You’ve Got Homework!

While your mailing list is the most important asset in your catalog business, your in-house database is the key to optimizing your mailing list. Relational databases are powerful marketing tools that allow catalogers many opportunities for understanding their customers and learning how to mail smarter.

How do you use your database to its full potential? Dave Kuncicky, chief executive officer of equine catalog Chamisa Ridge, uses his company’s database to segment its customer base into product categories and to “find interesting things about customers. If you have several nonintersecting groups of customers based on what they buy,” he says, “you find two classes of customers that have completely different marketing strategies.”

Continuity buyers, for example, don’t buy on impulse and can be mailed to much less frequently, whereas gift buyers do buy on impulse. “So, you have two different marketing plans based on a 30-minute exercise,” Kuncicky says. “If you can interact with your database and write a little bit of SQL code, you can answer questions in minutes that would take hours to figure out by hand.”

Tracking trends in product categories is tedious, but with a couple of lines of code you can see if widget A shows a decreasing trend, and if widget B shows an increasing trend; you can catch these trends easily, Kuncicky says.

Acme Tools uses its databases to produce vendor-exclusive catalogs by finding buyers of that vendor’s brand. “We deliver highly targeted promotions by mailing only to the buyers of a particular brand of tools,” says Vice President Paul Kuhlman. “It’s a win-win for us and for our manufacturers.”

What are some other ways catalogers can profit from their databases? Here are few.

Small Housefile Segments

Segment:

* multibuyers vs. singles;

* buyers in multiple product categories;

* buyers who’ve only bought in a single product category;

* lower and higher average order segments;

* holiday-only buyers;

* residential vs. business addresses;

* buyers in strong and weak geographic areas;

* ZIP code ranges; etc.
Look for segments to mail more frequently as well as segments to stop mailing.

Finding segments to stop mailing is hardly a sexy practice, but it can be very profitable when you cut out waste hidden in your buyer file. Finding highly responsive buyer segments is the easiest path to increasing sales and profits.
Degrees of Web Buyers

If you don’t understand your Web buyers, response undoubtedly will decay. There are two kinds of Web buyers:

1. catalog-driven Web buyers, who prefer to order online, and

2. pure Web buyers, who are driven to purchase without having received your catalogs.

These two kinds of buyers respond very differently to catalog mailings. Your database needs to segment Web buyers so you can stop wasting circulation by over-mailing Web buyers. The database needs to capture original source codes from Web orders so you can see if customers came from paid or natural search, e-mails, price-comparison engines, affiliates, eBay or other pure Web sources.
Catalog/Web Matchbacks

The second stage of classifying Web buyers is to differentiate Web buyers in your matchbacks between catalog-driven Web buyers (who will respond like traditional call-center buyers) and pure Web buyers who don’t match against your mail files.

Flag those nonmatching Web buyers in your matchback as pure Web buyers by default, and you’ll be able to measure their response to future mailings. Why is it so important to flag Web buyers? They may respond at one-half to one-tenth the response rate of traditional catalog buyers with the same RFM.

Your relational database provides more powerful ways to manage your merchandise and customers.

Catalogers often look at their merchandise as a big, homogenous, undifferentiated group of products. Your database provides the ability to slice and dice those products and customers who buy inside silos of product categories in many different ways.

Beyond Square-inch Analysis

Databases contain distinct subgroups of different types of merchandise buyers. Buyers of one type of merchandise may be high-profit repeat customers; buyers of another type of product may have a much lower lifetime value.

Refine your buyer groupings and realize significant opportunities. Segmenting buyers into merchandise groups will show you how to optimize the frequency and seasonality of mailing different types of merchandise buyers. Extract the best merchandise buyers and suppress less profitable merchandise buyers. Then model the best buyers at the cooperative databases. Models built on tightly defined buyer groups deliver better response and get you the higher value customers.

Relational databases allow catalogers to data mine for the best merchandise buyers in several ways. Catalogers who know their business can search for product sweet spots by any number of criteria, including:

* customers who buy across multiple product categories;

* B-to-C vs. B-to-B buyers;

* repeat buyers vs. merchandise buyers who tend to purchase only once or only a single item but don’t convert from “triers” to “buyers”; and

* any criteria that effectively separates higher lifetime value buyers from lower lifetime value buyers.

Keep Your Housefile Clean

Use every list hygiene tool available, and make sure your database files are updated and cleaned at the same time the mail files are cleaned.

Maintain a database of old addresses so if old ones show up on prospecting lists they can be suppressed. Test advanced list hygiene tools to identify old addresses, bad addresses and addresses that can realize cheaper postage through address correction.

With more than 15 percent of American households moving every year, it’s common to find that a housefile contains more than 10 percent old or bad addresses.

Catalogers should clean the “obvious things,” Kuncicky says, such as duplicates, missing data, coding and the same fields consistently over time. If the database is not maintained properly, he says, “then obviously it’s not going to work.”

Jim Coogan is president of Catalog Marketing Economics, a Santa Fe, N.M.-based consulting firm focused on catalog circulation planning. You can reach him at (505) 986-9902 or jcoogan@earthlink.net.