When Should You STOP Mailing to a Customer?
by Stephen Lett
This month, we will discuss two related topics; when should you stop mailing to a customer and just how many times should you mail your housefile. As we have said in previous articles, it is difficult to over mail your housefile (at least certain segments) when mailing by R-F-M. Therefore, you want to be certain you maximize contribution to profit and overhead by leveraging your own customer base. Customer reactivation techniques make it possible to mail deeper and more often to your “older” customers. This month, we have elected to discuss mailings to one’s own housefile. How many times should you mail your housefile? When should you stop mailing? These are just a few of the questions we will explore.
WHEN SHOULD YOU STOP MAILING TO A CUSTOMER?
Consider this; circulation plans today include fewer new-to-file names. That’s because catalogers are relying more on reactivating older segments of their housefiles in order to grow their 12-month buyer files instead of renting as many outside prospecting lists. Customer reactivation programs and promotional offers are being used more to enable catalogers to mail “deeper” and more frequently to older segments of their own housefiles. While the 12-month buyer file will grow as a result, the quality of names being brought forward could be in question. For many, it is less expensive to reactive a previous buyer than it is to prospect for a new one. For example, it costs $100 per M to $150 per M or more to rent an outside prospect list. This compares with the cost of having one of the cooperative database run a reactivation model on your older housefile names for approximately $45 to $55 per M. What’s more, many of these “older” buyers are being brought forward by the aggressive use of a promotional offer like free shipping. The life-time-value (L-T-V) of these older names that purchase again because of a promo can be questionable. Do your homework and compare the Life-Time-Value (L-T-V) of a buyer you have reactivated vs. a fresh, new name added to your file. It might be worth the list investment to acquire a new buyer compared with reactivation an old one. Or, you might want to do both but not at the exclusion of the other.
Think about this. Let’s assume our incremental breakeven point is $1.00 per catalog mailed. This is the cut-off for selecting prospect lists. But, should we use the same criteria for mailing to the housefile? The truth is everything cannot be incremental or you can incremental yourself into the poor house! The housefile needs to cover the overhead expenses. When prospecting, we try to cover our direct costs only. The housefile needs to cover the overhead expenses. However, if we don’t mail to housefile segments that fall below our full absorbed breakeven point, we are not maximizing contribution to profit & overhead. In other words, we would be giving up contribution dollars. Therefore, we feel the same cut-off criteria should be used when selecting housefile segments to mail as we use when selecting prospect lists to mail. The incremental breakeven point should be used for both. In review, this is defined as:
Gross Revenue less Returns & Allowances = Net Sales
less cost-of-goods sold less direct selling expenses = BEP (Breakeven Point)
So, when do you stop mailing to your housefile? If your goal is to maximize contribution to profit & overhead, you will want to stop mailing to segments that perform below the incremental breakeven point. However, we don’t recommend stopping there. Once you have selected all R-F-M segments at breakeven or better, you should consider running a customer reactivation model with one of the cooperative databases on the remainder of the housefile names. The coops will help you identify additional names on your housefile that are worth mailing again. Most likely, these names will perform as well or better than your best outside prospect lists. Through the use of these customer reactivation models, we are able to mail deeper to the housefile bringing older names forward into a more recent R-F-M cell; something not possible prior to the coops.
HOW MANY TIMES SHOULD YOU MAIL TO YOUR HOUSEFILE?
According to The DMA Statistical Fact Book 2004 page 64, a consumer catalog company typically mails to their housefile 11 times a year while a business-to-business cataloger mails on average 15 times to their customers. Keep in mind, of course, that not all segments of the housefile are mailed every time. The more recent cells are mailed more frequently and strict R-F-M guidelines should be followed.
Increasing the number of drops to your housefile does not necessarily mean going back to press to print a new catalog. Catalog re-mails can be used cost effectively to generate additional business from your previous buyers. You can always squeeze in another mailing to the “best” segments of your housefile. Here are a few ways to increase mailings to certain segments of your housefile:
- Mail “hot-line” names more frequently – Bring in buyer records that came onto your file after your latest update. These are hotlines and will be your best performing segment. In some cases, we have seen where it is beneficial to do a late de-dupe after the main merge to get even more hotline buyers into the mailing.
- Create an additional mailing to your hotline buyers – This works if you have a gap in mail dates. For example, if you have 8 weeks between drops, create an additional mailing 4 weeks out to your best buyers. This is a great opportunity to mail your hotlines again rather then waiting the full 8 weeks. Also, consider mailing best RFM groups in addition to your hotlines.
- Add a test drop during your best season – For example, if you’re a gift mailer, you might be able to mail more frequently during the holiday season. In some cases, you can squeeze in an additional drop that gets in home 2 weeks before the holidays. With consumers ordering closer to need, we have found that late mailings are performing better and better every year.
Re-mails to your housefile can be used cost effectively without the added expense of producing a completely new catalog. Here are five tips when making re-mails:
- Cover Changes – You don’t have to create a new catalog version to mail additional drops. Most catalogers create multiple cover versions for repeat mailings and leave the body of the catalog unchanged.
- Re-Paginate – If cover changes aren’t enough to create the results you are looking for in a re-mail, consider repaginating the opening and closing pages (outside signature).
- Add Additional Pages – The general rule for calculating the lift you will get from adding pages is that you will get ½ of the percent lift in sales that you have in increase in pages. So, if your page count goes up 8%, you will see a lift in response rate of 4%. This is especially true if you have the merchandise to support this increase. So, if you don’t think you can add pages with strong merchandise, this calculation will not hold true and we would not suggest increasing pages. But, if you do have the merchandise and the expected increase in profit outweighs the increase in cost, then the additional pages are justified.
- Use Dot-Whack Labels and Ink-Jet Messages – Special ink-jet messages can be added to the back cover along with a dot-whack label on the front cover referencing a special offer. Using a dot-whack label and promo on the re-mail can be used in lieu of changing covers.
- E-mail Blasts – Contact your best customers with an E-mail blast between regular scheduled catalog mailings. Increase your customer contacts via E-mail and offer a special or incentive when ordering over the Web.
Your customers are your most value business asset. Treat them well and develop a contact strategy which will enable you to communicate with them more frequently. Leverage your housefile in order to maximize contribution to profit and overhead.