Maximizing Your Housefile Potential

We all know that the lifeblood of any catalog company is the housefile. Previous catalog buyers are the most valuable asset of any company and should be cared for to insure their maximum loyalty to your company. Now is a good time to assess the performance of your customer database. Are you maximizing the potential of your housefile? Are your customers satisfied with your services and products? What can you do to get the most out of your housefile?

Customer service is the ultimate key to customer retention, and an overall healthy housefile depends on how well you take care of your customers. There are a variety of reasons why customers discontinue purchasing from a catalog company. According to a 1999 Nielsen Group survey, approximately 14 percent of customers stop purchasing because they are dissatisfied with the quality of products and/or services. Another 68 percent discontinue buying merely because they are indifferent about a catalog’s offerings and service. People want to feel good about their purchases, so it is important to create a positive buying experience for your customers.

Let’s look at the following results of housefile performances from two comparable catalog companies. The first table is an example of a healthy housefile:

Healthy Consumer Housefile

Response Rates Average Order Revenue Per Catalog

Last 12 month buyers 7.85% $63.67 $5.00

13 to 18 month buyers 5.33% $61.41 $3.27

19 to 24 month buyers 4.51% $62.28 $2.81

25 to 30 month buyers 3.67% $59.93 $2.20

31 to 36 month buyers 3.77% $62.32 $2.35

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6.31% $63.12 $3.98

As you can see from the diagram above, the response rate from the housefile is 6.31 percent and the average order size is $63.l2, which yields $3.98 per catalog mailed. Note the strength of the last 12-month buyer file at $5.00 per book. Assuming the break-even point is approximately $1.50 per book, this file is a solid producer.

Now, let’s take a look at a company with an under-performing housefile:

Unhealthy Consumer Housefile

Response Rates Average Order Revenue Per Catalog

Last 12 month buyers 2.00% $97.58 $1.93

13 to 24 month buyers 1.29% $96.62 $1.25

25 to 36 month buyers 1.46% $97.35 $1.42

36-plus month buyers 1.43% $88.81 $1.27

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1.63% $96.66 $1.57

In this example, response rates on consumer orders are low, resulting in a minimal revenue per catalog mailed of only $1.57. While the average order size is high at $96.66 overall, a response rate of 1.63 percent is too low. You can see this catalog company will have difficulty staying in business if it cannot find ways to improve the performance of its housefile. While the results may be at, or close to, a break-even point of $1.50 per book, this firm will most likely be unable to do any prospecting until it determines why the housefile is under-performing.

Now take a look at your own housefile. Is it performing the way that it should? If you think you could be getting more out of your housefile, now is the time to consider some key factors that may be affecting its overall performance. Here are some of the most important issues to consider:

Merchandising—Are you offering an adequate selection of merchandise—in both depth and breadth—to your customer pool? In general, you should be offering a minimum of 250 to 300 distinct products. If your selection is too narrow, consumer interest will decline and will lower your housefile response rate.

Customer Satisfaction—What is your level of customer service satisfaction? If your customer service is not up to par, you may be losing existing customers and turning away potential ones. Here are a few customer service standards to follow:

• Order turnaround time—24 hours: You should always try to turn around orders within a 24- hour time period. It has been shown that customers are more likely to continue buying products from your business if it is received in a timely fashion.

• Initial order fill rate—85 percent: This means that you have the inventory to completely fulfill 85 percent of all of the orders you receive thus eliminating the need to back order.

• Order calls as a percentage of total calls—75 percent: Considering the total number of calls received by your call center, at least 75 percent of those calls should be from customers placing orders vs. customer service calls and complaints.

• Abandon call rate—3 percent: These are callers who do not want to remain “on hold.” If more than 3 percent of callers hang up, your abandon rate is too high, indicating you need more operators and/or more incoming lines.

Customer Loyalty—How strong is the response rate from your housefile customers, compared to responses from outside rented lists? Comparing these two rates will give you a good indication of your customer loyalty. For example, if new lists pull at or near the response rate of your 13- to 24-month or 25- to 36-month buyers, you probably have a merchandise category loyalty issue! If you are selling a generic product where price and/or availability are the prime motivators to purchase, you could even be driving business away. In this case, you are not providing any value-added service to the customer. If you deal with exclusive products or brand identity, your loyalty factor should be greater.

Circulation—Are you over-circulating catalogs to nonproductive RFM housefile cells? Keep in mind that not all buyers are equal, and it is important to devise circulation strategies that maximize your rate of return. Separate your one-time buyers from your two-or-more-time customers. Think of a buyer as someone who has only purchased once and a customer as someone who has purchased more than once. Your goal is to convert a buyer into a customer.

The best customer loyalty program is achieved by providing excellent customer service and maximizing the order fulfillment. If customers are pleased with your service, enjoy the timely receipt of their orders and are satisfied with the quality of your merchandise, they are more likely to stay loyal to your company.

Stephen R. Lett is president of Lett Direct Inc., a catalog consulting firm. He is also on the faculty at Indiana University, where he teaches direct marketing at the MBA level. He can be reached at (317) 844-8228 or by e-mail at slett@lettdirect.com.