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To take the pulse of the industry, BtoB Senior Reporter Christopher Hosford contacted list management and list broker executives to solicit their views on trends within the list and database industry and, in particular, their response to the state of the economy and the changing needs of direct and database marketers. Participating in the virtual roundtable were Ed Mallin, president of InfoUSA Services Group (which includes Walter Karl, Edith Roman Associates, Millard Group, Direct Media, Donnelley Marketing, Triplex and Yesmail); John Papalia, president of Statlistics; Jay Schwedelson, corporate-VP, Worldata, and chairman of the Direct Marketing Association's List Leader Group; and Rob Sanchez, president-list management and interactive services, MeritDirect. BtoB: Well, there's no way to avoid it, so we'll start off by asking how you, and the list management industry overall, are being affected by the current economic downturn. Ed Mallin: It's been a challenging time, no question about it. The economy clearly has impacted direct mail volume; and, as for the list management business one feeds into the other. If mailers are mailing less, it obviously impacts list management because fewer names are being rented. What happened in the past was a budget would be set and, except for some dramatic business impact, circulation managers, general managers and heads of catalog and direct mail divisions could all work off their road maps and budgets. What we're seeing now is everyone is micromanaging month to month, managing on a 90-day budget and making decisions based on the results they're seeing. Jay Schwedelson: Obviously, business overall is not going great, but different sectors are doing better than others. The category leaders for us, for example, are technology and the public sector. Government is funding a lot of initiatives to keep things in motion, and marketers are aware of that. The public sector is one of the last where people have reliable money. The same is true of hospitals, which remains a strong sector no matter what the economy is. On the other hand, the professional categories of lists, such as lawyers and obviously the financial professionals, are hurting. An added danger here is that there is high turnover in this sector, so making sure of accuracy with these lists is a new challenge for us. John Papalia: I don't have to talk about what's going on in the publishing world. We have many publishers as our client-list owners, and they're going through extreme difficulties, with layoffs and reorganizations. And we list managers have to retool to help them, to maintain a consistent revenue level for them in the list management world. So in response, as markets dry up, we'll start selling some of those lists in secondary and tertiary markets. We have to stop selling what we have and sell what the buyers need to maintain revenue for our clients. BtoB: How is the list management industry responding? Rob Sanchez: As clients are cutting staff and costs, they're asking us to do more, to step into their companies and, in some cases, actually fill positions. If clients are feeling the pain, we have to help them get through it and produce revenue. Mallin: The answer is trying to find out how best to monetize our clients' base. OK, so list rentals are down. But we need to find creative solutions, such as expanding e-mail opportunities using creative co-op databases and co-registration on their Web sites where visitors to a site are given the chance to opt in to multiple lists simultaneously. We're also acting as list manager for inserts, blow-ins and “webserts” (a third-party banner ad shown typically during or after a check-out process). There are lots of different media we can play in to generate revenue opportunities. The thing is, our clients have customers themselves. We're asking them what other products or services they can offer to these customers, to offer a full menu of services provided as a list owner. Partnering with us, for example, our clients may have customers who want to do an e-mail append or enhancement, or data hygiene—or who may be interested in a variety of Web-based tools we have. We're partnering with them to bring these services to their customers and give them a revenue share on that opportunity. It's more of a business-development strategy. BtoB: John, you mentioned marketing your clients' lists to secondary and tertiary markets. Can you explain further? Papalia: Well, one of our clients is Business Insurance, a Crain (Communications Inc.) magazine. When their lists were managed by another company, they felt they were only getting the obvious business, such as direct mailers with insurance or financial offers. When we came aboard, we wanted to get in some travel offers, because obviously financial and insurance people have traveled. We also can bring in some high-end auto offers. Some of our clients, six or seven months ago, might not have wanted these secondary lines of business, thinking they didn't want their customers to get too much mail. But now they're realizing that their customers aren't getting too much mail, and as a list owner they're actually making more money in the process. Unless a market is off-target or off-color, we advise our clients to give it a shot. Schwedelson: And there are lots of different things we can do with