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Advertising is all about reaching the right people with the right message, and direct mail is one of many other advertising media used to deliver that message. Direct mail is thought to be a powerful tool precisely because it can be directed at pre-selected audiences, including subgroups of those proven to respond to direct mail. This targeting of the message is accomplished by creating and using mailing lists for many different profiles of potential buyers. A business can gradually build up its own mailing list by directly soliciting the addresses of its customers in its outlets and/or by using print advertising. Alternatively it can rent mailing lists from compilers. It may even choose to sell its own list to others.
Based on data published in the 2006 Statistical Abstract of the United States, citing Universal McCann of New York, expenditures on direct mail in 2004 were $52.2 billion, 19.8 percent of total advertising expenditures. In the 1990 to 2004 period, total advertising expenditures increased 203 percent but direct mail expenditures grew 224 percent. Thus direct mail was outpacing advertising as a whole. During this same period, a new type of direct mail solicitation also came of age—electronic solicitation over the Internet. This mode of contact, by the nature of its very low costs, rapidly aroused spirited consumer opposition and came to be regulated under the CAN-SPAM Act of 2003.
Mailing lists are compiled using various categories likely to appeal to a prospective mailing list buyer and thus represent virtually a catalog of any and all kinds of interests and profiles. Important classes are lists based on 1) income and demographics, 2) political, religious, and charitable characteristics—based on donations and memberships in organizations, 3) occupations and professional society memberships, 4) avocational and other interests as drawn from subscription lists to magazines, 5) past purchases of classes of products, 6) public lists available to list builders from government and regulatory agencies, 7) stockholders in companies, and 8) geographical lists compiled from telephone directories. The great variety of lists available for purchase ensures that most businesses looking for potential clients will be able to get a suitable list, whether their criteria are general ("the super rich") or very specific ("kayakers in Colorado").
Mailing lists are costly to assemble and to maintain. People are constantly in motion both physically and in other ways (they get divorced, go bankrupt, they sell their stock, they pick up other hobbies, change political affiliations, recover from ailments, etc.). Even if they remain on a list, they may no longer belong on a list. As a consequence of this dynamism, mailing lists are never completely up to date and tend to vary in quality based on the effort expended on purging and requalifying lists by the vendor; list vendors rarely expend the same intense efforts on all their lists. The upshot of this is that the list buyer will always also buy some "waste." He or she may be able to recover the cost of these names from the vendor but not the money spent on mailing to useless addresses.
Although people speak of "buying" mailing lists—and selling these to list vendors does take place routinely—the typical user of a mailing list actually rents the list for a one-time use. List vendors include addresses in every list intended to monitor what their customers send out. If a business rents a lists for a single mailing and then uses the list several times instead of only once, the vendor will know about this and send a new bill for second and subsequent uses—with proof in hand that the list has been reused.
Response rates to mailings tend to be very low. The best rates are achieved by the very costly mass mailings of sweepstakes marketeers ("You May Have Already Won!"—"Winner Notification Certificate Inside!"): these occasionally achieve return rates above 10 percent. Many direct mail users routinely get returns of less than 1 percent—and only a portion of these translate into sales. Direct mail is a medium like any other, not a silver bullet. List vendors typically require a minimum purchase (rental) of 5,000 names at rates between 8 and 25 cents per name. Minimum postage for pre-sorted mail in large quantities begins at 17 cents for non-profits, 18 cents for commercial users but may go as high as 24 cents if less sorting is done or quantities are relatively low. Production costs of the mailed piece will average 40 cents an item on a print run of 25,000 copies according to David Yates of ControlBeaters—not including costs of professional writers and artists, if employed. To achieve appropriate address formatting and sorting acceptable to the Post Office the business may have to employ a letter shop specializing in stuffing, addressing, sealing, stamping, and bagging the mail, labeling the bag, and getting the bags to the post office at between 2 to 3 cents per item. Assuming a somewhat minimal 25,000 item mailing, the business may be looking at a $17,000 cost, the material all written in house and creative costs not included. This estimate assumes the lowest range of costs throughout and average item cost (40 cents) for the mailing piece itself. This may, if the package is attractive enough, produce 250 leads at a cost of $68 a piece. If two-thirds of these leads translate into sales (165 items), each will have to absorb $103 in marketing expense. Obviously the item being sold has to be able to absorb such a surcharge or, in the long run, result in additional sales at much lower expense so that, ultimately, total sales will make the mailing worth while.
Mailing lists are classified by the method of compilation. Response lists consist of names and addresses of individuals who have responded to an offer of some kind (by mail, telephone, billing inserts, etc.). The addresses provided may be that of a business or a home. Because these people are known responders, their names are generally priced higher than those in lists compiled by other means. But individuals on response lists may have responded to solicitation other than direct mail (e.g., a phone call) and may not even open their "junk mail." Thus it is important for the small business owner to know what percentage of a list was direct-mail compiled. And always, the business owner's most valuable response list is the "house list" of current and past customers.
