News
 Circulation
Techniques
By Gina Valentino, president, Hemisphere Marketing
When you should change your catalog circulation plan
and — more important — how to change it is often
determined by necessity. And multichannel marketers
have definitely had to make some recent changes out
of necessity.
Situational circulation changes are specific tactics
affecting the customer contact strategy. Here's a
look at some critical situations — and how to deal
with them.
1. SITUATION: sales are down
The immediate reaction here may be to exclude
prospecting and omit some catalog mailings
altogether. Just remember that there will be a
corresponding decrease is gross sales. If you need
to cut expenses and aim to do it via mailings, here
are suggestions to help boost segment performance.
You must know or determine how many customers have a
promotable e-mail address. Then, for the percentage
of the 12-month file receiving e-mail campaigns, you
could reduce the number of catalogs mailed.
So if you were planning to mail your 12-month file
twice during a particular timeframe, you could omit
the mailing to the percentage of the customers who
have a promotable e-mail address. This approach
allows you to contact the entire 12-month file
twice, but with different mediums.
Tests show that multiple contacts produce stronger
results — not only seasonally but in terms of
lifetime value. So if you have to cut expenses, a
good option is to reduce mailings to customers who
will be contacted with an e-mail campaign.
If you can micro-segment the customer database,
identifying customer groups by channel—single, dual
or tri-channel—is another way to parse buyers based
on prior buying behavior. You could halt mailings to
customers who have made more than one purchase from
your organization, those purchases have been on the
Website, and matchback data indicates those sales
were non-catalog driven.
The same holds true with retail channel-only
shoppers. But the critical caveat is non-catalog
driven response. You don't want to stop mailing to
customers whose buying behavior is triggered by a
catalog — you want to keep mailing to them.
2. SITUATION: prospecting is too expensive
Instead of omitting prospect mailings, you could
reduce costs by creating a less expensive catalog to
reduce postage. For example, if your catalog weighs
more than 3.3 oz., consider creating a lighter
version (for a different classification and lower
postage rates) to mail both to prospects and
lower-performing customer segments.
Another option is to consider revising the catalog
to a slim-jim size to meet maximum letter rate
standards (no larger than 6-1/8" × 11"). Some
catalogers produce both a full-size book for
customers and high-performing rental lists as well
as a slim-jim catalog to use for acquisition efforts
and below breakeven customer segments.
You might consider adjusting the actual rental lists
used for prospecting by lowering the quantity to be
mailed or by source of acquisition. Look at the
costs for the rental names and evaluate potentially
moving more circulation to the least expensive
lists.
You may also want to use a cooperative database
because the cost is less than a traditional rental
list. There are price discounts for reaching certain
annual quantity thresholds, so you may want to
consider increasing quantities from co-op databases.
Using more list exchanges also keeps costs down,
since a one-for-one exchange is happening. But there
is a corresponding offset of reduced list rental
income. As you make these situational circ changes,
consider the expense, and the overall impact
relating to costs, performance and revenue.
3. SITUATION: the segmentation isn't working
Rather than an overall reduction, look at the
circulation specifically by segment and talk to your
data processing provider for optimization ideas. If
your 12-month customer file performs well, look at
statistically modeling the remaining customer file
names. Have a modeler find the next best 25,000,
50,000 or 100,000 names.
If you have ship-to names (same name as the billing
address but a different delivery address) and
recipient names (e.g., gift recipient) on your
database, you may want to mail these groups
differently.
Of course, you need to test, but some catalogers
find that ship-to vs. recipient names perform
differently. The recipient names will often respond
similarly to a qualified prospect. You can also
enhance the performance of the ship-to and
recipients by statistically modeling the names.
You should also carefully test non-buyer segments
such as catalog requesters, sweepstakes entrants,
warranty cards, tradeshow names, store-opening
offers — anything with a name and address. These
names may not be mail order buyers, and their
initial interest with your company may not have been
product-driven.
Keep in mind that these names will respond
differently amongst one other, and modeling may be
the best way to identify potential buyers. You may
find that certain types of lists are not worth
mailing at all, and some lists may have a small
portion of names that are likely to become buyers.
Segmentation changes are also warranted when RFM (recency/frequency/monetary)
needs rejuvenation. You want to aggregate customers
into similar performing groups to help predict
customer behavior. It's best to test into the new
segmentation but, generally speaking, here are some
options to consider:
Channel: Parse the customer file into
single-channel shoppers (only catalog, only
Internet, only retail) or dual channel (catalog and
Internet; catalog and retail; retail and Internet).
Depending upon the mailing, you may find that
dual-channel shoppers — combined with RFM — have
strong, predictable performance.
Primary product purchase: Some merchants have
a primary product category that is the
bread-and-butter of the company. For example, a
running shoes company that also sells apparel and
gear may parse data into customers with shoe
purchases and customers without. A school supplies
cataloger that also sells cleaning products may
segment the file by learning supplies vs. cleaning
products.
Proprietary credit card: Customers who have
the company's branded credit card are often more
loyal, shop more frequently, and are more receptive
to special offers than those customers who don't.
Seasonality: Enhance the RFM segmentation into your
primary selling seasons. If you sell to the
government, you may follow certain budgeting
periods; gift merchants may focus on certain times
of year (school season, summer) or specific holidays
(Mother's Day buyers may have different performance
attributes than Christmas buyers). Look at your data
to determine if seasonality is a factor.
Source of acquisition: Where the customer
originated is often a critical determinant of future
behavior. Perhaps customers from product
demonstrations have a stronger viability than
customers from tradeshows. Customers from certain
rental lists will have a performance hierarchy. You
could easily change how you mail customers based on
their originating source.
Cross-company buyers: Merchants with multiple
catalog titles and sister companies could identify
customers who buy across the family of titles vs.
buying from a single title.
Depending upon your customer's performance, you may
find that single-title buyers are more loyal and are
your best customers; conversely, you may find that
multi-title customers are stronger performers
because they are avid shoppers and buy frequently.
Situational circ changes are data-driven decisions.
You need to look at your business and determine
which variables or attributes are strong performance
indicators.
Take at least one or two years of data and isolate
the top 20 percent of the customers. Review the
records for like-attributes and identify patterns of
success. Test your hypothesis.
And most important: Don't make arbitrary circ cuts
to the mail plan. Be deliberate, and you'll be
prepared with alternative approaches when the
situation arises.
---Source: List
& Data Strategies Multichannel Merchant Feb. 9, 2009
newsletter (www.multichannelmerchant.com). Gina
Valentino can be reached at gina@hemispheremarketing.com.
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