data other than selling it for one-off campaigns. If list managers and brokers are doing the same thing today as they were 24 months ago, and think they're in the same business as before, they're on a path to failure. The game-changer for us and the entire b-to-b environment is that list owners and managers aren't looking at lists anymore as something to be used to fuel a direct-marketing campaign so much as they're looking at them as assets and how they can be monetized. For example, people are using lists as overlays on customer files, to see how much more information they can get on their own customers. Marketers can also allow lists to be a source for an append of additional information like titles or phone numbers. Here, rented lists allow marketers to dig into their own customer data for data mining. It's an entirely different way for list managers to help the owners drive revenue and use the assets they've built. BtoB: It seems that the list management business is evolving from just the management and rental of lists to more of a consultative, agency approach. Is that what you're seeing? Papalia: As marketers' budgets and staff have been cut, they're asking us to provide more consultative services along with our lists. They need more resources to help them out, and they're looking to us as critical thinkers. And yes, we're working with them on developing full, multichannel marketing packages. Technology is helping change this for us. For example, search engine optimization has become an important element in how we promote our lists. Our data cards have to be such that they maximize search results to get maximum clicks. And data co-ops are great, too, as are databases that have been enhanced with such data as company size, SIC (standard industrial classification) codes, genders, demographics, psychographics and more. The bottom line is to increase the response rates on acquisition campaigns and to increase revenue on the list management side. Sanchez: In addition to the buying and selling of media and lists, we're getting into lead generation and online advertising and, as an extension of that, working with clients in a consultative role. We're increasingly filling roles that they might otherwise have done in their own marketing departments. The list business is definitely changing. The buying and selling of lists isn't enough anymore so, as a result, we're diversifying and branching out with the services we offer on both the list management and brokerage side. Schwedelson: The game is, how can we help the list owner serve the marketplace? If the marketplace isn't renting as many names, what are they doing and how can we fit into that mix? Mallin: I'm respectful of our roots, but the fact is we're not in the list industry anymore. We're in the information business, creating products that may be derived from lists, information or data. We're really in the media business, if you think about it. BtoB: How do you see the digital world changing the list industry? Sanchez: What we're seeing is more multichannel list products that are available, where there may be a postal component, an e-mail component and a telemarketing aspect; and marketers are coordinating all those activities and channels. That's a major shift. But there's also a major challenge here, which is privacy. A lot of the new data is being collected online, which makes the permission level really important. For example, an emerging channel is mobile marketing, and here you have more of a pure opt-in situation. If you're not careful, it can be construed as intrusive. Marketers have to make sure they know the source of their lists here. BtoB: It sounds like the digital world is enabling the list companies to offer more multichannel marketing products and services? Mallin: Absolutely. Here, marketers are renting names for e-mail campaigns, either b-to-b or b-to-c. We've built very large co-op databases, so we can delve pretty deeply in helping give customers the ability to acquire new business through the Web and, at the same time, for them to market to their existing customers through our Yesmail division. We're doing a lot of cross-selling through our divisions. We're also looking at mobile messaging and social networking solutions. And for b-to-b, because it depends on selling direct or through resellers, a lot of marketers want to communicate with their client base, so there is a growing proliferation of online newsletters. These are all new channels that have applications to marketers and can be served by list managers. The whole challenge for the list brokerage and management community is to stay relevant, to remain an essential part of what our customers want. BtoB: By all accounts, e-mail marketing continues to resist some of the economic downturn, which obviously means it's a bright spot in the list business. Is that how you see it? Schwedelson: Yes, I see e-mail rentals continuing to grow. For marketers, obviously there aren't the built-in costs associated with direct mail, but they have to say, “OK, e-mail is important, but how do I adjust to the current economic realities?” For one thing, we're seeing a huge surge in personal e-mail addresses coming onto our b-to-b files—personal accounts with Hotmail and Yahoo.com, for example. That's another way to reach b-to-b buyers, but it's also got its downside. As these people are being laid off, they're