If I can paraphrase President Clinton, “It's the response, stupid.”
With all the hoopla regarding the latest modeling and profiling techniques, many of us have lost our focus on the core aspects of a successful mailing campaign — RFM. Recency, frequency and monetary segments from a mailing list still are the most critical pieces of data available that accurately predict response.
Recency is power! You mail the most recent segments that you possibly can. You see the results of your house file buyers and know that your best buyers are the ones who most recently made a purchase from you. Obviously, those customers who have spent the most and have made the most frequent purchases are unquestionably your best buyers.
Many studies have shown that consumer behavior such as buying patterns occur in spurts. When customers make a purchase, they usually are looking to make a number of additional purchases at the same time. They may buy some shoes, a sweater, something for the house. All of these purchases happen within a relatively short time frame. The customers then goes into hibernation before the buying bug hits again.
What if you could reach these buyers when they still have their credit cards out? What an opportunity that would be to present the right offer to the right person at the right time. It's something that we all work on every day.
A typical mailing includes list segments such as “Last 6 month Female $50+ Buyers” or “Last 3 Month $100+ Credit Card Buyers.” Most of us use house file segments that are broken down by 0-3 month increments and further defined by recency and frequency of purchase behavior.
Typically, you will see significant improvements in response by going to a tighter recency. These seemingly small differences in response can have a tremendous effect on the success of your mailings. Additionally, in cases where your average order is a bit low, you should consider testing a higher dollar segment if available. Your list broker should be able to help you refine your list segments to take full advantage of whatever selections are available.
Also, as you can see, the actual age of a list segment can vary greatly. Update schedules can play a critical role in deciding when to mail a name. A typical three-month segment may be four to six months old, a typical six-month segment can be even older yet. This doesn't even take into consideration your merge/purge and printing lead times. All of this can further age a name before it actually makes it into the mail.
While RFM segmentation can prove to be an incredibly powerful tool, database cooperatives certainly have something to offer by providing additional information not available from many lists. These cooperatives typically build models for predicting future response based on a profile of your customer file and how it matches against the data they have on their master file.
Many list owners also provide modeling services that build similar predictive models. You also can explore the use of response built regression models, which are built from the responses to a particular mailing and finding similar customers from the larger file. Many of the large publishers now offer regression on their files and have become fairly adept at building good, reliable models.
The use of overlaid information should not be overlooked either. There are great sources of demographic and behavioral data now available and worth testing. Many of you have begun testing optimization programs that take list segments and match them up against other lists or databases to generate a greater recency or other buyer characteristics. These can all be great ways to help out marginal files and to take advantage of additional information where stronger recencies are not available.
There also is a new cooperative database that is available that allows you to fully realize the true power of recency. This new program, called RFMplus, is built by capturing the purchasing transaction at the time of sale. With this information you can take advantage of the clustering behavior mentioned earlier and put your offer into the right hands just as the customer is in the buying mood. No other database has ever before been available like this. It is the next wave of real-time marketing. The recencies available are now days or weeks instead of months. This is the next generation for the list industry and it is creating new and more powerful opportunities for greater response.
By taking advantage of the power of recency and going back to basics (with a keen eye for the future), you could very well see much stronger response rates and greater profitability from your mailings. That's truly keeping the focus on response.
Frank Quaranta is account manager in the list brokerage division at The Millard Group, Peterborough, NH.