Tracking Cost Per New Customer

The following passage is a preview from Multichannel Merchant’s roundtable discussion on List and Databases in Seattle. Be sure to read the July issue of Multichannel Merchant for complete coverage of the meeting.

Do you have trouble keeping your new customer cost in line between store prospects and catalog prospects? If so, you might employ the same technique used by Kent, WA-based Recreational Equipment Inc. (REI). The outdoor gear and apparel cataloger/retailer prospects based on whether the customer is in a retail trade area or located out of an area where REI has stores.

According to REI’s circulation manager Bonnie Preace, “An out-of-retail-area customer isn’t going to be perform as well [as one who lives near a store], but we still have to be able to acquire that customer. So we’re judging them by a different cost per new customer than the cost to acquire an in-trade customer.

Preace says that out-of-trade prospects and customers perform less well because they are not familiar with the brand. “So I’ll take a select that’s been working really well for me [for in-trade-area customers] and if I go out of trade, then I’ll have to tighten that select. Certainly, they are responding, but at direct response rates vs. responding at retail rates.” More than anything, she says, it’s finding the customers who will respond coming out of the retail area. “It’s been a big challenge but very rewarding to us to understand the difference between the two customers. When we were clustering them together we weren’t making the best decision possible.”

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