—coupled with demographic overlays—should enable a cataloger to find potential customer clones in terms of behavior (product affinity and prior mail order purchase). If all goes well, Abacus will hand you a prospect file of the most likely respondents to your catalog—far more precisely targeted than if you were to rent affinity lists.

I’m told by numerous catalogers that the Abacus system is absolutely terrific for bringing in long-term new buyers at the incredibly low list cost of $70/M. However, some think that Abacus names may not be working as well as they had in the past. Mike Hayden, senior vice president of catalog brokerage at the Millard Group, suggests that the best multi-buyers are being overmailed.

When asked if the Abacus file was being overfished, Susan McIntyre, owner of McIntyre Direct, says:

Good models should overcome overfishing. Everybody had a bad year, and it may be that since Abacus was acquired by DoubleClick, the programming may be rushed, and less thought has gone into the models. If you work closely with Abacus, question them, push them to do things differently, force them to really think about the model, talk about all the points, examine all the catalogs on the synergy table, take into consideration gender, say, for example, “Did you know we have four specific niches ...”—you can make Abacus work for you. But you have to push them hard; you have to be knowledgeable. When building the initial model, you cannot say, “Just do your regular model.” Instead, you have to feed them a lot of data and force them—force them to run three different models and test them against each other.

According to one list broker/manager, Abacus in its heyday was usurping 10 to 15 percent of the acquisition list business. And since Abacus names are not commissionable, money came directly out of the pockets of the brokers and managers. The possible downside to Abacus: Your customers will receive offers from direct competitors who are members of the Abacus consortium. You can order Abacus not to allow specific competitive catalog offers to be mailed to your list; but that said, your customers probably buy from numerous catalogs in the Abacus consortium, so the mailing will arrive one way or the other.

Abacus operates on what it calls the “12x18 Rule.” In the words of Lori Molinari, director of marketing at Abacus:

For example, a participant contributes 10,000 names that have had a transaction in the last 18 months. This mailer is now allowed to take 120,000 prospect names from Abacus in the calendar year (12 x 10,000). The 12x18 Rule creates a cooperative environment of equality between the amount of data that is contributed and the number of prospecting names that can be used in a 12-month period.

To become a member of the Abacus consortium, a cataloger must have at least a thousand 12-month buyers.

Hayden is not enamored with Abacus, but, he says, “I try to do what’s best for my clients.”

Mainly, he continues, Abacus and its competitor, Z-24 (a database of 600 million transactions from 590 catalogs across 6 million households) benefit small and mid-sized mailers. “Frankly,” says Hayden, “I think large mailers in Abacus are giving away the store. And membership in a cooperative database very likely will diminish your list rental income.”

Renting vs. Exchange

Howard Kupfer, executive vice president of Mokrynski & Associates, says while many catalogers will not rent to their competitors, most will exchange with them. For brokers and managers, the commission on exchanges is smaller than that of straight rentals.

The traditional way to acquire new customers is to rent names from other direct marketers whose customers’ behavior mirrors your clients. According to McIntyre, the hierarchy of catalog rental effectiveness goes like this:

Best: Other analogous catalogs.

Good: Subscription files (e.g., if you have an outdoor catalog, rent outdoor magazine lists).

Fuggedaboudit: Compiled lists; they work for some offers, but not catalogs.

You also may want to test hotline names vs. 12-month buyers. You’ll pay a little more, but you may get a better response. In the words of Andy Byrne, “If hotline names don’t work, skip the list.” (I’ve gotten a lot of unpleasant feedback when I’ve quoted this rule, but all things are testable.)

Should you send your full catalog or a stripped-down version offering your best items to rented or exchanged lists? McIntyre points to food catalogs, which are traditionally skinny. “Many customers have been buying the same thing from food catalogs for 20 and 30 years. Often they don’t buy new stuff. This isn’t like shirts or shoes. So, if a food cataloger has a 32-page book, it doesn’t make sense to send a 16-page version; in large quantities, the saving isn’t that much. However, if you have a 168-page catalog, it may make sense to send a 64-pager with your prime merchandise,” says McIntyre.

Kupfer suggests that with the exception of such humongous books as Spiegel, most catalogers send their regular book to prospects. Hayden says that intuitively, it makes sense to have a prospecting book. “But in most cases, the main book works better. It’s frustrating,” he adds.

Space Ads: Merchandise

A number of catalogers take small space ads to offer a specific item and then convert that buyer into a regular customer. For years, TravelSmith, Novato, CA, ran small ads all over the place selling its Basic Black Travel Dress and picked up a legion of customers at, presumably, an acceptable cost.

Sometimes a space ad offering a high-ticket item in the right medium will bring in a customer at a cost of $50. However, run that same ad in The Wall Street Journal and you might find yourself paying $250 for that customer.

Can you afford it? McIntyre suggests it’s a question of arithmetic, and whether you are tracking your customers by source and have a lifetime value model. One broker told me she believes that few catalogers are sophisticated enough to track orders and project lifetime value by source.

Space Ads: Free Catalogs

McIntyre says many marketers are intrigued by the idea of offering their catalogs in venues where their competitors are not found. Her advice: Go where the action is. For example, if you have a line of merchandise for senior citizens, try a small space ad in Yankee to offer a catalog. And look into hiring a catalog consultant or freelance media planner to bring some new thinking into your organization. And push your list broker just as hard as you push the Abacus programmers.

The Geezer Factor

Suppose the privacy police win, opt-in becomes the rule of law, and the motor vehicle law is extended to transactional data with demographic overlays. Then what? In other words, if consumers become as outraged at the Abacus system as they did when they discovered what its parent company, DoubleClick, was doing online, how are you going to prospect?

The answer: Find a geezer—a senior direct marketer from the 1950s, 1960s and 1970s—long before the accumulation of massive individual electronic dossiers that rocket around the country from computer to computer sometimes as often as 100 times a day and more.

Alternate Media

Yes, test relevant package inserts and get an Internet whiz who knows about meta tags to drive traffic to your Web site. A niche cataloger I know gets a steady 3 to 4 percent response on catalogs he sends as a result of Web inquiries.

Denny Hatch, consultant and freelance copywriter, founder of Who’s Mailing What! (now Inside Direct Mail) and former editor of Target Marketing is author of the books “Method Marketing” and “2,239 Tested Secrets for Direct Marketing Success.” He can be reached at dennyhatch@aol.com.

Six Essentials for Prospecting

To find a customer, you want these six pieces of information, which are listed here in descending order of importance:

1. Name and Address

According to the USPS, consumer mailing lists go out of date at the rate of 2 percent a month or about 25 percent a year. That means if you mail to a list that is updated once a year,

a quarter of your mail will be wasted.

2. Demonstrated Affinity Behavior

If you have a catalog for outdoor activists, mail to those who have bought outdoor equipment or subscribers to outdoor magazines. Logic might dictate that a mailing to a city dweller would be wasted, but there are things called weekends and city dwellers often have more money than hicks in the sticks.

3. Has Purchased Over Distance (by mail or phone or Internet)

Go to a compiled list and you have no idea whether this person even reads the mail or shops anywhere but retail.

4. Can Afford the Offer

If you offer $1,000 teak benches to dirt-under-the-fingernails organic gardeners who buy $25 worth of seeds every spring, you might not ring up many sales.

5. Recency of Purchase

Helpful, but not essential.

6. Will Pay the Bill

You can eliminate #6 if your options are cash with order (CWO) or credit card only.

Finally, keep in mind the old Ed Mayer rule: Success in direct marketing is based on the following ratio: 40 percent list, 40 percent offer and 20 percent everything else.