Best Catalog Circulation Strategy for 2009
by Stephen Lett
I am optimistic that 2009 will be a better year for catalogers and on-line merchants even thought the experts say the recovery will be gradual. There are bright spots within given merchandise categories. For example, the religious goods, pet and hobby markets are all doing well, just to name a few. The National election is behind us which has been a huge factor affecting results. This month, I have outlined what I feel is a winning strategy and “best practices” with regard to catalog circulation this new year.
Here are a few reasons for my optimism. Selling expense to sales ratios should stabilize, perhaps even decline. That’s because of three main factors; postage, paper prices and response rates. Postage costs will remain stable in 2009 with no large increase on the horizon. Paper prices are expected to decline. Yes, decline! Demand for paper is soft and the dollar is more favorable with respect to foreign markets. We are no longer seeing frequent paper price increases and as one large merchant told me recently that paper prices should start to decline early this year. Paper and postage combined represent 60% to 80% of total selling expenses. We should also see an increase in results (response rates) as consumer confidence improves. This too will have a favorable impact on selling expense to sales ratios.
Here are my suggestions when planning your circulation this year:
- CONTINUE PROSPECTING – Absolutely! Stay focused on growing your 12-month buyer file. Don’t stop prospecting. If your 12-month buyer file count declines, it is difficult and costly to reverse the trend. Those catalogers who have been cautious while sticking to a plan of growing or at least maintaining their 12-month buyer files have been impacted less by the downturn. If your 12-month buyer count declines, your sales will also decline by approximately the same percentage.
- PROSPECT vs. HOUSEFILE CIRCULATION - Control the ratio of prospecting to total circulation being careful not to cut too much. Mailings to prospects should represent approximately 60% of your total circulation depending on the season, of course. Do not get overly aggressive by increasing the ratio of prospecting to housefile mailings. At the same time, avoid cutting the amount of prospecting you do and over relying on your housefile. Again, manage your circulation by the ratio of mailings to prospects vs. mailings to your customers.
- SPREAD PROSPECT MAILINGS - Do not put all of your prospect circulation in one drop. Instead, spread your prospect lists over multiple drops which are the best strategy in case there is an unexpected event that impacts sales. This could be a natural disaster, the stock market, more consumer bad news, etc. Keep in mind that the economy is fragile and subject to the daily news reports. Mailing all of your prospect lists (or just your “best” lists) at the same time is like putting all of your chips on one roll of the dice. Spread your risk.
- PROSPECT LIST SELECTS - Tighten the select on prospects, i.e., average order size, recency of last purchase, etc. For example, add a multi buyer select or tighten the recency select by mailing to the more recent buyers. The “tighter” the select, the better the list should perform. This will help reduce the risk of mailing to outside names. It will increase your list costs but it should improve your results and take some of the risk out of mailing to outside prospects.
- PRIORITZE PROSPECT LISTS - Look at your list relationship reports (this report will enable you to see how each list “hit” against each other) from the output of your merge/purge. If there are prospect lists that “hit” at a high rate to each other, mail these lists in different drops to net higher. This will help maximize the quantity of your better performing lists within any given mailing. Don’t change the number of contacts but separate them if you can. If they are good performing lists, don’t mail them less often.
- NEGOTIATE LIST COSTS – Don’t pay or accept list data card pricing. Tell your broker what you want and/or need to pay for the list to make the cut (depending on your own incremental breakeven criteria). This is an honest and effective way to negotiate list prices. Instead of asking for the list owners best price, let your broker know how much you can afford to pay for any given list.
- MAXMIZE YOUR HOUSEFILE – Add a mailing, i.e., consider adding a drop or two to certain buyer segments based on their R-F-M. Re-activate “old” buyers. Do not reduce your R-F-M!!! Do everything possible to leverage your strongest asset, your housefile. If selecting dollar by last or average dollar do normal selects and then go back and select high life-to-date buyers that were not already selected. It is difficult to over mail certain segments of your housefile.
- DON’T TAKE A LEAP OF FAITH... TEST! – Don’t make radical changes in order to save money without testing. Just about everything can be tested. For example, don’t eliminate your bind-in order form/envelop without running an A/B split test. Don’t convert to a Slim-Jim format without testing it first. Don’t convert from coated paper to a super cal sheet without prior testing. Small mailers can test too. Catalogers are often motivated by the amount of money they can save without consideration to the impact these choices can have on results. What you give up in gross profit dollars can more than offset any cost savings.
Stay the course! Firms, who cut circulation, reduce page count and make other radical changes without prior testing wind-up paying the price. Be sure you maintain your 12-month buyer count; don’t let your 12-month buyer count drop below the previous year. Don’t adjust mail dates to try to save money. Remain focused on growing your business. Keep these 12 suggestions in mind … your best catalog circulation strategy for 2009.