When you should change your catalog circulation plan and — more important — how to change it is often determined by necessity. And multichannel marketers have definitely had to make some recent changes out of necessity.
Situational circulation changes are specific tactics affecting the customer contact strategy. Here’s a look at some critical situations — and how to deal with them.
- SITUATION: sales are down
The immediate reaction here may be to exclude prospecting and omit some catalog mailings altogether. Just remember that there will be a corresponding decrease is gross sales. If you need to cut expenses and aim to do it via mailings, here are suggestions to help boost segment performance.
You must know or determine how many customers have a promotable e-mail address. Then, for the percentage of the 12-month file receiving e-mail campaigns, you could reduce the number of catalogs mailed.
So if you were planning to mail your 12-month file twice during a particular timeframe, you could omit the mailing to the percentage of the customers who have a promotable e-mail address. This approach allows you to contact the entire 12-month file twice, but with different mediums.
Tests show that multiple contacts produce stronger results — not only seasonally but in terms of lifetime value. So if you have to cut expenses, a good option is to reduce mailings to customers who will be contacted with an e-mail campaign.
If you can microsegment the customer database, identifying customer groups by channel — single, dual or tri-channel — is another way to parse buyers based on prior buying behavior. You could halt mailings to customers who have made more than one purchase from your organization, those purchases have been on the Website, and matchback data indicates those sales were noncatalog driven.
The same holds true with retail channel-only shoppers. But the critical caveat is noncatalog driven response. You don’t want to stop mailing to customers whose buying behavior is triggered by a catalog — you want to keep mailing to them.
- SITUATION: prospecting is too expensive
Instead of omitting prospect mailings, you could reduce costs by creating a less expensive catalog to reduce postage. For example, if your catalog weighs more than 3.3 oz., consider creating a lighter version (for a different classification and lower postage rates) to mail both to prospects and lower-performing customer segments.
Another option is to consider revising the catalog to a slim-jim size to meet maximum letter rate standards (no larger than 6-1/8″ × 11″). Some catalogers produce both a full-size book for customers and high-performing rental lists as well as a slim-jim catalog to use for acquisition efforts and below breakeven customer segments.
You might consider adjusting the actual rental lists used for prospecting by lowering the quantity to be mailed or by source of acquisition. Look at the costs for the rental names and evaluate potentially moving more circulation to the least expensive lists.
You may also want to use a cooperative database because the cost is less than a traditional rental list. There are price discounts for reaching certain annual quantity thresholds, so you may want to consider increasing quantities from co-op databases.
Using more list exchanges also keeps costs down, since a one-for-one exchange is happening. But there is a corresponding offset of reduced list rental income. As you make these situational circ changes, consider the expense, and the overall impact relating to costs, performance and revenue.
- SITUATION: the segmentation isn’t working
Rather than an overall reduction, look at the circulation specifically by segment and talk to your data processing provider for optimization ideas. If your 12-month customer file performs well, look at statistically modeling the remaining customer file names. Have a modeler find the next best 25,000, 50,000 or 100,000 names.
If you have ship-to names (same name as the billing address but a different delivery address) and recipient names (e.g., gift recipient) on your database, you may want to mail these groups differently. (For more on shop-tos and giftees, see “The gift that keeps on giving” on page 29.)
Of course, you need to test, but some catalogers find that ship-to vs. recipient names perform differently. The recipient names will often respond similarly to a qualified prospect. You can also enhance the performance of the ship-to and recipients by statistically modeling the names.
You should also carefully test nonbuyer segments such as catalog requesters, sweepstakes entrants, warranty cards, tradeshow names, store-opening offers — anything with a name and address. These names may not be mail order buyers, and their initial interest with your company may not have been product-driven.
Keep in mind that these names will respond differently amongst one other, and modeling may be the best way to identify potential buyers. You may find that certain types of lists are not worth mailing at all, and some lists may have a small portion of names that are likely to become buyers.
Segmentation changes are also warranted when RFM (recency/frequency/monetary) needs rejuvenation. You want to aggregate customers into similar performing groups to help predict customer behavior. It’s best to test into the new segmentation but, generally speaking, here are some options to consider.
Channel: Parse the customer file into single-channel shoppers (only catalog, only Internet, only retail) or dual channel (catalog and Internet; catalog and retail; retail and Internet). Depending upon the mailing, you may find that dual-channel shoppers — combined with RFM — have strong, predictable performance.
Primary product purchase: Some merchants have a primary product category that is the bread-and-butter of the company. For example, a running shoes company that also sells apparel and gear may parse data into customers with shoe purchases and customers without. A school supplies cataloger that also sells cleaning products may segment the file by learning supplies vs. cleaning products.
Proprietary credit card: Customers who have the company’s branded credit card are often more loyal, shop more frequently, and are more receptive to special offers than those customers who don’t.
Seasonality: Enhance the RFM segmentation into your primary selling seasons. If you sell to the government, you may follow certain budgeting periods; gift merchants may focus on certain times of year (school season, summer) or specific holidays (Mother’s Day buyers may have different performance attributes than Christmas buyers). Look at your data to determine if seasonality is a factor.
Source of acquisition: Where the customer originated is often a critical determinant of future behavior. Perhaps customers from product demonstrations have a stronger viability than customers from tradeshows. Customers from certain rental lists will have a performance hierarchy. You could easily change how you mail customers based on their originating source.
Cross-company buyers: Merchants with multiple catalog titles and sister companies could identify customers who buy across the family of titles vs. buying from a single title.
Depending upon your customer’s performance, you may find that single-title buyers are more loyal and are your best customers; conversely, you may find that multititle customers are stronger performers because they are avid shoppers and buy frequently.
Situational circ changes are data-driven decisions. You need to look at your business and determine which variables or attributes are strong performance indicators.
Take at least one, or two years of data and isolate the top 20% of the customers. Review the records for like-attributes and identify patterns of success. Test your hypothesis.
And most important: Don’t make arbitrary circ cuts to the mail plan. Be deliberate, and you’ll be prepared with alternative approaches when the situation arises.
Gina Valentino ([email protected]) is president of catalog consulting firm Hemisphere Marketing.