Get the Most From Outside Lists
Because it’s expensive to prospect for new buyers, it’s important to prospect as cost efficiently as possible.
Prospecting is critical to the long-term success of any catalog business. How much prospecting you do depends on how fast you want to grow your customer file. Too much prospecting will negatively impact your bottom line. But too little isn’t good either.
The goal is to maintain a balance between mailings to your housefile and to prospects. Every housefile has a certain attrition rate. Prospect so you’re at least replacing the customers who’ve decided not to buy.
This month, I’ll review basic, proven ways to get the most from outside prospect lists.
Most prospecting is done at an incremental loss. It’s not until those first-time buyers make second purchases that you go from red ink to black. Think of prospecting as making an investment in your business. Catalogers find themselves having cash-flow problems when they try to prospect too aggressively.
More than 20 years ago, I heard an experienced cataloger define a buyer versus a customer: A buyer is someone who purchases one time; a customer is someone who purchases more than once. You need buyers before you can create customers who will make repeat purchases and pay the overhead expenses of your company.
Effective prospecting must be evaluated on incremental expenses, not fully absorbed. That is, results from prospecting can’t be expected to cover overhead expenses. Rather, results from mailings to your housefile must do the job.
Obviously, all mailings can’t be considered incremental. Rent, wages and utilities must somehow get paid. But again, your housefile must be large and strong enough to cover these expenses. When prospecting, try to recover only your out-of-pocket expenses—that is, your incremental expenses. Bear in mind, this is difficult to do.