Thanks to a list modeling software system, Sur La Table last year improved its reponse rate by 43% in a test mailing to inactive customers. The Seattle-based kitchen products cataloger followed up its success with a 350,000-book mailing using the program.
The Sightward predictive analytics software enables Sur La Table to reactivate dormant customers by predicting the outcome of catalog mailings using an “ROI calculator.” In addition to recency/frequency/monetary value (RFM), Sightward incorporates such factors as the number of months a name has been on the company’s file, the response from the most recent catalog mailing, and the number of product categories from which a customer purchased to estimate the return on investment of the house file names and subsequently of the entire campaign.
The software program suggests mailing “better names that we probably wouldn’t have mailed” because they didn’t score highly enough on the RFM model, says Sur La Table’s director of marketing Sue Ghilarducci.
For the August 2001 test, the cataloger used two segments of its 24-month buyer file totaling 40,000 names. It mailed catalogs to one sample against which it had run its usual RFM model and to another using Sightward, Ghilarducci says. The company also did a head-to-head comparison of two 5,000-book mailings to customers beyond 24 months testing RFM vs. Sightward.
“With RFM modeling, you’re looking only at three variables,” points out Carla McGrew, director of retail client development for Bellevue, WA-based Sightward. “You remove all the other data that might be valuable.” Moreover, when you repeatedly use RFM, you end up dropping customers who haven’t made recent purchases off your list, she says.
Sightward identifies individuals deeper in the list that it predicts will still buy — even if they haven’t bought in more than two years. These customers can be profitable, too: Sur La Table found that these buyers spent $20 more on average than other customers, McGrew says.
Sur La Table pays Sightward $39 for every 1,000 names generated to create the model and maintain it. Sightward drops its price to $35/M for 500,000 names or more, McGrew says. Larger mailers working with more than 1 million names a year could license the software for $125,000. An optional annual maintenance contract that upgrades the software regularly runs $25,000 a year.
Results from the March rollout were not yet available. While it doesn’t anticipate another 40% lift in response, because this latest mailing is considerably larger, Sur La Table nevertheless expects that its investment in the software to yield a sizable increase in response.