How Important is Promotional History?

It seems like common sense. If you mail Mary Jane your catalog, as a customer (because she spent $500 three years ago) or a prospect (because she shops from your core lists) for two years and she never responds, perhaps she is likely to never respond and you should stop mailing her the catalog.

We find that:
1) Promotional history is very rarely used in developing contact strategies for customers, and
2) For those who have done the analysis, promotional history is not as predictable as it seems it should be. Mary Jane repeatedly appears on your core prospect lists, so you keep mailing her even though she doesn’t buy, AND studies show that you should keep mailing her because a recent hit on a core list is more likely to predict a response to purchase.

The reason I bring this up is that I have been receiving the same home décor and furnishings catalogs for years without buying anything. I suspect I get them because I am a gift buyer from catalogs like Sundance and Acacia, and these catalogs are core files for many home brands.

Here’s the thing- even though I have not bought from these home décor and furnishings catalogs in a long time, I really enjoy looking through them. Now, I am buying a home and suddenly these old catalogs are coming off the shelves and my wallet is coming out.

How important is promotional history?

6 Ways to Segment Customers (Other than RFM)

1) Email Activity- (Last Opened Email)

Understand how recently a customer has opened an opt-in email from you. For example, Mary Jane is a lapsed customer that you are not planning to mail until you see that she just opened an email last month and she is engaged again with the brand.

2) Promotional History Flags - (Mailed Last 30, 60, or 90 days)

It can be difficult to execute contact strategies because customers are migrating in and out of segments. As a brand, you may make a decision that you want to contact even your most lapsed customers once a quarter. If you add flags to your backend or promotional history, you can just select those names from an older segment that have not been mailed in the last 60 or 90 days.

3) Source of Acquisition- (This is something you hear from me a lot!)

Defining customers as web only does not tell us a whole lot, especially how responsive they are likely to be to the catalog. Understanding that a customer is a catalog-driven web customer or a pure web only drive from a program like non-branded paid search or affiliates is critical to optimizing contacts and costs. It also requires storing matchback data on your database.

4) Product Category- (Might seem obvious to some of you but it is still rarely used)

We most often see product categories included in the segmentation for apparel companies where differentiating shoe or accessories buyers is important, but it also has implications for general merchandise, children’s, gift, and home décor and furnishings.

5) Sale/Discount/Free Shipping Buyers- (These are large segments of customers for most retailers now)

Try testing different segments based on their type of purchase- full price, free shipping, discount, sale, etc. You may find that certain segments of buyers are more responsive to different contact frequencies/messages.

6) Presence of Opt in Email (Critical for optimizing catalog/email contacts)

Similar to the promotional history flags, adding a flag to your backend for presence of opt in email can also help you decide who to mail and who not to mail when you are cutting back circulation, especially to marginal segments. If customers will hear from you anyways, there is less risk in reducing catalog contacts (though it should be tested first!).

Opportunities to Consider for 2009

(In no particular order...)

1. Integrate cross-channel databases, linking web behavior with promotional history
2. Improve buyer definitions on house segmentation and list rental files- identifying pure web onlys vs. catalog-driven web onlys
3. Revisit testing across the board- more cost-effective creative versions, prospect sources outside of core files, contact strategies for lapsed customers and requestors, etc.
4. Launch at least three forms of auto-triggered email marketing, such as shopping cart abandonment
5. Consider replacing some of your core catalogs with smaller, less-expensive brochure-like pieces intended to bring the brand top of mind and drive the customer to your web and retail channels of business
6. Concentrate on lapsed customers with multi purchases (vs. dollar spent) who have purchased at least 1x in each of the prior 2 yrs but who have not purchased in the last 12 months; test sending them a special mailing, ie: we miss you with an offer
7. Offer customers contact preferences for method and frequency- perhaps some customers only want the first catalog of each season
8. Find one way to leverage social media for your business- it comes in many forms!
9. Revisit non-traditional advertising opportunities like space advertising and package inserts
10. Talk about how to reach the growing, affluent youth market- the traditional catalog customer base is aging
11. Consider brand/product spin-offs to increase share of wallet with your existing customers- still cheaper than cold prospecting
12. Consider mobile marketing and a dedicated mobile website, especially if you have a younger audience and/or a large retail presence
13. Offer additional payment methods: BillMeLater, Google Checkout, PayPal, etc. According to a recent article, sales increased an average 14% for retailers offering 3 or more payment methods (Website Magazine, August 2008)

$3.00 for One Click?

Back in my days in Ecommerce at Eddie Bauer and RedEnvelope, success was so easy!! Clicks for major keywords cost, at most, $0.75; all of our reporting was purely cookie-based, without any understanding of how many of our web buyers were influenced by offline marketing. Our ad cost was 15% (or so we thought). It was fun- we were all rock stars.

