Cut Back on Starbucks, But Don’t Stop Prospecting

We’re all feeling the bite. Some of us have cut back on our Starbucks consumption, others are nervous about paying $4 a gallon at the pump. And who isn’t worried about layoffs at their company?

That’s the way we think as consumers. But as merchants, we want shoppers to disregard their economic fears and spend away.

How do you achieve that when the penny-pinching consumer within you tells you to stop prospecting? That’s what many merchants are doing, according to cooperative database executives.

Listen to cooperative database executives. They say it’s a mistake to pull back on acquisition mailings.

“Our overall view is while the (May 2007) postal increase was difficult for mailers, and the current economic outlook can make things difficult,” says Phil Wiland, president and CEO of Wiland Direct. “But we’ve advised our customers who want to make aggressive cuts to keep prospecting.”

Cutting back on prospecting seems to be a good cost-cutting initiative because it means producing and mailing less books. But it can be dangerous to a merchant’s growth, even if it’s just a quick-fix solution.

“We recently had a customer tell us they’ve decided not to prospect this year,” says Eric Rosa, chief operating officer at NextAction. “But history says if you’re not prospecting, your house files can shrink pretty rapidly.”

And when the house file shrinks, it of course means fewer opportunities to get that sale you need in the first place. Casey Carey, senior vice president of product management for Abacus, a division of Epsilon, says even a cut in prospecting can equal lower profits.

But he says he’s seen clients cut back on their prospecting in hopes of turning one-time Web buyers into catalog buyers.

“There’s always the danger that if you cut prospecting by even 25% to 50%, that’s less revenue coming in the door, and you’ll shrink your house file,” Carey says. “You can augment some of that buy getting new buyers off the Web, but a lot of the merchants we’re dealing with feel they’ve maxed that out.”

But is there a way to get away with not prospecting? One way would be to reactivate names on your house file. There may be a reason that your customers have stopped buying. And if you stopped mailing to names you own, now would be a good time to reacquaint yourself.

“Reactivation was big for us this fall, and continues to be,” says Ken Johnson, CEO of CMS Direct, which owned co-op database Prefer Network. “We were going into anything our clients weren’t typically mailing and seeing if we could get that name to pop. The client already owns the name, so it’s not costing them anything.”