Strategy: When Prospects Aren’t Buying

What to do about declining results to prospect lists.

Response rates to outside prospect lists have been on the decline, and last year was no exception. In some cases, results to tried-and-true continuation lists are off by as much as 50 percent. This isn’t a trend that’s likely to reverse itself anytime soon. This month, I’ll look at some reasons why response rates have declined and what you can do to compensate.

Why Prospect Lists Trend Down

Response rates to prospect lists have declined for several reasons: unseasonably warm weather during this past fall and holiday buying season, large amounts of consumer debt (an ongoing issue) and low consumer confidence. Aside from these legitimate reasons, the most significant reason response rates are flat or declining is the lack of housefile growth. Last 12-month buyer file counts are flat and/or declining from year to year — a trend that’s difficult to reverse quickly, and is costly for list owners.

Therefore, when you mail continuation lists (i.e., prospect lists you’ve used previously), you’re mailing many of the same names over again. The same people who didn’t buy from you six months ago still aren’t purchasing today. Those who did buy now are on your housefile, but have been de-duped from the prospect lists you’re mailing, lowering the response due to the names remaining on the file. This is a simple case of list fatigue that’s likely impacting response rates to outside lists.

The cream’s being scraped off the top, and many people remaining on the lists you’re using continue to not convert at the same response rate. To grow a file these days, a list owner must prospect to marginal or less productive outside lists.

Response rates from many of the cooperative databases also are off. Flat or declining 12-month buyer counts cause a ripple effect. Like outside prospect list results, co-ops depend on fresh, new-to-file names to help enhance and/or refresh results.

The chart “Typical Results to Prospect Lists” (below) offers actual results to outside, rented lists compared with a year ago. These results are after a matchback was done to allow for any Internet attribution. The same lists with the same select and similar mail dates are trending down.

The chart contains actual results to three outside prospect lists, two rented lists and one co-op list. These lists are trending down and are seeing a decline in list continuations. Although not all lists are trending down, still you should continue to do everything possible to maximize prospecting results.

Typical Results to Prospect Lists

Name of Prospect List – Average Order – Response Rate – Revenue Per Book

Prospect List A, 2005 – $83.68 – 1.49% – $1.25
Prospect List A, 2004 – $84.89 – 1.8% – $1.53
Prospect List A, 2003 – $85.56 – 1.87% – $1.60

Prospect List B, 2005 – $81.11 – 1.6% – $1.30
Prospect List B, 2004 – $88.06 – 1.62% – $1.43
Prospect List B, 2003 – $89.45 – 1.73% – $1.55

Co-op List C, 2005 – $72.45 – 1.88% – $1.36
Co-op List C, 2004 – $75.75 – 1.98% – $1.50
Co-op List C, 2003 – $78.94 – 2% – $1.58

Nine Ways to Boost Prospect Response Rates

So, what can you do about declining prospect response rates? How can you reverse this trend for your business? Try the following:

1. Test ZIP code models. These can help you decide which ZIP codes are most profitable to mail. There are companies that build ZIP code models for free, but then charge about $15 per thousand for selected names.

2. Expand your merchandise offering. If you’re a niche marketer, expand your product offering to include more general merchandise. This will help grow your prospecting universe.

3. Optimize rental singles. After a merge/purge, optimize rental singles (one-time buyers), and suppress the lowest-scoring 10 percent to 20 percent. Doing so should yield a 5 percent to 15 percent (or higher) lift. It’s always good to mail a 5,000-to-10,000 back-test cell to monitor suppression results in order to measure the exact lift achieved.

4. Take a break. If a list continuation you’ve been mailing each drop has fallen off in perform-ance, don’t entirely eliminate it from your mail plan. Try mailing it every other drop, or just in your best prospecting drops. This should lessen the impact of list fatigue.

5. Test singles vs. multis. Look at lists with declining results to see if the singles or new-to-file names outperform the multis. You may not have to drop an entire lagging list. Mailing the single buyers and/or new-to-file names could be the answer.

6. Drop non-codeable prospects, or less deliverable records to which a service bureau can’t assign a ZIP + 4. Often, these names perform well below the rate of the list from which they’re being dropped. If you clear this in advance, you can adjust these out of your list-rental invoice and reduce your rental expense.

7. Check datacards for your continuations. If the list owner’s zero-to-12-month file is shrinking, this could be an advanced warning that list performance also will decline. Your outside list performance depends on the strength of the files you’re using.

8. For new tests, check the zero-to-six-month count as a percentage of the zero-to-12-month count. If it’s more than 50 percent, the list owners most likely are prospecting at a healthy level. If it’s less than 50 percent, they’re probably not prospecting a lot. Test lists from companies that have new-to-file names.

Tip: Consider the mailer’s seasonality when you review this information.

9. Don’t drop co-op models. Your cooperative database rep should work with you to develop ways to improve the various models’ performances. You might have to get the co-op to tighten its parameters.

Track Housefile Growth

How much you’d like to grow your business depends on your 12-month housefile’s growth rate (see “Success Depends on the Growth of Your 12-month Housefile,” Catalog Success, March 2005).

If your 12-month housefile is growing, your revenue most likely will increase. But if your file’s decreasing, your revenue probably will go down. Rule of thumb: The percentage of revenue growth will approximate the percentage increase in your 12-month buyer file. This means if you grow your 12-month file by 10 percent, your revenue also should increase by about the same percentage. The change in your 12-month buyer file is a key indicator as to how well your business is doing (or not doing).

Response rates certainly have been impacted during the past several years. The fact that files aren’t growing, resulting in list fatigue, certainly is a big factor. While you can use various techniques to improve response rates, growth will continue to be an issue due to the lack of new catalog buyers.

Stephen R. Lett is president of Lett Direct, a catalog consulting firm specializing in circulation planning, forecasting and analysis. He can be reached at (302) 537-0375, or by e-mail via his Web site: www.lettdirect.com.