10 Proven Ways to Increase Your Outside List Performance

Adding new buyers is critical to any catalog business. At a minimum, catalogers need to replace lost buyers due to attrition. A lack of prospecting to outside lists will cause a reduction in the size of the housefile and start a downward spiral that’s difficult to reverse. Prospecting has certainly become more difficult and more costly, but you can’t afford not to. This month, I’d like to share ways to increase the performance of outside lists. This will lower the cost of acquiring a new buyer.

Most prospecting is done at an incremental loss. Accept that you can’t make money prospecting based solely on initial orders. You need first-time buyers to make a second purchase to make a profit. Think of prospecting as an investment in the future of your business.

Not all expenses in a catalog business can be incremental. Treat them that way and you’ll incremental your way into the poor house! But with prospecting, cover just your out-of-pocket expenses, including customer returns and allowances, cost of goods sold, and direct-selling expenses. The housefile has to be strong enough to support the overhead expenses of the business — not the prospects. The formula for determining the incremental break-even point is as follows:

Gross sales...
minus customer returns and allowances
minus cost of goods sold
minus direct-selling expenses (printing costs, outside lists, postage, etc.)
equals incremental breakeven.

Accept the fact that you need to spend in order to grow or simply maintain the current size of your 12-month buyer file. How low you mail below the incremental break-even point depends on the financial strength of your company, the size of your existing housefile and how fast you want to grow. I always caution against overmailing and trying to grow too fast.

Several years ago, catalogers could prospect above incremental break-even points; it was easier to grow a catalog business then. There are several reasons why it has become more difficult and costly to prospect:
✔ response rates have declined from overmailing the same names time-and-time again; and
✔ paper and postage costs are much higher today, which has increased incremental break-even points.

It’s a double-edged sword with lower response rates and higher costs. As catalogers, we need to do all things possible to improve outside list results. Here are 10 proven ways to increase the RPC (revenue per catalog):

1. Study how each list performs over time. We tend to look at list performance only by drop. But it’s better to look at list performance over time. How many times can you mail each list per year/season? Perhaps you can mail a particular list more often in order to increase the RPC. Or you could be mailing a list too often, which reduces your RPC. The danger of overmailing a list is the performance can fall off to the point where it looks like you can’t use the list, when that might not be the case at all.

2. Use ZIP models. ZIP models can improve performance. A good use for ZIP models is when you're selecting lower-performing segments of a file (deeper selects), or when using a larger file that performs marginally.

3. Re-evaluate your selects. If you have lower-performing lists, mail a tighter select rather than taking fewer names for the same select. For example, if you normally select a $50-plus three-month buyer, try a $75-plus two-month buyer. This often counteracts the lower performance and increases the RPC.

4. Look beyond standard performance indicators such as response rate, average order and RPC. Consider performance indexes. These tell you which lists over- or underperform relative to all lists used. This will help you plan and evaluate lists you want to use. The chart on pg. 32 shows how performance indexes might appear on your weekly report. Note the three columns to the far right of the chart — Resp. Index, Avg. Order Index and RPC Index — these show the average performance of these lists compared with all the lists mailed.

5. Understand sporadic list performance. If a list works sporadically, look for performance patterns. Your offer might not be appealing to that core list at certain times of the year. Or customers the list owner acquires might not find your offer appealing. If you see a pattern, limit when you mail to maximize the performance of the list.

6. Keep an eye on exchange balances. If you’re in a highly competitive market, this is essential. Often your “best” lists will not rent to you if the exchange balances get out of balance. It’s important to monitor these exchange balances yourself to avoid falling short on names unexpectedly. What’s more, be careful not to approve your own list orders on exchange just because of the exchange. Exchange for lists you want to use based on proven historical results.

7. Use promotional offers. Use promos to increase the response rate of outside lists. Free shipping will typically lift the response rate 20 percent to 25 percent. A dollar amount off the order will also increase response. If you want to maximize response, don’t set the dollar minimum to qualify for the offer too high. In fact, consider not having a dollar minimum; this encourages more people to order.

8. Use proven direct-response catalog buyer lists. Product affinity is the most important factor when determining which specific list to use. Be sure to select lists which are synergistic with your offer. Be careful using subscriber and compiled lists (unless you’re selling business-to-business). You’ll always get the best results from mailing to proven mail order catalog-buyer lists whose product offering is compatible with yours.

9. Optimize lists (some lists). List performance can be improved by optimizing marginal outside lists. Or, if you’re using subscriber or compiled lists, through outside list optimization — the process of using one of the co-op databases to identify the catalog buyers on the list most likely to purchase your offer.

10. Consider seasonality. Know when to prospect. But better yet, know when not to prospect. Only fish when the fish are biting! Don’t prospect in the off-season if you want to maximize the RPC. The highest response will be achieved during the holiday season. Your fall results will be 70 percent to 75 percent of your holiday results. Spring is 65 percent of holiday and the slower summer months equal 60 percent of holiday. Say a list generates a response rate of 1.88 percent and $1.17 RPC during the holidays. Assume our incremental break-even point is $1.00 per book. The response rate for this list in summer will be approximately 1.13 percent with an RPC of 70 cents per book — way below our break-even point. We can prospect this list above the break-even point during the holiday season. If we use the same list in summer, expect an incremental loss. «

Stephen R. Lett is president of Lett Direct, a catalog consultancy specializing in circulation planning, forecasting and analysis. He’s the author of “Strategic Catalog Marketing.” You can reach him at (302) 537-0375 or at www.lettdirect.com.