Effective Customer-contact Strategies

Because 2002 may be a difficult year for many catalogers, I will focus my columns on proven business practices that currently are working for other catalogers. In this way, we can, as an industry, learn from and assist one another through these challenging times.

Determining how many times to contact your customers and prospects is one of the most common and important questions marketers ask.

But it’s not the only critical question. Discerning when and how best to contact them can help you devise an effective customer-contact strategy.

If you’ve never performed a contact strategy test or haven’t updated yours in several years, now is a good time to do so. The three questions to ask include: how often to contact customers and prospects; when to contact them; and how to contact.

How Often to Contact

If you plan a customer contact strategy correctly, you can optimize your revenues and costs. That is, you’ll find that “sweet spot” where you continue to get marginal revenue at an acceptable cost.

Once you cross that line, however, every dollar in revenue will cost too much and drive down your profitability. So the key to optimizing contacts comes first in understanding your revenue and profit objectives. Then you can discern if more contacts will drive enough revenue or profit to make them fit into your plans.

To determine your optimal contacts, test. An effective contact-strategy test takes time and effort; start now, and plan to track your results. You need at least a year and several data segments of 5,000 to 10,000 names each.

For example, if you’re currently mailing a book every eight weeks, you’ll need a segment to mail every five or six weeks, and another every 10 weeks. Create test segments in each of your major RFM (recency, frequency, monetary) categories so you can determine if there are different optimal numbers of contacts for different segments.

Test for at least one year so you can determine the cumulative effect of your actions. If you increase frequency and begin mailing too often, it may take a few mailings for results to show in a measurable way. Remember, if you know your revenue and profit objectives, it’ll be easier to determine how many contacts are appropriate once you have the test results.

When to Contact

Knowing when to mail is a first cousin to knowing how often. With the correct testing, you may discover that the “how often” will change with the “when.” That is, you might decide to mail every four weeks in the latter part of the year, but only be able to justify mailing every 10 weeks in the middle of the year and every six weeks in the beginning of the year.

Depending on your product mix, your timing for being in-home can dramatically affect your results. Even before you test, make a good guess about your timing given the types of products you sell (e.g., whether they sometimes have gift-giving appeal) and look at the seasonality of consumers in general for purchasing that product category.

If you belong to a co-op database, its reports can show you when customers are buying in major categories across the industry, which is helpful in determining your best times for prospecting, for additional contacts to customers and more.

We often find that the weeks right after the December holidays often are overlooked by many marketers. It’s easy to assume that most consumers are “shopped out” after the fourth-quarter holidays. But in direct mail, January is a very responsive month—usually the second or third most responsive of the year for many product categories.

Also, when thinking about how often and when to contact customers, it’s important to remember you’re contacting people in groups of thousands of names. And since you’re only getting 1-percent to 5-percent response rates, 95 percent or more of the people contacted weren’t ready to buy, didn’t find anything they wanted at that time or didn’t even open your catalog.

Catalogers often ask if the 5 percent of customers who purchased in the past are ready to buy again so soon. Rather, that additional contact really should be geared to the 95 percent of people who didn’t purchase the last time.

How to Contact

Next consider what kind of vehicle to use to contact customers and prospects. As a cataloger, you have numerous ways to make contact with customers: a post card, mini-catalog, direct mail package, outbound phone call or outbound e-mail, and myriad other methods. All of these, especially low-cost e-mail marketing, should be planned into your overlap of contact strategies.

Below, I examine a few contact options and consider the pros and cons of each. Remember to test before you roll out any campaign.

• A postcard is easy to create and produce, and it generally will cost less to mail than your catalog. However, a postcard doesn’t have nearly the revenue-generating ability of a catalog. So a postcard must work hard to affect a consumer’s current or future buying behavior. Again, this can be known only with testing. We recommend testing postcards as Web and retail traffic-generating devices and as a way to announce a special event such as a sale or a new catalog arrival. Remember, you must get the necessary lift to pay for the postcard program.

• Mini-catalogs (e.g., smaller trim or lower page count catalogs) also can be great for additional customer contacts. Like postcards, mail costs generally are less than a traditional catalog and if designed correctly, mini-catalogs can garner impressive dollar-per-catalog numbers. They also can work well as a Web or retail traffic-generator and may not cost that much more to mail than a postcard, although your creative production costs will be greater.

Using smaller catalogs for prospecting generally is not a good idea, unless your main catalog is an extremely large page count book. In this case, the smaller book might be more focused and easier for prospects to browse through.

• Many catalogers effectively use a direct mail package in off-seasons or as an additional customer contact. For example, Omaha Steaks mails its catalog only in the fourth quarter. The rest of the year, the cataloger uses direct mail packages and e-mails to contact its customers.

The direct mail package works well if you have a few signature products that lend themselves to a single or limited multi-presentation format. If your brand positioning is about assortment and choice, a direct mail package probably is not for you. The costs most likely will be comparable to your catalog, so testing will reveal if the results merit this method in your strategy. Sometimes just hitting your customers with something different will jar them into purchasing.

• Depending on your type of business, your customers and your product offerings, outbound marketing phone calls may increase your mailings’ effectiveness or generate additional income between mailings—especially if yours is a business-to-business catalog. Don’t be afraid to call your customers to ask for the sale, but be sure you’ve got something compelling to offer them.

• If you’re not already testing outbound e-mails to your customers, you should. Many catalogers are getting impressive results from these campaigns. Be sure that when you develop a strategy for an outbound campaign that you have something exciting to offer. Each e-mail campaign should have a reason, such as a sale, a new product, or an announcement of a catalog arrival. E-mail customers want to quickly know why you’re contacting them and what you want them to do. Be concise, and make a great offer.

In addition to tracking the results of each e-mail campaign, analyze the results of those same e-mail recipients to other forms of marketing. Perhaps the results of your e-mail campaigns aren’t quite what you’d like them to be, but the e-mail recipients are performing 10-percent better when they get the catalog. Or perhaps the e-mail results look good, but you’re cannibalizing the catalog results.

Developing and managing your contact strategy is imperative to achieving effective results for your catalog. Take into account all of the complexities of frequency, timing and methods of contact. Plan your contacts well in advance, and don’t forget the most important and fun part of our industry—test, test, test!

Phil Minix is executive vice president and general manager of J. Schmid & Associates. He can be reached at (913) 236-2408 or at philm@jschmid.com.