By Rick Brough, director of consulting services, Transcontinental Database Marketing 
If you’re a mailer seeking advice about making the best list selections, you’ve come to the right place. The following suggestions should give you an edge.
Profile your house list. House lists can help determine how to apply targeted selections on prospect lists. For example, a concentration of ZIP codes on the house list may be an indication that you should test targeted mailings to other individuals in the area or mail to areas with a similar profile. People who live in the same neighborhoods typically share similar attributes — income and other demographics.
Do a cost-benefit analysis. With list selection likely being the most critical success factor in a direct marketing campaign, you can’t afford to make mistakes. The old model of low response rates being offset by relatively low costs doesn’t exist anymore. Postage alone makes waste very expensive and can easily reduce the expected return on investment from an otherwise well-conceived campaign. There are many lists to choose from, so you have to begin with a cost-benefit analysis which factors in cost per thousand names (CPM) on one side of the equation and response rates on the other.
Be aware of the different lists that are on the market. It’s critical to be informed about various lists before making your selections. The least expensive and most widely available are files compiled from phone directories and other public sources. Usually these will have the lowest CPM — about $90 — but also the least specificity. Moving up the ladder, targeted lists of subscribers may be sourced from general- or special-interest magazines. The smaller special-interest lists will have a higher CPM at approximately $120 to $150 and up, but also the highest potential response rates if subs relate well to your offer. Often the priciest files include names proven to be direct mail responsive (or better still, responsive to offers ranging from specific products or services to those containing premiums or other incentives). These lists come from catalogers, nonprofits and other marketers.
Combine files to arrive at the quantity of names required. A common challenge is obtaining the volume of names needed to reach marketing goals. Renting multiple lists often solves this problem but also introduces the possibility of duplicate names, an obvious source of waste — and an annoyance to recipients. The best way to avoid dupes is to rent on a net-name basis: When two lists are merge/purged, you only pay for the non-duplicate names.
Ask questions. Be certain to inquire about the recency of compiled lists and the last verification date of subscriber and other targeted lists. Age definitely will affect quality — and responsiveness. You’ll also want to identify geo-demographic selects: age, gender, job title, income, market segment, geographic location and so on. Expect to pay approximately an additional $5 to $10 per 1,000 names for each select. Telephone numbers and e-mail addresses also carry surcharges. Finally, find out the renter’s list hygiene practices. It’ll help you evaluate the services you might have to perform yourself.
Consider frequency up front. You can rent lists for one-time or multiple uses. Generally there’s a discount for multiples. You should know that owners insert seed names into their lists to identify each time the file is mailed, but renters are free to mail at no additional charge to those who purchase or make an inquiry. Just keep careful records to document your legitimate future use of the name.
Test, test, test. Smart marketers are constantly testing new lists to see if they can improve results. Remember: If you want to test both lists and, say, an offer, you need to plan ahead to ensure sufficient quantities for each component to be tested, and you must employ random sampling to ensure the components are similar in every way except for the characteristic you’re examining.
Track results. Testing requires that you can identify and track response. If you’re providing a coupon, for example, then you should have a different barcode for each criterion including list source. For e-mail, track open rates and clickthroughs to gather information, even if it’s the custom offer code. For more detailed tracking, invite responders to a personalized landing page where they can log in with a supplied password and receive tailored information.
Measure what you tracked. Too frequently direct marketers only measure response rates or the number of responders divided by the total number of records expressed as a percentage. But determining true ROI requires measuring sales, cost of goods sold, list CPM and all other marketing costs. Factoring overhead and other costs isn’t required because you’re only calculating marketing’s contribution. Since the lists and other targeting components will all have different quantities, comparing lists requires a comparable measure be calculated. I recommend using a net marketing contribution per 1,000 records.
—Source: List & Data Strateies Jan 1, 2009 newsletter (www.multichannel merchant@pbinews.com.) Rick Brough is director of consulting services at Transcontinental Database Marketing in Toronto. Reach him at rick.brough@transcontinental.ca.