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List Brokerage - How to get your money's worth from a Brokerage Partnership
(or how a surly, demanding client made the jump to the vendor side...)
Ok, let me start out by saying "surly" and "demanding" are relative terms, but if you were ever one of my brokers in one of my previous positions, you probably would agree with these terms, and perhaps even add a few of your own. I found out that I was offered the position of head of brokerage at The List Group (TLG) because I had admitted to relish in the "bloodying" of list brokers who performed poorly. The thinking by our companies' ownership was that "one who has bloodied will do all in their power to avoid being bloodied" - and funny enough, I have found that pretty well holds true.
Let's begin with a fairly simple concept - Brokerage IS NOT rocket science. It's a combination of exceptional list knowledge, marketing experience and a healthy dose of great customer-relationship management. Simple as that. These are not revelations that came to me recently. These are things I picked up early in my career and have only been strengthened by the move to this side of the client/broker relationship.
Since we have established that brokerage is not rocket science (but I make it clear, I did not say brokerage is not a science!), let's look at the hierarchy of where a broker belongs in a marketing relationship. Far too many mailers (and that term encompasses email marketers) look at list brokers as a "vendor." I really love the definition of vendor in Webster's Collegiate Dictionary: "One that sells. Seller: Vending Machine." I can state unequivocally that I am not, nor have I ever been, a "vending machine." What I am (in many cases) and what I strive to be (in all cases) is a partner. With the power I yield in the success, or failure, of your marketing campaigns - your very business - I darn well better be a partner. I make a mistake; I cost you extra money. I make a big mistake; I cost you orders, inquiries, revenue, profits, jobs, your very business. The quickest way to insure that I fail is to treat me like a vendor.
The flip side of this is to look at what happens when you treat me (or others like me in this business) as your partner, confidant, brother-confessor. Let me in on the information that drives your business, and watch the magic we can perform. Watch us uncover lists and list strategies to help your business achieve its full potential. Hold me accountable! I want you to put my very feet to the fire and require that I perform, but I can only do this if I'm on the inside, not the outside looking in.
If you are new to the business, or new to working with a list broker and unsure as to what a list broker can or should do? Or, want to check to see if your list broker is doing everything they should be doing? Here is a listing of the services your list broker does (or should) provide.
List Recommendations: Obviously, this is the first and most important thing we brokers are expected to do. But trust me, some do this much better than others. You should expect to get your typical list selects and data cards, but also make sure you understand the research that went behind the recommendation (we in the business call it a "reco", so don't be confused when you hear this term). What is the logic behind the list choices? If a broker only provides you with a deck of data cards, now there's a true vending machine! The research should be your window into the thought process of the broker. I always wanted to see this on my reco spreadsheet. Not only that, I usually made my broker rank their list suggestions from top to bottom. Some hated that. Made them think too hard. They never lasted too long...
Within the list reco, you need to know what is the source of the list (direct mail buyers, compiled, controlled circulation, opt-in internet, etc.). This is very important because you are looking for these individuals to respond in some way and it's usually those individuals who have done this for another mailer who is most likely to do it for you. You'll want to see who else has used the file and who is continuing to use. It. If you see a competitor using the file on a continuation, good chance it will work for you. If you are renting a magazine subscription file, a great thing to look at is who is advertising in that magazine. If the products advertised are similar or at least appeal to an audience that is similar to your target, you should be in pretty good shape.
Here may be a big surprise to you. Not all the information on a data card is correct. It is very important that your broker check out the pieces of information that are important to you. When was the file last updated? Newer names (at least those names that have been confirmed as being alive and at the address you have on file) outperform older names. Pricing changes frequently. Quantities are often only estimates - and are usually estimated a wee bit on the high side.
