Just about anything can be purchased on the Internet – including direct mail lists.

A simple Google query, one or two mouse clicks and voilà, you’ll find hundreds of potential lists for sale at bargain-basement prices. The Internet, in fact, is quickly becoming the destination of choice when shopping for direct mail lists.

Although the industry’s move to the Internet is generally a positive one that benefits buyers, it is also fraught with real risks that come with purchasing any complicated product over the Web.

Search engine results may pull up large data warehouses that sell volumes of raw data, fly-by-night data brokers reselling pre-packaged and overused products, and boutique shops that specialize in particular markets. Search queries are also likely to produce inexpensive lists that deliver suboptimal results, as well as effective ones that cut through the clutter of our media-saturated society.

So how to figure out which list is right for your company?

A good starting place is to understand the two most common types of lists available: compiled lists and response lists.

A Closer Look at Compiled Lists

Compiled lists are typically built in the following fashion: a list compiler purchases names from a large data house, or collects them from public records. He/she then slices and dices the data in a variety of ways, and puts it up for sale.

The advantage of a compiled list is that it is usually less expensive than a response list.

There are several disadvantages to compiled lists, which often suppress response rates:

• You may not know how the list was created.



• Data brokers often repackage the same list under different names in an effort to make them appear to be unique products.



• List compilers want to sell a list as many times as possible to make the greatest profit, so they are not concerned if you buy the same one numerous times under different names and guises.



• Compiled lists do not take into account consumer purchasing behavior, so using them can be a hit-or-miss proposition.

 The bottom line: compiled lists may be less expensive to acquire, but they usually generate significantly lower returns than response lists.

A Closer Look at Response Lists

Response lists are built from customers who have responded to an offer, made a purchase, or expressed an interest in a particular product or service. An example of a response list can be found at Victoria’s Secret: it is composed of customers who have bought clothing from the merchandiser.

Since response lists are records of customer transactions – essentially proven leads – they are very valuable. There are several reasons why they are also a very accurate reflection of customer information and purchasing habits:

• Names and addresses are validated (because the package has to be sent to the customer’s house).



• Telephone numbers are validated (because phone numbers have to be on UPS packages).



• E-mail address are validated (because order confirmations are sent by e-mail).



• Continued interest in lingerie (or whatever they are purchasing) is confirmed.



• Propensity to buy from a catalog is confirmed because they most likely bought based on receipt of a catalog/e-mail/promotion.



• Economic status is confirmed because if they had lost a job, or experienced some other change in finances, they probably would not have made the purchase.
   

The accuracy and detail of this information stands in stark contrast to compiled lists, which rely solely on self-reported data. And of course, responders may give false information when answering questions because their responses have no consequences.

The apparent disadvantage of a response list is that it is more expensive than a compiled list. But because response lists almost always produce better response than compiled lists, they usually end up being less expensive in the end. That is why sophisticated marketers continue to rent response lists over and over again.

 
Compiled versus Response Lists: A Real-Life Case Study

A company that we know of recently experienced the advantages and disadvantages of compiled and response lists.

Company “X” was selling a product to individuals with a poor credit history. The firm had little knowledge of the direct-mail industry, decided to go it alone, and purchase a compiled list. To their satisfaction, the list generated a good response rate, partially due to an enticing offer.

We pointed out that this approach had a serious pitfall: The compiled list was likely to attract a considerable percentage of respondents who would fail to get credit approval. This would saddle the company with significant processing expenditures from having to reject thousands of unqualified candidates, and result in a large number of unacceptably risky customers.

A response list that produced a lower response, but more qualified candidates, would have been a smarter strategic move – and a much more profitable one, too.

Summing It Up

Compiled lists…response lists…the nature of the solicitation…cost-per-name: purchasing a list is a complicated and important decision that can have far-reaching implications for your company. Even seemingly straightforward decisions, as shown in the above real-life case study, can hold dangerous traps and pitfalls.

Although the Internet may promise a cheap solution, it’s rarely the most cost-effective one in the end. Make sure that you purchase the best-performing list for your industry, objectives, and situation by working with an experienced list broker.