Approximately 60 percent of consumer catalog sales and 55 percent of total orders generated annually are received during the holiday season (October through December), according to data we compiled at Lett Direct, Inc. This three-month period represents all or most of the profit for catalogers during the year. Therefore, it's critical to make certain your business is hitting on all cylinders during the busy holiday season.
You'll want to maximize contribution to profit and overhead from all channels. Think as a multichannel marketer, taking full advantage of web and catalog initiatives (not the web or catalog). It's not a matter of trading selling expense dollars, but rather making certain the dollars being spent generate a positive incremental contribution to profit and overhead.
Recognize the importance of prospecting. I always tell our customers that you want to go fishing when the fish are biting. New buyers are the lifeblood of any business, and response rates will be maximized during the holiday season. Be sure to maintain your 12-month buyer count. At minimum, replace the buyer count lost to attrition. If you desire to grow, then focus on increasing your 12-month buyer count. If the size of your 12-month buyer count increases 10 percent, your sales will increase by approximately the same percentage. When prospecting, be sure to maintain the proper balance between circulation to the housefile vs. to prospects. And consider lifetime value when investing to acquire new buyers. Take a longer view on the payback of that investment.
Let's take a look at an annual catalog circulation survey done by Lett Direct comparing 2014 to 2013 (see chart below). This data is from 100 different consumer catalog companies.
Note that 32 percent of respondents plan to increase catalog circulation this year. Approximately 55 percent plan to keep circulation about the same, while only 13 percent plan to decrease circulation (compared with 17 percent last year). Catalogers recognize the importance of mailing catalogs. The catalog is the biggest driver of traffic to the web.
Increase page count if you have the merchandise. Pages increase response rate — i.e., the more pages (more SKUs) a catalog has, the higher the response rate. Sales will increase by approximately 50 percent of the percentage increase in page count. Adding pages assumes merchandise availability. It also means maintaining the same product density. Pages are a good investment and incrementally don't add greatly to your total selling expenses. If your catalog weighs less than 3.3 ounces, you can add pages without increasing your postage expense at all.
There are segments of your housefile that can be mailed profitably every time you mail. Therefore, reducing a mail drop will likely reduce profitability. Rather, consider adding a mailing to the top-performing segments of your housefile. Use RFM analysis to determine which segments to mail, or select customers that only buy in the holiday period and give them an extra drop. It's difficult to overmail your housefile (at least certain segments of your housefile).
You also want to examine the impact of promotions on response rates. Promotions such as free shipping, a dollar amount or percentage off the order, etc., have become commonplace because they increase response rates if structured properly. If your competition has an offer and you don't, it can hurt your response rate. You should be thinking about and planning your holiday promotions now. Promo offers can be fairly aggressive during the holiday season because catalogers and other merchants are competing for the almighty dollar.
Free or flat shipping or a dollar amount off the order are examples of strong offers. Furthermore, no order value minimum to qualify for the offer should be considered (except for dollar-off promotions). From all of the testing we've done, no order minimum will increase both the response rate and the average order size. Offers are frequently not structured properly. If a cataloger insists on having a dollar minimum to qualify for the offer, it's generally set too high. Don't use a minimum dollar amount to increase your average order size because it will most likely be at the expense of the response rate. The goal should be to increase the rate of response so more people order.
Be sure to have your online campaigns all cleaned up and ready to go. You should have completed most of your pay-per-click testing earlier in the year to avoid any surprises (i.e., poor performance) that may come up during the holidays. Take advantage of remarketing capabilities, especially for consumers you tagged during last year's holiday season. Most importantly, be absolutely confident that your product data feeds, which are being sent to Google Shopping and Bing Shopping, are error free and in the best condition possible. Shopping campaigns will continue to play an increasingly important role in paid search.
Your search engine optimization campaigns should have addressed all of the low-hanging fruit by the time you enter the holiday season. It can take the search engines several weeks or longer to recognize your updates. This means optimizing your best product category the week before Cyber Monday isn't a good strategy. Check your Webmaster Tools accounts to confirm that Google and MSN are able to crawl and index all of your site's pages. If there's a technical problem with crawling your site, you need to address it ASAP, long before your traffic begins to ramp up.
Now is the time to prepare for the busy holiday season. You have one opportunity to get it right. Unfortunately, you won't have a second chance to make a good first impression. The buying season will be here and gone before you know it.
Stephen R. Lett is the president of Lett Direct, Inc., a catalog consulting firm specializing in circulation planning, forecasting and analysis. Stephen can be reached at steve@lettdirect.com.
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- Lett Direct Inc.