The paybacks of creating frequent buyer clubs

Dec 01, 1998 10:30 PM  By

For the average consumer cataloger, the cost of acquiring a customer is at least 25% greater than it was only five years ago, estimates consultant Don Libey. It’s no wonder, then, that more catalogers are looking not only to retain their customers but also to persuade them to spend more money more often. And it’s also no wonder that, according to consultant Steve Lett, president of Carmel, IN-based Lett Direct, there’s been a steady rise in the number of catalogers introducing frequent buyer clubs, which offer discounts to customers who pay an up-front membership fee or spend a specified amount of money.

“Catalogers are trying to get more out of their house files today because of rising costs,” Lett says. “And buyer clubs are good programs to develop customer loyalty, solidify relationships with customers, and encourage repeat business.”

In addition to encouraging customer retention, clubs can significantly boost revenue. At travel supplies cataloger Magellan’s, response rates and average order sizes are “many times higher” among club members than among regular customers, says marketing manager Jack Kotowski. The $20 million-plus marketer charges $45 a year; members get free ground-delivery shipping on all purchases, a $25 gift certificate, discounts of up to 50%, and a newsletter.

Other companies offer similar concepts at different rates: Lakewood, NJ, health and beauty products mailer Lifestyle Fascination, for instance, charges $29.95 a year for 10% discounts on all purchases. Tweeds, one of Hanover Direct’s women’s clothing catalogs, gives members who pay the $25 membership fee 10% off all purchases, while other Hanover apparel and housewares catalogs offer similar plans. And Rohnert Park, CA-based toy cataloger HearthSong gives members 20% off all orders, “early bird” specials, exclusive product offers, and a special 800-number for ordering in exchange for a $40 annual fee.

Among buyer club members of Foster & Gallagher Children’s Group catalogs, which include HearthSong and the Troll toy catalog, response is two to three times higher than among nonmembers, says the group’s president, Sydney Klevatt. “They’re good customers, they like you, and they express it by giving you the club fee up front.” What’s more, members tend to buy throughout the year-”whereas the toy industry is typically a fourth-quarter business.”

The benefits to catalogers extend beyond the tangible. Santa Barbara, CA-based Magellan’s, for instance, uses solo mailings to club members to test-market new products. “We give members price discounts; in return, we ask them to let us know what they think about items we’re considering putting in our catalog,” Kotowski says. “And they give us great feedback on the products, such as which ones they use and how they like them. There’s nothing like a group of people who are most representative of your best customers taking a look at products you’re planning to roll out.”

Perhaps best of all, the cost of running the loyalty clubs is insignificant. “Other than printing and mailing our special sales fliers to members, there’s no expense,” says Lifestyle Fascination catalog director Jackie Harris. “It’s really just the maintenance of updating the club records-nothing much else.”

By fall 1999, catalogers should be able to learn the actual dates their catalogs are delivered in-home to prospects and customers. The U.S. Postal Service and the Mailers Technical Advisory Committee (MTAC), an organization of mailers and USPS representatives, are developing Planet Code, a barcode applied by mailers that can be scanned at post offices after the final sort, just prior to the mail being loaded onto postal carriers’ trucks for delivery.

The delivery information gleaned from Planet Code could help catalogers plan for response more accurately, since they’ll know when clusters of customers will be receiving their books. The USPS began testing Planet Code on letter mail in November, says USPS business program manager Paul Bakshi.

Mailers will have access to the delivery data by a file transfer protocol (FTP) process, in which the USPS will download information from its central computer to individual mailers’ computers via the Internet. The agency will also post the delivery dates on its Website; mailers will be assigned access codes so that they’re the only ones that can view their company’s delivery data.

The fee for the service has not yet been determined, says Bakshi, who nonetheless describes it as “nominal.” Next year, he says, the USPS will have to file for a rate to be approved by the Postal Rate Commission. Catalogers wishing to take part in flats tests of Planet Code early next year should contact Bakshi at 202-268-3520.