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Don't Rent, Don't Sell

  |  November 10, 2003   |  Comments

List rental ROI: Zero (or worse).

Call Number One

"Hello?"

"Yes, hello. I'm with a recruiting firm, and I'm calling to see if I could get access to your employee directory."

"Our employee directory?"

"Yes. We'll pay your company several thousand dollars if you would care to share your employee contact information with us, and even more if you would rank them by performance."



Call Number Two

"Hello?"

"Yes, hello. I'm with a marketing firm, and I'm calling to see if I can rent your customer list."

"Oh, yes, we rent our lists. Call Amy at extension 5555. She can give you the information and rates."

On call number one, you would hang up and perhaps tell a colleague about the call so you could both have a good chuckle. Yet with call number two, more organizations than not would gladly rent their lists to make an extra buck or two.

Renting your customer list is just as ill-informed as renting your employee list.

It's intuitively obvious why we don't rent our employee directories. It would enable others, perhaps our competitors, to poach our best staff members. Companies invest heavily in attracting, training, and retaining employees. They are considered an important asset of any organization and are protected as such. Doesn't the same logic apply to customers? It costs a lot of money to attract and "educate" them regarding the products and services you offer.

Once you've managed to break through the clutter and engage with customers, why would you share them with anyone? People are inundated daily with advertising messages. There's no good reason to add to that clutter by giving others access to your customers. Incremental list rental revenues are hardly relevant when compared to the lifetime value of a loyal customer.

Why do organizations still rent lists? I contend it's commonly because of a lack of understanding of the value of the customer "asset." An investment in that asset must be carefully managed and protected.

I've developed a model over the past couple of years that I often share with clients to give them a framework for valuing customers. The model likens customer relationships (and the information you use to get to know customers) to a mission-critical, high-value corporate asset.

If you have 1 million customers with an average future value of $1,000, you're sitting on a $1 billion dollar asset. If giving others access to your customer list decreases the effectiveness of that list by only 1 percent, the asset value just decreased by $10 million dollars.

At a recent ClickZ conference, I presented this model in my keynote. On a later panel, Elaine O'Gorman, who runs American Airlines' email marketing program, referenced the asset model and described how she did some simple calculations at American. She concluded American's email list is worth approximately the same amount as a wide-body airplane. If anyone comes to Elaine and asks if he can use her email list, she's quick to point out the asset's value means he needs to treat it with care and only use it in such a way as to increase its long-term value. Nobody at American questions the need for proper management and maintenance procedures for a Boeing 777. The company's future viability depends on it.

Customer data is no different.

Privacy rules and regulations are rapidly proliferating. Individuals rightfully demand they be given control of and access to their personal information. It's more important than ever to develop a strategy to manage personal information assets. Proper governance and oversight soon will not be optional. It will become a requirement for all organizations that retain and store ever more intimate profiles of the people they interact with.

Businesses today are a long way from being able to track the information they collect. Most don't know what they've got, nor where it's kept. "Ownership" is often distributed. Oversight is entirely lacking. If the average CMO were held to the same management, oversight, and reporting standards for customer information assets as the CFO is for financial assets, he'd be fired on the spot. The company would face shareholder lawsuits.

Strategic investment in personal information assets enables companies to grow. Protecting those assets creates tremendous return on investment (ROI). Poor oversight and use exposes organizations to ever-growing liabilities. Returning to the American Airlines' email list for a moment, state anti-spam laws alone pose a significant threat to this asset. If not managed carefully, spam allegations could force American to spend heavily on legal fees and penalties, unless it can prove proper consent from all recipients in its database.

Next time you consider renting your list, consider it as the valuable corporate asset it is. Would your human resources VP rent the employee directory? The answer should provide any skeptics with an unequivocal answer.

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ABOUT THE AUTHOR

Hans-Peter Brøndmo

Hans Peter BrØndmo has spent his career at the intersection of technological innovation and consumer empowerment. He is a successful serial entrepreneur and a recognized thought leader. His latest company, Plum, is a consumer service with big plans to make the Web easier to use. In 1996, he founded pioneering e-mail marketing company Post Communications. His recent book, "The Engaged Customer," is a national bestseller and widely recognized as the bible of e-mail relationship marketing. As a sought-after keynote speaker, he has addressed more than 50 conferences in the past three years, is often featured in national media, and has been invited to testify at two U.S. Senate hearings and an FCC hearing on Internet privacy and spam. Hans Peter is on the board of the online privacy certification and seal program of TRUSTe and several companies. He performed his undergraduate and graduate studies at MIT.

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