Making the right decision is made even more difficult if the decision-maker is unclear concerning what the substantive issues are, what the “right” questions are, what the “right” answers are, and what the options for a list owner are. Where to begin?
Firstly, most list owners are likely to deal with the question for the following reasons–the need to have reciprocal access to other lists; the opportunity to generate incremental, investment-free income to support the mission of the organization; and lastly, the opportunity to off-set other expenses. Are there other reasons? Perhaps, but we believe these are the “big three”.
For many organizations, generating ,000 or ,000 or 0,000 or more in list rental income might be considered a welcome result, but the income itself might be of lesser importance in the larger scheme of things. That is, many list owners with lists in the marketplace state quite clearly on their datacards that their lists are being made available to other mailers on a reciprocal basis. “If you want my names, we want yours”. Now that does not automatically mean that both lists must be priced exactly the same. But it does mean that equal access is key to the transaction. If a mailer does not make its donors available to other mailers, it can be very difficult securing access to these lists, lists that are likely very desirable. By ensuring your “access to market” the near-term and long-term financial benefits for your organization can far outweigh the welcome income from the list rentals.
What other issues are likely to need to be addressed by the leadership? Some key points include:
- Should you engage in rentals and exchanges, just rentals or just exchanges?
- What are the pros and cons of releasing the active donors to other mailers versus releasing only lapsed donors to mailers?
- Should you handle list management internally or retain a professional list manager?
- Should you continue to perform list maintenance and list hygiene (and also list rental fulfillment) yourself or should you retain a service bureau?
- Do you have the staff in place to manage this process?
Let’s deal with these one at a time.
Some list owners promise their donors that they will not rent donors’ names to third parties, and then engage in bartering, or exchanges to ensure access to market while not monetizing the value of the donors’ names. Technically, they are abiding by the promise to not rent the donors’ names, however, this is not really keeping faith with the meaning of the promise.
Most mailers engage in a mixture of exchanges and rentals. But, not all exchanges or rentals are created equally. For example, some list owners will allow any mailer to have access to both active donors and lapsed donors, high value donors and low value donors. But many have a two-tier system. They allow “like for like” transactions only. That is, if a list owner will only allow its lapsed donors to be rented or exchanged to/with a fellow fundraiser, then in return that mailer will only receive lapsed donors, not active donors. Some list owners differentiate between “out of category” for-profit mailers selling merchandise or subscriptions (and) nonprofit mailers. They will allow for-profit mailers to receive active donors on rental or exchange. In addition, exchanges present two additional “wrinkles”.
Wrinkle #1 is that all lists are not created equal. If you own a list of active donors and your average gift is $22, and you exchange 10,000 names with a fellow fundraiser (whose average gift is $12), one can not say that the value of the 2 groups of 10,000 donors is equal. We refer to this inequality as “giving gold and getting silver”, and it is in fact a very valid point in favor of only renting, and not exchanging. Why? Because the higher gift donors would enjoy a higher rental value—perhaps $90/M versus $80/M. Money, as a medium of exchange, factors in the relative values of the 2 lists and their relative values are reflected in their rental cost.
Wrinkle #2 is an accounting and financial control issue. Let’s say that after one year of being active in the list marketplace, that an organization owes you 50,000 names. At first blush you might be tempted to say “Great, we are owed names! We can mail them for free!” But is it great and are they free? Those 50,000 names that are owed to you could have been monetized and you could have been paid for making them available to the mailer. Those 50,000 names have value, but in an exchange environment, the value will only be realized when you mail them. In a rental environment, the value is realized—in this case nearly $5,000—when the mailer mails your names. When you are owed names, you are foregoing income. Also, on the surface, exchanges appear to be without cost, but professional list managers do charge a fee for handling exchanges, and so the barter is not a purely cost-free exercise.
A controlled list rental program, monetizing the value of the lists does not result in exchange imbalances. If all your list transactions are on a rental basis, at the end of the year, you are neither a debtor owed names, nor a creditor owing names. You are, by definition, in balance thanks to money being a medium of exchange.
This is not to say that exchanges are not a viable option, but you must monitor them to make sure the exchange relationship works for your organization.
A common thread running throughout this article is that list transactions are a two-way street and we always seek equity, fairness and a reasonable outcome for both the list owner and the mailer.
Let’s address another 2 points: Do you have the staffing to manage the process, and should you handle list management responsibilities internally or engage a professional list manager? We are list managers and list brokers, but I am also a former list owner and active mailer. Let me wear that hat for a few minutes. Usually, only organizations with very small or very, very large lists (1MM+ active 12 month donors would be a good description of a very, very large list) undertake list management “in house”. Why? If a list is very small, it is unlikely that a list manager can dedicate the time and resources to the property. Remember, list managers pay for all sales promotion activities out of the commission earned, and collected. The ROI is very limited if the list is very small.
If, however the list is very large, the list owner can itself invest in supporting the property with dedicated staff, sales promotions, and marketing activities, and perhaps enjoy a positive ROI. For the vast majority of list owners, engaging the services of a professional list manager is the decision of choice. Why? List managers have extensive credit history, usage history, and an established presence in the market. List managers are familiar with the seasonality of the direct mail world. List managers know who is mailing what and when mailers are mailing.
In most instances you will have a staff person who is handling your list transactions, working closely with your list broker and that is the person you are most likely to put in place as the liaison with your list manager and your service bureau. Even if you select a professional list manager, you do need a designated person to receive clearance requests, sample mailing pieces, invoices, merge-purge reports and house file updates. He or she will be kept busy!
Lastly, we firmly believe that list owners are better served by retaining a professional service bureau versus handling the tasks “in house”. Service bureau work is technically demanding, based on ever-changing postal service rules, requires a dedicated level of expertise and attention, and frankly, it’s one of the least expensive variable costs you will experience.
If you choose to perform this task internally, invariably there will be a conflict between the IT department’s other responsibilities and your need to “update the house files!” or “get that list rental order out the door today!” Factoring in the actual overhead burden of performing this task yourself—even if all things were equal, and they aren’t!—it is usually not cost-effective to do this yourself.
We believe a controlled list management program helps you do a better job as fundraisers, enables you to generate much-needed incremental income and ensures that you have equal access to donor lists on an equitable, reciprocal basis. As hundreds of fundraisers demonstrate on a daily basis, list management is an activity that is an important and legitimate part of their mission.
To ensure you are keeping a close watch over your donors’ best interests, keep your eye on every clearance request that comes across your desk, examine the sample mailing pieces submitted by prospective mailers very carefully and always—always–think like a donor! What would he or she want or need, and is this offer relevant or an annoyance? Is this offer directly competitive? It’s easier to do the right thing if you think like your donors and make decisions based on walking in their shoes.
Being careful is the best policy, and so too is protecting your “share of wallet” with your active donors. You can do that, you can be careful and deliberate, and still have a very successful list management program generating much-needed income for your programs and your Mission.
For additional Information please contact Geoff Batrouney, Executive Vice President
(914) 235-7080 ext. 308 or firstname.lastname@example.org