Why Don’t More Business Marketers Rent Their Customer Lists?
I’ll never forget my first lesson in the world of business-to-business mailing lists. After seven years at Book-of-the-Month Club, I migrated over to Ziff-Davis to market computer product information packaged on CD-ROMs. The target audience was companies that purchased large quantities of PC hardware and software. When I started at Ziff, in 1992, we had, maybe, 5,000 subscribers, with an annual subscription priced at $995, and they received a new CD every month.
In my first week on the job I marched into my boss’s office and suggested we put the file on the rental market. Found money, I reasoned. My boss frowned. “No way,” he said.
Now, he was a savvy sales guy. A revenue maniac. So it wasn’t that he was old fashioned or unwilling to try new ideas. But his reasoning was very clear, and very sound: “Whey would I risk the relationship with my customers for a few dollars of rental income, when the value of each customer is worth thousands of dollars to me?” I didn’t have an answer.
Since then, I’ve kept an eye on the B-to-B list rental arena, and made a number of observations. The upshot is that business marketers should consider renting their customer lists, but weigh the pros and cons very carefully.
Let’s review the business list arena as a whole. According to David Gaudreau, vice president, list brokerage, at Direct Media, Inc., MIN identifies about 18,500 B-to-B postal mail lists on the market, of which about 1,600 are in the “mainstream” of regular usage, and about 400 are very active.
Key B-to-B list categories include:
- Office supplies, like Viking Office Products, Staples, and OfficeMax
- Seminar and training companies, like Fred Pryor, American Management Association, National Seminars and Skillpath
- General business publishing, like Business Week and McGraw-Hill
- Technology publishing, like CMP, Ziff-Davis, IDG and Tech Target
- Newsletters, like Clement Communications, Briefing Publishing, Aspen Publishers and Harvard Business School Publishing
- Back office supplies, like C & H Distributors, Harbor Freight, Chiswick and National Business Furniture
Food and gift, like the B-to-B files of Omaha Steaks, Mrs. Beasley’s cakes and LL Bean
Industrial products and trade publications, like New Pig, Seton Name Plate, Advanced Packaging and Adhesives Age - Compiled information, like D&B, InfoUSA, Harte-Hanks Market Intelligence and idEXEC.
No surprise, categories may fade in and out of favor over time. During the go-go 1990s technology boom, a number of PC-related lists were active, among them Adobe, Intuit, Symantec and Iomega. All of these companies have removed their lists from the market in recent years.
Notice that most of the categories comprise traditional mail order or subscription businesses. Essentially, we are talking about businesses that grew up communicating directly to customers via mail, whether for selling or for product fulfillment. For these companies, list rental is as natural as mother’s milk. Some may decide not to put their names on the market, for various reasons, but all are large users of mailing lists, and are at least familiar with the business—and comfortable with its practices.
But there are plenty of marketers whose core business has nothing to do with direct mail, or even e-commerce. These are the millions of companies who sell through person-to-person contact, whether through field sales, telesales, distributors or resellers. And in B-to-B, these companies are the mainstream. Compared to consumer marketers, these businesses are likely to have relatively fewer accounts, but each will represent much higher value.
Consider companies like, say, Pricewaterhouse Coopers, or Siebel Systems, or Cummins Engine. Companies selling products and services to other business, and who have sizable customer files—even substantial prospect files—for whom the notion of list rental is a tricky one. Why should companies like these even consider putting their files on the market?
Why rent? The arguments in favor
For some, the leading argument in favor of renting your customer list is shear lucre. When you consider that after brokerage, management and data processing expenses about 65% of the rental revenue goes directly to your bottom line, the benefit of rental can be compelling. According to Direct Media’s vice president of B-to-B list management Mike Mayhew, B-to-B postal files rent for $100 to $250 per thousand, and if you provide phone numbers for telemarketing, you earn another $50 to $75 per thousand. Email files go for even more: $300 to $450, including transmission. If the file turns sufficiently, you can expect to net between one and five dollars per name, per year, on postal files alone.
A more philosophical argument has to do with the true nature of customer relationships. Marketers frequently get starry-eyed about “their” customers, deluding themselves that the relationship is somehow exclusive. But mail-order companies gave up on that idea decades ago, when they learned that it’s a rare mailbox that is “owned” exclusively by one marketer. They found, instead, that their own best customers are very likely excellent customers of other marketers as well. In fact, when they shared these names, even with their competitors, everyone was better off.
Business marketers, especially those in industrial and services markets, are unlikely to go that far. But they should consider that an account with a large budget, who is “open to buy,” will make an attractive prospect for suppliers of all sorts. Furthermore, competitive concerns are entirely manageable, because list owners may approve—or reject—rental requests from any company for any reason.
But it may be that the most compelling argument in favor of renting your file is that of fairness. Assuming you are building your business by renting names from other companies, it hardly seems cricket to withhold your own names from others. One way to approach this is via exchanges or reciprocal agreements.
The arguments against
The main reason business marketers give for keeping their lists off the market is potential harm to the customer relationship. CDW, a publicly traded direct marketer of computer equipment, for example, rents lists regularly, but refuses to make its own list available to other marketers. A CDW spokesman, Clark J. Walter, explained their position this way: “We don’t share our list. We believe our customers are our greatest asset. Our customers trust us. We don’t want to risk the hard-fought relationship we have with them in exchange for income.”
The other reason is irrelevance, as in the Ziff-Davis example related earlier. When you are selling millions of dollars of products and services, a few dollars of list rental revenue may be too small to justify management attention.
A third—and somewhat ironic—reason is the state of the customer data itself. As Linda Klemstein, president of the list management firm TriMax Direct in St. Paul MN, points out, many B-to-B house files are simply unready to take to market. “We often find that the data has been entered incorrectly, or without any entry date, that the duplication rate is high, or there is no sales channel identified. We are usually asked to clean up the data, add overlays, and then maintain the files at TriMax and do the list pulls from here. In some cases, the marketers back at the client ask us to share the file with them, because it’s in better shape than they can get from their own IT departments.”
The voice of the list owner
So how do you weigh the pros and cons? Consider a few tales from the trenches. Ralph Drybrough, president of the B-to-B broker/manager Merit Direct, offers a story about the lure of the list rental income: “Back in 1990 or 1991, I was with a list brokerage client, walking back to his office from lunch. We passed a Rolls Royce-Bentley dealership. In the window was a used late-model red Bentley convertible. My client, whose list was not on the market, told me he lusted after that red Bentley but just didn’t think he could swing the $100,000 price tag. I told him to give me his list for management and he could pay for the red Bentley convertible out of the first year of rental income. He bought the Bentley and his list provided $112,000 in the first year.”
Mike Thimmesch, senior marketing manager at Skyline, offers another: “Renting our file is a source of market intelligence. As part of the approval process, we are exposed to products, offers and formats that keep us up to date on the marketplace. This is especially true when we look at telemarketing scripts from other marketers. We’ve picked up some tips on objection handling that we then wove into our own scripts in house.”
Some marketers feel that their lists are too small to be of interest to other marketers. But with the arrival of prospecting databases, this issue has gone away. According to Linda Klemstein, a file as small as a few thousand names can be successful when mixed into a database. “If the names are unique and represent an unusual market segment, we can make them work. Of course we won’t know until the names have been tested. But the rental revenue will be all profit to the list owner.”
In most cases, the list-rental decision is rooted in the corporate culture. You can look at the rational factors—the revenue, the competitive intelligence, the opportunity for exchanges—and still decide to stay out of the game. Open-minded business marketers will weigh the pros and cons, and make the right decision for themselves.