Compiled lists contain names and addresses of individuals gleaned from the White Pages and Yellow Pages, often enhanced with information gathered from public records (e.g., auto registrations, birth announcements, business start-ups). A very popular method of list compilation is through magazine subscriptions, since lists of readers provide an excellent means of targeting individuals in specific industries (e.g., Institutional Investor,) or within distinct areas of interest (e.g., Field and Stream.) Lists may also be compiled based on zip code when the small business owner seeks to reach consumers in a particular geographic area or income level. The average income of a zip code area is determinable from the decennial population census and thus can be used to classify such lists fairly precisely by level of wealth. Credit card lists are also an effective means of list compilation.
Membership lists come from all manner of associations and organizations with permanent members. Selling such lists is a source of income for the associations and groups involved. To be sure, this category itself is a compilation, but with the special character that members of such grouping are self-selecting and have specific profiles and associate income and interest patterns.
Direct mail is an industry of $52.2 billion in sales, it is populated by a large number of list sellers. The base of the pyramid is represented by list owners who may be businesses with customer lists, banks with credit card customers, publishers of periodicals with subscription lists—anyone, in fact, with a list of names he or she is entitled to rent or sell to others. List compilers rent or purchase such lists for retail to final users and frequently combine and create their own composite lists. Compilers, being specialists in the management of lists, typically employ staffs for the purpose of qualifying, analyzing, purging, and otherwise engineering mailing lists. They are in the business of renting lists directly to end users and supplying list brokers. The list broker is a marketing expert specializing in direct mail; his or her job is to know what lists are available and which can be deployed for the purposes of a client. Brokers work with list owners or compilers and are paid a commission for list rentals (around 20 percent of the transaction). They typically represent the final user and are thus technically "buyers." The industry also has a specialized seller, known as the list manager. Managers represent owners and promote lists to ultimate users, compilers, and brokers.
Service bureaus have emerged in this industry. They specialize in the physical management of lists on behalf of owners and compilers. These operations are computationally advanced businesses which perform data mining, enhancement, and the more routine maintenance steps of merging and purging huge lists, eliminating duplicates, and "normalizing" variant forms of the same names and addresses.
Letter shops, already mentioned, service the ultimate list user by minimally performing mailing operations as already outlined. Many also offer data processing services to ensure that the addresses used conform to U.S. Postal service regulations and that the sorting is done to achieve lowest possible postage costs.
With the dramatic rise in Internet communications, e-mail rapidly came to be used for commercial solicitation. Here the mailing list transforms into a list of e-mail addresses which Web sites can capture from visitors mechanically and build into databases with a little programming effort. The volume of this new kind of mail grew so rapidly that it acquired the derogatory label of "spam." It was used and abused by organizations sending out millions of unsolicited e-mail messages selling anything from drugs to insurance to pornography. E-mail solicitation continues but has been curbed somewhat by Internet gateway providers that filter it out. E-mail solicitation has also come under government regulation.
This took the form of legislation awkwardly by cutely titled Controlling the Assault of Non-Solicited Pornography and Marketing Act—which just happens to abbreviate to the CAN-SPAM Act of 2003 (Public Law 108-197). The law was signed in December of 2003 and took effect on January 1, 2004. It requires that senders of unsolicited commercial e-mail label their messages, but Congress did not require a standard labeling language. Such messages must carry instructions on how to opt-out of receiving such mail; the sender must also provide its actual physical address. Misleading headers and titles are prohibited. Congress authorized the Federal Trade Commissioned to establish a "do-not-mail" registry but did not require the FTC do so. CAN-SPAM also has preemptive features: it prohibits states from outlawing commercial e-mail or to require their own labeling. Since 2003 other bills have been proposed but have not been enacted. Congress clearly hesitated straddling a fence: on the one hand consumer protection, on the other the free-wheeling market in virtual space.
Curiously the "opt-out" feature required by U.S. law in electronic transmission is also available to people who receive unwanted sexually-oriented material by snail-mail. A person can obtain a Post Office form, entitled "Application for Listing and/or Prohibitory Order." It is available over the Internet (see citations). Using this form, the unhappy recipient of such mail can stop receiving such mail or gain the right to sue the sender. As for the rest of the junk mail, it will keep on coming.
SEE ALSO Direct Mail
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Davies, Kent R. "Little Black Book: How to buy and keep mailing lists." Aftermarket Business. November 2005.
"Direct News: New mailing list data in decline." Marketing. 20 April 2005.
Federal Trade Commission. "The Can-SPAM Act: Requirements for Commercial E-mailers." Available on http://www.ftc.gov/bcp/conline/pubs/buspubs/canspam.htm. Retrieved on 28 February 2006.
Goldberg, Laurence. "Get the Word Out With List Servers." Learning & Leading with Technology. February 2006.
Levey, Richard H. "Data by Design." Direct. 15 May 2005.
"Most E-Retailers Comply with Can-SPAM: FTC." Promo. 11 August 2005.
U.S. Postal Services. "Application for Listing and/or Prohibitory Order." Available from http://www.usps.com/forms/_pdf/ps1500.pdf. Retrieved on 10 April 2006.
Yale, David R. "Direct Marketing Beginners: What You Need to Know." ControlBeaters. Available from http://www.controlbeaters.com/L5.html. Retrieved on 10 April 2006.