Food for Thought on Improving Sales
Beautiful photography and an artful layout just aren't enough to stay ahead in the crowded catalog market. Add in the effect that e-commerce is generating, and you have a challenge greater than ever to stay in business, let alone expand.
Experience shows that dynamic catalogers use several techniques that help them pull ahead of their competition.
Give customers more than one chance to buy from you. If you start your fall/holiday mailings early enough, you can mail certain segments of your house file three, four or more times in the season. Increase your mailing frequency until the incremental or marginal profit contribution equals your minimum return on investment requirements.
It is amazing how little time and attention are spent in many smaller mail-order food businesses deciding how to segment the customer file and tracking and reading the results. Few decisions in the marketing department have a greater effect on sales and profit. Getting the catalog into the hands of those customers who are most likely to buy is the essence of what segmentation is all about.
Companies that treat all buyers on their house file alike are just not managing their businesses to win. With in-the-mail catalog costs running 50 to 65 cents per book, no one can afford to mail dead names. Stop mailing the dead wood on your house file and use this cash to get another catalog to your best buyers or prospect for new customers.
List rental response rates continue to fall while costs keep rising. This can't go on forever.
If your marketing strategy is to say, "We'll just rent more names this year, call the list broker," and then hope for the best, increasing your profit margin will be an acute challenge. Don't expect different results if you do the same things you have always done.
Test offers, even ones you think you can't afford. These may lead to a breakthrough idea or two. If a core product lends itself to sampling, test it. Obviously, this technique does not work for steaks, live lobsters and other perishable products with high shipping and packaging costs. But for some candy, spice and condiment mailers, sampling programs have succeeded.
Look closely at geography as one way to define your target market. We found with one client who manufactures and sells a regional specialty line that mailing outside the region was a disaster while mailing within the region was quite successful. Had we never looked at geographic bias, we would have concluded the market for these products by mail was not viable. Instead, we found a smaller but highly profitable market.
Conversely, if your products are readily available in local grocery, gourmet and specialty stores, you may find response is higher outside of your region. You will never know if you don't dig into your numbers and read your results.
If you use rental lists, look for techniques to bolster your response rates. Don't be afraid to pay the extra fees or select charges to get the best names on the list, even if it adds $50 or more per 1,000 names to the base cost. Work the math. The extra charges might add 10 percent to your in-the-mail cost but give you a 30 percent to 40 percent increase in response. Consider building a simple ZIP code penetration model to suppress the lower-penetration ZIP codes from your prospect mailings.
Take a hard look at your catalog and evaluate your creative execution. Break out your fixed and variable marketing expenses. The heavy expenses are in printing and postage, not design and photography.
Is poor creative execution costing you more in lost sales than you are saving? To find out, run multiple pro forma P&Ls with different response rates and fixed marketing expenses. Know your true cost per new name and your short-term and long-term customer value (total profit contribution per name).
Effectively managing these two components of your business, knowing what the numbers should be and how to move them, is the essence of catalog marketing strategy. This is what separates the viable growth firms from the ones that struggle in this industry.