Renting Your Customer List... Is It The Right Thing To Do?

by Stephen Lett

Several catalog companies today still choose not to rent their customer list. What’s more, many of these catalogers will also not agree to exchange their list with other reputable firms. While it is more common for business-to-business catalogs to disallow others from using their list, several consumer catalogers will not allow other firms to use their names either. This, month we will discuss the many different aspects with respect to putting your #1 company asset, your customer list, on the rental market. Our position is that it is healthy (and necessary) for a catalog company to rent and to exchange names with others providing the proper controls are in place, which can govern the use (or unauthorized use) of the names.

Consumer catalog companies who do not rent their list feel they are protecting their customers from receiving unsolicited mail. They also feel these valued customer names do not appear on other lists. In other words, these names are exclusive or unique names that do not show up on other lists. Keep in mind that these people are proven mail order buyers who probably enjoy receiving catalogs. In many cases, they are active and responsive catalog shoppers.  As a catalog buyer, their name most likely already resides on several other lists and particularly one of the cooperative databases like Abacus, I-behavior and others. The bottom line is, while these buyer names are proprietary to your catalog offering, these same customer records also appear on many other outside lists. They are not unique names.

Before the advent of cooperative databases, a company could, to some degree, protect and/or reduce the amount of mail going to their customers by not renting their list. But, as these coops have grown there is a strong likelihood that the very customer names a catalog company may feel are proprietary to them are being rented frequently by other mailers. The coops have changed the way mailers look at the list rental market.

According to a leading list management company, approximately 10% (or less) of all consumer catalog companies and an estimated 25% of all business-to-business catalogers do not rent or exchange names with any outside company.  Conversely companies will exchange names only with companies whose list they wish to use.  These companies make up about half of all consumer catalog companies who do not rent or exchange names with others.  It used to be that a cataloger would have difficultly obtaining lists if they were not willing to rent their own file.  This mindset has changed since companies are hungrier for list rental income to help their bottom line.  But, there is no question that not renting or exchanging names can and does impact the lists that are available to you for prospecting. Therefore, the growth of any catalog company will be limited if they are not willing to rent and/or to exchange names with other firms. If your list works for a particular mailer, chances are their list will work for you too!

CONSIDER THE FACTS

If your company does not rent your customer list, please consider the following:

  1. Typically, over 95% of a cataloger’s customer names already reside on the Abacus Alliance cooperative database.
  2. Catalog shoppers are proven mail order buyers who enjoy receiving catalogs.
  3. You are the one who decides which companies you are willing to rent and/or exchange names with.
  4. You will approve every mail piece that is being sent to your customer list. If it is not appropriate or if the offer is too competitive, you can turn down the request.
  5. Several studies have proven that a customer list, which is used by others, performs better for the list owner over time.

The companies who have tested how well buyers whose names are rented perform have “flagged” names three ways; (1) names to receive all list rental offers, (2) names to receive only non-competitive offers and (3) names to receive no outside offers.  These tests are generally conducted over a two or three-year period and the names are “frozen” over time.  The results, in all cases, showed that the names receiving all offers, including the competitive offers, responded best to the company’s own offer.   Worst case from the studies I have seen shows that there was no affect on the response rate to one’s own offer if they rented their file.  In well over half the tests I am aware of, the names, which are rented, perform better!  Conclusion: Active mail order buyers are among the best buyers on a customer list!

HOW MUCH LIST RENTAL INCOME CAN YOU REASONABLY EXPECT?

It does not matter too much if you have an apparel file or a hard goods list. The real difference seems to be in the file size and select ability. The more opportunity there is to impose select charges, the more money a list owner will generate. Product selects seem to be the biggest draw. This is applies more for hard goods mailers than it does for the apparel market. On average, an apparel/accessories list should generate approximately $1.45 per name on the file. Obviously, the size of your 12-month buyer file from one period to another has a direct affect on the amount of list rental income you will generate. For example, if your 12-month file decreases from one year to the next, you list rental income will do the same. An increase in your 12-month buyer count will result in more list rental income. Collectibles, general merchandise and gift lists produce about $1.30 per name. Please refer to the following chart, which provides a summary for both categories of lists:

SFA.xls
LETT Direct, Inc.
Date: 01-24-03
       
LIST RENTAL INCOME
FINANCIAL ANALYSIS
CATEGORY AVG.
ORDER
$/M # TURNS $/NAME
Apparel/Accessories $81.00 $76.53 18.45 $1.45
Collectibles, GM and Gifts $79.46 $71.42 17.21 $1.30

Typically, list exchange vs. rental ratios tend to vary greatly. However, for consumer files, exchanges seem to average 40% to 45%. For the most part, business-to-business mailers do very little exchanging. It is easy to accumulate large list exchange balances you will never use therefore, limit exchanges to only those lists you want to use for your own prospecting purposes. If you are not going to mail a particular list within a reasonable period of time (one year) request the order for your file is for rental and not on exchange even though the mailer requested it.

