Escape the Circulation Death Spiral

Aug 11, 2008 8:57 AM  By

In the face of the current economic storm, mailers may feel they have had no choice but to scale back on prospecting. The extent of these cuts is extreme, resulting in a 20% drop over the trailing 12 months.

Although beneficial in the short run, these cuts often harbor long-term financial side effects that are hard to overcome. Sometimes referred to as a circulation death spiral, this drastic reduction in prospecting will cause the housefile to grow stale and can impact future campaigns for months to come.

It is not unusual for mailers to fall into this situation occasionally. These cutbacks are usually for short periods of time, like one season or even a year. Once conditions improve or internal problems are resolved, mailers need to fight their way out of the death spiral through aggressive and productive mailings, building their house files back to robust levels.

To help avoid the circulation death spiral, it is important to mail enough prospect names to replenish housefile attrition. This will ensure there are enough new customers to sustain revenues on a go-forward basis. Achieving this balance is normally not an issue. However, we see an imbalance from a large portion of mailers in various segments of the industry.

With less acquisition circulation, there are far fewer names in one- and 6-month recencies for mailers to leverage—and we all know recency is king when it comes to mailing the most productive names.

This is real and happening right now. A review of a large cross section of our industry determined that 12-month file counts had come down by 12% since last year and 3-month file counts had fallen at an even more alarming rate.

Some decided the answer was to put more of their marketing dollars towards the Web, which is a wise move, but one where you can only productively go so far so fast. Like it or not, mailing catalogs is still the main driver of growth for our industry and generally produces the most productive buyers.

Rescuing names from the spiral
So with all of these increased costs, how are we going to grow our industry and get out of the death spiral? The answer is to mail smarter. It boils down to the fact that there is a lot of room for improvement in house file and prospect mailings.

Depending on your business, you are most likely living with prospect response rates ranging from .05% to 2%. Your immediate goal should be to improve that by 30% or more. To mail prospects aggressively again, an increase in response is needed to overcome the substantial increases in costs that have been heaped upon our industry.

This brings us to the immediate problem of rescuing the good names. Because such a large quantity of mailers have reduced their mailing efforts, many of their 3- and 6-month buyers have migrated to the 7- to 12-month or 13- to 24-month timeframes. Therefore, many of the best prospects have fallen into the older recencies on your most productive files.

To make up for the severe shortfall mailers will be experiencing, techniques need to be leveraged to identify recent buyers on mailing lists that have older recencies.

For example, if a mailer was expecting to mail list A with a 3-month $100+ selection and was expecting to receive 50,000 names but only 35,000 were available, the quantity will have to be made up somewhere else. The solution would be to go back into list A and append the 7-12 month $100+ buyers with 3-month recency data from a source that has that information available.

This will give the mailer a name from a proven list that has purchased within a similar timeframe and has also made a purchase within the last three months from some other mailer. The results should be nearly as good as the normal 3-month selection and in some cases are even better.

This has been happening for years in the merge-purge process with what many mailers call super duping, when a mailer identifies non-productive older recency buyers on their house files that are now deemed suitable to mail because they matched an outside list in the merge. It was thought because they were a multi buyer in the merge they would be more productive, but it is really the fact that they were a recent purchase from another list that identifies them as the better potential buyer.

Michael Hayden is president of the American List Exchange Association.