Choosing the Best Mailing Lists

There are tens of thousands of mailing lists available for rent. This article explains how to select the ones that will most effectively serve your direct marketing objectives.

OVERVIEW

The most important element of any direct mail program is the mailing list.

This is one rule to which there are no exceptions. If you use the wrong list, everything else is futile. Market-savvy timing, distinctive mailing piece, catchy headline, creative copy, irresistible offer--none of it matters if the mailing piece goes to people who aren't good prospects.

That time-honored rule is becoming increasingly powerful. Some years back, direct marketing guru Ed Mayer said that selecting the right list accounted for 40 percent of the success of a direct mail program. Today, as marketing niches become narrower and narrower, it's even more important to home in on exactly the right people. According to Ray Jutkins, author of Power Direct Marketing (see Online Services), the list is now 60 percent responsible for direct mail success. The upside of this rule, of course, is that once you select the right list, you're more than halfway to running a successful direct mail program.

A key factor in the narrowing of niches is the computer, which has revolutionized the creation and usage of lists and has brought us into the era of database marketing. The terms "list" and "database" are often used interchangeably. Drayton Bird, founder of the Drayton Bird Partnership and formerly vice chairman and creative director of Ogilvy & Mather Direct, says that "Once you add any information beyond the name and address to a list, it starts to become a database." Then, using a computer, databases can be searched, manipulated, and analyzed, making it possible to target your direct mail efforts ever more accurately.

But the resulting proliferation of lists--the computerized refinements--makes the job of selecting the best lists mind-boggling. There are lists of physicians by specialty and subspecialty, buyers of interior design products, America's wealthiest investors, Canadian consumers, buyers of children's educational software, known gamblers who regularly visit U. S. casinos, subscribers to industry magazines. It's up to you to identify the lists that are compatible with your marketing objectives and determine if they are likely to work for you.

DEFINITIONS

In order to select the best list for your marketing program or campaign, it's necessary to understand the services that are provided by various suppliers. The services listed below are not mutually exclusive. In fact, some of the larger companies provide two of them or even all three.

List broker. Acting as liaison between the list manager (see below) or list owner and the mailer, the list broker helps the mailer find the most appropriate list. The broker has access to nearly every available list and can evaluate them in terms of their demographic and psychographic (i.e., attitudes and interests) relevance to your objectives. The broker also analyzes responses to test mailings and helps to determine whether or not a list is likely to work for you. When you rent a list, you pay a rental fee to the list owner; the broker's compensation is a commission (usually 20 percent of the rental fee) from the list owner.

List compiler. A company that creates compiled lists, which are defined below.

List manager. List managers may be employed by the list owner or by an outside list management company. However, the 1998 Direct Marketing Association (DMA) Annual List Usage Survey shows that 86 percent of business-to-business marketers and 80 percent of consumer marketers use an external list manager to promote and rent lists that they own. Working on behalf of list owners, a list manager promotes lists, rents them, and handles all record-keeping. Typically, a list manager handles just a few hundred lists and therefore has a narrower focus than a list broker. An outside list manager receives a commission, usually 10 percent, from the list owner when you rent a list. Sometimes mailers go directly to the list manager, but the usual procedure is to work through a broker. Brokers in search of lists routinely take the initiative by contacting list managers.

TYPES OF LISTS

House list. Your own list of customers and prospects is obviously your most valuable list, because its effectiveness has already been demonstrated. You'll capture some of these names when people respond to direct mail offers and ads. You'll need to get others from your field salespeople, and that can sometimes be difficult. Independent reps and distributors are especially possessive of the names of "their" customers and may be concerned that if you mail direct, you'll cut them out of the loop. Even your own salespeople may wonder why you need to mail to customers and worry whether the mailing will in any way conflict with what they're doing. Your best bet is to explain early on how the direct marketing campaign can benefit everyone on the sales team.

Response list. Names of people who have responded to an offer or inquiry. This can include people who have simply requested information, as well as people who have purchased your product or used your service.

Compiled list. A list compiler consults such sources as telephone books, trade and professional journals and directories, motor vehicle registrations, college catalogs, and trade show registration lists. Most compilers specialize in a particular market; some will create a list according to criteria that you provide.

STATISTICS

Companies that use direct mail reap significant rewards. Economic Impact: U. S. Direct Marketing Today, 1998 (fourth edition) reports that direct-mail-driven sales in 1998 were $429.8 billion, up from $395.5 billion in 1997. The breakdown:

• Consumer direct mail sales were $267.8 billion, up from $249 billion in 1997;
• Business-to-business direct mail sales were $161.9 billion, up from $146.5 billion in 1997.

