Contact Database Economics 101: Weighing Choices

One of the life-changing lessons I’ve learned from two semesters of macro- and microeconomics is that there’s always a trade-off in every choice we make. Economists refer to this as “opportunity cost” – the cost of the thing given up when making a decision. So what does this have to do with a contact database? Everything!

To begin with, trade-offs affect every aspect of list building, management, and usage that requires you to make a choice. Considering the trade-offs involved in choosing one alternative over another gives you a more accurate and reasonable basis for your decision. It allows you to go beyond the obvious or immediate factors and into the real benefits and costs of making contact lists-related decisions.

Trade-offs, by no means, simplify the decision-making process. If anything, they complicate the analysis you have to run. But the resulting clarity and completeness are well worth the extra effort you put in. So let’s try to see how we can incorporate trade-offs in our decision-making thought process.

In our case, let’s use the (relatively) simple example of choosing between two sales leads database sellers. There are countless other decision points involved with marketing lists but, for our purposes, this basic situation should be enough to illustrate the important ideas in doing trade-off analysis.

1. Enumerate your alternatives.

Since our example involves choosing one mailing list provider over another, the alternatives are quite obvious. However, there may be specific situations in your list management efforts where the choices aren’t as clear-cut. To get past such a potential hurdle, be sure to trace the main problem or issue you’re facing, just as how a physician isolates symptoms from the overall syndrome.

2. Define “good” & “bad” attributes.

The next step is to outline the relevant attributes that each alternative has and to quantify or precisely define “good” or “bad” ones. Examples of list provider attributes include product diversity, industry penetration, pricing schemes, database maintenance practices, etc. After you’ve identified these you have to set parameters to see if one alternative is comparatively better or worse in each attribute (e.g., in numeric or Boolean terms).

3. Run the options by attribute.

Now that you’ve identified the comparison points to follow, it’s time to make the actual comparison. Compare how the alternatives fare under each attribute and see how much you’re going to gain and give up from taking either choice. For example, when examining provider A and B under the pricing scheme attribute, the cost savings that you’ll be generating from working with either of the two is part of the trade-off involved. Repeat this process for each attribute and see which choice results in better net benefits (incremental benefits & costs along with trade-offs).

4. Make room for uncertainty.

Although our example involves fairly little uncertainty (since attributes and values for deciding between list providers are reasonably easy to acquire and there are only minimal assumptions made), you still have to factor in the possibility of adverse developments after you’ve made your decisions. After all, there are a lot of factors that are simply beyond your ability to control and measure. Make sure your assumptions are realistic and are conservatively made.

5. Consider qualitative factors.

Qualitative factors are those that you can’t easily express as numbers or precise values but still have an effect on your choices’ outcomes. In the above case, one qualitative factor would be provider’s reputation. Other list decisions may require you to significantly examine qualitative attributes more than quantitative factors, so be sure to have them covered.

On a more fundamental level, trade-offs remind us that it’s impossible to achieve everything we aim for. We always have to give up something in place of anything else we choose. Trade-off analysis, and ultimately decision-making, can be reduced to asking yourself how much of X you’re willing to give up to gain more of Y.