Co-op Names May Not Be the Most Cost-Effective for Direct Marketers
Published: July 21, 2009
Several major direct marketers have abandoned list rentals in favor of sourcing names from cooperative databases. Cooperative databases commingle buyer lists from thousands of companies and optimize “their names.” Co-ops use compiled data to append lifestyle or demographic information to each transactional record for modeling.
There are a few old wives’s tales in the list business. One of them is that co-op names are superior to individual files. The fact is that co-op names are good and not so good. Individual response lists with appropriate pre-selects can rival or outperform their co-op cousins.
Many direct marketers rent copious amounts of names from co-ops. Those names can be mailed profitably if care is taken in supplying co-ops with your top names, and the final list selection is done utilizing best practices. The statistical methods co-ops use to select names are pretty universal, although some are better than others. List hygiene can make a big difference.
Not all “members” send their finest names to co-ops. Unfortunately, this is a chronic problem among new participants with tiny house files. They want to mail the best “mirror image” names. These new members may have little to offer fellow members other than names from questionable sources.
Modeled names are broken by down by decile or quintile. The so-called “cream” is not always at the top, meaning top decile or rank. Over the years, we have noted that some clients blindly mail co-op names that are at the bottom of the revenue curve, just because there is some mystique associated with their pedigree. The only mystery is why these same mailers continue to rely on bad data, to the exclusion of better segments or individual list rentals, both of which can be more profitable, and have greater potential for lifetime value.
When you supply names to co-ops, your company has lost control of its most valuable asset, its customer list. Those names will be mailed innumerable times, which may account for the recent decline in response rates and increase in DO NOT MAIL services. Most co-ops restrict access to your names to members. However, we have observed that some co-ops may allow outsiders (non-members) to use your names and not reciprocate.
There’s a strong motivation to rent co-op names because they tend to be less expensive than individual files. The flip side is that co-op names often have very high duplicate rates with those sourced from other co-op databases. So when you merge-purge, your effective list rental cost for co-op names can be a multiple of what you expected, because some co-ops will not allow standard list industry deductions, even for duplicate names, edit fails, or DMA panders. What about prioritization? That’s another issue.
Just because a co-op list may be cheaper doesn’t make it better. We have clients who will spend over $250/M for individual list rentals, and still mail profitably. A good rule of thumb is to test and re-test, and then roll out gradually, based upon probability tables. The marginal names are perfect candidates to be optimized at your friendly local co-op. Using optimization to mail older or less responsive segments is a proven strategy.
If you are relying on co-op names in the future, think about this. What if co-ops are prohibited from sharing their names without an opt-in? That is a distinct possibility because the prevailing political winds are blowing the wrong direction for direct marketers.
In summary, eliminating individual list rentals from your mailings in favor of co-op names may be analogous to “throwing out the baby with the bath water.” Using both list sources wisely can make dollars and sense.
David Kanter is the President and CEO of Ventura, CA based www.acculist.com.
AccuList USA® provides a broad spectrum of services to direct marketers and their agencies including consulting, list brokerage, list management, list enhancement, merge-purge, response analysis, campaign planning, graphic design, copywriting, printing, mailing, and predictive modeling services.
AccuList USA is headquartered in Ventura, California. It maintains a list and insert management office in Laguna Woods, California, along with affiliates in La Quinta, Oxnard, and Thousand Oaks, California.
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Advertising Federation of the Desert (Desert AdFed)
Association of Fundraising Professionals
Direct Marketing Association – (National – List Leaders)
Direct Marketing Association Southern California (Charter member)
International Association Of Exhibitions and Events
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