DMA projects a compound annual growth rate of 8.7 percent in direct mail sales for 1998-2003, the same as the growth rate for 1993-1998.

Increased use of direct mail is also reported in the 1998 DMA Annual List Usage Survey. Some 67 percent of consumer marketers and 75 percent of business-to-business marketers increased their mail quantities from the previous year. More than half of the total respondents reported mailing more frequently. About 52 percent increased mailings to current customers, and 53 percent increased them to prospects on outside lists.

The 1998 Pitney Bowes Direct Mail Study, conducted by the Gallup Organization, reveals that marketing executives are increasing the number of direct mail pieces they send, because they consider direct mail the best communications tool for achieving ten key marketing objectives.

For the study, a random sampling of 302 directors and vice presidents of marketing and marketing communications in U. S. companies with 100 or more employees were interviewed by telephone during June 1998. Respondents were asked to compare direct mail/catalogs with calls by salespeople in the field, telemarketing, TV, radio, magazines, newspapers, billboards, trade shows, events, and the Internet. Among the key findings:

• 70.2 percent of the respondents use direct mail/catalogs, making it the most popular of all the media listed.
  
  
• 40.4 percent of respondents say direct mail/catalogs are best for selling a product or service directly to businesses or households. In second place: direct sales/sales rep, with just 14.1 percent.
  
  
• 32 percent find direct mail/catalogs best for increasing awareness of products or services. In second place: newspapers, with 13.9 percent.
  
  
• 42.6 percent find direct mail/catalogs easiest to track for results and effectiveness. In second place: direct sales/sales rep, at 12.3 percent.
  
  
• The intensity of mailings has increased dramatically since the benchmark study was conducted in 1996. More than 22 percent of respondents reported sending 500,000 or more pieces in an average year, up sharply from 9.9 percent in 1996. At the other end of the scale, only 3.9 percent of respondents said they send 500 or fewer pieces in an average year, compared to 28.7 percent of respondents in 1996

STEPS TO SUCCESS

Commenting on the Pitney Bowes Direct Mail Study, Kevin Weiss, executive vice president, Pitney Bowes Mailing Systems, and President, Mailstream, The Americas for Global Mailing Systems, says, "Businesses use direct mail because it works. The trick is to find ways to make it even more effective." The following guidelines will help you make your direct mail program as effective as possible.

Determine what type of list you want to use. The three types of lists, as defined above, are house list, compiled list, and response list.

• The advantage of using a house list is that the people on it are already your customers or your carefully selected prospects and are likely to respond well. The disadvantage of this list is that it limits you to the universe you already know, rather than helping you to expand.
  
  
• The people on a response list have responded to previous mailings and may even have made a purchase. Their response history, as well as their psychographic and demographic characteristics, can be matched with your requirements. This is the most expensive list to use, but it has the greatest potential for growing your business.
  
  
• A compiled list is usually less expensive to use than a response list. But because it is drawn from many sources, it is difficult to keep it up-to-date. Also, there is no way to calculate the response rate.

Define your target customer. The more specific the information you give the list broker, the better the selected lists will be.

• For a consumer list, consider geography, household income, age, gender, number of children, profession, hobbies, and special interests. The list broker can then make preliminary suggestions for your review. If, for example, you sell women's lingerie through a catalog and want to increase your buyer list, a broker might suggest mailing to subscribers to Cosmopolitan magazine or women who buy from the Bloomingdale's by Mail catalog, says Janine T. Vosseler, executive vice president of 21st Century Marketing, Farmingdale, NY, list broker and manager.
  
  
• For a business list, specify the appropriate industry that you want to reach, possibly narrowing the target down to a specific segment of that industry. Is the size of the business--annual sales, number of employees--significant for your product or service? If so, specify. Look at job titles: refine "engineers" into civil, chemical, or mechanical engineers; refine "physicians" to dermatologists or pediatricians or cardiac specialists.

Review the data cards of suggested lists. For every rentable list there is a data card that profiles the names on the list, giving demographic and psychographic information. It also gives the costs for renting the entire list or one of the available selections. Some typical selections: males or females only; people who have made a purchase during the preceding 3, 6, or 12 months; or people who have made a purchase of a certain amount.

Ask the list broker key questions about the list. Data cards do not follow a uniform format. The list broker should be able to supply any necessary information that's not included. Here's what you need to know:

• The RFM. These initials stand for the most important criteria for evaluating the names on a mailing list: Recency (when the person last made a purchase in this or a related category); Frequency (how often the person makes such purchases); and Monetary value (how much the person spends on such purchases).
  