WAYS TO BE PROTECTIVE

If you still have concerns about renting your customer names, here are a few cautionary steps you can take:

  1. Obviously, you should always screen and approve who wants to rent your file.  Look at it from your customer’s point of view and eliminate the offers, which are not appropriate based on your own definition.
  2. Try holding back some of your house file for a period of time.  Some companies hold back their “best” names out of their 30-day hotline buyers.
  3. Use the DMA Preference Service suppression files for every mailing you make.  This will eliminate those mail order buyers who do not wish to have their name rented or exchanged with other firms.  I know for my clients, this is standard operating procedure as it is for most reputable catalog companies.
  4. You might want to consider exchanging on a name-for-name basis using the same selection criteria, i.e., last 3-months over $100 buyers.  And, be careful not to let your exchange balance get out of balance.
  5. Consider a mail date restriction if you feel it is necessary.  In other words, don’t let a competitor use your file prior to the mailing of your own catalog.  Be sure your catalog is in the mail first.
  6. Only rent or exchange with companies who are willing to share their list with you.  The use of a list must be a reciprocal arrangement.
  7. Seed your list with decoys. Subscribe to a decoy service like Hauser and check to be sure the company using your list was used properly and that it was mailed only one time.

Renting or exchanging names with competitors is common among consumer catalogers and not as common among business-to-business mailers.  Generally speaking, consumer mailers in the food, apparel and hard goods categories do exchange names.  And, for good reason.  Most often, the competitors you exchange with will be your best performing prospect lists.  If you can get good names, it is recommended that you exchange with your competitors.  Exchanging names with competitors is not risky as long as you too can benefit from this reciprocal arrangement.

THE COOPERATIVE DATABASES

If a catalog company does not rent or exchange their list, should they join one of the cooperative databases? Does doing so void their privacy policy? Joining a coop is different than renting and/or exchanging names. The coops do not actually rent a particular customer file. They use the transactional data, i.e., buying history, in combination with the transactional data from other contributors to the database to build models. As a practical matter, most of the names, which a coop selects from mailing, have made purchases from several different catalogs. What’s more, the Abacus rule on modeling excludes any household, which has only made a single purchase from one of their Alliance members. Therefore, unique names are not selected for someone else’s model and use.

A WORD ABOUT PRIVACY

Always comply with the DMA (Direct Marketing Association) privacy promise.  In October 1997, the Direct Marketing Association Board of Directors made a Privacy Promise to American consumers.  The Privacy Promise is a public assurance that all members of the DMA will follow certain specific practices to protect consumer privacy.  Those practices are designed to have a major impact on those consumers who wish to receive fewer advertising solicitations. Compliance is a requirement to DMA membership. However, regardless of membership, we encourage all catalogers to follow this guideline. It is important that we self-regulate our business in order to minimize government regulations. All DMA members are required to sign a statement, as part of their membership agreement, to certify that they follow the Privacy Promise and Guidelines for Ethical Business Practice at the time of acceptance into DMA membership. Each company identifies a Privacy Promise contact person and provides full contact information for that person who is responsible for assuring compliance. Companies also reaffirm their compliance each year as part of the annual membership renewal process and re-confirm or appoint a new compliance contact person. If you are a business-to-consumer marketer that rents and/or exchanges lists, you MUST give your customers notice that they have a choice NOT to have their contact information rented, sold or exchanged. An example of the correct wording that should appear on your order form in your catalog is as follows:

We make our customer list available to other companies so they may contact you about products and services that may interest you. If you do not want your name passed on to other companies for the purpose of receiving marketing offers, just tell us by contacting us at _________________________ , and we will be pleased to respect your wishes.

If your organization operates an online site, you must provide all visitors to your Website (customers and prospects) notice about your information practices. If you send unsolicited commercial E-mail, you must provide notice to customers and prospects, in each solicitation, of both in-house suppress and “opt out” opportunities.

In summary, the advantages of renting your customer list are many. The disadvantages are very few. Other firms are generating from the same names that appear on your customer list. You can also participate in this income stream by allowing others to rent your list.  Take advantage of the cooperative databases. Be willing to exchange. Have checks and balances to monitor the use of your list. And, by all means, subscribe to the DMA policy on privacy.