The paybacks of creating frequent buyer clubs Dec 1, 1998 12:00 PM
, Paul Miller
JobZone
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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.