  
• How fresh is the list? You want a list that's been updated frequently so that it's accurate. But it's not usually advisable to request a selection of only the names that have been recently added; those that have been on a list for a long time could very well be steady buyers, and the broker should be able to document this.
  
  
• How often has the list been used by other mailers? If it's used often, that suggests that the response is strong.
  
  
• Have your competitors used it? If so, how well has it performed for marketers of products or services similar to yours?

Remember that size doesn't always matter. Choose the most targeted list, not the one with the most names on it.

Test the list. Mailing lists can contain more than a million names. Before spending money on renting and mailing to the entire list, it's wise to gauge how well the list will perform for you. It's also a good idea to test a new list against one that you know works for you, so you can compare the results. You might even want to test two or more new lists at the same time. Some brokers say a test mailing should go to at least 5,000 names in order to be meaningful; others say 1,000 names is enough. Your broker can help you decide how many names will enable you to project statistically reliable results for your own business.

Track the results. Include a response mechanism that is keyed to the list; this is especially important if you're using more than one list and want to see which one performs best. For example, an order form or reply card could have a code number printed on it. If you include a phone number in your mailing, either use different numbers for different lists or be sure that the telemarketing representatives taking the incoming calls ask a question that will enable you to determine which list prompted the call.

Re-use the list wisely. The list-rental fee entitles you to use the list only once. You can pay to reuse a list; you can also reuse the names once they respond to your mailing and thus become part of your house list. In either case, you need to run tests to determine a sensible re-use schedule. Many marketers mail less often than they should, perhaps out of concern that they might antagonize recipients. But business-to-business mailers especially should realize that prospects often don't keep mailing pieces around, and they might have an urgent need for your product or service just a few weeks after your last mailing.

COSTS

The costs that you incur when renting lists depend on how many responses you need, what response rate you anticipate, and thus how many names you must mail to in order to receive the desired number of responses. List rental costs vary widely, from about $40 to $250 per thousand names. For consumer lists, the average is $70 to $85 per thousand; for business-to-business lists, it's $100 to $110.

Each additional selection within the list increases the rental rate. For example, a list of people who purchased a type of product within the last 12 months might cost $135 per thousand names. Narrowing that down to people who purchased within the last six months adds another $5 per thousand names; narrowing to those who purchased within the last three months increases the rate by $10 per thousand names.

CASE HISTORY

Family Software Club, Stamford, CT, is a continuity club that sells computer software for parents and children. In a continuity program, products are periodically sent to members, or subscribers, who must accept and pay for a specified number of orders. Family Software mails to "hundreds of lists," says president Claire Fennessey, noting that if the company didn't use a list broker, "we'd have to go to every list owner and manager ourselves, and we'd need the staff to do that internally."

But staffing is just one issue. Fennessey points to several advantages of working with a list broker. She says, "A broker acts like a funnel," narrowing down the myriad choices to those that are most appropriate. More than that, "a good broker will help you find lists you'd never find on your own, and can negotiate better rates than you'd get on your own."

Besides finding new lists, "a good broker will look at the lists you're already mailing, to see how you could use them better," Fennessey says. For example, reviewing the results of recent mailings, the broker might suggest which segment should be emphasized in the next mailing.

To get the best results when working with a broker, says Fennessey:

• Use a firm that's established and has good contacts. It helps, too, if the company is also a list manager, because it may be handling a lot of lists that match up with your mailing objectives.
  
  
• "Tell the broker what lists work well for you," Fennessey says. "The broker can then figure out what kind of person is on that list and how to find more." She stresses that to do this, you need a broker with insight, one that can go beyond simply matching up the demographics.
  
  
• "Ask the broker to tell you why it recommends a particular list," says Fennessey. "I do that for every list that's recommended."

ASSOCIATIONS

Direct Marketing Association (DMA), with 3,600 member companies worldwide, is the primary association for companies involved with any aspect of direct marketing. Member benefits include an extensive range of seminars and conferences, member directory, newsletters, journals, use of the DMA Library and Resource Center, and access to the DirectLINK online information service (see Online Services). Special subgroups include the List & Database Council, whose members focus on list brokerage, management, compilation, and ownership issues. Call 212-768-7277; go to http://www.the-dma.org/.

FINDING SUPPLIERS

Many sources, both print and online, can help you find list brokers, managers, and compilers. Here are some of the best bets:

Direct Marketing Association's membership roster of "List Brokers, Compilers, & Managers" is available through the DMA's free fax-on-demand service. Call 212-790-1400 and request Document 5005.

