Now that the holidays are over and sales analyses have been completed, catalogers are confirming the continued migration of sales to the Internet. As a larger and larger portion of sales is coming from the Internet, what should you do with those buyers? Are they truly “Internet only” buyers or will they respond to a catalog?
Internet buyers and catalog buyers are not created equally. While catalogs work hard to create customer desire and loyalty – to be one of the select few that stay in the reading pile or better yet, generate an order immediately – the Internet, by nature, works hard for high results in organic and paid search. In many cases, an Internet buyer made his purchase based on search results – not on a predetermined decision to buy from a specific brand. As a result, Internet buyers are less loyal and have a lower lifetime value.
The first step in determining whether to mail or not to mail an Internet buyer is to segment your file. In an ideal world, Internet buyers would be broken into two groups – those that were driven to respond by a catalog mailing and those that are pure Internet responders. It is also important to understand those customers that are now multichannel buyers. A multichannel buyer has on average a 30%-50% higher value than those that have only purchased only from the catalog or the Internet.
To determine catalog-driven Internet customers, order records should be flagged during the matchback process. Any Internet order not matching the mail file should be flagged as Internet only. The final customer segmentation, with RFM+, should include the following channels:
- catalog-driven Internet
- catalog and Internet
You can mail most Internet buyers; however, due to the decreased value, Internet buyers cannot handle the same contact strategy as traditional catalog buyers or multichannel buyers. Internet buyer response will also fall off faster than catalog or multichannel buyers. While catalog and multichannel buyers can be mailed aggressively for 12-24 months, Internet buyers typically cannot be mailed aggressively for more than six months.
Many companies believe that mailing catalogs to Internet buyers is a waste of money. They believe that the Internet marketing spend on search engine optimization, affiliate programs, and e-mail contact will drive Internet customers to purchase again. But mailing a catalog to Internet buyers has proven to drive incremental sales of 25%-80%. To optimize incremental sales, Internet buyers should be segmented further into subscribers, those that unsubscribed, those that never subscribed, and dead e-mail addresses. The unsubscribed, never subscribed and dead e-mail addresses will not receive e-mails and thus will drive higher incremental catalog-driven sales. But overall their performance will be 30% to 40% less than that of active subscribers. The contact frequency of these buyers needs to be much less than that of the subscribers.
Testing the segmentation and contact strategy is always important. By taking an nth select across the mail file and holding it out as a control panel, the total sales results of mail file and the control panel can be compared and summarized by any of the segmentation variables. This allows for a small control sample to be used with a minimum impact on sales and full incremental sales analysis on the backend.
So, mail the Internet buyers, but mail pure Internet buyers less frequently than catalog driven or multichannel buyers. In addition, if the Internet buyers can be further segmented by e-mail address status, the contact strategy can continued to be refined to optimize the overall company results.
Michelle M. Farabaugh is a partner with San Rafael, CA-based marketing consultantcy Lenser.