B-to-B Insights: 3 Ways for B-to-B Retailers to Save Marketing Dollars … and 1 Way Not To

True confession: I love it when mail quantities in the United States are down. Although this trend is overall bad for our industry, in the here and now it's good news. The reason? There will be less competition in the mailbox for my clients. As a result, their response will soar.

Catalogs and direct mail continue to drive sales for niche and specialty B-to-B companies, but a question persists: Through web optimization, can't you get all of these sales by spending a lot less money? Without testing the theory, companies across the country are cutting their mail quantities, which is great news for companies that continue to mail.

However, those same companies that are benefiting from their competitors' error are seeing their own postage and paper costs increase. As a result, their catalog marketing benchmark inches up as a percentage of sales. It makes good business sense to cut costs where you can.

There are three main ways to save money in catalog marketing: mail fewer catalogs, mail fewer pages and shift mail quantity from rented names to house names — whether they're prospects or buyers. You can tweak trim size and paper weight, but those savings tend to be small compared to the big three.

1. Mail fewer catalogs. When you mail fewer catalogs, you have two choices of where to cut: housefile names or rented prospects. The benefit of reducing rented prospects is twofold: one, you save on your three "Ps" (printing, paper and postage) and, two, you save on name rental, which can add up to significant dollars for quality B-to-B names.

Of course, the pitfall of cutting prospect names is that you delay future growth. Though you may not miss those initial sales this year, you will miss their subsequent purchases next year. It's best not to throw the baby out with the bath water. Temporarily reducing your prospect circulation is safe. Cutting it altogether can be dangerous.

You can also choose to mail fewer catalogs to your housefile. In theory this means cutting names that you no longer mail profitably. When you discontinue mailing a customer segment, you tacitly acknowledge that those customers are, in fact, no longer customers. That said, it continually surprises me that many B-to-B catalogers let their customers go before they're ready to leave.

Before you make the decision to stop mailing a segment, run your response analysis to the contribution level. This means counting your gross sales and subtracting your cost of goods sold and promotion costs. To make sure that you're capturing your full demand for each segment, invest a few hundred dollars in a matchback. Any reputable service bureau can help you with the process.

In my experience, after performing segment matchback and contribution-level analysis, I've yet to see a mail plan that wasn't significantly altered from what we learned. Without analyzing this level of detail, you're guessing at what to do next. In reality, you can know exactly what you should do.

2. Reduce page count. The second way to reduce marketing costs is to cut catalog pages. For decades, the general rule was the more pages you mailed, the higher response and average order you received. Of course, there was a point of diminishing returns, but the general principle held. This dictum no longer holds true 100 percent of the time. In a recent head-to-head comparison, a smaller page count catalog outperformed a larger version.

Page-count tests can be expensive and complicated to manage, so I'm not here to convince you to conduct one. However, reinstating a good old-fashioned square-inch analysis is in order. Hint: If your catalog is too big to conduct a square-inch analysis, it probably has too many pages.

If you don't have the time to conduct an analysis on a product level, run your analysis on the category level instead. Identify product categories that clearly aren't selling enough to justify their space. You now have a direction to follow when choosing which products to cut. Bringing in a third party to analyze your merchandise can help. If they don't know your sacred cows, they'll give an honest evaluation based on your metrics and not on who wants to keep a product in your catalog.

3. Shift circulation. The final way I've identified to trim catalog marketing costs is to shift your circulation from prospects to house lists. In other words, reactivate old buyers. As mentioned previously, most B-to-B companies don't mail their housefile effectively. Once you've instituted a matchback and contribution-level analysis, you'll likely want to test deeper into your housefile. Although you may not be able to mail your older segments with every mailing, you may be able to mail them seasonally, quarterly or biannually. Shifting circulation from prospecting to these profitable housefile segments saves you list rental costs.

To make selections on your older buyers, you can use your own transactional and firmographic data or you can send older names to a list broker for modeling. There's an expense associated with modeled names, but it's usually less expensive than traditional rented names and often modeled names perform significantly better than true prospects. If you choose to model your older buyers, run a test segment of the buyers who didn't make it into the model. This verifies that your model isn't leaving profitable names behind.

What Not to Do
Avoid a knee-jerk reaction. Direct marketing is scientific. Develop a clear strategy that you can test. By correctly managing your mailing and back-end analysis, you can know for certain what works and what doesn't. Your gut may be correct, but test and verify your assumption. This way you not only avoid a costly mistake, but you measure and define your improvement to help build on your initial success.

George Hague is principal of HAGUEdirect, a full-service marketing agency. George can be reached at georgeh@haguedirect.com.