trying to stay involved in their industries by signing up for different publications and events with their personal e-mails. The problem is, they're no longer employed and no longer a great target for buyers. List owners can't put their heads in the sand and imagine that everyone joining their lists are the right people. We're often omitting a lot of these personal e-mail addresses because they hurt the marketer's chances of getting a good response rate. BtoB: So are lists deteriorating along with the economy? Schwedelson: Well, there are competitive pressures here that don't help. For example, list owners will always be a bit wary about participating in cooperative databases because they're afraid of losing control of their data. Most co-ops are very reputable, but in a down economy list owners may feel even less comfortable about the data they're putting in there. For example, the names might be in there but perhaps they're not the most recent names because of this list-owner reluctance. This can create a false perception among marketers of the value of the database. A marketer may use a data co-op, but he has to take the time to understand if he's getting the best list and if it's performing well. This isn't a knock on co-ops, just (to say) that marketers shouldn't rely on them as their sole source for prospecting. BtoB: What's the future hold for offline marketing, your traditional arena of excellence? Mallin: I don't believe that direct mail is dead by any stretch of the imagination; but it is changing—perhaps more rapidly than we expected. The economy is forcing it to change. Here, the opportunities are in multichannel marketing, where the printed mail piece or catalog drives people to action on a Web site. In the b-to-c world, for example, there is a growing community of people over the age of 50 that is probably ripe for this kind of multichannel marketing. Sanchez: I don't know if I'd go so far as to say it brightens my day, but direct mail is still very important, particularly in the business catalog space. Direct mail is still the primary acquisition vehicle, but there are concerns about how the U.S. Postal Service is responding to the down marketing. BtoB: The Postal Service certainly is suffering. How might this impact your business? Sanchez: Obviously the Postal Service is having trouble because marketers are doing more online. And then there is the environmental twist where people want to save paper. But some very good companies rely on catalog mailings and direct mail to sustain their businesses. And there needs to be some basic consideration by the Postal Service about accommodating the b-to-b side of things. Papalia: I would add that the U.S. Postal Service has created for us constant headaches that just keep coming back. The Postal Service will put (itself) out of business unless it becomes more reasonable and manages its business better. For example, it can't just hike postage to meet all its needs. That's crucifying the catalogers and will serve to eliminate even more direct mail. Mallin: Because of postal price increases, the consumer catalog space has had the toughest road, not just this past year but for the past couple of years. There are tremendous costs associated with running a catalog business. As a result, they're trying to migrate a portion of their business to the online space to maximize profitability. BtoB: To expand on this topic, I'll ask Jay Schwedelson, in his capacity as chairman of DMA's List Leader Group, about these kinds of macro issues. Schwedelson: The biggest concern of the List Leader Group, and our key initiative, is we don't want any list company to feel isolated in this economy and to fail. So it's important for us to share successful ideas with each other. Maybe you're thinking about selling package insert programs or learning about appends. People need to know what's working and what's not. We need tough tactics for tough times. We think that the DMA is doing a thankless but fantastic job in fighting do-not-mail campaigns around the country and working with the Postal Service. In the public's eye, direct mail can be perceived as something that's negative, so the DMA has the opportunity here to carry the flag and battle these campaigns. We're also active in List Day on Capitol Hill to meet with legislators and review the language that's being introduced into bills. BtoB: How does the future look to you? Schwedelson: One area we're getting involved in is international lists. A lot of marketers want to expand beyond the U.S. in a lot of b-to-b categories to extend their reach because the U.S. is a mature market. And the data quality is getting a lot better internationally. It's always been pretty good in Europe, but now in the Asia-Pacific region you've got data quality that's comparable with Europe and the U.S. India and China were a challenge until recently, but we're seeing data sets coming on the market that are allowing marketers to penetrate there. I see this as an explosive opportunity for 2009. Mallin: These are unique times. I think we're going to have to manage day by day, month by month, to make the right decisions. And we have to remember that we're in a partnership with our customers, the actual list owners. If they don't do well, we don't do well. We're all in, betting on our customers' success. M
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