Outside List Optimization: Does it Pay?

Finding the perfect conditions for fine-tuning lists can help define your response.

The process of optimizing outside rented lists, commonly called Marginal List Optimization, is known to increase response rates. Abacus claims the lift ranges from 10 percent to 15 percent, which is consistent with my own experience. However, there is a cost associated with optimization.

So can we say that the procedure is cost-justified? In other words, is the incremental increase in response and in the revenue per catalog mailed greater than the expense? In most cases, I feel the answer is no, which I will explain. There is, however, a place for list optimization when used properly.

Outside lists, which perform at or above the incremental break-even point, are normally not optimized. Optimizing these proven lists would only increase the breakeven point, and for little or no reason, since they are already performing at acceptable levels. That’s why most catalogers optimize the lists that are slightly below the break-even point, i.e., their “marginal” lists. It is also common to optimize compiled lists, such as those from Polk. Optimization identifies the catalog buyers who are on these compiled files and ranks them best to worst in terms of which groups are most likely to purchase.

A certain level of results will be achieved without optimizing. Let’s say, for example, that an average order size of $60 can generate a 1.5-percent response without the added step of optimization. With optimization, let’s assume the response rate increases to 1.68 percent, generating a 12-percent lift in response. Without optimization, $0.90 per catalog mailed is generated vs. $1.01 per book with optimization. In this example, optimization resulted in an $0.11 per catalog mailed increase. This is the incremental increase associated with the optimization process. This incremental increase needs to be enough to offset the cost associated with optimization. If not, optimization is not cost-justified.