Boost Your Prospecting Results

As a cataloger, you want to maximize the performance of the prospect lists you use to generate new buyers. You also know that the prospecting universe for your offer may be limited.

It seems the better-performing lists have too few names available for rent. Therefore, you want to do whatever you can to cause marginal outside lists to perform at break-even or above.

How can you improve the performance of outside-rented lists in your next campaign? And what about the added costs of doing so?

Marginal List Optimization

The process of optimizing outside-rented lists, commonly called marginal list optimization, can increase response rates. One proven technique is to suppress the weakest segments of those lists that are performing slightly below acceptable response. By optimizing these marginal outside lists, your response rates will increase, as will your revenue per catalog mailed. This process can help marginal lists achieve break-even, defined as net sales, minus the cost of goods sold, minus direct selling expenses.

Many mailing lists contain households with overall buying patterns that are atypical when compared to the rest of the list. For example, a high-end gift list may contain a household that made a purchase for a special occasion, but that more generally buys from lower-end catalogs. Optimization identifies households that don’t fit the buying patterns a mailer seeks. These names then can be suppressed from the mailing, and the response rate from this particular list may increase as a result.

Mailers typically suppress 10 percent to 15 percent of a list. This generally provides enough of a lift to make the list acceptable to mail. Try to negotiate an arrangement with the list owner to pay only for the names mailed. It’s common, however, for optimization to provide enough lift to justify its cost, as well as the list cost for the suppressed names.

Run the Numbers

Typically, the charge for optimization is about $45/M, based on the number of names suppressed. However, if more than half of the names on a list are suppressed, the charge then is based on the number of names selected for mailing. Volume discounts apply if the number of names billed is more than 125,000. Most often, there are no running charges for passing the file.

The example in the table shown on page 48 demonstrates how the economics of list suppression work. The first column represents a mailing without optimization. A list with 500,000 names responding at 1.4 percent would be slightly below break-even, generating a loss of $2,000.

The second column shows the effect of optimization; 10 percent (or 50,000) of the names in the file would be suppressed. These names are assumed to perform at 0.7 percent, which is half of the response rate of the average name on the list. The optimization cost of $2,250 is more than offset by the savings from not printing and mailing 50,000 catalogs to this below-average group of names.

The most common use of list suppression is optimizing the rental singles (one-time buyers) who come out of a merge. The worst-scoring segments of the rental singles frequently perform at less than half the response rate of the average rental name.

In many cases, mailers replace the suppressed names with names from a balance model. These models will perform better than the names that have been suppressed. This allows the mailer to improve the overall performance of the outside names that are mailed, and to fine tune the number of names on the mail tape sent to the printer.

You can improve the performance of the marginal outside-rented lists you’re using, and expand your prospecting universe, by optimizing your files. This process will enhance the performance of the lists you’re currently using. It’s not necessary, however, to optimize those lists that are already performing at a rate that’s greater than your incremental break-even point.

To use outside-list optimization to improve the performance of marginal lists, you’ll need to plan ahead, as more time will be required to coordinate these activities. But for the most part, the extra time and expense will be offset by improved results. Only by testing will you know for sure.

Stephen R. Lett is president of Lett Direct, a catalog consulting firm specializing in marketing, circulation planning, forecasting and analysis. He can be reached at (317) 844-8228 or by e-mail at slett@lettdirect.com.