Mailing Lists

Related Terms: Direct Mail

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 IN CONTEXT

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.

TYPES OF LISTS

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.

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