Staying Alive in List Brokerage

To maintain a list brokerage, one must handle much paperwork and be adept at list recommendation and rental

SRDS' “Direct Marketing List Source” directory itemizes over 800 brokerage firms — or, to be a bit more precise, over 800 companies that claim to offer brokerage services.

I can assure you there are some real brokerage companies hidden among the lettershops, in-house firms that think they can save a 20% commission by asking the office custodian to pick their mailing lists, bookmaking outfits that want to launder their money and FBI agents who want to entice our businesses into violating various privacy laws.

“Twenty-seven thousand lists, twenty-seven thousand brokers.” That's not an old saying; I just made it up. And it's true, of course, that any company that wants to broker can order a mailing list — it's knowing what list, tracking the order, keeping the paperwork, billing it out…that's difficult.

We come from a nation of entrepreneurs who think that, armed with a directory and a basic knowledge of mailing lists (“a…mailing…list…is…a…list…of…names”), any mailer can be served properly. Well, I don't want to come across as sounding too cynical. As a class, brokers are very bright, but brain surgery this ain't. It's true that over the past few years the nature of list brokerage has changed radically — and that the number of list brokerage houses in our industry has increased radically.

The two main reasons for this are the decade-long boom in American business, and the rise of new types of lists. In boom times — you remember those — a disproportionate number of new brokerage houses almost always springs up, because brokerage is very often perceived by the uninitiated as a source of easy income requiring little investment.

Can't anyone order a mailing list? Can't we all see that a list of tennis racquet buyers would really work well for a tennis magazine? Isn't that easy?

Prospects become particularly promising when a new type of list or marketing vehicle that can be utilized by direct mail companies appears. And over the past few years, the development of e-mail lists has watered the mouths of dozens of entrepreneurial types — a perfectly natural thing to happen. Hence one of the reasons for the startup of dozens of brokerage houses.

The Definitive Broker List

Some months ago, one of my clients asked me to build the best, most wonderful, most comprehensive list of list brokers to be found. We used the print edition of SRDS' broker list as a starting point, and ended up by having someone call every single brokerage house in the country to get its data.

While doing this, however, we made note of the broker entries under the paragraph labeled “fields of specialization” in the SRDS direct mail list and print directories. We broke these listings down into 74 types of entries, such as “sports,” “health,” etc.

Three hundred forty-seven brokers either left the “fields of specialization” section blank or stated “all types” in the space. The rest of them noted specialties.

There are two meanings that can be inferred from listing specialties. The first is that the house will handle that type of offer and no other. A good example of this would probably be a fundraising brokerage house.

The second is that, while the brokerage company might accept any type of offer for brokerage, it has a special expertise in the field it lists — so that, for example, while a general-interest house might list “fundraising” as a specialty, it's certainly not going to turn down Capital One as a client.

So the meaning of the counts is somewhat ambiguous. But the fact remains that almost 500 houses listed one or more specialties, and it might be worthwhile to quantify and discuss some of these.

To start with, no less than 125 houses listed “fundraising” as a specialty (these in addition to those who handle “all types” or who didn't list any specialty, as we've mentioned. No startling news here; this certainly confirms something about the dimension of fundraising and donor brokerage in the United States.

It should be added that six companies listed “Hispanic”; “African American” got one listing, “American Indian” got one, and “ethnic” got four. That certainly says something about the lack of attention paid to American ethnic and national minorities.

• There were almost 140 mentions of a combination of techie categories: “high tech” in some form, “e-mail” in some form and “telemarketing.”

• Seventy-six companies listed “financial” or “banking.”

• Sixty-eight firms listed “package inserts.” Given the relatively small number of package insert programs in this country compared with mailing lists — somewhere between 1,000 and 2,000 — you've gotta believe there's money in them there hills.

• Twenty-four companies listed “seminars.” Wow! Talk about a field that's largely overlooked and underestimated…

• Another 24 listed “opportunity seekers” and an additional 14 “sweepstakes.” Bet you any amount of money that the figure 10 years ago would have been at least double that in relation to the number of brokerage houses listed.

  As we know, the Internet has taken over a lot of the business and functions of sweepstakes companies. And the “Future Presidents' Club” — as Mike Heaney, vice president sales, brokerage at Millard Group Inc., recently so aptly called the various state attorneys general who have prosecuted agent-sold firms — has really diminished the field as far as direct mail is concerned.

• Eleven listed “political-conservative” and four “political-liberal.” Twenty-seven listed just “political.” That conservative-to-liberal ratio reflects the fact that the Republicans started mining their grassroots constituencies much earlier than Democrats, but I have a sense that the Dems are catching up.

• And finally: “Cultural” received five mentions — and “astrology,” “New Age” or “metaphysical” got seven. Clearly, our heads are in the stars rather than the books.

These, of course, represent only a portion of our findings, but they do invite speculation. And the area that invites the most speculation, in my view, is the rise of e-mail brokerage and management houses.

Getting the Business

One of the strongest immediate needs for any new brokerage house, of course, is business — and that business generally would come from two directions.

First, if the entrepreneur/broker has broken away from another company, he would want some sort of reasonable certainty that some of the business he had done at the old house would go with him (that is, if he had no effective non-compete contract).

At the very least, he might feel that a field of specialization he'd developed at the former brokerage house could be used to mine prospects successfully.

Second, a computer maintenance house or advertising agency might feel that a sufficient number of list rental orders could be attained if it got into the list brokerage business.

But it takes a very different set of conditions to maintain and grow a list brokerage house.

For one thing, the broker must have some sort of ability and talent to deal with the incredible — and often unforeseen — amount of paperwork that goes along with list brokerage.

For another, at some point the broker must demonstrate to his clients that he has a reasonable amount of expertise in the list recommendation and rental business. This will enable him to keep the mailers he's started with and then lay the groundwork for developing a number of other clients.

If the brokerage house has started on the basis of its expertise in one particular type of list — such as e-mail lists, for example — the house, of course, is in trouble if that list doesn't prove to be the wunderkind of the decade.

Well, sometimes it works out: Houses with a single specialty in fundraising have survived and prospered, as have package insert brokerage houses.

And sometimes it doesn't: Witness the difficulties of some houses that've based their futures on the continued prosperity of sweepstakes offers. In these instances, unless the house has the flexibility to move to other areas, develop expertise (or hire brokers who have the expertise in these areas) and acquire a set of clients in these areas on which they can build for the future, that future will not look very bright.

The current situation in e-mail lists follows a very typical pattern in the list rental community. The larger houses, which at the outset knew very little about e-mail lists and the motivational values that drive customers to that vehicle, nonetheless have recognized the potential income that might be derived from these files. They began to develop their own expertise, form divisions…and learn. And they now have the financial wherewithal to be able to build well and learn well.

The houses that have started in the e-mail business and remained there will probably be acquired by a larger house, move genteelly back to their original status as computer maintenance outfits and advertising agencies, or simply wither away, like some of us after going on a Weight Watchers diet.

And a few — those blessed with smart management, great foresight and the ability to adapt to new and unforeseen circumstances with flexibility and energy — will remain and thrive.

Isn't that what life's all about?

Bob Castle is a marketing and technology consultant in the direct response business.