An Owner’s Manual
I OWNED ONE list management house or another for almost 25 years, and I have a special message for list owners: It’s arguable you haven’t the faintest notion of how to tell a good house from a bad one when you look for a company to represent your list.
This is not exactly a trade secret-managers have known it for years-but who in Peter Drucker’s name wants to blurt it out to a list owner anyway?
This isn’t a knock at managers. They’ve got to make a buck, and there’s no obligation to give a list owner secrets he can use to investigate other management companies.
It’s an important topic. List rental income is often the difference between finishing in the black or in the red each year. The margin on list rental, assuming the cost of name acquisition has already been absorbed by the marketing budget when the offer was mailed, is almost as large as that for heroin dealing or owning the rights to courtside seats at Madison Square Garden.
There are two problems in attempting to find just the right list manager.
The first is setting realistic standards-knowing what to look for in a management house and knowing what questions to ask. The second is having an idea about the kind of presentation to request of the candidates.
Tough Questions Many questions one ought to ask about prospective managers aren’t easy to answer. The list owner should-must is the operative word, actually-make extensive use of his broker contacts to help him. It goes without saying that, as a rule, brokers are the best judges of list managers. (The reverse is also true.) And when it comes to financial and order reporting practices, the list owner should call owners of lists managed by the houses it’s investigating.
A management house should be judged by the following standards when one is seeking to place a list.
* Does it have experience in the type of list you own? You don’t want a house that manages a list competitive to yours, but a list with a similar target market is desirable.
Broad market affinity is also worth looking at. If a management house has experience primarily in business-to-business lists, can it manage a consumer file? If a manager has most of its experience in catalog files, why should a red-hot magazine file go there?
* Can it present case histories in which rental income for a similar list has been maximized? How? When? To what extent?
This is critical, because some managers are excellent sales administrators but lousy entrepreneurs-or the exact opposite. The current problems you feel you have with your own list and your goals for seeking new management must be assessed before the search begins.
Is the problem poor sales? Are you not getting enough tests? Is the paperwork coming in from the management house virtually nonexistent?
* How effective is the contact between management personnel and brokers?
This contact takes two forms: the extent to which a list manager visits brokers to make eye-to-eye presentations, and the extent of casual phone contact between them. It is worth the list owner’s calling his company’s brokers, and other brokers he knows as well, to get a line on the items being discussed below. These are yardsticks in measuring the entrepreneurial creativity of a management house.
* Given a relatively limited budget, management houses are often confronted with the painful choice of whether to put their promotional money into courting list owners or seeking out broker/customers. If it chooses to spend most of its budget attempting to find new lists to manage, it’s possible for a management house to actually forget broker visits are an indispensable marketing tool in acquiring rentals.
I’ve experienced situations in which my own fairly good-sized brokerage wasn’t visited by some managers for decades. This is a serious problem, and one worth the list owner’s inquiries.
And regarding phone contact: Of course, every manager is on the phone often with brokers who inquire about one list or another. That is not the issue.
The real question here is how often a management house initiates a phone discussion by calling a broker with a marketing idea about a list. It’s worth it for the owner to call a few brokers to find out.
* What new, concrete ideas does it bring to the table for enhancing rental income? You deserve a marketing plan. It doesn’t have to be earth-shattering, a new slogan or vehicle for disseminating data-it just has to be a sensible working plan that meets your goals.
* How efficient is its reporting of orders, invoices, aged receivables and the like? If a management house has efficient reporting and payment practices, that doesn’t mean it’s going to sell the hell out of your list. But if these practices are inefficient, that’s a sure sign [the managers are] a bunch of incompetent nincompoops-or worse.
* What’s the turnover rate on the files the manager has overseen? Has it been able to hold onto its properties? Are its list owners cooing or booing?
This is a surprisingly easy question to answer if you have foresight. Keep your old SRDS mailing list print directories. Just put ’em on a shelf and forget them-until it’s time to find a new list manager. Then pull a 2-year-old directory off the shelf and check the lists managed by the house in question, and then against those managed currently. You’ll have a hint soon enough on how dependable your candidate is.
It’s worth considering what to ask for in presentations for list management. First, narrow down your field of candidates to two or three houses at most. Then ask for a print presentation-a manager’s best shot in print.
I’ve heard list owners boast to me that they’ll settle for a two-page letter from a management house as a presentation. Presumably, these list owners have been blessed with special eyes that can see through bond paper and ink to discern the real value of a list manager. My best advice is if you’ve a list that’s worth some moola, act like it’s one that’s worth moola. Ask for the best presentation a management house can muster. And read it closely, even if most of it is pro forma boilerplate. If a manager has taken the trouble to put together a formidable proposal format, it probably will go the extra mile for an owner.
Having narrowed down the search to two or three houses, ask each for an in-person presentation to elaborate on the print presentation, where the people who would actually handle the list daily will be present to explain what they’ll do-and how they’ll do it-in greater detail. The secondary purpose of this meeting is to determine whether your gut instinct is to like the people and the way they operate, whether you’ll be able to get on with them and whether they actually talk your language.
Musts to Avoid There are some things to avoid.
* Don’t pick a house because a friend owns it or is a major executive there. Aside from the fact that your days of friendship might very well be numbered the moment the contract is signed, good management houses (as a rule) are run from the bottom up, and top management might not have a clue as to what really goes on in its house.
* Don’t sign a management contract that runs from year to year-which can be canceled only on, say, Feb. 7 between the hours of 2 p.m. and 5 p.m., or else it automatically renews for another year. Do give a management house a year’s no-cut contract (except for disclosure of fraud or the like), and then provide for cancellation of the agreement on a day’s or month’s notice. Give it some leeway to prove it can sell the list; give yourself some leeway to leave after a year if you’re dissatisfied.
* Don’t give the list-processing functions to a company owned by your management house, unless the processing outfit and/or management firm is huge and prestigious. There are serious hazards to giving both the order-reporting and order-processing functions to the same company.
* Do give small management companies a chance if they meet the other criteria you’ve set. Some of the most creative list managers I’ve ever met are at small management houses.
And one more thing: Do exercise prayer after you’ve signed the contract. You’ve just put one of the greatest and most lucrative properties owned by your company into someone else’s hands.
Good luck!
