Track Your Results with Source Codes

One of the aspects of cataloging that I’ve found useful is that everything you do from a circulation and marketing standpoint can be tracked to a specific source, or key, code.

When a marketer runs an image ad (non-direct-response) in a general interest magazine, for example, it’s difficult to know the effect the ad has on sales. But when you, as a cataloger, run a direct response ad or mail a catalog, most of the orders can be traced to a source, so your marketing and circulation efforts can be measured.

This month, I’ll offer examples of the common list results you can capture, and how source coding is used to determine which promotional offers work best. I also will examine the ever-present, non-traceable factor, as well as tracing business to the Internet.

Benefits of Source Codes

Source codes help you know which housefile segments to mail, which prospect lists to use (and which to eliminate), the best promotional offer to make and much more. In fact, you can’t remain in business very long without using source codes. Consider them the lifeblood of any catalog business—consumer or business-to-business.

Some catalogs prefer to build some intelligence into the code, while others simply use a sequential numbering system (i.e., alpha, numeric or a combination of the two). It’s best to avoid using certain letters, such as “I” (which can be confused for a 1) or “O” (might look like a 0). Avoiding these types of letters and/or numbers will reduce your non-traceable factor.

Some catalogers like to increase the results proportionally across all key codes, which is fine. I prefer not to allocate the non-traceable results for the following reasons. First, I think it’s good to draw attention to what the non-traceable factor truly is. By knowing this, you can reduce the amount of non-traceable results.

Second, you’re never exactly sure how much of the non-traceable results to allocate to the housefile and/or to outside names. For example, should the non-traceable results be allocated based on circulation or on some other criteria? By looking at the raw results, you’ll see the individual list results are better than those shown on my report because of the non-traceable factor. This enables you to forecast list results on a more conservative basis.

Of course, you must include a non-traceable factor in the forecast, and I do. I simply prefer not to eliminate the exposure to the amount of non-traceable business you generate by allocating it back across all segments and/or lists.

Determine Promotional Offers to Make

Without source codes, you have no way of knowing how well a particular offer, like free shipping, works to draw customers and/or prospects. So split your mailing into two parts. By doing this, you can make an offer, such as free shipping, versus no offer (the control).

The “A” group is the control—no offer. The “B” group is the offer group. This offer was used to reactivate previous customers and to bring them into a more current recency, frequency and monetary value cell.

The use of source codes makes it possible to know the effect that offering free shipping had on your housefile. (See chart.)

The Non-traceable Factor

You’ll want to try to trace 100 percent of all orders and sales. Based on experience, non-traceable results shouldn’t exceed 20 percent of total orders and revenue. A ratio of 10 percent to 15 percent is even better.

You should be able to trace at least 80 percent of your business to a specific source, and if you can’t, your phone reps aren’t doing a good job getting the codes, or they’re frequently using a default code just to get the order entered into the system, which is not good either.

Ensure that your front-line people know the importance of asking for source codes; in particular, they need to understand how important the codes are to your marketing department. Following are a few ways to increase the amount of business traced to a specific source code:
- Place the source code in a colored box on the back of your catalog.
- Use as few digits (alpha or numeric) as possible.
- Avoid using codes that can be mistaken for letters or numbers.
- Ink-jet the source code onto the back of the catalog (in the box) and onto the order form. The code must appear both places.
- Train phone reps to ask customers for source codes.
- Be sure every catalog is coded, including bulk copies used as bounce-back catalogs and to fulfill catalog requests (inquiries).

Trace Online Orders

The Internet presents challenges in terms of tracing orders to specific source codes. Catalogers do know, however, that every time they mail a catalog, their Internet business increases. That’s because the catalog is the biggest driver of traffic to the Web.

Driving more business to your site will result in less business being traced to a specific key code. Some catalogs request the source code on their Web site when the customer places an order. Tracing Internet orders to a specific code is difficult to do for most catalogers. Asking customers to enter their source codes usually doesn’t work. The customer simply doesn’t take the time. But if you use incentives, there’s a better chance they might. For example, try offering a price reduction to customers who enter source codes from their print catalogs.

The best approach is to “match back” the responders to your original mail tape to see, by code, who responded. Save the original mail tape, and once the catalog campaign is 80-percent complete, match the people who made a purchase since your mail date against the mail tape. If they made a purchase since the mailing, chances are it was because they got a catalog in the mail if they also appear on the mail tape. This will tell you which code to assign credit. It’s probably not necessary to do the “match back” after every mailing, but by doing this once or twice annually, you’ll be able to determine the origin of the business by source code.

Test results can be skewed by Web customers. More of the test group will tend to enter their source codes, where there’s no compelling reason for the control group to enter theirs (superficially making the test group look even better).

Also, understand that Web unknown volume doesn’t represent your total Web business (especially if you’re taking source codes from customers on Web orders). Have an order type that indicates “WEB.” This will help capture all Web volume whether or not the customer entered a specific source code at the time the order was placed. At least you’ll know how many orders (and the gross demand revenue) come from the Web.

Without using source codes, you can’t read your results, and that limits your ability to move your business forward. Source codes are critical to your success.

Stephen R. Lett is president of Lett Direct, a catalog consulting firm specializing in marketing, circulation planning, forecasting and analysis. He can be reached at (302) 541-0608 or by e-mail at slett@lettdirect.com.