Circulation Planning - Part 2... What You Should Know About Prospect Lists
by Stephen Lett
Last month, we discussed the importance of the merge. This month, we want to discuss what goes into the merge and what you should know about outside prospect lists. We will review what to look for when testing a new list, how to expand your prospecting universe maximizing contribution performance and important considerations when starting a new catalog. Circulation planning from the bottom-up and knowing how to prospect is critical to the success of any catalog, business-to-business or consumer.
THINGS TO LOOK FOR WHEN TESTING A NEW FILE
- How actively is the mailer prospecting? When testing a list for the first time, it is always a good idea to determine the list owners 0 – 6 month file size as a percentage of their 0 – 12 month file size. If their 0 – 6 month file size is greater than 50% of their total 12-month buyer file, the list owner is actively prospecting and adding new names to the house file. This should be a top consideration when deciding which lists to test because it means that the file is “fresh” and full of active mail order catalog buyers. This is also an important consideration when planning list continuations. You want to prospect to outside lists that are prospecting and growing themselves.
- How well is the list maintained? Make sure the files you use are updated and run through the proper hygiene regularly. Even so, it is important to run NCOA (National Change Of Address) on every prospect list going into your merge. This will give you some idea how well the list owners are maintaining their own file.
- What list selections are available? Find out what selections the list owner makes available so that you can drill down on specific ones. Often times, the list selections shown on the data card do not include all of the selections available to a mailer. For example, you might be able to select or to omit based on product category information, demographics, seasonal purchase, etc. While select charges do cost additional, the lift in response that might be achieved can cost justify the expense.
- Test lists that are “out of category. In order to expand your prospecting universe, it is important to find lists that work for your offer, which is not in your particular product category. Although the success rate is lower than testing lists in your particular category, when you find a list that works, it opens up a whole new universe of prospect names for you to use. This is a key consideration if you want to grow your business beyond the normal limitations of your primary market. Testing out of category can also provide insight into other product categories you might want to consider expanding into.
- What other mailers are using the list? Knowing this will give you an idea of how the list works for other mailers in your market (make certain your broker only tells you the name of the catalog firms who are using the list on a continuing basis). You can also request usage on your continuations in order to develop your own new test ideas. But be careful, list usage does not always mean the usage is both ways. You still need to consider all factors when deciding to test a particular list for the first time.
- How did the file “net out” in the merge? If you are mailing a list in your own product category, you can expect the “net out” of the merge at a similar rate to those lists you use on a continuing basis. In other words, the percentage of names you lose in the merge (gross names ordered vs. net names out of the merge) should be similar to lists you are already using successfully. Actually, the higher the dup percentage, the greater chance the list will work for your offer. If the retention rate is significantly higher, the list probably does not have a synergistic base to your continuations. It is less likely to perform as well for your offer. The exception is if you are testing out of category. In this case, the percentage lost in the merge will most likely be low. With out of category lists, what you net out of the merge is not a significant indicator of the potential performance of the list.
- When a test works. When retesting a given list, be careful to gradually increase the number of names you take as you rollout. Resist the temptation to more than double the number of names you rent each time. And, make certain you read the results of the retest before you retest it again. The results may not hold up therefore, it is important that you test as you go.
EXPANDING YOUR MARKET & MAXIMIZE CONTINUING PERFORMANCE
- Look at how well each continuation list does over time. It is not enough to look at performance for each drop. Rather, it is more important to look at the performance of a list over a longer period of time. For example, how many times can you mail each list per year or per season? Can you mail more? If so when? Or, are you over mailing the list? The danger of over mailing is that performance can decline to a point where it looks as if you can no longer use the list at all. Yet, it may be the list just needs to be mailed less frequently.
- Use zip models. Zip models can be used to improve performance. A good use for zip models is when selecting lower performing segments of a file (deeper selections), or, when using a large file that performs marginally.
- Continually reevaluate selects. Selects should be reviewed on list continuations. If you have mailings that are typically lower performers, consider mailing a tighter select from your list continuations rather than taking fewer names from the same select. For example, if you normally select a $50+ 3-month buyer, try using a $75+ 2-month buyer select. This will often counteract the lower performance of the mailing.
- Understanding your demographics and your customer base. Do not try to use your list selection to change your customer base. You cannot appeal to a different audience without changing your merchandising and you need to be careful not to abandon your existing customer base. In other words, you will not appeal to a younger audience simply by mailing younger lists.
- Look beyond standard performance indicators. In addition to response rate, average order size and revenue per catalog look at performance indexes. Therefore, if a list over (or under) performs, you will know the relative performance of that list compared with other lists you are using. This will help you in planning and evaluation of list performances overall.
- Understand sporadic performance. If a list works sporadically, look for patterns. It could be that your offer is not appealing to a particular list certain times of the year. Or it could be that the customers the list owner is bringing onto their file do not, at times, find your offer of interest. Either way, if you see a pattern, you can limit when you mail the file to help insure success.
- Keep an eye on exchange balances. If you are in a highly competitive market, this is essential. Often your best lists won’t let you use their file if the exchange balance is out-of-line. It is important to be your own monitor in this case so that you do not get caught short on names (particularly good names) unexpectedly.
- Keep relationships open. It is always favorable to have a good relationship with the list owners you work with and those list owners that are important to you. Sometimes this happens directly or, sometimes your list broker or list manager is your representative. Conferences are a good place to get this started.
CONSIDERATIONS FOR NEW CATALOG TITLES
When starting a new catalog or spinning-off a new title, there are other considerations you should think about. A few important considerations for new catalogs are as follows:
- Get counts on competitive mailers to see how much your potential core lists will contribute to your mail plan. Is the available universe large enough to build your business?
- Talk to a seasoned list broker who has experience in your specific market. They will be able to help you prepare for the unexpected and they will save you time and money in the end.
- Find out how competitive and strict the market is. Specific list owners may restrict you from using their file until you have a buyer file to exchange with them on a reciprocal basis. Therefore, it might take some time before you can use a key list and once you are established you may continue to be restricted to using only the amount of names you can offer them in return.
- Testing all cooperative databases is a good way to overcome the potential shortage of “good” lists. These lists are traditionally less expensive and most effective. However, you will not be able to rent names from a coop until you have enough (at least 5,000) names to contribute to the database for modeling purposes.
Growing a catalog business depends on list testing. And, list testing depends on being able to utilize effective techniques, which will help you, maximize contribution to profit and overhead. Over circulating and/or over spending can result in financial disaster. Proceed. But, proceed carefully and utilize the services of industry professionals who can help you.