In a previous life, I led a men’s apparel direct marketing company that almost doubled in size while catalog circulation was reduced by over 30%. By cutting out a good deal of redundant house file circulation, we were able to invest more heavily in non-catalog customer acquisition activities, which in turn fostered more house file growth and bigger sales increases.
But I am not going to discuss how we did that in this post (meet me for a beer at NEMOA and I will tell you). Rather, I am going to describe why, and how, we went down that path. One day, my catalog printer called me out of the blue and said, “Allen, you are mailing too many catalogs.”
Wait, that didn’t actually happen. I had a great group of catalog partners back then (printer, paper merchant, list broker, merge house, etc.), but none of them were going to tell me to mail less. Why would they? First, it wasn’t their job, and second, their natural instinct was to think about how we might mail more (just as our natural instinct is to sell more widgets to our customers).
Here is what really happened: We stopped getting the right answer to the wrong question! Since 1986 (my first year as a direct marketer), I had always used “event based” analysis to determine how deep to mail in my house file. Did the 13-24 month, 1X, $0-50 segment make a profit in the Spring 3 mailing? But with the growth of digital marketing, we started to wonder how much of that $1.16 per book we would have received if we had not mailed some of our more marginal segments.
So, we did what any intelligent direct marketer would have done; we hired Kevin Hillstrom to help us figure it out! And a few very important things happened:
- We began to understand that event-based analysis would never get us to an optimal house file mailing strategy. We started, instead, to test various contact strategies to house file segments and measure the profitability of those segments over time.
- We learned from that testing that we were dramatically over-mailing many of our house file segments. Ultimately, we reduced circulation to existing customers by over a million books, and saw no measurable decrease in sales volume from the segments we cut! We then re-invested the cash we freed up in new customer acquisition activities.
Direct marketing is a very different discipline then it was 25 years ago. Customers have much greater control over their contacts with your brand than they did “back in the day.” To truly understand the best catalog contact strategy for your customer file, you should do significant holdout testing and measure sales and profits over time, not by event. Here is a suggestion to get you started:
- Give each of your mailable house file segments a grade from A to F (just like in school),
- Take several of the B segments and split them each into 3 sub-segments,
- Using a 3-month or 6-month time frame (based on your mail frequency), mail sub-segment 1 with the same frequency that you normally would. Mail sub-segment 2 65-70% of the normal catalog frequency, and sub-segment 3 40-50% of the normal frequency. For example, if you normally mail 10 catalogs during a 6-month period, the different sub-segments might receive 10, 7 and 5 catalogs respectively,
- Keep the other contacts with these sub-segments identical (i.e. everyone gets 3 emails per week),
- At the end of the 6-month period, calculate the profitability of each sub-segment.
I suggest starting with the “B’s” because that is where we found the most leverage to be.