Know Your Housefile

Most catalogers know the broad brush strokes of their housefiles: that is, how many 12-month buyers, 24+ month, etc.

But to really know the impact your marketing and merchandising efforts have on the file in time, do a detailed houselist inventory at least once a year. This also will become your road map for planning future marketing and merchandising efforts.

Producing the summary is easy and in many cases can be done by your database manager or merge/purge company. To make the inventory even more effective, put it into a chart that consists of cells to hold counts in each of your segments for recency, frequency and monetary (RFM) value. (See the charts on this page for examples.) Use average monetary value (AOV), not lifetime, to get a better picture of customers’ responses to your individual marketing offers.

A chart can help you easily compare your current housefile to your previous ones and determine the effect in time. You also can identify current problem areas and develop plans to address them.

The most important goals of doing the inventory are to understand if your marketing and merchandising efforts are producing the desired outcome; to continue finding areas that need improvement; and to develop specific efforts for these problem areas.

The desired outcome is an increase in counts for your best segments and a decrease in counts for your worst. While a theoretical goal might be to move all your customers to your best segments, practically speaking, this won’t happen. Instead, put most of your efforts into maintaining or growing your counts in the “sweet spot” of

the RFM, while also producing a slight increase in your best segments and a slight decrease in your worst.

The Sweet Spot

The sweet spot is the segments (or segment) that drive the highest amount of total contribution dollars. These may not actually be the most-profitable segments on a percentage basis, but they’ll drive most of your profits. Ensure that your marketing and merchandising programs are designed to continue keeping the counts of buyers in these segments by maintaining a high response rate within that sweet spot.

Now that you know your sweet spot and what’s been happening to your file in the last several months or years, you can begin building plans for addressing the key areas of your file. Start with plans for improving the worst segments.

One of the advantages of the houselist inventory is that you can develop offers for the bad segments without making offers to the entire file. In many cases, your best customers don’t need the offer in order to respond or spend the right amount. It’s the unprofitable customers for which you want to develop the right offer, so you can continue mailing them in the future.

For example, say you have a high count in a segment of 1X, 37 to 48 months, more than $50 but less than $100. Their average order wasn’t too bad, but they haven’t purchased in more than three years. Devise an offer that compels them to buy again. But, before you begin working with older buyers, ask your staff: “Have we made significant changes in our product assortment, pricing or brand positioning in the last three years?”

Perhaps you dropped a category, changed your pricing or changed something else that caused these customers to leave. Knowing this may be important—you could be spending time creating marketing efforts to get them back, when the crux of the issue is that they were shoe buyers and you no longer carry footwear.

Adding product category to the segmentation can help you answer this, or you simply can produce a report that shows how many of these buyers bought shoes. If it was a large number, you may want to just let them go. Ask these kinds of questions before expending effort on older customer groups.

If you still want to revive this group, develop an offer expressly targeted to them. Perhaps it’s a free shipping offer or a message on the cover that states “We Miss You!” Since it’s response you want from these customers, don’t set a dollar qualifier on the offer, or at least set something low such as $40 or $50 (their last AOV).

Testing several offers and a simple message against a control offer is a good idea when beginning reactivation programs. You don’t want to give away more than necessary, and you must ensure the effort meets an acceptable profit (or loss) per customer.

Secondly, you might have a group of more recent 1X, six-to-12 month customers who have a low AOV, say, less than $30. They’re unprofitable, but they’ve responded lately, so they have indicated an affinity for your offering. In this case, increase their AOV or their frequency to make them more profitable. However, if the AOV is less than breakeven, improving their frequency won’t help.

One you’ve determined you want to increase their AOV, develop an offer that’s tied to a dollar qualifier such as x amount off shipping and handling for any order of $60 or more. Don’t set the qualifier too high, since that actually may deter response.

Core Customers

Be sure your marketing and merchandising efforts will continue to satisfy this core group of customers. If your core group are 1X, zero-to 12-month buyers with an AOV of $50 to $75, mail to them frequently enough and be sure your catalog offering characteristics haven’t changed so much that these results will be difficult to achieve. In other words, if you’ve been averaging 1.8 items per order with an average price offered of $35, be sure your average price offered doesn’t jump to more than $40—or that AOV will be difficult to maintain without a decrease in response rates.

Fully understanding the makeup of your housefile (by segment) and the effects on it in time will assist you in developing appropriate offers, mailing strategies and merchandising efforts to help it grow.

Phil Minix is the managing director, Catalog, for Reiman Publications. You can reach him by e-mail at pminix@reimanpub.com.