The way this information is presented to you is also of extreme importance. I never met a mailer that wanted to see a reco in the exact same format as another mailer. What's of critical importance to one may be of no interest to another. Don't just accept the format the broker hands to you, let them know exactly what you want to see. The basic reco information should include at a minimum, List Name. List Selects, CPM, Select Fees, Shipping (Transmission fees for email), Last Update, Next Update (might impact when you order the list), Universe Size for this select, Minimum Quantity and Recommended Quantity. If doing continuations, I like to see these broken out from my tests. I also like to see the results of at least the last two events attached to my continuations. That lets me see if any trends are developing or if seasonality appears to be a factor in my mailing results.
Testing is another critical area of list research - if not the most critical. The list broker should be providing the mailer with extensive testing ideas. After all, testing is the very basis for all direct marketing activities. Every direct marketing promotion should be looked at as an opportunity to learn and improve. I always looked at each of my direct marketing efforts as a way to refine, and in some case make major overhauls in, my creative, offer(s) and lists. As a broker, I now concentrate on the list side, but if I'm a good broker, I don't forget how lists tie in so closely with offer and creative. I learned early on in my career that lists account for about 40% of a campaigns success (offer 40%, creative 20%). But they all have to work together to be truly successful!
Within the list/circulation area, there are tremendous testing opportunities. Assuming this is not your first marketing event, in which case everything that you are doing is a test, you should look at testing all of the following: new lists, new list categories, individual list selects, offers or creative by list/list category, modeling, and medium (email versus postal). New lists are the most obvious. When you send out any mailing, you are likely to find that a percentage of lists performed very well, another percentage performed marginally, and finally, another percentage of your lists didn't perform well at all. When this happens, the logical thing to do is eliminate those poor performers, look at the characteristics of the lists that performed well, and go try to find new lists that have the same traits as these files. As a broker, that means I need to have you share those results with me so I know what worked and what didn't - gets back to that partnership thing.
Recommending new lists is the easy part (usually). Often times, however, you will have several lists that performed marginally. You probably don't want to discard them in their entirety, but you need them to perform just a bit better. Or in other cases, you have a list that performed magnificently, but would love to have more names to go back to. This is where tweaking a select, or two, comes in. There are many variables in a list that can be adjusted (tightened or loosened) to make a list perform better, or to expand the universe. If you are mailing consumer files, a few that you and your broker should consider are: recency selects, dollar amounts, multi-buyers versus single buyers, method of payment, product category, home address/business address, buyer/inquiry, bill to address/ship to address, male versus female. Then, if the file has been enhanced (using an Experian, Equifax, or Acxiom to append demographic and psychographic data to a file), there may be as many as another 200 variables you can tweak. If you are a business-to-business mailer, the selects may be very different, but the concept is very much the same. Some of the more "potent" selects are employee size, revenue, job title, buying authority/purchase influence, recency, industry, buyers/inquiries/specifiers, for starters. By working closely with your broker, you will quickly identify which selects make the biggest impact on your business.
List Categories: One of the fun things about direct marketing is that you sometimes get to think outside the box to see if your creative thinking can generate a breakthrough in response. One way we can do this in the list area is by identifying new list categories to test that may seem to be a bit off base. Take for example a recent reco we did for a company selling electronic muscle stimulators - the kind you see on late night TV 3 or 4 times per night. The obvious list category to promote this product to is dieters. It also makes immediate sense to promote the product to health and fitness enthusiasts. A little more obscure is the category of hardcore sports participants - runners, bikers, snowboarders, climbers, etc. But muscle condition is critical to these individuals. Even more fringe is the category of injury rehabilitation. This would include doctors, chiropractors, back pain sufferers, recent orthopedic patients, and lists of elderly individuals. By thinking a bit outside the box, we were able to expand the available universe from 2.4 million names to over 6 million names.
List/Creative Targeting: An area that I have played with successfully over the years is to target my creative to the attributes of specific list categories. While you may already have a creative that works very effectively to your existing list category (ies), what might happen if you adjust your creative (or offer) to an entirely new creative? If you wanted to test lists that were more promotional than those you have used in the past, it makes perfect sense to make your creative/offer more promotionally driven. This gets back to the formula for direct marketing success. Each element contributes on its own, but all elements must work in concert to be truly effective.
