With the increase of bankruptcies among retailers, online merchants and other consumer companies, the accumulated marketing and ordering information embedded in these companies databases are growing more and more valuable. These firms have built sophisticated analytics to improve sales results by massaging the acquisition data of each and every customer. This data in no way was responsible for the company's demise. More than likely, if it was carefully pursued, the company would not be in a bankruptcy situation. The disposal value of this customer information is extremely time-sensitive. Many auction firms and other disposal entities prefer to handle the hard assets early in the liquidation process since there are ready markets for inventory, manufacturing equipment, finished goods and supplies. After the hard assets, the intangibles like patents, domain names and customer files are pursued less aggressively.
The hard assets can be quickly advertised, promoted and sold in live auctions. The secret is that customer files can be sold almost as quickly with just a few key steps. First, the estate's trustee needs to provide a few key facts regarding the business, its product line, its typical customer base (e.g. heavy construction vs. men's wear), normal payment terms, a computer file or database of customers information (we'll talk about personal and credit card information later) and its location. Is there a prospect file also? These file prospects are usually nonbuyers who request a catalog, call in with product questions, etc. Their value lies in the firm's ability to convert these names to buyers, through special promotions, discounts, etc.
The direct marketing industry, which oversees the standards of thousands of sellers through catalogs, online and other retailers, has a sophisticated base of industry firms that analyze, configure and structure the data for a variety of these resellers. It is not unusual for a catalog retailer of men's wear to trade 50,000 names of buyers of men's winter jackets for an equal number of a competitor's customer file of men's winter jacket purchases.
It is necessary to determine the public privacy policy of the company to ensure that any sale of the customer file will be in conformance with 11 U.S.C. §§363(b)(1)(B) and 332. These sections of the Bankruptcy Code specify what can be used and what is not transferable. A key third-party firm can analyze and prepare each company's file for a direct mailer of catalogs or do an e-mail broadcast while encoding labels with response data to track success rates.
There is a plethora of list-cleaning firms that can ensure that critical data is carefully preserved, which adds value to the customer file. Purchase history, product categories purchased, average order size, etc. all add value to the list. If the list was maintained in-house, details of the file may be more difficult to determine. If it was maintained by an outside firm, it may be available to determine the file structure and its contents and layout, all vital details for a potential buyer. Of course, it can also strip out the credit card information mandated by the Fair Credit Reporting Act.
In addition to the above customer file features, there is another key aspect of maintaining the value of the customer files: its age. Lists commonly degrade in value because of their age. An old rule of thumb states that the value of a list decreases 2-3 percent per month due to people moving, name changes, expiration of forwarding addresses and stale last purchase data. Keeping addresses updated by an outside service bureau can help tremendously. The U.S. Postal Service provides several computer-based services to ensure deliverability.
The biggest factor in determining a files value is its age. Analysts often refer to categories of customers, such as 90-day buyers, 120-day buyers or six-month buyers. It will not take long for the 90-day buyers' file to completely disappear. However, there are numerous professionals in the direct-marketing business that can provide their professional skills to get these kinds of files into saleable condition and quickly monetized.