Many companies we see treat each mailing as an individual event and they’re not deliberately resting weaker segments between contacts. If you do so, it will decrease marketing costs and increase profits at essentially no cost in sales.
I have an effective formula that was originally developed by a long-term client. It is an elegant concept, easy to apply, and effective.
Take a look at the sequence of mailings for a set of segments of a given strength level. If the total segment’s seasonal sales contribution divided by the number of contacts is less than the cost of an additional catalog, then remove one contact from the sequence for that segment. You should also add contacts to high-performing segments using this same concept.
This frequency adjustment method is easiest to apply to a sequence of mailings of similar cost such as in the fall/holiday mail plans of gift, home décor, and apparel companies.
Here’s how it would work: Assume an in-the-mail cost of $.80/book and breakeven of $2.00 with a 30% marketing contribution (sales minus marginal cost per catalog, gross margin, and variable operating cost):
- Group A received three summer sale books. The total sales are $6.00, contribution is $1.80, and therefore average contribution is $.60. This group then would receive one less catalog.
- Group B got three summer sale books. They averaged $3.00 per book. Total sales are $9.00, contribution is $2.70, and average is $.90. This group stays with three contacts.
- Group C got three summer sale books and averaged $4.00 per book. Total sales are $12.00. Contribution is $3.60, for an average of $1.20 per contact. Add a contact to this group of names if there is one available in the mailing sequence.
- When subtracting or adding contacts, always do so in the middle of the drop sequence, or add and subtract from the weaker in-home dates if there is perceptible variation.
Assuming your data supports it, this method is fairly simple to apply and quite effective in extracting the maximum profit from the fewest catalogs. It has the effect of lowering the marketing cost even further when layered over my earlier suggestion (see last week’s article, Adjusting Mailing Volume by Reducing Depth).
Bill Nicolai is a senior partner at San Rafael, CA-based consultancy Lenser.