When sales dip and protecting profits becomes critical, many catalogers respond by cutting back on mailings, as has been the case during the past few years. As the economy struggled and geopolitical events preoccupied consumers in 2002 and 2003, cautious marketers modified their contact strategies to protect the bottom line in the face of declining response rates. But circulation cutbacks can have a spiral effect that stifles file growth for years to come.
So if you’re ready to build up your house file by growing the 12-month buyers, the following seven tactics can help you.
- Maximize your contact strategy
Most catalogers today, especially those with less than $30 million in revenue, fail to contact their customers frequently enough. But how many times should you contact your customers? Simple: As many times as you can and still meet your goals.
Most catalogers leave money on the table and customers out in the cold because they leave catalogs in circulation too long without remailing. Or they don’t mail their file deep enough, or perhaps they simply don’t know what they are really trying to achieve. Must you hit a sales goal? Are you required to reach a profit goal? If so, is your target pure profit dollars or profits as a percent of sales? The goal is the crucial item, and once it is established you can put together the contact strategy to reach it.
A few thoughts on contact strategies:
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Every contact counts, and this includes e-mails, postcards, solo mailings, and catalogs. If you’re reaching out to touch your customer in any way, that contact should be part of a global plan and should be accounted for in your financial plans as part of the overall marketing mix. This also means that you don’t need to actually mail 20 catalogs a year to reach your customers 20 times.
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Evaluate your response curves to determine if you have gaps between mailings that you can fill with additional customer contacts. If you’re able to spot three- to four-week lags between the point when the mailing response curve reaches 80% complete and when you have another catalog in the mail, you likely have an opportunity to contact customers more frequently — and profitably — while building the size of your active buyer file.
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Plan a season at a time, not a year at a time. Planning the season will allow you to maximize production efficiencies and forecast the P&L with accuracy while providing you the flexibility to adjust the course of action if needed when the next season comes.
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- Build a one-time-buyer plan
One-time buyers, also referred to as singles, often represent a substantial portion of the customer file. They also tend to have the lowest retention rates. Putting a program in place to get these “tryer” customers firmly established in the buyer file is critical to the long-term growth of the customer file.
In-package bounce-backs and special promotions can encourage repeat purchases from this important group. Savings on “the next” purchase, special shipping offers, and free gifts can provide the necessary incentive to get the next purchase sooner than later.
- Reactivate, reactivate, reactivate
Reactivation of older buyers, sometimes called win-back, is every bit as important as customer acquisition and a heck of a lot cheaper. If you write off customers after 24 months of inactivity, you’re probably among the countless marketers holding back the potential growth of their 12-month files.
Reactivation programs don’t have to be difficult to administer. Simple cover changes or dot-whack applications featuring targeted messages or promotional offers can entice back customers who, presumably, have had a good experience with your catalog but for whatever reason haven’t purchased in a while.
These inactive customers will often yield response rates two to three times than those of prospect lists — and you already own the names. Plus, you can enhance the performance of these customers through customer file or third-party modeling. Most catalogers can probably mail to their 48- to 60-month customer files at least once a year for significant reactivation and, ultimately, growth of the 12-month file.
- Increase prospecting
Yes, prospecting with outside lists is becoming increasingly expensive. Response rates are down; paper and postage costs are up. But for many catalogers, customer acquisition through list rentals is still the number-one — and often only — method of growing the file. The key to list prospecting is mailing more, and the key to mailing more is finding lists that a) work, and b) have enough names on the back end with which to roll out. And with the existence of cooperative databases such as Abacus, Z24, iBehavior, and Prefer Network, among others, options for modeled names with huge universes are tremendous.
The first step to increased prospecting is understanding how much you can afford to invest in acquiring a customer. Depending on your product type, your average customer lifetime value, and your retention rates, you may well be able to afford to lose money on a customer’s first order because you’ll more than make up for it on repeat orders. This realization will open up the range of lists available to you; you could probably reconsider some lists that had failed to break even for you in the past.
Also, consider prospecting in your key “second season.” If you do a substantial fourth-quarter business and tend to focus all of your annual prospecting during that period, look to the balance of the year for opportunities for additional prospect contacts. You may find, for example, that Valentine’s Day is a strong holiday that affords you some opportunity for testing. If you can identify a second season, test it. It’s not uncommon for customers acquired “off-season” to generate higher lifetime values than those acquired during the peak season, because they show a propensity to purchase year-round from the beginning.
- Rekindle old flames
Even if you don’t want to increase overall prospecting, consider looking for new names in old places. Every cataloger experiences periodic list fatigue across files that have been good historical performers. But don’t forget about those lists. If you’ve shelved for a couple of years some lists that used to work well for you, consider dusting them off. If the list owners have done a good job of regenerating their files, those lists could have something valuable to offer. (And if you’re fortunate enough to find that you have an exchange balance owed you on those lists, even better.)
Similarly, if you tested lists in the past that showed mediocre results but have noticed that those catalogs have “changed” (upgraded the merchandise or evolved the brand, for instance) consider retesting the lists for improved results.
- Put together a prospect book
If your assortment is broad, consider creating a prospect-specific creative effort. Testing has shown that response can increase significantly when prospects are mailed a book composed of items that first-time buyers generally purchase.
Prospects tend to “try you out” on low-risk items, which generally have lower price points. They are looking for a good experience, for you to deliver on the promise that your brand has made.
A thorough merchandise analysis should shed light on which items are preferred by new buyers. If you have enough to build a complete book, terrific. But even if you don’t you can still put this tactic to work by paginating so that these items are placed in important hot spots throughout the catalog. The point is that customers and prospects don’t always respond to the same items, and applying that knowledge can increase prospect response and, ultimately, the size of the 12-month file.
- Use alternative media
Space ads, long- and short-form television commercials, package insert programs, pay-per-click keyword buys, card decks, and the like can all help to increase the size of your customer file, so long as you keep what you calculate to be acceptable acquisition costs in mind.
You can frequently buy space ads and TV spots at lower “remnant” rates as publications and stations look to liquidate unsold inventory. It isn’t uncommon for direct marketing companies to save as much as 80% off the cost of ad space through remnant buys. With the right offer, headline, copy, and response devices, these media can be exceptionally powerful for customer acquisition. Don’t forget: You don’t have to rely solely on catalogs to bring in new customers; other affordable vehicles are out there for growing the file.
BUT WAIT, THERE’S MORE Here are a few other tactics to consider to boost the size of your 12-month buyer file. First, make sure your file is as clean as possible each time you put out a mailing. Running your list through the National Change of Address (NCOA) file will almost certainly generate a greater response and will typically pay for the processing at even minimal match rates.
Second, make your offers work as hard as possible. Don’t mail an offer merely because you think you need one. Test, test, test. Different dollar thresholds, different types of promotions, and different messaging will drive varying levels of response. If your goal is to grow the house file, you should be working to identify the offer that generates the highest possible response at the lowest acceptable loss.
And third, if you have multiple house files, cross-pollinate them. Test mailing your business buyers a consumer book. If these customers like you enough to use you for business, doesn’t it make sense that they’d use you for themselves?
Overall, growing the 12-month buyer file is an exercise in persistence. Your catalog is your store, and your store has to be open for customers to buy. Increased mailings, finely honed prospecting, nontraditional media, and targeted creative can all generate a lift in response to broader audiences, which should translate into adding 12-month buyers to your file.
Steve Trollinger is senior vice president, client marketing for J. Schmid & Associates, a catalog consultancy based in Shawnee Mission, KS.