How to Make List Prospecting Work

For business-to-business (b-to-b) catalogers, the basic prospecting process using lists consists of several steps. In this article, I’ll focus on three of them:
- understanding what you can spend on a customer;
- identifying the potential prospect universe; and
- using your merge/purge reports.

These general steps include the key elements of getting through list prospecting in a way that gives you the most information and greatest opportunity for success.

Expense Per Customer

Understanding lifetime value, or even 12-month payback, is the first step in the customer-acquisition process, no matter what method you use to get new clients. Determine what return on investment you must make to bring in a new customer.

One way to do this is to look at an estimated 12-month payback from a newly acquired customer. By forecasting the number of mailings, estimated response rate, average order value (AOV) and average catalog cost — and knowing your contribution margin — you can do just that.

Let’s assume that in the full year after a customer is added to the file, he or she will be mailed seven times.

* Number of mailings in 12 months: seven

The average response rate during the course of those seven mailings is 8 percent. That is, for each mail drop the customer segment generates an 8-percent response on average. Estimate the response rate by looking at how one-time, 0-to-12-month buyers historically have responded, on average, to mailings for a 12-month period.

* Average response rate for all mailings: 8 percent

Look at the AOV during the course of those mailings just as you did the response rate above. I’ll assume the AOV is $250.

* AOV for all mailings: $250

Determine how much your catalogs cost “in the mail,” (e.g., paper, printing, postage, manufacturing, data processing). For this example, I’ll assume $.80 per piece mailed.

* Average “in the mail” cost per catalog: $.80

Finally, identify your net contribution margin (NCM), that is, your gross margin minus net fulfillment expenses. NCM is contribution to overhead and profit, factoring for fulfillment. For this example, I’ll assume a healthy net contribution margin of 60 percent.

* NCM: 60 percent

In the chart, you’ll see you can spend up to $78.40 for every order generated

from a prospect list to break even after 12 months of mailings. This gives you a benchmark from which to move forward.

Identify the Potential Prospect Universe

This is where b-to-b prospecting really starts to differ from most consumer prospecting.

For example, consumer mailers typically will, and should, focus on responder files for new-customer acquisition. In other words, apparel catalogers may target only Eddie Bauer, J.Jill, Coldwater Creek or Pottery Barn — established mail-order buyer lists — to build their own customer bases. And they rely far less on compiled lists that primarily feature demographic data for selection options. B-to-b mailers may not always have that luxury.

While many business mailers have their lists on the market for rental or exchange, it might be difficult for a tightly defined niche mailer to find responder lists that make sense for its extremely targeted offering.

Consider the example of a parking supplies cataloger. Looking to mail-order buyer lists may not be an option because the market segment is so specific. In this case, compiled lists with Standard Industrial Codes (SIC) or North American Industry Classification System (NAICS) and title selects may be more appropriate.

In addition, the mailer will want to look to organizations and associations of individuals within the target market. Or perhaps there are publications specifically for the parking professional (yes, there really is a magazine entitled Parking).

The point is that in the b-to-b arena, you don’t want to leave any stone unturned. Following are some list options:
- mail-order buyer files;
- association/organization membership lists;
- industry publication subscriber files;
- compiled lists with SIC or NAICS selection availability;
- trade show participant lists;
- vendor developed lists; and
- event participation lists.

Act on Your Findings

You can improve your chances for prospecting success in the following ways. First, get a good list broker, one who knows the b-to-b world.

Next, target specific selection criteria within some of the above-mentioned files. Adding title selects is a benefit with compiled lists. And you typically can increase the quantity of names available in your prospecting universe if you’re willing to mail records that have, say, a title, company and address but no actual contact name.

An exploration of your existing database should help shed light on the key titles to mail. It may seem as if the right move is to mail presidents, CEOs and owners, but a good look at your own data may show that human resources or facilities managers are the key contacts for long-term response.

If you have the data and the ability to perform lifetime value analysis or some other meaningful evaluation based on contact title, SIC code, company size, geography, etc., use it. As they say, numbers don’t lie, and they often can present opportunities for growth outside of the obvious.

Ideally, the lists you choose should have rollout potential. That is, you may find the best list ever — great response and AOV every time out — but if the total list quantity is small, there may be little long-term opportunity.

Small lists that aren’t frequently refreshed tend to fatigue faster, and you may see performance fall fairly quickly, hence the recommendation to consider mailing titles.

Once you’ve identified the potential lists for mailing, try to forecast response and AOVs — using historical data, if possible — so you ultimately can evaluate contribution per order. At this point, you want to compare your forecasted contribution per order to the acceptable investment level that you determined from the exercise above.

If the forecasted contribution per order is in line with the acceptable investment level you’ve identified, proceed with the order, and then onto the merge.

Use Your Merge/Purge Reports

Merge/purge reports can give you a wealth of data. Look at the list-to-list matrix that shows which lists match. If you use a ranking that puts all outside lists “random in the merge” (i.e., no individual prospect list outranks another), you’ll see where you have heavy overlaps or dupes.

If a known winner has a higher-than-average match rate against a new, untested list, the new list may have good potential. Keep an eye on this new list to see if the expectation holds true. If so, check out which lists the new list matched high against, and work to expand the overall list opportunities from there.

B-to-b list prospecting isn’t always as easy as consumer prospecting seems to be, but the rewards can be much greater. Starting with good information is key. Know what you can spend, have a list broker help you with your research, test, re-test and then roll out.

Steve Trollinger is senior vice president of client marketing for J. Schmid & Assoc., a catalog consulting company based in Shawnee Mission, KS. He can be reached at (913) 236-8988.