Modeling: Most brokerage companies don't perform modeling, but most good brokers will know what's behind it, when to do it and how to get it done. Modeling is used primarily to take large, unsuccessful, files and turn them into smaller, successful lists. Models look for specific characteristics of a file to determine if the presence of these characteristics makes the list more or less likely to be responsive. Some of these characteristics might be low income/high income, direct mail buyers versus non buyers, responsive zip codes versus non responsive. Depending on the product or service that you sell, the characteristic(s) that predicts your responsiveness might be very different. I once worked for Renovators Supply. A catalog company that sold supplies to renovate older (primarily Victorian) homes. The model that worked best for me was the one that could identify neighborhoods where Victorian homes were prevalent. A note on modeling - almost no model will turn a "dog" file into a star. But I have seen models take a pretty poor performing file of 1 million names and find a pocket of 10,000 very responsive names.
Price Negotiation: Brokers are supposed to negotiate for their clients. My experience, though, is that most brokers are not very good at it and really don't like it. If you think about it, there is a disincentive for brokers to reduce the price to the mailer. Brokers get paid a commission on gross dollars billed (usually) and when gross dollars are reduced, commissions are reduced. Here we go back to that partnership thing. If your broker is a partner with you, they look at the relationship over the long run. By saving you money, this helps out your business and insures that you will be around to do business with in the future. See, this partnership thing works in both directions.
There are many areas for a broker to negotiate on your list orders. The obvious one is base pricing. Easy to see, immediate impact, that's where I would head first. But other areas to look include getting owners to waive select charges (or capping them at a maximum), reducing minimums for tests, increasing net name arrangements (where you only pay for the unique names mailed, as some will match your own house file names in the merge), annual volume discounts, exchanges (but this will reduce list rental income!), transmission fees (email) or shipping fees (postal) and others. If you're up to it, take your circulation plan and look at what a 5% reduction in each area of list expense does to your overall costs and bottom line. Turn your broker loose on those areas that have the biggest impact.
New Mediums: The current buzzword of the new millennia is email marketing - and right now, for good reason. Email promotions are very effective from both a cost standpoint and a response standpoint. While the typical list cost on its own is often much higher than a postal list, there are no postage fees, printing fees, and creative is often much less. Response rates too, are comparable to what most postal mailers are seeing (if not higher), so the net impact is a more cost efficient promotion. Another very large advantage of email marketing is the speed with which results come in. Usually, within 48 hours 80% of the responses are already in. Many savvy marketers, if working with savvy list brokers, are discovering the benefits of combining their postal efforts with email, and often even telemarketing. This comprehensive contact strategy often pays very big dividends.
A big question that we answer almost every day is "how much should I test?" The quick and easy answer to this is "it depends." If you are a new company or launching a new product via direct marketing, by definition, your testing accounts for 100% of your budget. As your product or service matures, that percentage will continue to decline. At no point would I ever recommend that you actually eliminate all testing. Even in the most mature product life cycle, I would still recommend that testing account for 10 to 20% of your budget or mail quantity.
Finally, the last area, but by all means not the least in importance, in which you need to have brokerage involvement in your business is back-end analysis. This is where everyone gets together to pick apart what happened in a mailing (blast, telemarketing effort, etc.) to see what went right, what went wrong and what do we do now. If my events were major enough, and they often were, I would fly my list brokers out to our facility to be part of this process. We would look at the response of each and every list, each and every segment, results by list by creative or offer test panel. Slice and dice! It is so very critical to understand what happened so you can react properly. And I really want to stress, this process is just as important for an event that dramatically exceeds plan, as it is for an event that comes in below plan.
In closing, I want to express this thought to every broker whose services I have had to summarily dismiss (AKA fired...) - I hope you were able to find mailers who don't care about follow-up, creative thinking, holding you accountable, being a partner. For me, I'm very comfortable in this new role. And you know what? My marketing partners don't find me surly at all.