Direct Marketing List Source provides more than 28,000 lists, with a data card for each one, in 212 market classifications. Six issues per year, plus six issues of the "Bullet" newsletter. Subscription includes PIN number for the new online version. $514/yr. Call 800-851-7737. Go to http://www.srds.com.

Direct Marketing Marketplace includes listings of service firms and suppliers, direct marketing agencies, associations, events, and periodicals. 1,150 pp. $239.95, or $215.95 for a standing order. Call 800-521-8110 or go to http://www.dirmktgplace.com.

Promo magazine's "Resource Center" department, a guide to services and suppliers, appears in each regular issue; includes list brokers and compilers (see Publications). Visit Promo Magazine at http://www.promomag.com.

SourceBook '99 from Promo magazine includes listings of list brokers and compilers. Free to subscribers, $49.95 to others (see Publications). Go to http://www.promomag.com.

TRADE SHOWS AND CONFERENCES

For a list of Industry Events, go to #9510, Calendar of Industry Events.

KEY RESEARCH

Direct Marketing Association Annual List Usage Survey, conducted by the DMA List & Database Council, documents mailing patterns, use of external lists, response information, use of alternate media, and list rental marketing trends in both consumer and business-to-business markets. Free to survey respondents and members of the Council; $80 DMA members, $120 nonmembers. Call 212-768-7277. Go to http://www.the-dma.org

Economic Impact: U. S. Direct Marketing Today, 1998 (fourth edition), a study conducted by the WEFA Group for the Direct Marketing Association, measures the size and scope of direct marketing. Useful for direct marketing strategic planning, it provides analyses and forecasts for the business-to-business and consumer markets and more than 50 industry categories. 182 pp. $125 DMA members, $165 nonmembers. Call 301-604-0187; go to http://www.the-dma.org

1998 Pitney Bowes Direct Mail Study, conducted by the Gallup Organization for Pitney Bowes Mailing Systems, is based on telephone interviews with 302 randomly selected marketing executives in companies with 100 or more employees. It covers how budget allocations are made between different communication methods and media; sales volumes and trends; and which media best meet common marketing objectives. 12-page executive summary available free; call Pitney Bowes at 203-356-5000.

The DMA 1998 Statistical Fact Book is organized into five sections: Direct Response Advertising, Media, Lists & Databases, Market Applications, and Practical Management. 330 pp. $84.95 DMA members, $119.95 nonmembers. Call 301-604-0187; go to http://www.the-dma.org/

BOOKS

Each of the following books touches on lists, databases, or both:

Business to Business Direct Marketing: Proven Direct Response Methods to Generate More Leads and Sales, by Robert W. Bly, reveals the secrets of the seven key strategies and tactics of business-to-business direct marketing. 272 pp. 1998. NTC Business Books. $44.95; through Amazon.com, $31.47.

Commonsense Direct Marketing, by Drayton Bird and Anne Knudsen, includes advice on list selection and tips for increasing the return on mailings. 374 pp. 1999. Kogan Page Limited. $35; through Amazon.com, $28.

The Complete Direct Marketing Sourcebook: A Step-by-Step Guide to Organizing and Managing a Successful Direct Marketing Program, by John Kremer. Topics include designing effective promotions, finding and testing lists, calculating costs and break-even points. Includes more than 70 templates, forms, and sample letters. 288 pp. 1992. John Wiley & Sons (http://www.wiley.com). $27.95; through Amazon.com, $22.36.

Desktop Database Marketing,by Jack Schmid and Alan Weber, shows how database marketing can be used profitably even by small businesses or those with small databases. 288 pp. 1997. NTC Business Books. $49.95; through Amazon.com, $34.97.

Direct and Database Marketing, by Graeme McCorkell, explains how databases work and why people do or don't respond. 315 pp. 1997. Kogan Page Limited (http://www.kogan-page.com). $29.95; through Amazon.com, $29.95.

Direct Marketing Rules of Thumb: 1,000 Practical and Profitable Ideas to Help You Improve Response, Save Money, and Increase Efficiency in Your Direct Program, by Nat G. Bodian. This is a succinct presentation of information and suggestions on all aspects of direct mail, including when and how to use list brokers, compilers, and managers, and "the art and science of mailing list usage." Includes glossary of mail order, mailing list, and related terms. 404 pp. 1995. McGraw-Hill (http://www.mcgraw-hill.com). $59.95; through Amazon.com, $41.97.

How to Find and Cultivate Customers Through Direct Marketing,by Martin Baier and Bob Stone, focuses on developing and retaining long-term customers. 272 pp. 1996. NTC Business Books. $47.95; through Amazon.com, $33.57.

