More On Compiled Lists Like Abacus

Talking about Abacus caused this blog to have it's top-rated day ever, in terms of RSS/E-Mail subscribers reading content.

It's always good to stimulate the 25% of the audience that reads this blog because of the catalog content.

You catalog folks tend to be shy, so I'm not expecting a lot of comments on the following questions. If you'd like, please join in on the conversation.

Question #1: If you were in the list rental/brokerage business (i.e. Millard/Mokrynski among many others), how would you restructure your business to compete against the likes of Abacus?

Question #2: If you were in the compiled list business, how would you evolve your business to compete against marketing activities like paid search (the digital/online version of a compiled list)?

Question #3: If you are a catalog circulation expert, what are the reasons you choose compiled lists over traditional list rental/exchange activities?

Discuss!

Millard / Mokrynski Merger

By now, my catalog industry readers know that infoUSA is merging the Millard and Mokrynski list brands that they acquired over the past two years for a combined $20,000,000+.

Many industry veterans surmised that consolidation was inevitable, and given the amount of downsizing that happened over the past year, it appears headcount adjustments weren't enough.

Here's a question for my catalog readers, and I am not making any judgments here, I simply want to hear your point of view. "How will you, as a customer of Millard or Mokrynski, benefit from this merger?"

More On Abacus, Google, And Customer Biodiversity

Please click on the image to enlarge it.

One of the most popular pieces I've written this year was Tuesday's discussion about Abacus, Google, and Brand Implosion.

Almost nobody chose to leave a comment. But you're reading this article, you're forwarding this article to friends and co-worker. When you come to the site to read it, you're interacting with the site much more than usual.

Interest in the article made yesterday the busiest day on the blog in the past eight weeks.

Why is this article interesting to you, and why is the topic so divisive among the catalog marketing community?

Why is this topic of interest to me? To me, it all boils down to "customer biodiversity".

Online marketers excel at using customer biodiversity to their advantage. They drive traffic through a massive network of affiliates, often numbering in the thousands or more. Online marketers utilize portal advertising to reach larger audiences. Brilliant online marketers cultivate traffic through natural search, at close to no incremental cost. Most online marketers use paid search across hundreds, thousands or more keywords. All of this guarantees a diverse audience of potential and existing customers. Some strategies work, some fail. The marketer manages a complex ecosystem of marketing strategies and customers.

Retail marketing is all about a complex interaction between "who you hang out with" and "target customer demographics". Nothing happens when you put a physical presence in front of the wrong target demographic. The right demographics and the wrong shopping center or wrong set of competitors cause problems. Combine the right demographics, competitive biodiversity, and a modern shopping environment, and cash registers sing.

Catalog marketing, however, is being threatened by a lack of customer biodiversity. The entire left side of the diagram represents potential customer biodiversity for catalog marketers. In the past, the list broker was the gatekeeper of biodiversity. S/he managed hundreds of outside lists, s/he even fueled the growth of compiled lists because s/he wanted to do "what is right for the client". In the process of doing that, s/he ceded market share to the compiled lists. This hastened the decline of the list broker, and accelerated the rise of the compiled list vendor. In 1990, one list broker ensured customer biodiversity by simultaneously managing a hundred relationships with competitors. Today, the same service can be provided by one statistician creating a statistical model at a compiled list vendor.

There was a lot of discussion about postal rate increases at last week's catalog conference. Obviously, this is an important topic in the short term.

Long term, there must be a significantly increased focus on customer biodiversity. The success of a multichannel business is predicated on the ability of the retailer to align with the target customer across a wide variety of potential sources.

My experiences tell me I want to spread my marketing efforts across a thousand affiliates, several large portals, natural search, paid search focusing on several hundred or more keywords, e-mail marketing, RSS and applicable Web 2.0 marketing, several compiled lists, several dozen or more rented/exchanged catalog lists, catalog requests, and other prospect lists. This gives me a portfolio of opportunities to manage.

I do not want one statistician who knows nothing about my brand culling prospects out of a compiled list as my primary source of new customers. I'd love for this statistician to be a piece of the puzzle, not be the entire puzzle.

Your turn, what do you think?

Abacus, Google, And Brand Implosion

Using Abacus for customer acquisition has always been a hotly debated topic in catalog marketing.

Many circulation experts have always enjoyed their relationship with their favorite list broker. It's fun to exchange 50,000 names with Talbots, to net out 24% and realize, by default, that you share the exact same customer as your competitor. It can be a rush to test a Crutchfield 0-3 month $100+ select, and see the list work. List rental, exchange and brokerage requires gut feel, instinct, business savvy, and negotiation skills.

Then along came Abacus. You dump your housefile into their database. You then have access to modeled prospect names for something like seven cents a name. You have no idea which names you're getting, you just know their model picked "good" names, names that have an "affinity" to your brand.

At first, big companies hated this idea --- why should a big company dump six million names into the compiled list, only to realize that sixty percent of the compiled list is your customer?

