Many catalogers reacted to the recent economic downturn by cutting back on prospecting to focus on their best customers: their house file names. Some simply eliminated prospecting altogether and held their breaths.
As most catalogers have realized, this strategy can be employed for only a limited time before natural aging and attrition hurt overall house file response rates, bottom line revenue and even deliverability.
It’s time to exhale.
Smart catalogers are refocusing on prospecting to bring fresh names to their databases, revive lagging house file response rates and lay the foundation for sustained growth.
Prospecting is not without challenges. For most catalog marketers, it is a losing proposition, at least in the short term. Catalogers must look beyond ZIP models and use their best direct marketing know-how to build their house files with quality buyers who will deliver long-term value. Here are some cardinal rules, innovative strategies and cost-effective techniques.
Read your results right. It may take multiple mailings over several seasons before you see ROI from first-time buyers. Metrics that accurately evaluate list performance beyond acquisition are necessary to understand the potential lifetime value of new buyers. These advanced analytical techniques often uncover counterintuitive findings – a list that looks like a loser at first glance proves over time a winning source of profitable customers. If you lack the capability in-house to conduct ongoing lifetime value studies, engage a reputable analytics group to do it.
Leverage your Web site. The Internet as a selling channel has been one bright spot of our economy in the past five years. Cost effective, flexible and interactive, a cataloger’s Web site can account for 50 percent or more of its orders. The Web site’s importance as a prospecting channel should not be overlooked. Search engines, advertising, word of mouth and even serendipity bring browsing prospects to your site. Influencing them to register, if only with their name and e-mail address, can produce an ongoing, reliable source of new names for prospecting.
Several communications options are available for these Web-acquired names, including: reverse append of address in order to send catalogs or other less-costly direct mail pieces; and e-mail campaigns to encourage online purchase or, alternatively, response with full name and address for subsequent catalog mailings. A structured contact strategy and test design must be in place to measure performance of each option.
Prescreen your verticals. Historically, catalogers prospected by renting lists at premium rates and evaluating them on a list-by-list basis, hoping for a hit. Today this measurement is not only too short-term, it is too broad. Catalogers need to seek ways to narrow their selections. Prescreening models developed on a list-by-list basis lets DMers target better by selecting only the most productive parts of an overall list. This surprisingly cost-effective technique uses appended demographic data and sophisticated algorithmic formulas to cut out the waste in your vertical mailing files.
Because these models use sound statistical technique that weighs the meaning of each demographic attribute, they are far more effective than selecting by gender, RFM or geography. And because they are customized for your business, they work better than the “black boxes” offered by data consortiums, which were developed to serve the broader direct marketing industry.
Look for friends in the family. When seeking new prospects, start right at home. You may be able to use your database to identify, either directly or indirectly, valuable prospects with which to expand your circulation universe. Suppose that you are a marketer of music CDs whose database is built at the household level, with a designated head of household as the main customer. Demographic and transactional data may indicate that a particular head of household is a middle-aged woman who enjoys classic rock. But occasionally this customer orders Britney Spears or Avril Lavigne. By recognizing this unusual buying pattern, you may be able to use compiled data to append the name of her teen daughter, target orders specifically to her and thus expand your reach in a household that already has an affinity to your brand.
Surveys also can capture data that draw a richer profile of a household – for example, the month and date of birth of all the children so that you may target offers to specific age ranges and know when the household “ages out” of your catalog’s offerings.
Another approach is to use merge/purge data to better understand the composition of a household. If a customer on your inactive file bumps up against another individual at the same address on an outside list, you may be able to merge those records and pay for the new name only when you mail. Meanwhile, you created a more robust understanding of the household for better targeting and know that the household, overall, has a deeper alignment to your brand. And referral programs, friend-get-a-friend offers and viral marketing techniques are excellent ways to develop prospects and create marketing buzz.
Optimize offers. To maximize the likelihood of response and purchase at the acquisition stage, create offers that are distinctly different from those extended to current buyers. You want your offer to be aggressive enough to lure prospects but not offend current, loyal customers by treating an outsider better than them.
Design and test several series of offers, including a series that becomes more aggressive over time; one that becomes less aggressive over time; and one that maintains an even level of aggressiveness throughout. Other elements to test include the number and the timing of contacts throughout the year. To execute these tests you will need to work with your merge/purge service bureau to properly identify names that were previously mailed and maintain careful response records for analysis. Roll out with your optimal offer(s) but don’t stop testing. When your results start to decline, you will have a new offer in your vest pocket to substitute as needed.
When brainstorming your offers, be as creative as possible. Catalog offers might include: free shipping, buy one get one free, buy two get one free, percentage discount and dollar discount for threshold purchase. You may want to consider a premium, especially if you can add it to your shipments with no consequence to your costs. A women’s clothing catalog, for example, could offer an accessory as a premium. If sourced properly, this premium could cost very little but make a big impression on new-to-file customers.