Broker Roundtable: What’s the Biggest Threat of 2011?

Welcome to Broker Roundtable, where each week we ask list brokers to give their opinions on issues that matter to the marketing community. This week’s question: What does the list industry see as its greatest competitive threat in 2011?

Our current panel includes: Geoff Batrouney of Estee Marketing Services Inc.; David Dotson of American List Counsel; Michael Kertelits of RMI Direct Marketing Inc.; Lee Kroll of Kroll Direct Marketing Inc. and Michael Peterman of Veradata. (Would you like to be considered to be a member of our roundtable? Contact Larry Riggs at [email protected].)

Geoff Batrouney, executive vice president, Estee Marketing Services Inc.:
Unfortunately, our greatest competitive threat appears to be from the inside. That is, the postal service failure to scale its expenses to match its anticipated, declining revenues. Cutting out a day’s delivery would have a shocking impact on all of us, and would hardly put a dent in the USPS’ cost structure. Congress needs to relieve the USPS of its huge pension burden and allow an open vote on cost-cutting measures that must be discussed without rancor and parochial protectionism. We can’t have real reform if members of Congress holler “not in my back yard” and 535 decision-makers lose sight of the larger picture. We need a functioning postal service, a more efficient postal service. Should we expect it to break even or make money? No we should not, not if we want national coverage and delivery six days a week.

David Dotson, managing partner, American List Counsel:
The first competitive threat is U.S. Postal Service (USPS), with the cost of postage, the possible closing of post offices, the talk of going to a five day work week and the slowness of delivery) As a consultant, I see postage as high as 70% of my clients’ budgets. As postage continues to increase, the fewer new customer acquisition efforts clients can afford. Most of my clients’ mail gets delivered in 7-10 days, but the USPS reserves the right to take up to 21 days to deliver. In today’s environment, clients want to see instant results in the most cost-efficient manner. The USPS is both raising prices and reducing and/or slowing service which sends a negative signal to direct marketers.

Michael Kertelits, account executive, RMI Direct Marketing Inc.:
One of our biggest competitive threats in 2011 will likely be the naysayers who claim that direct mail is no longer a relevant form of communication. Quite the contrary, it remains one of the most vital aspects of direct marketing. Studies show that some 30% of online purchases are the result of someone receiving a direct mail piece and then going online to make a purchase. It shows the synergy that can exist between two separate channels. One threat that never seems to change is rising costs of postage, printing and so forth.

Leland Kroll, president, Kroll Direct Marketing Inc.:
I believe the list industry’s greatest competitive threat in 2011 will be the government with new consumer privacy legislation being proposed. As an industry we need to voice our opinion to our Congressmen and Senators and let them know that self-regulation in our industry works. The impact on the consumer opting out of the receiving of postal mail can decrease our prospect universe by as much as 70%! Who knows how Do Not Track would affect our online marketing activities. Just think of how the Do Not Call legislation has affected telemarketing.

Another competitive threat to our industry is ourselves. What I mean is that list managers need to elevate how we promote data to list brokers and mailers. Brokers don’t have time to play a game of “cat and mouse” where we need essential information about a list that just isn’t provided on a datacard. There are millions of dollars of business being left on the table because of inferior quality datacards which translate into lost opportunities.

Michael Peterman, CEO, VeraData:
I see Google as the single largest threat (I could say ‘search marketing’, but I mean Google specifically). Hats off to founders Sergey Brin and Larry Page , who according to Forbes, represent two of the top five most powerful people in the world (this was Nov. 2009, they could have moved up since then). Google wields incredible global power and is ever increasing their share of marketing budgets…now pursuing the acquisition of Groupon, presumably to gain a stronger foothold in local markets. It’s hard to forecast what’s next for Google, but one thing is for certain, the company will continue to grow into other areas of marketing. Looking a little further out, if privacy legislation does become stricter – which, at present, appears highly likely – Google possesses the almost immediate ability to require permission from 85% of U.S. consumers to use its information for marketing purposes, leaving Google in control of what could become the main source of marketing data on the planet.

Another potential threat is the USPS’s severe operating deficit. In this economy, even slight postage increases can have material effects on the list business.