Review Your Remail Strategy

Sep 06, 2005 6:33 PM  By

Remails to best-customer groups maintain about 65% of the original response rate for the group: If the best-customer group earns an 8% response rate on the first drop, the remail will earn 65% of the 8% (.08 x .65 = .052, or 5.2%). Not bad. How many of your average-customer groups pull 5.2%? Any rental lists pull 5.2%? You can see why a remail strategy is important to the overall growth and profitability of the company.

Remail strategies have traditionally been mathematical in nature. But as multichannel merchants began to realize that mailing smarter means challenging assumptions, remail strategies now entail testing creative, merchandising, and other marketing tactics as well.

What does that mean exactly? First, let’s look at the mathematical aspect. Sophisticated mailers tracked the order response curve of the best-performing customer segments and realized these customers ordered much faster than an average-performing customer segment, and certainly lightning speed ahead of prospects. If the average-performing customer segment’s response curve could be represented in a standard bell curve, the best-performing segment’s response curve was a spike followed by a quick descent. So if your next mailing didn’t drop until eight or nine weeks after the first, the best customers were sitting idle for nearly six weeks waiting to be tapped on the shoulder a second time.

Marketers started to test this best-customer group to identify its sales potential. If a cataloger sent the exact same catalog to the exact same best customers four weeks after the previous drop, rather than eight, could revenue offset the cost of mailing? It sure did.

Then catalogers began testing the creative messages of remails. Placing on the front cover a dot whack with a special message or offer evolved into a standard marketing strategy.

The next step was incorporating the remail strategy into the annual circulation plan and giving the creative team the task of developing special covers to actually target market the remail group. This tactic, too, has been virtually standard practice.

One multichannel merchant needed to understand the impact of additional services within the new shipping and handling table and thus introduced it to the best customers first. This group is most likely to buy more frequently; they would probably be the most vocal. And with the remail mailing during a valley period of a main mailing, the effect on customer service should be contained. Sure enough, the cataloger quickly found a bug in the service idea, was able to respond appropriately, and could roll out the service properly before a busy holiday period.

Now let’s say that the main mailings are carrying all the fixed catalog costs. When calculating the return on investment for the remail, you identify only the variable costs of printing and mailing. Would other customer segments be eligible for a remail strategy if cost allocation were strictly variable expense?

If you’d asked that question a decade ago, the answer might be no. And even today, the primary reason for a remail is to tap your best-customer segments on the shoulder to make a purchase. But what if this segment is too small to provide you with mailing efficiencies? Why not identify other segments in your customer file that would benefit from a mailing? How about using a remail to test the timing of an offer, a product or service introduction, or a sale insert? If you can boost sales and otherwise justify the costs (by increasing cash flow, for instance, or updating your database), then expanding the circulation of your remail could make sense.

Another remail strategy broadens the definition of “best customers” to include “like” customer segments. For example, a co-op database company could build a predictive model from your best-customer segment and then use the model to identify an additional pool of names. This pool of names, duly noted as prospects, has the characteristics of your best customers. The mailer now has the option to test these names directly or perhaps try an add-a-name service to “fill” the quantity within each postal carrier route. The cataloger is maximizing postal savings within a carrier route sortation, testing a potential new universe of names, modeling from best customers, and using the remail strategy for incremental cost allocation.

What if you’re not using remails? You’re leaving money on the table. Identifying response curves is so important; it lets you see the optimal frequency and timing of the mailings, as well as how to maximize profitability of customer groups. Remails generate additional revenue and provide flexibility to the ideas and demands of marketing, merchandising and the creative team.

Go ahead, do the segmentation and the math. You’ll make more money.

Gina Valentino is vice president/general manager of Shawnee Mission, KS-based consultancy J. Schmid & Associates.