Are You Mailing Too Deeply Into Your Buyer File?

BY: JIM COOGAN

Measuring the True Incremental Sales Is the Key

Increasing the frequency of buyer file mailings is a straightforward circulation technique to build sales and profitability.  Catalogers often mail buyer file segments all the way down to breakeven assuming that mailing all segments above breakeven will maximize profitability.  The flaw in that reasoning is that some buyers re-buy on their own initiative without the additional stimulus, and cost, of follow up catalog mailings.  If you are mailing buyer segments down to “breakeven sales per book,” you are mailing too deeply and cutting into your profits.

Measuring the incremental sales that result from a buyer remail is the key metric in determining how deep to mail into your house buyer file.  Setting up tests to measure the incremental sales from house buyer mailings gives you the necessary metrics to draw the line at your true breakeven sales for house buyers.  For example; if your breakeven sales per catalog is $1.00 in revenue (the amount needed to pay for the catalog cost and the merchandise cost), testing may show that a buyer segment yielding $1.30/catalog would have received $.30 from those buyers without ever mailing them a catalog.  So the incremental sales from the catalog are actually $1.00/catalog and the breakeven line for profitability is at $1.30/catalog rather than at $1.00/catalog.  If you mail below breakeven, profits will go down.  So knowing your true catalog driven sales from an additional mailing is the first step in deciding how many buyer file segments to mail.

Actions you’ll take when you have visibility to the incremental sales from mailing an additional catalog to house buyers include:

• Breaking your house file into more segments.  In addition to RFM (recency, frequency and monetary) you’ll want to measure buyers by channel, low average order buyers, holiday gift buyers, etc.


• Segmenting web buyers because web buyers may be much less responsive to catalog mailings that your traditional mail order/call center buyers. 


• Segmenting web buyers into catalog driven web buyers who received a catalog and then ordered on the web versus pure web buyers who ordered on the web without having received a catalog.


• Mailing more frequently to your best buyers and less frequently to your older buyers and catalog requests.


• Lengthening the time between mailings of marginal house file segments so you don’t cut off the sales “tail” of an older buyer file segment.  Segments may merit being mailed once per quarter that would be unprofitable if mailed three times per quarter.

The test design for measuring incremental sales is to have “hold out panels” of buyers you are not going to mail.  Take these panels from the marginal segments of your house file; those segments which are just above breakeven.  Mail half the panel and do not mail half the panel and measure the sales of those segments.  Obviously you can’t just track key code sales because the segments not mailed won’t have key codes.  Take all sales during a date range of two to three months after the catalog mailing and match those sales back to the mail and no-mail segments of your hold out panels.  Run the tests over a series of catalogs and measure the decay in response as buyer file segments go longer and longer without having received your catalog.

If your financial goal is to maximize profitability, you’ll never want to mail below your true breakeven.  Knowing your incremental sales per catalog will keep you from over-mailing your house buyer file.