Online marketers are just now feeling the pinch that direct mail marketers have been feeling for the last few years. As catalogers have battled rising costs across the board, online retailers are now faced with incredibly high costs, driven up by competition:

Cost per click for the keyword “gift baskets” - $3.00 (on a good day)
Cost per click for the keyword “food gifts” - $1.80
Affiliate revenue share for the shoe category- 25%
Cost to send an 80-page catalog- $0.65

We also know that, depending on the retailer, 30% to 60% of the buyers from paid search and affiliates were first mailed a catalog.

Two scenarios:

$100,000 Spent on Non-Branded Paid Search
$2 Cost per Click
50,000 Clicks
3% Conversion Rate
$100 AOV
$150,000 in Sales
67% Ad Cost, not including the cost of any catalogs mailed to these buyers

$100,000 Spent on Catalogs to Targeted Lapsed Customers (Reactivation)
$0.65 Cost per catalog
154K in Circulation
2% Response Rate
$100 AOV
$308,000 in Sales
32% Ad Cost

Acquisition, in all forms (paid search, affiliates, catalog prospecting), is more expensive than ever in this economy. Two recommendations for your 09 planning:
1) Housefile Reactivation, via email and direct mail
2) Website initiatives to improve conversion rates- these efforts will improve the ROI of all marketing programs

The Future of Catalog Acquisition?

Much has been written about the future of catalog acquisition, with the growth of ecommerce, the bankruptcy of so many major mailers in the last year, and now, the green movement and consumer opt-out programs.

But I wonder how many truly targeted acquisition opportunities exist today where we can proactively drive new consumer demand. As marketers, we can’t control how many consumers each month will search for “wood daybed” or “turquoise necklace” on Google. And Mary Jane doesn’t just wake up one morning, unaided, and decide to type in your brand name.

Viva La Terra and Acacia are two of my favorite catalogs I just discovered in the last year. I received each of these catalogs a few times as a prospect before a need (in one case, Mother’s day) drove me to the web to make my purchase.

Now, I am by no means a traditional direct shopper. I could probably count on my hands the number of phone orders I have placed in my life. And I prefer the immediate gratification of in store retail shopping more than anything, but I find more and more that the merchandise in retail stores is the same, same, same.

Did mailers potentially mail too deep as response rates declined? Or did response rates decline because we pushed too deep?

Web merchandising has a long way to go before it can deliver the advertising impact of a well-executed catalog. It’s time we shifted our thinking to the catalog as a targeted advertising vehicle, rather than an order channel. The question we should be asking is whether we can make the same advertising impact with 40 pages instead of 80???

Product is King

It’s not all doom and gloom. I talked with a handful of clients in the past week who are pleased with results this summer. (Of course, it depends on how you define success- sales growth vs. LY, improvements in operating profit, achieving Plan.)

As Kevin Hillstrom pointed out in a recent blog, it is frustrating to read headlines such as Five Easy Tips to Boost Business- as if anything is easy right now! But it got me thinking about the similarities in recent strategy for the brands reporting success. It also reminds me of something we used to say at Eddie Bauer…

Product is King.

Some marketers have a tough time admitting this, but even the most brilliant marketing strategy can only sell so much mediocre product.

Some of the companies achieving strong results this summer include brands in the following categories- home furnishings, children’s merchandise, and specialty gift. The one common element they all share is an intense focus on the “freshness” of their merchandise strategy: introducing new product, spinning existing product in a fresh way, providing content and solutions, establishing authority, and putting a new look on the catalog creative.

These brands prove that it’s possible to succeed even with all the challenges we face!

Speaking Out on Postal Reform

With prices increasing in all phases of our business, it sometimes feels that we are at the mercy of the postage system, paper vendors, and other suppliers.

Last week, the American Catalog Mailers Association (ACMA) held an advocacy and strategy forum in Washington, DC. As an industry, we have been remiss in making our collective voices heard.

Representatives from the USPS, PRC and Congress indicated that they had very limited contact from catalog mailers and the lack of contact allowed other special interest groups to gain ground and to adversely affect the industry.

We need to be speaking directly with our local representatives, to help them understand the impact of postal increases on our businesses. Here are some tips on how to connect with your representative:

1) Assign someone as your Postal Reform Advocate
2) Write a letter to your Congress representatives
3) Be specific about your individual issue (avoid form letters)
4) Reference how many constituents in your district will be impacted by your issue
a. Potential jobs lost is a powerful argument with Congress
5) If you have multiple locations – write letters to all representatives
6) The letter will start a file – so keep in contact via email, letters, calls, etc.