E-mail List Rentals: Red Flags
A look at one consumer goods company's plan to use a third-party e-mail list to boost business. Part one of a series.
When I was visiting relatives before Thanksgiving I met the owner of a small consumer goods company — let’s call him Bill. His product makes a great gift and he was looking at the holidays as a peak season for sales. Bill was about to embark on a multi-effort marketing campaign to a third-party e-mail list.
He had high hopes; I saw red flags. Bill agreed to let me share his story, an important read for anyone looking to use third-party e-mail lists to boost their business. In this column I’m not going to name the list company or the consumer goods company, but I will cite the red flags I saw from the beginning. In the next column, we’ll talk about the results.
In an e-mail that Bill shared with me, the list company promised the “best targeted e-mails on the market today.” Then it presented its fee structure, which ranged from 12.5 cents per record (16,000 quantity) to 3.5 cents per record (300,000 quantity).
Red Flag No. 1: I’ve never heard of a legitimate list company offering a sliding price scale. The cost-per-thousand figure quoted holds, no matter how large or small a quantity you contract for. This type of pricing discourages the buyer from testing a small portion of the names (10,000 to 20,000) before investing in the full list. You should always test a list before you rent it — and any company with a pricing structure that makes this unattractive probably isn’t 100 percent confident in the quality of its names.
The list Bill requested was a business-to-consumer (B2C) list. Wordata provides a quarterly price index on e-mail and direct mail rental lists. Its Fall 2008 Report put permission-based e-mail B2C lists at an average of $150 per thousand, or 15 cents per record.
When I probed more, I found that Bill was actually not getting just a one-time rental of this list, which is what the Worldata index measures. The 3.5 cents per name he paid included four sends managed by the list company, after which the names would be turned over to him to “market to as many times and as often as you see fit.” So the actual cost of this deal, assuming it was a legitimate list, would have been more than four times the 15 cent one-time list rental fee, or 60 cents per record.
Red Flag No 2: If these are the “best targeted emails on the market today” then why are they being offered at a cost that is 79 to 94 percent below the industry average? If someone offered to sell you a brand new car for 79 or 94 percent below what you knew to be the market value, wouldn’t you be concerned?
Red Flag No. 3: An opt-in e-mail list is an asset. The way companies make money is to rent the list, not give it away. Legitimate companies renting e-mail lists don’t turn the names and e-mail addresses over to the buyer — ever.
The list company representative explained that that list would be “double opt-in,” because the people on the list had opted-in once to receive e-mail from the list owner and would be given the opportunity to opt-out of receiving e-mail from Bill’s company.
Red Flag No. 4: This is not “double opt-in” — double opt-in requires a person to sign up for e-mail and then take a second action, when an initial e-mail is sent, confirming that they are the person who signed-up and that they do want to receive e-mail. The procedure the representative described is a single opt-in with a second “negative option opt-out” effort, where silence assumes permission. The level of permission here doesn’t come anywhere near a “double opt-in.” Either the list company doesn’t understand the meaning of “double opt-in” or it is co-opting the term to make its practices sound more credible than they are.
The list company representative also provided some benchmarks for this list. He quoted an open rate of 12 to 18 percent and stated that some e-mails have had open rates as high as 24 to 30 percent. For click-through rate, he cited 11 to 21 percent.
Red Flag No. 5: These are very high performance metrics for third-party rental lists. Benchmarks for house lists have open rates in the 20 to 30 percent range, with click-through rates ranging from 3.5 to 14 percent. Third-party lists usually perform no more than half as well as your house list. So while the open rates are in the range, the click-through rates he quoted are well above what would be expected.
Curious about how this list did for Bill’s company? I’ll have results of the send, plus a few more red flags and tips, in my next column.
Happy New Year!
Jeanne
