Give first-time buyers a boost

Particular to gift cards and gift certificates, customers usually spend more money. This extra spend is often called “reach” or “stretch” dollars. If customers have a comfortable spending threshold of $65, a reach could be as much as 25%, or an extra $16.25. Monitor your customers' performance to benchmark the reach dollars.

An added benefit of isolating the first-time buyers is to evaluate their second purchase. If the data reveal a majority of customers typically by widgets their second purchase, you may want to make a special offer to first-time buyers on multiple widgets or an upgraded widget.

If your operating system does not capture or isolate first and second purchase information, test different strategies. Don't limit yourself to merchandise criteria — evaluate the channel of purchase. Catalog customers who purchased via the telephone are often good candidates to receive a promotion to make their next purchase from the Website.

Tip: Using the customer packages to garner another sale is not limited to first-time buyers. Other in-the-box promotions can be a sale flier or a catalog bounceback.

For example, one business-to-business cataloger saw a nice lift when the bounceback catalog had a “thank you for your order” wrap. Just the message alone doubled the response rate. (Yes, doubled.)

Looking at the first-time buyer segment as a whole, you'll find it's best to group these buyers into most recent year of purchase. Let's assume the tally of first-time buyers is outlined as 700 year-to date 2007; 1,200 for 2006; and 1,300 for 2005. If you would like to include additional years, do so.

The next step is to separate each year into two groups: those with an average order value at or below your AOV, and a group who spent more than the company's average AOV. Identifying the monetary spending helps isolate purchase behavior and allows you to better select mailings/promotions to target these groups.

If you are participating in a cooperative database, ask about modeling techniques to better identify general buying activity. With modeling, you can mail a targeted portion of the first-time buyers instead of randomly choosing a portion to mail.

If you're not participating in a co-op, ask your data processing service bureau about their overlay products. Many times they have multiple resources for profiling data and scouring your first-time buyer file.

The third option is based on buying behavior. Current year first-time buyers should be treated like royalty — you should be cultivating the second sale. For the first-time buyers who spent less than company average, you may want to mail only sale catalogs or one catalog in the height of your strongest season.

Sale catalogs are often inexpensive to mail (compared to a non-sale catalog) because most of the creative is pick-up. Mailing the first-time, low-dollar customers with campaigns that are less expensive or mailing them during the strongest season offers the best potential to make a second purchase.

The first-time customers who bought in prior years with better than average dollars spent should receive extra consideration. What did they buy that was so expensive? And why did they purchase only once?

Look at the purchase history and segment merchandise categories. Perhaps the purchase was a big ticket item that doesn't need replacing, or a wedding registry item, a gift (look at the ship-to address for clues) a gift certificate, or a brand that you no longer carry. Once you've identified several key commonalities, develop a promotion to initiate a second purchase.

Tip: A promotion has two elements: an offer and a message. Often a simple message is enough to motivate a customer to purchase. One cataloger monitors first-time buyers who spent twice the average. If the first-time customer remains inactive for 13 months, the mailer sends a letter asking, “Did we do something wrong…give us a chance to make it right” and includes a survey. The responses shape future mailings of the first-time buyer and frequently help craft a compelling message to earn the second sale.

First-time buyers have untapped potential. Identifying this special group and then marketing to them is the best way to recoup the acquisition costs.

Do the math to understand the marketing cost to acquire customers. Run the numbers to reveal the potential revenues of each campaign as well as the break-even. And give them the attention they deserve — these are future multibuyers.

Gina Valentino is the owner of Hemisphere Marketing, a catalog consultancy based in Kansas City, MO.

SPRING '07 CATALOG: VARIABLE COSTS

	TOTAL	UNIT COST
Creative	$27,000	$0.27
Print	$25,000	$0.25
Postage	$21,164	$0.21
Lists	$6,000	$0.12
Data processing	$4,000	$0.04
Order form	$1,909	$0.02
Total quantity printed	100,000	$0.91

SPRING '07 CATALOG: MARKETING COSTS

	ACQUISITION
Mail quantity	50,000
Orders (customers)	500
Revenue	$32,500
Average order	$65
Cost	$32,000
Cost to acquire	$64