The New Direct Marketing: How to Implement a Profit-Driven Database Marketing Strategy,by David Shepard Associates, tells how to acquire the data needed to identify and profile the best customers and prospects. 493 pp. 1994. Irwin Professional Pub (ph: 630-789-4000). $74.95; through Amazon.com, $52.47.

NTC's Dictionary of Direct Mail and Mailing List Terminology and Techniques, by Nat G. Bodian, goes beyond basic definitions to give detailed explanations. Useful appendixes include questions to ask when seeking someone to build or maintain a list. 320 pp. 1990. NTC Business Books. $49.95; through Amazon.com, $49.95.

Successful Direct Marketing Methods, by Bob Stone. The author is one of the most authoritative sources in the direct marketing industry. 560 pp. 1996. NTC Business Books. $49.95; through Amazon.com, $34.97.

2,239 Tested Secrets for Direct Marketing Success, by Denny Hatch, Don Jackson, Donald R. Jackson, and Denison Hatch. Lead author Denny Hatch, consulting editor for Target Marketing magazine, founded Who's Mailing What!, predecessor publication of Inside Direct Mail (see Publications). 320 pp. 1997. NTC Business Books. $39.95; through Amazon.com, $27.97.

PUBLICATIONS

Each of the following publications carries articles on list selection and usage.

DIRECT, 16x p/year. The authoritative resource for direct marketing professionals, DIRECT delivers detailed coverage of every aspect of successful direct marketing, and helps marketers find, reach and keep their customers. Free for qualified subscribers. Visit http://www.directmag.com.

Direct Marketing, monthly. The longest-running direct marketing publication. $60/yr. Call 800-229-6700.

DM News, 48 issues, print and online. News articles plus focused sections and supplements covering specialized market niches. Reports on companies, campaigns, suppliers, trends. Free to qualified professionals; otherwise, $75/yr. Subscribe online at http://www.dmnews.com.

Inside Direct Mail, monthly, print and online. The editorial staff reviews 3,000-4,000 pieces of direct mail each month and reports on the winners. Articles give detailed information on the most powerful and profitable techniques. Subscription includes three special reports on secrets of direct marketing. $169/yr. Subscribe online at http://www.insidedirectmail.com.

PROMO, monthly. PROMO defines promotion trends, presents critical "how-to" information and case studies about promotion, and serves as a meeting ground for companies and professionals in the industry. Free for qualified subscribers, or paid subscription is $65 p/year. Go to http://www.promomag.com.

Target Marketing, monthly, print and online. Covers extensive range of direct marketing topics. Each issue includes recommendations of "hot lists" and information on newly published lists. Most issues have feature articles related to choosing and using lists. Free to qualified subscribers; otherwise $59/yr. Call 215-238-5300; go to http://www.targetonline.com/.

ONLINE SERVICES

Some of the following services will help you locate suppliers; others will permit you to order and download lists.

DirectLINK Online, a reference database, provides marketers with immediate access to the extensive Direct Marketing Association database. Available to DMA members only. Call 212-768-7277; go to http://www.the-dma.org.

Direct Links. A sampling of direct marketing resources available on the Internet, it has links to those resources. Includes listing of list brokers and managers. Go to http://www.mediacentral.com.

Direct Marketing Buyers Guide is from the publications Target Marketing and Inside Direct Mail. Searchable categories include list brokers and managers. Go to http://www.napco.com/classified/directbuyers/directbuy.html.

Direct Marketing List Source launched an online version in February 1999; it is included as part of the subscription to the print version (see Finding Suppliers). The 28,000 lists in 212 categories are updated nightly. Also provides Web site and e-mail links to list brokers, managers, and compilers. Go to http://www.srds.com.

DMPlaza describes itself as "a virtual direct marketing and telemarketing resource mall." Under "Suppliers," it includes list brokers, with links to their sites. Also provides general information on the direct marketing industry. Go to http://www.dmplaza.com.

ListsNOW. This online service of Direct Contact Marketing Group compiles customized business and consumer lists, which then can be downloaded. Also provides links to industry articles, software, services, and information resources. Go to http://www.listsnow.com.

Ray Jutkins. The site of direct marketing consultant Jutkins includes many articles on direct marketing and the full text of his book, Power Direct Marketing. Go to http://www.rayjutkins.com/.

RELATED SMN ARTICLES

For related information about direct mail, see #1010 and #1011, a two-part Direct Marketing Overview, and #1021, Co-op Direct Mail Strategies.