How Many Web Buyers Will You Have for Next Year’s Catalog Circulation?

Jan 08, 2007 10:39 PM  By

Web buyers represent an ever-increasing portion of a catalog’s circulation. For multichannel merchants, the growth of Web buyers is a key variable in business planning.

Multichannel merchants need to look at their order flow of Web buyers and break down the online orders into as many granular segments as possible. You can tell what is going to happen to sales by looking at when different Web segments start buying, and how the number of Web buyers accelerate, plateau and slow down.

The key is to segment Web buyers by the type of buyers. Natural search, pay-per-click, affiliates, price comparison engines and other sources of Web buyers may be at different stages terms of maturity. Some Web order flows may be brand new, some may show signs of hockey stick exponential growth, some order flows may be tapering off or hitting a sales plateau and some order flows may be declining. Tracking each separate order flow by segmenting the orders by their Web source is the key to knowing whether your business is going to grow in the next 12 months.

Catalogers are used to reviewing the growth of their house file of buyers. The simple catalog model is to mail all the prospect names that perform above breakeven and to mail all your buyers that perform above breakeven. When you are mailing the full universe of prospecting lists and your entire profitable house file of buyers – and you are mailing these list universes as frequently as possible – your sales growth is going to inevitably plateau and will flatten out. Hockey stick growth tapers off and smart catalogers look for ways to balance the slowdown in sales growth and maximizing the profitability of the business as it matures.

Multichannel merchants need to look at the metrics that define the historical growth and the future potential for the different flows of Web orders. For instance, you can measure the amount of traffic from each Web source, you can see if the flows are increasing or decreasing. You can also see the potential in terms of financial profitability. If your Google ad words traffic is increasing 10% but the cost of the traffic has increased 50%, then the amount of future traffic from pay-per-click will decline because you simply can’t afford it. So you need to measure not only the potential universe of Web business from a source, but also whether the traffic is affordable.

If the trend in Web traffic is not clear from comparing last year to this year, compare traffic by month or by quarter.

Don’t assume that if one source of Web traffic dries up, that you can automatically replace it with another source of Web traffic; “Pay per click is getting so expensive, but we will replace that traffic with natural search.” New sources of Web buyers may or may not appear!

Examine your biggest sources of traffic for trends. Are your top traffic generators continuing to drive more traffic or is traffic slowing down.

If your business is driven by customer contact through e-mails, look at your e-mail capture rate and how you can capture more buyer e-mails. Distinguish between e-mail addresses of buyers and opt-in addresses who’ve simply signed up to receive future promotions or information.

Look carefully at Internet customers broken down by the type of merchandise purchased. Web buyers of consumables will respond better than buyers of impulse purchases. Shopping comparison engine buyers tend not to be loyal because your competition is just a click away. Buyers who respond to promotions will be trained to respond to your next promotion.

Measure the catalog response to different types of Web buyers to see if the types of Web buyers respond differently to your catalog.

Look at the projected flow of buyers from each Web buying source. Review the potential universe and the cost to acquire a customer through your various Web channels. Look at those customers’ rebuying behavior on the Web, the revenue you can expect to get from them in the future and their value when you mail them a catalog or send them an e-mail.

The devil is in the details with projecting the growth of your overall Web buyer file. Look at each original source of buyers and you’ll have a much clearer picture of how the Web portion of your multichannel business will grow in the next year.

Jim Coogan is president of Santa Fe, NM-based consultancy Catalog Marketing Economics.