As Vice President, Director of Sales for The List Group, Mr. Dodge has taken on the dual roles of continuing the long-standing double-digit sales growth and enhancing what is already the industry standard in customer service/support. By emphasizing the company's corner stones of outstanding research, coupled with unrivaled customer service creating a true marketing partnership (foundations established by co-founders Michelle Brown and Patrick O'Hara) Dodge is confident he can keep the sales trend alive. Throughout his career he has been consistently results-oriented and has developed innovative marketing tactics that have increased customer awareness and product sales. As Vice President, Sales and Marketing for Achieve Communications, was responsible for media plans, direct mail campaigns, collateral materials, web content, and vendor support. As Vice President of Catalog Sales and Marketing for Mattel Interactive/The Learning Co., Mr. Dodge was responsible for all catalog operations within Mattel's Interactive Software Division, including creative, circulation, merchandising, and analysis for three catalogs, one of which grew from a start-up to $13 million in revenue over three years. He oversaw mailing in excess of 27 million catalogs annually with revenues in excess of $30 million and was responsible for the Web site marketing management of Edutainco.com, which grew to five percent of the company's total revenue. During his 20-year career in direct marketing, Dodge has also worked for Garden Way, No nonsense Hosiery, Renovator's Supply/Yield House and Wyse Direct Marketing Agency, where he was Director of Client Services. Mr. Dodge received an MBA from the University of Northern Colorado at Greeley and a BS in Business Administration from Colorado State University at Fort Collins. He is a frequent speaker at industry functions and also co-presented a seminar in marketing studies and effective advertising methods at the Russian Economic Academy in Moscow.
Relevant Direct Marketing Terms:
- Brokerage/List Brokers - companies and individuals whose job it is to find, recommend and procure lists to direct marketers for mailings, emailings and telemarketing campaigns.
- List Recommendation (AKA Reco) - the set of lists that your broker has found that fits the target audience you seek to promote your product or service to.
- Data Card - a document that contains all the important information about a single list or a list database. Includes pricing, selects, update schedules, etc.
- Event - a single direct mailing, email blast or telemarketing blitz.
- Test List - a list that you are trying for the first time.
- Re-Test - a list that either performed well the first time at a small quantity and is now being tested in a larger quantity, or a list that performed marginally in the past and the selects (see below) have been changed to try to increase its responsiveness.
- Continuation (List) - a list that you have used before that has performed well enough to use again.
- Selects - the attributes on a list that can be altered to pinpoint the most responsive targeted audience. A few of the more common consumer selects include recency (when the names came onto the file or had their last activity with this company) and dollar amount (how much this person has spent with this company - usually on their last purchase), gender, and zip/SCF. Common selects on business files include employee size, company revenue, industry, and job function or job title.
- SCF - Sectional Center Facility. The first three digits of a zip code and a means to refine a list select.
- Modeling - a means for improving list response by identifying characteristic in a list that either help or hurt response. Usually done by outside companies, models eliminate undesirable characteristics (non buyers, non payers, etc. ) or concentrate on identifying and selecting desirable characteristics (buyers, good credit, product purchase characteristics, etc).
- Net Name Arrangement - an arrangement with a list owner where the mailer pays for the net names that come out of a merge. Because outside names are usually merged with a companies house file, some of these outside names will match those that the company already owns. A net name arrangement allows the company to deduct from the list invoice a portion of the names that are duplicates.
- Updates - the process for either adding new names to a list or cleaning names that already exist on a list. The more recent the update, the cleaner the list and usually, the better the response from that list.
- NCOA - National Change of Address. A service provided by the post office that allows select service bureaus access to changes in addresses that consumers and businesses give the post office. This information can be used to correct bad addresses on house files and outside lists - for a fee.
- Enhanced File - a list that has had additional information appended to it to add selectability. The information can be demographic (age, income, presence of kids, etc.) or psychographic (purchase traits, behavior patterns).
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