Don’t Tell The Donor

What’s Eating The List Industry?

By “A Fundraiser …”

While reports of direct mail’s death may have been greatly exaggerated, unfortunately the same cannot be said for the traditional mailing list management and brokerage industry. There is a growing understanding that a series of events over the past year have wounded the list community and left it ill-prepared for the coming challenges ahead.
Before I go any further, it should be noted that I have long been an advocate of nonprofit fundraisers ability to use mass mailing to prospect for new members. Not only is it protected by the Constitution, it can also be a cost effective way to raise money and build donor files.

I believe strongly in the ability of organizations to use the unique power of mail to educate and motivate potential new donors. If you believe (like I do) that the revenue from direct mail is responsible for building many of our country’s most important nonprofit organizations – then the mailing list industry deserves a large amount of the credit for developing this successful fundraising channel.

But times have changed. Just as my Don’t Tell the Donor blog attempts to focus debate on controversial issues in the fundraising world, I wanted to use this space this month to talk about the uncertain future of the traditional list industry.  

For those not familiar with this practice, when nonprofits plan an acquisition campaign they hire list brokers to plan and coordinate a mailing list. Many nonprofits exchange their mailing lists with their peers as part of this process. Nonprofits looking to make extra money often hire list managers to create and market data cards advertising a profile of their donor file. Some rent the names for $50-$100 per thousand names (or more) depending on the detailed level of selects and the source of the names.

During the past year, the industry has endured a combination of: shrinking list universes, a weakening economy, lots of bad publicity, increasingly organized backlash against “junk mail,” and the aggressive expansion of cooperative databases. More importantly, nonprofits with established mail programs are beginning to ask questions about the saturation of the shared donor universes and whether there are better ways to reach new donors.

I was at a conference last year when I heard a well known and respected list brokers say that the total 12-month active universe for all nonprofits was estimated at 70 million names. This broker lamented the fact that this was down over 5% since 2005. With the exception of some new large religious lists coming onto the market, this broker blamed this shrinking universe size on the same trends observed by recent benchmarking studies – many nonprofits have shrinking active donor files.

While I agree that you can’t sell what you don’t have… the only thing worse than not having enough lists to sell is not having enough buyers to buy. In my opinion, as the public perception that the economy is headed for a recession increases, nonprofits are already cutting expenses. Despite the advice of many fundraising consultants, anxious nonprofits are going to cut acquisition budgets and list orders are going to decrease dramatically.
Even without the current economic weakness, the entire list industry is becoming a target of the increasingly organized coalition of consumer groups, environmentalists, and well-funded citizen activists who are threatening to wage war on all “junk mail.”

The Direct Marketing Association and others were scared enough to launch preemptive marketing campaigns geared toward self-regulation in the hopes of avoiding do-not-mail legislation. One of the most controversial of the tenants of the new marketing effort (called the Commitment to Consumer Choice) is to force mailers to make it easier for recipients to “opt-out” of future list exchanges and mailings. This increased public scrutiny is sure to continue to suppress the total list universe size.

From an entirely different direction, the list industry has to worry about challenges from within. For the most part, the list industry is small enough that participants police each other and use an honor code to guarantee that rented and exchanges names are only used once. A rare public fissure erupted earlier this Spring when an industry leader questioned the current lack of agreement over how groups were retaining list information to model the likely responders and build Chronic Non-Responder databases. It’s difficult to underestimate the impact on the industry that would accompany weakening trust between list brokers.

Additional internal pressure is also coming from the increasingly aggressive pursuit by cooperative databases to replace the traditional list sources. The basic theory of a cooperative mailing lists service is that nonprofits pool their names together and append third party variables to determine a better list of prospective donors. Mailers are increasing able to find more effective sources of names by modeling a cross section of prospective donors without being limited to one source. It seems inevitable that this modeling approach is bound to replace the tradition list order structure.

For an industry that has already endured a major wave of consolidation, all of these challenges described above will continue to pressure list managers and brokers. As nonprofit fundraisers continue to struggle to find new audiences, they are looking to the list industry for ways to save money and target better prospective universes. If the list universe can’t adjust, it’s future is in jeopardy.

*Editor’s Note: Don’t Tell The Donor is one of the hottest blogs in the sector. It’s written anonymously because the author is well known in the sector and he/she/its bosses wouldn’t be pleased. Be assured, The NonProfit Times knows the author’s identity, at least enough to write the check. You’re going to have to trust us.