10 Proven Ways to Increase Your Outside List Performance
Adding new buyers is critical to any catalog business. At a minimum, catalogers need to replace lost buyers due to attrition. A lack of prospecting to outside lists will cause a reduction in the size of the housefile and start a downward spiral that’s difficult to reverse. Prospecting has certainly become more difficult and more costly, but you can’t afford not to. This month, I’d like to share ways to increase the performance of outside lists. This will lower the cost of acquiring a new buyer.
Most prospecting is done at an incremental loss. Accept that you can’t make money prospecting based solely on initial orders. You need first-time buyers to make a second purchase to make a profit. Think of prospecting as an investment in the future of your business.
Not all expenses in a catalog business can be incremental. Treat them that way and you’ll incremental your way into the poor house! But with prospecting, cover just your out-of-pocket expenses, including customer returns and allowances, cost of goods sold, and direct-selling expenses. The housefile has to be strong enough to support the overhead expenses of the business — not the prospects. The formula for determining the incremental break-even point is as follows:
minus customer returns and allowances
minus cost of goods sold
minus direct-selling expenses (printing costs, outside lists, postage, etc.)
equals incremental breakeven.
Accept the fact that you need to spend in order to grow or simply maintain the current size of your 12-month buyer file. How low you mail below the incremental break-even point depends on the financial strength of your company, the size of your existing housefile and how fast you want to grow. I always caution against overmailing and trying to grow too fast.
Several years ago, catalogers could prospect above incremental break-even points; it was easier to grow a catalog business then. There are several reasons why it has become more difficult and costly to prospect:
✔ response rates have declined from overmailing the same names time-and-time again; and
✔ paper and postage costs are much higher today, which has increased incremental break-even points.