Co-op databases offer savings, services for those willing to share

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A customer file is among a marketer's most valuable assets-one that conventional wisdom says should be kept under lock and key. So why are some companies putting their files in cooperative databases for their fellow marketers-even competitors-to access?

The short answer is that cooperative databases can offer data and services that are greater than the sum of their parts. Still, the decision to "go co-op" isn't necessarily an easy one. Marketers must first understand the different types of cooperatives and then evaluate their business needs, the value the co-op offers and their tolerance of perceived risks.

According to Merit Direct VP Chris Pickering, there are two basic types of co-ops: public cooperative prospecting databases and membership cooperative databases.

Public cooperatives, such as Merit Direct's MeritBase and Direct Media's Data Warehouse, contain list rental files and house files of invited participants. For these databases, marketers need not "give" to "get." Any mailer can make selections from public co-ops for prospecting mailings.

"List owners are compensated their standard list rental rate, and credit for names supplied by more than one owner is fractionally allocated," Pickering said. "Often mailers also execute some or all of their house file mailings from these databases." This enables them to take advantage of certain cost-efficiencies and optimizations.

In membership cooperatives, such as Experian's b2bBase and the Abacus B2B Alliance, marketers can only pull names by contributing their customer file with RFM (recency, frequency, monetary) data. Targeting cannot be done on a list-specific basis. Also, membership co-ops do not return list rental revenue.

"The operators of these databases aggregate and integrate the data, and develop models ... to identify prospects that are most likely to respond," Pickering said.

These databases aren't used exclusively for prospecting; retention, reactivation and list optimization capabilities may also be available.

The selling points

For marketers that contribute data to a public cooperative, the decision is typically driven by list revenue. For those that purchase data from public co-ops, the key selling points include the breadth of lists available, cost-efficiencies, and firmagraphic and compiled data sources that are appended to the files.

George Schmidt, marketing manager for L.L. Bean's Direct to Business division, said public co-op MeritBase offers "a traditional, open model. ... I compensate list owners for the lists and reciprocity is not required. It would be inconsistent with the L.L. Bean privacy policy to subject our customers to the unscreened offers necessary with [membership] co-ops."

Access to comprehensive transactional data is perhaps the biggest selling point for membership co-ops. Abacus B2B Alliance has approximately 400 members that contribute their transactional files. It includes 75 million business contacts and, on average, records have 20 purchases across the Alliance. Experian's b2bBase has more than 14.9 million contacts from 75 participants.

Melissa Howley, director of direct marketing at Hello Direct, said Abacus B2B Alliance has given her a better view of customers and potential prospects. "It provides a more complete picture of who these people are," she said. "Are they buying from other direct marketers? What types of businesses are they buying from? How much are they spending? How often are they purchasing?"

Deep transactional data also help marketers locate qualified multibuyers, said Austin Wright, senior product manger-cooperative databases at Experian Marketing Services. "As marketers, we know that a one-time buyer isn't as valuable and doesn't have the lifetime value that we're looking for. We are looking for people who are comfortable making purchases via catalog or the Internet, and who will provide the long-term value we can invest in."

Another advantage of membership co-ops is access to proprietary data models. But in order to take advantage of these, a marketer must keep an open mind.

"Mailers sometimes say, `This is how I have traditionally mailed,' and ... require us to put those preselects on models instead of letting our statistical modeling do its thing," said Stacey Hawes, VP-b-to-b services at Abacus. This effectively limits the universe participants can access, she said.

The best approach, Hawes said, is to "test a few different models a few different ways and allow the modeling to work without human intervention."

Within the public cooperatives, the biggest area of concern for prospective participants has historically been house file data security, Pickering said. To address this, Merit Direct has "strict guidelines in terms of how long data will be available for FTP download ... and how it's encrypted and password protected."

List validation is the industry standard, which means only names that are specified by the list owner as valid for a client can be queried for that client. In addition, internal database access is managed at a user level, so employees can access files only for the clients they serve.

Wright said many b-to-b mailers are still unfamiliar with how membership cooperatives work. As a result, they may worry about the use of their information by competitors.

To alleviate such concerns, both Experian and Abacus cloak the source of data, allow blocking of data to competitors and have set up business rules to prevent participants from targeting another mailer's files.

"We have found that these features have given mailers the peace of mind they need to move forward and participate," Wright said.

Privacy is another potential hot-button issue. Wright said Experian screens all b2bBase participants to make sure their privacy policies fall in line with the company's own policies.

Hawes cited Abacus' relationship with DoubleClick as evidence of the company's strong commitment. "We have privacy experts on staff, and we will not accept a list that is not what we deem privacy policy-compliant," she said. M

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