Success Depends on the Growth of Your 12-month Housefile

By what level you can grow your business is dependent on the increase in your 12-month buyer file, as you can see in this issue’s list of the Top 200 catalogers. If your housefile is growing, your revenue likely will increase, and vice versa.

No doubt you pay a lot of attention to your catalog’s daily and/or weekly demand report. Is it up from last year? How does it look against budget? But you probably don’t pay enough attention to the increase/decrease in your 12-month housefile. This month I’ll examine why this file is critical to your growth rate. And I’ll offer strategies to grow your file and explain what it means if you don’t.

Rule of thumb: The percentage of revenue growth will approximate the percentage increase in your 12-month housefile. This means if you grow the 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. So if you focus on adding new buyers and bringing previous buyers forward into a more recent RFM (recency, frequency and monetary value) cell, your business will grow.

In the chart, “Consumer Catalog Housefiles”, I compare the 12-month buyer counts for 10 consumer catalog companies on Dec. 31, 2003, vs. Dec. 31, 2004. Also shown: the percentage increase in order/revenue demand for the same time period. Note the relative consistency of the growth percentage compared with the increase in number of buyers added to their files.

In the example, the 12-month buyer file increased from 65,839 to 92,844, or about 41 percent. This large increase resulted in a 35 percent growth in the order/revenue demand. (Again, these are averages from 10 companies.)

When comparing your own housefile-growth rate, it’s best to compare the same time periods if possible, thereby eliminating the seasonality factor. For example, determine the buyer count on Dec. 31, 2004, compared to Dec. 31, 2003; or Feb. 28, 2005, vs. Feb. 28, 2004. Always pull your numbers from the same point in time, if you can.

This rule of thumb assumes your average order values (AOVs) remain fairly constant. A change in AOV, for example, will cause the rule not to hold true. For example, the 12-month housefile depicted in the chart “One Cataloger’s Housefile and Demand” increased almost 39 percent, yet the demand increased 25 percent. The cataloger made merchandising changes to the book, which caused the AOV to decrease from $80.45 to $72.80, a 9.5 percent drop. A nice rate of growth was achieved, but the rule didn’t hold true.

Seven Ways to Boost Your Housefile

Following are seven ways to increase your 12-month housefile rates.

* Target and try to reactivate customers who haven’t bought in more than 36 months. Encourage them by offering incentives to buy. Segment based on recency and dollar amount. You may find that the high dollar RFM cells need to be mailed.

However, there will be several cells in the older recency and lower dollar spender cells that are good targets for reactivation. Encourage them to buy again by offering free shipping (always the No. 1 offer) or a dollar amount off their next orders. Goal: Bring these previous buyers into a recent zero-to-12-month RFM cell.

* Convert inquirers. Catalog requesters are an excellent source of prospects. Review your remail strategy. How many times should you be mailing to nonconverting inquiries? More than likely, three, four, five or more times.

Takeaway tip: After you’ve maximized mailings to the nonconverting inquiries, have one of the cooperative databases model the remaining names. They’ll identify which inquiry names to remail.

* Target one-time buyers. Catalogers often treat one-time buyers like they do all buyers. Yet a large percentage of the file includes those who’ve purchased only once. Segment and target this group by offering an incentive to encourage one-time buyers to become multibuyers. Again, the goal is to bring these one-time buyers into a more recent zero-to-12-month segment.

* Use cooperative databases. Each has a slightly different twist on modeling, and each will identify qualified prospect names another one missed. So don’t just stick with using one; you can use them all cost effectively.

* Tap outside prospect lists. Of course you must rent and/or exchange others’ customer lists, because the universe of names available from the co-ops will be somewhat limited.

Takeaway tip: When examining your results from list rentals/exchanges, look at lifetime value and not just the conversion rate from one mailing.

* Expand your product offering and increase page count to boost your response rate, which will encourage more people to buy.

* Include a bounce-back catalog with every outgoing order. Increase response by making a special offer to customers who reorder within, say, the next 30 days.

Takeaway tip: Be sure the catalog is the first thing customers see when they open the box. You’ll hinder your results if the catalog is on the bottom.

Conclusion

The goal of most businesses is to increase revenue. Rather than focus solely on this end objective, focus on increasing your 12-month buyer count. The revenue will take care of itself. Be sure you have everything in place to grow your file, and your revenue will increase.

Stephen R. Lett is president of Lett Direct, a catalog consulting firm specializing in circulation planning, forecasting and analysis since 1995. He spent the first 25 years of his career with leading catalog companies; both business-to-business and consumer. He can be reached at (302) 537-0375, or via e-mail from the Web site: www.lettdirect.com.