Testing for Profit Fatigue

How many times should I mail my buyer file?

That’s one of the most-asked questions in marketing. It’s hard to answer because each business has its own metrics.

But here’s a clue: You should mail the list until it is no longer profitable. And you can get an early reading on this by testing.

You don’t need to do it every season. It’s enough to do a small profit-fatigue test every several years as a validation of current practices.

We recently set up a test with a client to determine if buyers could generate similar profits with fewer contacts within a season. In this mailer’s case, the control strategy was to mail the strongest segments up to five times during the period.

We isolated a small test group to strike a balance between readability and financial risk and mailed them in three out of the five possible contacts. Key numbers in the results have been indexed against the control (Control Index = 100).

These results told us that while the smaller mailing quantity to the test group was more efficient, driving a 16% higher dollar per book, it came at the expense of profitable sales. After factoring in the cost of goods sold and the marketing expense, the control mailing strategy drove a 26% increase in contribution. For a tightly managed business, these are, quite simply, dollars you can’t live without.

Moreover, this analysis only focuses on contribution to profit. We also know that the control strategy is driving incremental orders vital to maintaining stable growth of the 12-month buyer count. With these additional orders, one-time buyers convert to two-time buyers, two-time buyers to three-time and so on.

Even better, the productivity of this company’s buyer file will be enhanced for years to come by its highly optimized contact strategy. Testing with detailed and disciplined data analysis helped the firm identify that point of profit fatigue, and then craft marketing our strategies accordingly.

Jude Hoffner is director of marketing and database services for San Rafael, CA-based catalog consultancy Lenser.

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