Strategy: Maximizing Outside List Performance

Most catalogers can’t break even on the initial order when they mail to prospects. That’s often why start-up catalogs have difficulty surviving. Catalogers, new and old, depend on repeat purchases for profitability, i.e., turning one-time buyers into customers who purchase two or more times.

This month, I’ll discuss ways to maximize outside list performance on the initial order to get closer to the incremental break-even point.

You can maximize outside list performance by increasing response and/or your average order size (AOS). I prefer to focus on improving the response rate because it yields a greater number of new buyers, thus growing your 12-month buyer file faster.

Don’t be concerned with trying to increase the AOS to prospects. A deliberate attempt to increase the AOS often results in a lower response rate. When prospecting, you want to maximize the response rate and add as many new buyers to your housefile as possible. The chart shows the advantage of increasing the response rate as opposed to the AOS.

In both results shown in the chart, the revenue per catalog (RPC) mailed is identical. But the response rates and AOS differ. From an operational standpoint, it might seem better to have fewer orders and the same RPC. From a marketing viewpoint, however, a higher response rate is preferable because it results in greater housefile growth. In the example in the chart, the higher response rate yielded 270 more new buyers.

Maximizing outside list performance isn’t easy and requires much testing.

Here are seven proven ways to increase the response rate to outside lists.

1. Use all of the cooperative databases, not just one or two. There are six consumer co-op databases to take advantage of: Abacus, NextAction, I-Behavior, Z-24, Prefer Network and Wiland Direct. Yes, there will be overlap from one database to another, but each co-op can identify names worth mailing, based on its modeling, that another co-op might not find. That’s because all the co-ops build statistical models differently.

2. Select based on recency. In the priority of recency, frequency and monetary value, recency of someone’s purchase always ranks highest. So when selecting outside rental lists, prospect to the most recent buyers offered by the list owner unless there’s a seasonality factor, such as the case with food mailers. It’s often not necessary to add the monetary value select, and there’s no reason to pay additional charges if they’re not necessary.

3. Maximize rollouts vs. new tests. Maximize outside list continuations first since these lists are based on prior history, i.e., actual results. Double the usage each time, assuming there’s a large enough universe.

4. Use marginal list optimization. This will improve performance and thus increase the revenue per catalog (RPC) mailed. There are two ways to use list optimization: selection and suppression. Both techniques use 10 percent to 20 percent of a given file.

◊ Selection: Used for pre-merge lists, it enables you to use a compiled list or subscriber file to capture affinity; then, use optimization to select the top 10 percent to 20 percent of the known catalog buyers.

◊ Suppression: Used in post-merge to identify and suppress rental singles (one-time buyers). After the merge, you can optimize the rental singles and suppress the worst scoring 10 percent to 20 percent. This method should yield a 5 percent to 15 percent lift. Takeaway tip: It’s always good to mail a 5,000- to 10,000-back-test cell to monitor the suppression results in order to measure the exact lift achieved.

5. Know who to prospect to. Product affinity is the most important factor when determining which specific lists to use. Select lists that are synergistic with your offer. Be careful using subscriber files and/or compiled lists, unless you’re selling B-to-B. For consumer mailers, subscriber files and compiled lists need to be optimized prior to mailing. You’ll get your best results from proven mail order buyer lists whose product offering is compatible with yours.

6. Take advantage of seasonality factors. Know when to prospect in order to maximize results. Catalog seasonality does influence the results you’ll achieve. Typically, the holiday season is the best time of year for consumer catalogers, and your response is highest. Your fall results will be 70 percent to 75 percent of your holiday results. Spring is 65 percent of holiday, and the slower summer months equal 60 percent of holiday.

7. Rely only on matchback data. Today, catalogers are lucky to trace 50 percent of their business to a specific source code. Lists containing heavier Web buyers appear not to work well when they’re actually profitable. But without a matchback you’d never know this, and any testing would’ve been meaningless. You may think you have trouble finding lists that work, when in actuality you have winners to add to your continuations.

Additionally, you might have lists that look like they are falling off, or your total rentals look like they are trending downward. But this might be a result of heavier Web sales. It sounds simple, but without truly knowing the level of performance of all segments mailed, you could be led to some false conclusions that influence your marketing strategy.

When prospecting, develop a strategy to increase response and the RPC mailed. This will result in a greater number of the prospect lists you use achieving the incremental break-even point.

Prospecting is much more than renting a bunch of outside lists. These prospecting techniques should help you maximize your results.

Stephen R. Lett is president of Lett Direct, a catalog consulting firm specializing in circulation planning, forecasting and analysis. Author of “Strategic Catalog Marketing,” a Catalog Success book published by Target Marketing Group Publications, he can be reached at (302) 537-0375 or www.lettdirect.com.