Catalog Spotlight: Turning Lists Into Profits

Catalog marketers are overwhelmed with data. They need to measure what’s important and keep track of the data that’s critical to the health of their catalog’s circulation, and do away with the rest. Here are tips on how to do just that:

• Measure each list segment mailed in terms of dollars per book of response and whether the list segment has reached breakeven — i.e., the catalog cost plus the variable selling cost divided by gross margin. Basic circulation practice is to mail all segments that respond above breakeven.
• What are the incremental sales generated by a catalog mailing? Use mail vs. no-mail test holdout panels to measure incremental sales from your best housefile buyer segments as well as your marginal names.
• Test how frequently you can and should mail your best buyers, as well as the cadence of such mailings. “More to the best and less to the rest” is an old saying that refers to the tactic of generating more profitable sales by relying more on mailings to your very best customers.
• Test new cooperative database models against legacy models by segmenting the new and old models and flagging the names that overlap, as well as the unique singles from the new models and the old models, then look at the difference in response rates.
• Optimization by scoring your housefile reveals house segments that can be profitably reactivated and house names that should be suppressed. Make sure you know your break-even points for reactivation and for suppression.
• Segment cooperative database models into “previous” vs. “new” names to measure if the names mailed multiple times respond better than fresh names that didn’t come into the models the last time they were built. The quantity of new names also tells you how many fresh names are coming into your models vs. names you’ve mailed multiple times.
• When building cooperative database models, separate merchandise categories and build models by product category. For example, if you sell footwear and apparel, consider modeling the two categories separately; you can get both a deeper universe and a more profitable response.
• Segment your prospecting lists into “singles” and multibuyers to know if the singles are proving profitable. If the singles are above breakeven, the list is profitable only because of the multibuyers — which you’re also getting from other lists.
• Look at prospecting list results over time for list fatigue.
• Test a ZIP code table or “heat map.” Identify the hottest ZIP codes to test for deeper selects into marginal lists. Use the heat map to define your retail store market area for efficient mailing.
• Promotions are critical to today’s consumers. Gone are the days when the majority of catalog shoppers would respond at full retail price. Know what promotions work best in terms of top-line response and bottom-line profitability. Furthermore, know how different promotions will trigger different lifts in response rates and average order value.
• Email is becoming the primary tool for harvesting demand. Increasingly “catalogs create demand, and email harvests that demand.” Know your email response rates, how emails perform with different promotions, and what happens when you extend email promotions to a wider audience.
• Your daily sales flash is the key indicator of how all your marketing programs (catalog, email, search, social, affiliate, etc.) are driving sales. Watch your daily sales flash closely. Make sure you know how much of your daily sales volume is being driven by promotions.
• How many new-to-file buyers are you acquiring? New-to-file buyers are a catalog’s lifeblood. Are your new-to-file buyers coming from catalog prospecting, digital efforts or Amazon.com? Does the lifetime value of your new buyers differ based upon their acquisition channel? Is your 12-month housefile growing or shrinking?
• Historically, your baseline for budgeting catalog circulation was what was profitable. Rank your list segments from housefile and prospects, then draw your break-even line. That’s your starting point for next year’s circulation plan and budget.
• Printed pieces, whether they’re catalogs, self-mailers or postcards, can respond at 20 times to 50 times the response rate of emails. Know your response metrics for printed pieces. Know how deeply you can mail your catalogs and postcards into your house buyer file. Know the relative response rates and profitability between catalogs, postcards and email.
• Compare your online marketing results vs. the claimed results from your retargeting vendors. Google Analytics uses last-click attribution (which is very conservative), while many digital programs will claim sales if they have had any cookies within the last 30 days (which is overstating the impact of their contribution to generating a sale). Comparing results for a program when you have alternative attribution is very useful.

It’s critical that you’re able to focus on the really important data that drives the business and separate, in the words of Nate Silver, “the signal and the noise.”

Jim Coogan is the founder and president of Catalog Marketing Economics, a consulting firm focused on catalog circulation planning.