As I look back on 30 years of prospecting history, a heretical conclusion forms in my mind: As an industry, we are really no further evolved in prospecting than we were 30 years ago.
True, there are highly sophisticated databases and models, as well as co-op prospecting databases that attempt to maximize today’s prospecting yield. Yet 30 years ago prospecting response rates were often 10% and higher; today, a good prospect response rate is 1%. We may as well say, “Here’s $1,000. I’m gonna go out and throw $990 away and then build a business on the $10 remaining.” You would think that we would have come up with something a little better in the past 30 years. Where is the progress in that?
We are continuing the prospecting methodology of the long past: looking for needles in haystacks. Our prospecting technique remains, essentially, one of sifting. We mail the same names over and over, slicing and dicing them a little differently each time but never doing anything really new or contacting anybody totally new. With the emergence of the co-op database, everybody mails the same people over and over and over and over, ad infinitum. As a result, response rates erode deeper and faster with no chance of any improvement. Where is the progress in that?
Aside from technological modeling and high-volume transaction and demographic data crunching, there really has not been a new concept in customer prospecting in decades. It is basically still all about lists of mail-order-responsive buyers and lists of categorically compiled names. The height of prospecting sophistication is “mail more to poorer-performing lists.” Where is the progress in that?
In my 30 years of observation, one prospecting concept has never gained the favor of a direct marketing industry audience: the retail channel potential. We direct marketers stubbornly refuse to form cross-channel, retail consumer information alliances in order to craft new and innovative prospecting tools that could lead us to the largest available share of new customers that exists: people who don’t purchase from catalogs or the Internet. Far better that we should write off 990 of every 1,000 prospecting catalogs mailed than we should try to convert retail customers to our channel. Where is the progress in that?
Gimme an evolution
Here is a skeletal view of a prospecting evolution I see forming in the next 10 years. The economy of the U.S. in all probability cannot sustain the rate of retail overbuilding that has occurred and is taking place right now. There is simply not enough potential consumption left to support the vast amount of stores in existence and planned for the future. A decline in retail store consumer spending of as little as 15% would precipitate massive store closings. Huge numbers of potential new customers will be looking for alternative channels that offer selection, service, speed, and convenience. In short, the future is a remote shopping future.
There is a pool of 300 million names out there, and we have a shot at getting 150 million of them to give us 25%-50% more of their total consumer purchases. We will, though, have to become experts at prospecting to the five- to 10-mile radius of a Wal-Mart or any of our competitors that shut their doors. And when prospecting databases are built on the retail experience translated into catalog convenience, the entire concept of direct marketing will, for the first time in more than a century, be refreshed and renewed. We as an industry will have taken the first step to achieving parity with our biggest competitor: retail.
Outside looking in
Also in my view of the future, the list industry will learn from early innovators that view the existing inhouse customer file as a rich but neglected prospecting and reactivation pool of available names. When a list firm becomes a trusted adviser to a catalog company and brings the power of analytics, data crunching, and productive modeling to the house list, we have an innovative advisory relationship with catalogers that has never before existed.
Astoundingly, many of the large and small catalog companies that I do forensic reviews of or conduct due diligence on do not have the ability to analyze their own customer lists to improve response rates and earnings. Many cannot even prepare their own internal customer mailing selects.
When the list industry evolves from its old focus on prospecting and becomes an integrated, total response and reactivation partner, the future of the catalog becomes brighter. And when that level of catalog prospecting and internal innovation is integrated with the huge, new universes available to us through the retail and Internet channels, the future for the catalog is enormous. We already know how to treat customers 100 times better than the best retailer. We are the future channel of choice.
Donald R. Libey is president/cofounder of Libey-Concordia, a Cherry Hill, NJ-based investment bank for the catalog industry.