Spend money to mitigate the impact of postal rate increases

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For some small and medium-sized merchants, specifically those who use direct mail and catalogs for advertising, the upcoming U.S. Postal Service rate increase provides a significant challenge. If history is a guide, the natural reaction will be threefold: 1) adjust piece formats to reduce costs; 2) reduce overall circulation, especially among marginal housefile and prospect names; and 3) base variable cost purchase decisions on price rather than value.

Most agree that changing formats is a prudent step. However, reducing circulation and blindly lowering expenses are easier, short-term fixes fraught of long-term ill effects.

A contrarian's approach would be to invest in your customer database to drive significantly improved performance. Here are a few options worth exploring.

Data attributes. Data is the foundation on which all performance gains are driven. If your current marketing database does not provide the access, analysis and data elements you need, you cannot afford to not to improve your capabilities in this area.

Matching. Now would be a good time to review your matching logic that combines disparate records into a single customer. If the logic is too loose or unable to include data from all sources, you may be overstating the number of customers and missing a more accurate view of their activity.

Hygiene. Basic hygiene such as postal address standardization, NCOA, ZIP+4 coding and e-mail hygiene needs to be performed on a regular basis to improve your matching accuracy and remove orphan households. If you have addresses with recent or significant purchase activity that cannot be coded, consider an address verification and correction-calling program.

Customer modeling. Work diligently to get the most out of your customer database. Approaches that augment or replace basic RFM selections have been proven to significantly improve housefile performance, sometimes providing as much as a 50 percent lift on some segments. And these modeling strategies can be continuously improved over time to achieve even better results.

Segmentation. Going beyond RFMC segmentation, some marketers are beginning to use persona-based segmentation as a way to customize their contact strategies. Applying a combination of attributes such as current value, life-stage, purchase categories and demographics, they are able to identify a handful of unique clusters in their customer base.

Media effectiveness. Over the past several years, marketers have been trying to cope with the need to allocate transactions to marketing efforts through a process known as matchbacks. Generally, these matchbacks have one best winner - one offer channel getting the credit for the demand. This approach is sufficient when looking at media in silos and not caring about double counting or halo-effects.

To truly develop an understanding of media effectiveness, a rules-based fractional allocation methodology holds the most promise. In this approach, all potential marketing channels are identified and their attributes measured. Relevant attributes include order curve, the products contained and other information about each offer. Through analysis, rules can be developed to assign weights to each marketing channel and its attributes to fractionally allocate demand of an order across the offers likely to have influenced the purchase decision.

Contact strategies. Building on all the data from the strategies discussed above, marketers can begin the task of testing and optimizing contact strategies. Activities as simple as only e-mailing cross-sell offers to new-to-file buyers from shopping comparison engines can go a long way to ensure improved performance of your marketing investments. Armed with a new and more complete understanding of their customers, marketers can now realistically design improved contact and migration strategies that significantly improve performance.

Some may consider these sophisticated and complex database marketing strategies. The reality is that these are within reach of marketing professionals today. By putting the infrastructure in place and developing a roadmap of incremental improvements, marketers that employ such techniques are much better equipped to create programs that ultimately increase their return on investment and help overcome challenges such as postal rate increases.

By Casey Carey

For some small and medium-sized merchants, specifically those who use direct mail and catalogs for advertising, the upcoming U.S. Postal Service rate increase provides a significant challenge. If history is a guide, the natural reaction will be threefold: 1) adjust piece formats to reduce costs; 2) reduce overall circulation, especially among marginal housefile and prospect names; and 3) base variable cost purchase decisions on price rather than value.

Most agree that changing formats is a prudent step. However, reducing circulation and blindly lowering expenses are easier, short-term fixes fraught of long-term ill effects.

A contrarian's approach would be to invest in your customer database to drive significantly improved performance. Here are a few options worth exploring.

Data attributes. Data is the foundation on which all performance gains are driven. If your current marketing database does not provide the access, analysis and data elements you need, you cannot afford to not to improve your capabilities in this area.

Matching. Now would be a good time to review your matching logic that combines disparate records into a single customer. If the logic is too loose or unable to include data from all sources, you may be overstating the number of customers and missing a more accurate view of their activity.

Hygiene. Basic hygiene such as postal address standardization, NCOA, ZIP+4 coding and e-mail hygiene needs to be performed on a regular basis to improve your matching accuracy and remove orphan households. If you have addresses with recent or significant purchase activity that cannot be coded, consider an address verification and correction-calling program.

Customer modeling. Work diligently to get the most out of your customer database. Approaches that augment or replace basic RFM selections have been proven to significantly improve housefile performance, sometimes providing as much as a 50 percent lift on some segments. And these modeling strategies can be continuously improved over time to achieve even better results.

Segmentation. Going beyond RFMC segmentation, some marketers are beginning to use persona-based segmentation as a way to customize their contact strategies. Applying a combination of attributes such as current value, life-stage, purchase categories and demographics, they are able to identify a handful of unique clusters in their customer base.

Media effectiveness. Over the past several years, marketers have been trying to cope with the need to allocate transactions to marketing efforts through a process known as matchbacks. Generally, these matchbacks have one best winner - one offer channel getting the credit for the demand. This approach is sufficient when looking at media in silos and not caring about double counting or halo-effects.

To truly develop an understanding of media effectiveness, a rules-based fractional allocation methodology holds the most promise. In this approach, all potential marketing channels are identified and their attributes measured. Relevant attributes include order curve, the products contained and other information about each offer. Through analysis, rules can be developed to assign weights to each marketing channel and its attributes to fractionally allocate demand of an order across the offers likely to have influenced the purchase decision.

Contact strategies. Building on all the data from the strategies discussed above, marketers can begin the task of testing and optimizing contact strategies. Activities as simple as only e-mailing cross-sell offers to new-to-file buyers from shopping comparison engines can go a long way to ensure improved performance of your marketing investments. Armed with a new and more complete understanding of their customers, marketers can now realistically design improved contact and migration strategies that significantly improve performance.

Some may consider these sophisticated and complex database marketing strategies. The reality is that these are within reach of marketing professionals today. By putting the infrastructure in place and developing a roadmap of incremental improvements, marketers that employ such techniques are much better equipped to create programs that ultimately increase their return on investment and help overcome challenges such as postal rate increases.

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