How often should you mail your buyer file? Some mailers overmail the marginal segments of their buyer file and may be mailing below breakeven. To find out whether you’re among those mailers, you need to set up a test to measure sales from the “tails” of previous mailings to determine how much of the revenue you receive from the subsequent mailing is incremental.
Setting up a test to measure the incremental sales is straightforward, says Jim Coogan, president of Sante Fe, NM-based consultancy Catalog Marketing Economics. Split marginal house file segments in half. Mail to half of the test panel, and do not mail to the other half. You measure the difference by matching back the catalog orders against the mail file (and the “no mail” test panel).
Suppose your breakeven is $1.00/catalog, the mailed portion of the house file segment yields $1.25/catalog, and the “no mail” test panel yields $0.50/catalog from demand created from previous catalogs. Your true incremental demand is ($1.25 minus $0.50) $0.75/catalog.
“If you breakeven at $1.00/catalog, your initial measurement of the catalog sales of $1.25 is wrong, and you should not have mailed this segment,” Coogan says. Knowing the incremental demand for your house file segments is important to know where to draw your breakeven line for mailing house file segments. You will have other sources of orders in addition to your catalog mailings—-Web orders, orders from previous catalogs, and orders you would have received “over the transom” even if the customers had never received the follow up catalogs.
Which segments should you be measuring the incremental demand of with mail/no-mail tests? Coogan suggests paying close attention to:
- Pure Web segments that came to you through the Web rather than as a result of catalog mailings.
- One-time buyers who haven’t made a second purchase even though they have received multiple mailings after their first purchase.
- Low-ticket buyers whose average order size means they may have a marginal lifetime value.
You don’t need to split each marginal house segment into mail and no-mail segments, Coogan adds. Set up some test panels to track the incremental sales from aging Web buyers, one-time buyers, and low-ticket buyers, and use the results to draw assumptions across the buyer file. But you should set up test panels to measure the rate of decay over time when older house file segments are not mailed any catalogs over a long period of time.
“The data will tell you that your breakeven sales per book for house file segments is higher than you think,” says Coogan. “The data will also tell you that the buyer frequency strategy may be quite different for Web buyers compared to traditional call center/mail order buyers or for one-time or low-ticket buyers. You trim some unprofitable house file circulation and increase your profits by paying close attention to the true demand coming from each catalog mailing.”