Is Your Direct Marketing Business Growing?

Is your direct marketing business growing? It’s a simple question, but the answer isn’t so easy. The core, the essence, the kernel of whether your business is growing, shrinking, or static is hidden in two metrics.

Smart marketers track the number of 12-month buyers and the number of 12-month new-to-file buyers. By comparing the current number of 12-month buyers to the number of 12-month buyers on your file last year, you can determine if your business is growing. The comparing number of 12-month new-to-file buyers now against a year ago tells if you are continuing to acquire new buyers economically or if any revenue growth you may be experiencing is resulting exclusively from your preexisting customers.

These two metrics address a number of key issues:

  1. Is the number of house file buyers static, shrinking, or growing? If the house file was growing and is now static, your business may soon plateau. If the buyer file is static, growth can usually come only from mailing the buyer file more frequently.
  2. Is the business churning an eroding buyer file? A shrinking 12-month buyer file almost always translates into slowing sales or shrinking margins.
  3. Can you still acquire buyers above breakeven? What is the proven prospecting universe? How is the number of new buyers trending year over year? Is the cost to acquiring new buyers increasing? Your company’s future depends on the ability to add new customers as economically as you’ve added them in the past.
  4. How does the number of 12-month Web buyers compare with the number of 12-month traditional call center buyers? What about the number of 12-month new-to-file buyers? The number of new buyers by channel defines how your channels are changing.

Keep a month-by-month tally of the number of 12-month buyers and the number of new-to-file 12-months buyers, and you’ll know where your business is heading.

Jim Coogan is president of Santa Fe, NM-based consultancy Catalog Marketing Economics.