Once Abacus achieved scale, all contributors theoretically benefited. Another funny thing happened along the way. The performance of Abacus names rivaled that of rented/exchanged lists. Why go through the hassle of managing 73 different lists in a mailing, when Abacus can automate the process for you?

The evolution of catalog customer acquisition is driving companies toward Abacus, away from the good folks at Millard and Mokrynski.

Everything seems peachy.

Except for one person I recently spoke with. This person made an interesting observation. He told me that almost all of his customer acquisition is from Abacus. He told me that the performance of Abacus names continues to be good. But, his housefile names are not performing well anymore.

I asked this individual what his twelve month buyer annual repurchase rate was. The answer ... thirty percent.

Remember, this individual does almost all of his customer acquisition via Abacus.

So, two years ago, this individual had 100 buyers. 30% repurchase. This person has to recruit 70 new customers ... almost all from Abacus.

In year two, there are 30 existing buyers, and 70 from Abacus. 30% of each list repurchase. This leaves us with 9 existing buyers, 21 existing buyers from Abacus, and 70 new customers from Abacus.

Within two years, 91 of 100 customers are from Abacus. Obviously, some names come from other lists, or from lapsed buyers. So let's assume that just 75 are from Abacus, not 91.

Still, in just two years, 75% of the active housefile are Abacus-sourced buyers. And this individual points out that his housefile names aren't working well anymore.

If your annual repurchase rate is in "Acquisition Mode", under forty percent, and you do the vast majority of your customer acquisition work with Abacus, you've got an interesting dilemma. In just two years, the vast majority of your active housefile is sourced from Abacus.

Remember, this individual says his housefile names no longer work well. Hmmmmmmmm.

This isn't the fault of Abacus. They are simply providing a service that clients are willing to pay for.

No, this is the fault of circulation experts. It is our fault! We're doing this to ourselves. Not smart!

Our business models participate in a big ecosystem. Unwittingly, we are moving our ecosystem away from something we control, toward something we no longer control. In this example, Abacus now owns the brand I spoke of, with housefile productivity imploding as we speak. The success or failure of the brand is no longer in control of the merchants who pick great product. Instead, the brand depends upon the type of names that Abacus makes available for the client.


And all you online marketers, if you think you're immune to this, you're not. Where do you get all of your customers from? Google? Abacus is tiny. Google owns the world. Once we've saturated the online customer market, Google plays the role for online marketers that Abacus plays for catalog marketers today.

Multichannel CEOs and CMOs: If your annual repurchase rate is under forty percent, be wary of sourcing the majority of your new customers from one vendor. The dynamics of your housefile dictate that, within just two years, that vendor determines the fate of your brand, not the product/creative/service/brand strategies you initiate.

The Marketing Digital Divide

I am coming around to the idea that a "Marketing Digital Divide" is happening all around us.

I like to read the point of view of many different marketing folks. This morning, this article arrived via Google Reader, from Andrew Chen. Andrew didn't gain his experience in the catalog industry. His marketing skills were honed in Seattle and Silicon Valley, during the internet era.

His article is titled '10 Obvious Strategies To Ruthlessly Acquire Users". Here are the ten strategies that he outlines.

1. Email/IM features for invites and content
2. Blog/MySpace widgets
3. Auto-invite for email, social networks, etc
4. Auto-embed for blog widgets
5. A/B tested signup pages
6. Smart adwords buying
7. Viral referrals
8. SEO/landing page generation
9. Push through RSS/Email, etc.
10. Reduce user "drag" through the entire funnel

Do the phrases "Instant Messaging", "Widgets", "MySpace", "Social Networks", "Auto-Embed", "Blogs" or "RSS" appear anywhere on your list of customer acquisition strategies, if you're a Multichannel Cataloger or Retailer?

Remember, Andrew calls these "obvious" strategies. Imagine what his list of less-than-obvious strategies looks like.

How many of my loyal readers, direct marketers with decades of experience, view these strategies as "obvious"?

This is the essence of the "Marketing Digital Divide". A generation of marketers are honing skills in a realm most Multichannel Catalogers or Retailers cannot envision. It seems to me that the "MDD", as I'll call it, is accelerating. And if you don't practice any of the items Andrew outlines, it becomes harder and harder to see them, to understand what is being done.

This might be a great time for Millard, or Mokrynski, or MeritDirect, to reassign job responsibilities to small number of individuals. These individuals could focus on Andrew's list. These folks could test Andrew's proposed strategies with progressive Multichannel Catalogers and Retailers willing to experiment. These individuals could spend time with "Web 2.0" folks, if you will, folks who are practicing these activities --- and then transfer the knowledge back to progressive Multichannel Catalogers and Retailers.

The Marketing Digital Divide isn't too big to cross, yet. With postal reform bearing down on catalogers, with Google dominating the online advertising space with their acquisition of DoubleClick, it's a great time for our list industry to build out solid Web 2.0 divisions that help transfer skills across the Marketing Digital Divide (MDD) to Multichannel Catalogers and Retailers.

What are your thoughts? Does the Marketing Digital Divide (MDD) exist? Are catalogers and retailers falling behind?