Keeping list prices down: 6 ways to find relief from escalating list prices

Folio: The Magazine for Magazine Management, Oct 1, 1992 by Maxim C. Bartko

There's no denying that there has been a steady rise in list prices over the past several years. There are, however, ways to keep the cost of lists down. The five that come to mind immediately are exchanges, reciprocal pricing, tier pricing, better net-name arrangements, and the "haggle." A sixth, and the one that is closest to my heart, is a small database participation, wherein the prospect mailer works in a pure net/net environment.

Now let's take a closer look at each of the six ways to keep list prices down.

Exchanges

The exchange implies that both parties--the list owner and the mailer--yearn for each other's names with relatively equal passion, and that each party is willing to forego the normal list rental billing and payment cycles to get the other party's names.

The exchange process is not a free ride, though. There are several fees involved in the process: broker's fees, which can cost 20 percent of the regular rental price; list manager's fees, which can range from gratis to 10 percent of the normal list rental price; and running charges for the tape itself, which are usually paid by the list owner.

What's wrong with exchanges?

If they work, nothing is wrong with them. However, most people will tell you they don't like the bookkeeping--who owes whom names? And most list owners do not want to let the exchanging partner take a disproportionately greater number of names before he or she has a chance to catch up. As a result,there are frequent split orders, where the list owner sets a limit to the exchange quantities, and any quantity beyond the specified limit must be taken on straight rental.

Another potential problem with exchanges is the exactness of list selections. It is seldom clearly defined what selects will be allowed on exchange. One result of this lack of definition is that normally meticulous mailers can sometimes become riverboat-gamblers.

And sometimes one partner in the exchange will select much more tightly than the other, thus reducing the chances of using up as many names as his or her partner.

Seldom are net names part of the discussion with exchanges, so if one of the exchanging partners nets out less from his or her merge/purge, the quantities of the exchange are really unequal.

But when all is said and done, if the passion for the exchange is alive and well after the before-mentioned nuisance issues, exchanges are definitely one way a mailer can keep his out-of-pocket list costs down. (It will is not a free lunch, however, since you are not getting the list rental income as list owner.)

Reciprocal pricing

The second approach to keeping costs down is reciprocal pricing. Here the two consenting partners agree to charge each other a lower price when using each other's names.

Let's say the two list owners have their lists on the market for $90 per thousand. Based on past experience, they will each be using a large quantity of the other's names. But they don't want the bookkeeping of list exchanges. So they agree to rent each other's names, with no limitations on quantities, for $50 per thousand, either with or without the selection charges added on the top.

Reciprocal pricing has been around for a long time. It is seldom formalized in writing, however, and with changes in circulation personnel, list brokers and list managers, the arrangement can be forgotten or can fall through the cracks.

Tier pricing

This is an attractive wrinkle in the list management field, which came into vogue a few years ago when list managers started going after secondary and tertiary markets for their managed properties. The theory is that a mailer is not willing to pay premium dollar for lists outside his or her primary market.

For example, a magazine publisher is not willing to pay $100 per thousand for a list of female apparel buyers, since experience has shown that merchandise buyers are not necessarily information buyers. Thus, as an incentive to get the publisher to test an apparel list, the list manager/list owner offers a special publisher's rate--say, a flat $65 per thousand, with no charge for selections.

Now the magazine publisher has a true dollar incentive to test the non-primary market list. And if the list breaks even at $65 per thousand, the magazine publisher has a whole new universe to go after.

Tier pricing has many faces. Managers of merchandise lists offer attractive tier prices for publishers, and managers of publishing lists offer tier prices for catalog merchandisers. The more progressive list managers offer across-the-board specialized tier prices for insurance mailers and fundraisers.

In very competitive markets, such as the computer field, the list manager might offer a higher than normal rate for competitive computer offers--let's say a $50 per thousand surcharge. It's still a good buy for the computer marketer, and the list owner reaps additional profit from his or her mailing list.

Better net-name arrangements

Net-name arrangements are also a reasonable way to keep the real cost of lists down. When a mailer is forced to pay for names that the mailer does not mail, it drives up the costs for each thousand pieces mailed.