The past holds the keys to the future – through looking at the past, you can determine what works and what doesn’t, and then make educated decisions about how best to move forward. This may seem like a simple statement, but often marketers get caught up in current operations and do not look carefully enough at past performance, procedures, and processes to create the most informed plans to grow circulation profitably.
With that in mind, my company, Marketsmith, has identified eight steps to optimizing circulation, grounded in an historical framework:
- Create an accurate performance history, segment by segment and source by source, which functions as a baseline. Include all lists, web sources (sign-ups, search, affiliates), retail activity, and any other sources, in addition to all house segments.
- Identify the most useful and effective rules for source selection based on careful analysis of historical performance. Determine which variables are the most effective segmentation factors and which metrics are the most consistent predictors.
- Determine reliable analytical tools to allow you to grow your circulation safely, such as, recognizing an adjustable lifetime value analysis may be a more powerful determiner of long-term profitability than a sale-per-book breakeven analysis.
- Review and challenge inherited circulation practices to ensure they are not relying on data that are broken or inaccurate.
- Establish fixed data variables that are no longer at the mercy of an individual process, but result from and are tied to a corporate standard.
- Move to a zero exchange balance every year to make sure no names are left on the balance sheet, allowing list rental income to climb.
- Return to instituting business rule documentation process in the merge/purge, including identifying multibuyers by source groupings, which allows greater control over contact management strategy.
- Develop and institute a contact management strategy by source and channel.
How do you start to implement these rules? A former marketing professor of mine once said: If you don’t know where you are going, any road will take you there. The right roadmap is essential and the right research is critical to crafting the map.
Marketers must begin with a strategic assessment of the company’s circulation practices and processes relative to its objectives, history, and long-term goals, going beyond new segmentation schemas, fancy modeling techniques, and prospect scoring, to look carefully at the underlying data. We call this process an optimization audit.
Through an optimization audit, historical data, typically for the past three years, are reviewed and repaired, using standard-setting best practices to analyze, measure, and report on the data. The process assesses costs on a line by line basis, considers like segment comparisons, and applies an adjustable lifetime value factor tied to the specific competitive environment as well as corporate ROI goals.
An audit will identify both categories and lists characterized by oversaturation and underperformance. It will also look at lists which may have been abandoned in an effort to ramp up too quickly, losing sight of critical segments that still have the ability to generate profitable names.
It is important to look at abandoned lists and the reason for dropping the lists. Unsuccessful outcomes can be the result of:
- Applying incorrect measurement standards;
- Keying in data incorrectly or in inconsistent formats;
- Applying fixed costs to a variable cost structure; and/or
- Using list size as a determining factor for selection.
Conducting an optimization audit should find an additional 25% to 35% profitable circulation; thereby allowing the company to grow steadily. Other factors which come to light by creating an inclusive historical view are the need to adjust for page count, warehousing cost, and margin changes that occur periodically from mailing to mailing.
Additionally and more important, regularly reviewing circulation practices for optimization challenges the industry mantra of mailing to breakeven. Without the looking at results over time, catalogers fall prey to original sources that generate a strong front end and then continue to steadily decrease in value after a cycle of mailings, generating poor performing long term customers who are not efficient.
The bottom line is an optimization audit provides a healthy return on investment by:
- Presenting an accurate picture of the state of marketing operations
- Creating a baseline for future measurement
- Developing a standardized set of business rules for processes and procedures, ensuring consistency
- Elimination of unprofitable sources identified through lifetime value analysis
- Growing your circulation profitably.
Circulation optimization comes from focused, strategic analysis applied in a rigorous and disciplined process. Starting with an audit, a company can have confidence its road map will be focused and targeted, helping the organization grow its circulation profitably.
Monica C. Smith is president and CEO of Morristown, NJ-based consultancy Marketsmith.