Net names: breaking the rules

Folio: The Magazine for Magazine Management, August, 1988 by Karlene Lukovitz

Net names: Breaking the rules Like other direct marketers, magazine publishers are finding that owning and renting lists is a far different ball game in the eighties than it was 10 or 15 years ago.

Computerization has allowed direct marketers to grow and prosper in an increasingly competitive environment. But the accelerated cross-pollination of names and the array of new prospect targeting capabilities made possible by computerization have also forced marketers into an ongoing struggle to define list terms and agreements, and to make hard decisions about what policies they should follow in their dual roles as list owners and users.

Some of the most debated list questions of the day concern net name agreements, which state the minimum percentage of names for which a mailer will pay when renting a given list. Years ago, when name duplication among lists was relatively low, there wasn't much to discuss when it came to paying for rented names. A mailer rented the whole list, or maybe a segment of it, and more often than not paid on a gross basis--that is, paid for every name rented, including those not mailed, at whatever price per thousand had been set by the list owner.

Then, in the seventies, an increasing number of mailers were alarmed to discover that the numbers of names they were actually mailing from rented lists--their "nets"--were declining because of rising duplication rates. Large list owners and mailers, who were most affected by the problem, recognized the need for some kind of concession. Over a period of time, it became common practice, at least among these major players, for mailers to be offered an 85 percent net name agreement. To qualify for the 15 percent allowance for duplicates and other unmailable names, a mailer traditionally has had to order a certain minimum number of names--usually 50,000 or 100,000-and demonstrate, with a merge/purge report from the service bureau, that duplication is at 15 percent or greater. If the duplication rate is lower, the allowance is reduced accordingly; however, a higher dupe rate does not qualify the mailer for a larger allowance.

1988: A watershed year?

Today, the 85 percent net name agreement is still frequently referred to as "the standard." In reality, however, the changing nature of direct marketing has, to a large degree, already made 85 percent more of a starting point for negotiation than a true standard.

Furthermore, with the shock of the recent 25 percent increase in bulk third class postage rates, many mailers/owners and list brokers and managers are predicting that 1988 will be a watershed year in which net name negotiations will take on a new intensity, and agreements will be more flexible than ever before.

"Pressure for net name agreements is the theme for 1988," says Michael Manzari, executive vice president of The Kleid Company Inc., brokers, consultants and exclusive list managers for such major publishers as Time Inc. and Conde Nast. "If 85 percent was really still the standard up to this point, which is questionable, it almost certainly will no longer be the standard after this year."

Several factors have contributed to the growing trend toward negotiating net name agreements.

For starters, there is the continuing rise in duplication rates, which, as noted, was the reason for the list community's general move toward net name agreements in the first place. As mailers, magazine publishers by and large are not as hard hit as some other groups. Catalogers, for example, in their quest for high-ticket mail order buyers, exchange and rent lists from one another so frequently that it is not uncommon for them to experience duplication rates for 50 percent or greater. In the publishing world, rates that high are generally seen only among two groups: very large circulation general interest publications, which must use millions of names each year to maintain their circulations; and publications in highly competitive special interest markets.

"In something like the golf market, where you have a limited universe and many competing magazines, each of which has a high saturation in that market, duplication rates can be incredibly high," says Donn Rappaport, chairman of American List Counsel, Inc., list compilers, brokers and/or managers for such publications as U.S. News & World Report, Inc., Family Computing, Family Circle, The Atlantic Monthly and Ms. "But in other publishing markets, duplication might be as low as 5 percent."

"Duplication rates are rising, but that's been true for a long time now," observes Andrew Kapochunas, vice president, general manager for AZ Marketing Services, Inc., list managers/brokers. "Magazines like Reader's Digest have had to deal with very high duplication rates for 15 years or more. But it may be that the reason there's so much concern about net names today is that there are now more big mailers who were formerly small mailers, and who aren't accustomed to dealing with the duplication problem. Mailers who have built their lists up from 100,000 to three million names will naturally start having a bigger duplication problem because they've used a lot of lists along the way."