November 18, 1997

FOUR WAYS TO GET PROSPECT LISTS

Edited by Dennis Berman

Identifying and renting the right prospect list, at times a daunting task for beginners, is getting easier. (Database is probably a better term, as many lists contain much more than names and addresses.)

Encouraged by the proliferation of small businesses, several database marketing companies now offer lists on CD-ROM. The introduction of new small-business CD-ROM products -- which bring millions of names to a common PC -- expands the mailing-list options for marketers on limited budgets.

Of course the best list available is a company's own "house list" of existing customers. Sometimes ignored by small-business people, existing customers should be contacted regularly, keeping in mind that the best offers are usually customized to a client's previous buying patterns. But no matter how responsive existing buyers are, nearly all companies must be constantly prospecting for new ones. Here's a review of the four ways small businesses obtain lists:

Compilers. Large list companies such as Polk Co. and American Business Information are compilers. That is, they compile lists from government agencies, phone books, business directories, and association membership lists. Residential lists (used often by retailers) and business lists (organized by industry type or geography) are also the work of compilers.

Most list compilers let marketers customize lists by using various criteria or "selects." For example, someone might be able to focus a list on homeowners who live in a certain Zip code and who drive a Volkswagen. Or maybe single-household parents in a particular suburb.

List brokers. Direct-response lists are the domain of brokers. By using a direct-response list, a marketer knows he or she is renting the names of potential customers who have responded, in some way, to direct marketing before. Response lists can be customized in many ways. Three of the most important criteria to look for are what's called RFM, for "recency," frequency, and monetary. Ideally, the better-potential customers on any response list -- be they mail-order computer buyers or Fruit of the Month Club members -- are those who have bought within the last three months, have bought many times before, and spend a lot each time. Prices for response lists range from $50 to $150 per thousand names and addresses. Compiled lists are often less than $50 per thousand because they do not necessarily represent proven mail-order buyers. The more responsive a list, or the higher the average amount a customer spends at one time, the more expensive the list.

For example, a list of subscribers to a consumer magazine may cost $65 per thousand, while a list of recent buyers of expensive clothing may cost $135 per thousand.

Many direct-response lists contain "hotline names," that is the customers who have responded most recently -- within the last few months. Hotline names are often more expensive, but they're thought to be more responsive, particularly because they will not have already been bombarded with a variety of other mail-order offers. Hotline names usually cost an additional $10 to $30 per thousand names.

CD-ROMs. Lists on CD-ROM have been available for several years, but only recently have the products been perfected to the point where they are cost-effective for small business. Literally millions of names, addresses, and pieces of demographic data are available on CD-ROM at bargain prices.

This month, Metromail Corp. is debuting new CD-ROM lists under the name MarketShare, which was developed with small business in mind. Experion Corp., formerly TRW, is introducing an enhanced version of CD-ROM lists called Neighborhood ConnX and Business ConnX. With the Metromail product, mailers buy all the names (business and consumer) in a given metropolitan area for a flat price -- $199. Experion offers marketers the chance to select either business or consumer lists on separate disks, but they receive national databases of millions of names from which to select prospects. The base price is $100, which includes the use of 500 names and addresses. Using additional names cost 10 cents per entry.

CD-ROM lists are compiled lists, but they have several advantages over simply ordering a list from a compiler. First, the lists often come with software that allows the user to sort the names and data according to his or her own marketing criteria, rather than relying on a list company to suggest the right sort. (Adding selection criteria increases the price of a rental list, which isn't the case with lists on CD-ROM -- though the selection criteria of most CD-ROM products is, at present, limited.) Second, marketers can usually buy just a few thousand names at a time (as with the ConnX products), do a test mailing, and see what happens. Third, names on some CD-ROM lists can be used over and over for the same price.

Do-it-yourself. Although time-consuming, the best prospect list is often one the marketer creates himself. Many businesses build prospect lists via trade-show booths, contests, and display ads. Small-business marketers can even search local county records, association memberships lists, and business directories. The main difference between a self-compiled list and a rental one is that marketers can mail to their own list as many times as necessary. And if they do their homework and verify the data, they can vouch for the list's accuracy, too.

-- Mark S. Bacon