A Continuity Mailer ... Who Me? Never! Why Not?

By Shari Altman

Continuity programs can help catalogers reduce the number of customers who vanish after one or two purchases.

Continuity mar-keting often isn't the domain of catalog marketers, but those who dismiss this marketing approach too quickly as "not for us" may want to reconsider. For the average cataloger or multichannel marketer, more than half of new customers never make a second purchase. Even if your stats are better than average, it's hard not to be intrigued by the fact that continuity customers buy three to six times per year. Continuities also can offer a valuable service, saving your customers time and hassle — and ensuring their category or item purchase is from your brand.

While continuity marketing is compelling from a sales standpoint, it can be operationally complex — when you decide to pursue a continuity strategy, do it with your eyes wide open to avoid mistakes and omissions.

Should You Develop a Continuity Program?

First, evaluate whether your product line contains a viable continuity product. The most common are consumables that customers don't want to run out of, such as:

ink-jet cartridges, vitamins, coffee, cosmetics/skincare, pet food, air filters and medication;

segmented education or entertainment products;

book and video sets, collectibles, kids' and adult craft projects; and

wine, flowers, gourmet food and seasonal home décor.

On the fence about whether your product would make a viable continuity? Products with one of the following characteristics are easier to market:

"Needs" vs. "wants." If you require monthly medication, automatic delivery is a big time saver.

Needs that don't change frequently, e.g., air filters, vitamins or skincare. If you continually use the same product, it's easier to see the benefit in automatic deliveries.

Shopping for the item isn't enjoyable, e.g., pet medication.

Food marketers are the most likely catalogers to run an active continuity program, since their products are consumable and open to replenishment. But there's a wide range of products and program sizes, so don't limit your thinking to food items. Take a look at your evergreen products to see if they might be candidates for a continuity offer to increase purchase frequency. If the products in your existing line aren't appropriate for continuity marketing, ask your merchants to identify continuity products that appeal to your customers.

Meet Operational Challenges

Along with the obvious benefits, continuity programs add certain operational demands.

Inventory planning and management. Continuity products may make inventory planning more predictable, since you'll know today whom you'll sell to next month. However, the accuracy of projections can have long-ranging impacts, for example, being out of stock on auto-replenishment items can be disastrous, as missed shipments can't be made up.

From a service standpoint, backordering is "not acceptable," says Gordon Magee, Internet marketing and analysis manager at Doctors Foster & Smith. When an auto-replenishment item is as critical as pet food (as with its Catered Pet program), the need for the product can't be deferred until it's back in stock.

Magee adds that the load on the shipping department can be challenging when a high volume of auto-replenishment orders needs to be sent out. Catalogers should schedule functions clearly to serve continuity orders as well as individual phone and Web orders.

Information systems. It's best to utilize a system designed to manage continuity customers and shipping cycles. Attempting to "shoe horn" existing fulfillment and data systems may be problematic. Some key points to remember:

Shipping cycles must take into account shipments initiated by phone, mail and on the Web. If offline and online databases are separate, expect challenges in giving your customer service reps (CSRs) and customers access to up-to-date continuity order status.

Current, recent and future shipment cycles must be accessible to customer service.

Be prepared for ongoing system adjustments to accommodate customer requests.

Continuity customers are your "gold" customers, so they're worth the extra work of installing systems to allow them to easily make changes to their orders, either via the Web or a special toll-free number, says Ken Crites, director, Consumer Direct, Green Mountain Coffee Roasters.

There are many ways catalogers can promote continuity programs to customers and prospects, depending on how key a continuity program is to brand strategy.

Green Mountain Coffee Roasters Café Express' continuity program is a top priority and is promoted in everything the company does, including on the Internet, in the catalog and direct mail solos, and through partnerships. Crites says the Café Express program enjoys a strong presence on the company's homepage and at least one full page in the catalog. Existing customers are more receptive to signing up for Café Express, but it's promoted to both customers and prospects, he says.

Conversely, Doctors Foster & Smith doesn't actively promote its Catered Pet program; it's merely presented as an available option on the Web site and in its catalogs. Magee says the program currently is considered more of a service, though marketing goals always are being evaluated.

Taking a more middle-of-the-road approach is Cushman's Fruit Lover program, which is a way for the catalog to extend its selling season, says Eileen Schlagenhaft, director of marketing. Most purchases are gifts that ship for a fixed number of months, dictated by the customer (e.g., three or six months). Cushman's promotes its continuity program only to existing customers, using the Web, catalogs and solo mailers.

Keep Customers In

The tricks to retaining your continuity customers are clear communication, understanding customer needs, letting customers retain a level of control, and keeping on top of data and analysis.

Prior to the Internet, customers didn't experience the level of purchasing control they expect today. The best way to retain customers in your continuity program is to give them as much control as possible — for example, allow them to delay shipment dates when they'll be out of town, adjust the item mix they receive each month, etc. By putting control in customers' hands, you ensure they receive the products they want, when they want them.

Ramp up customer service. Send a welcome letter in each customer's first shipment, detailing how your continuity program works. This will go a long way toward ensuring customers understand what to expect.

Consider providing your customers access to their accounts online. Not only does this save you money in service calls, but it gives the customer more control over her account. As Green Mountain Coffee did, you may want to consider a special customer service line for continuity customers.

Reduce cancelled orders. A customer who calls to cancel his order likely still values product continuity, but there may be something about your program that isn't working for him. Give customers more control so that staying in your program makes sense. This can include allowing customers to postpone or cancel specific shipments (for moves or vacations), or alter the frequency of shipments if they arrive too quickly.

Retain continuity customers. Listen to what the customer is saying. Flexibility is key — when you're rigid with a continuity customer, you'll have more cancels and fewer program members.

The ability to customize shipments in the future also can impact your ability to make the initial continuity sale. When customers have the option to change, cancel or customize their shipments at any time, many of their doubts about the program will fade away.

Analyze your program. Lifetime value should be your primary measuring stick for success. If you can't accurately measure customer lifetime value, use the number of shipments sent to a customer as your closest proxy. Most continuity programs will look for at least three additional shipments beyond the initial order. Whether your goal is three or more additional shipments, the key is to monitor and analyze results on an ongoing basis.

Conclusion

Don't dismiss continuity marketing, but don't go into it blindly either. Evaluate its operational aspects in advance, and be sure you can handle both the continuity and your ongoing, one-at-a-time orders in the fulfillment and shipping process. Your IT system should be up to the challenge, and if not, make necessary changes or additions. Think about and plan customer retention before you announce your program to customers and prospects. Then, forge ahead — greater lifetime value and share of customer await you.

Continuity Definitions

For those new to continuity marketing, here are some definitions you should know.

Continuity marketing: any direct marketing effort where the customer's initial order initiates multiple future shipments.

Following are four types of continuity programs. Your specific product line will determine which program is best for you.

Closed-end series: a finite series of items, often collectibles, e.g., video or music. A customer has a unique delivery schedule based on her start date.

Open-end series: continuous shipments until the consumer asks you to stop, e.g., annual tax software update. All customers receive the product at the same time.

"... of the Month Club": different items within a niche, shipped monthly, e.g., red wine. Setup can be open-ended until the customer cancels (usually for herself) or a for a finite number of months (often gifts). All customers receive the same item at the same time.

Auto replenishment: same shipment each delivery. Products commonly are consumables, such as pet food or nutritional supplements. Customers have a unique delivery schedule based on their start dates.

Shari Altman is president of Altman Dedicated Direct, a direct marketing consultancy specializing in acquisition and loyalty marketing support. Reach her at (336) 969-9538 or saltman@altmandedicateddirect.com.