A CEO’s Guide To Modern Catalog Circulation, Part 3 of 3

In the third and final installment of my three-part series on the evolving role of catalog circulation in today’s multichannel environment, I’ll focus on how obtaining prospect names from co-op databases can affect your merchandising strategy, as well as the CEO’s role in catalog circulation.
(Click here for part 1, and here for part 2.)

Co-op mailing strategy
Today, many catalogers obtain more than half of their new customers from co-op databases. In the short term, it’s been a fantastic way for catalogers to obtain lower-cost customers.

But CEOs are seldom told how influential co-op names become. Here’s an example: A cataloger has a customer base with a 40 percent annual repurchase rate. This means that within just two years more than 80 percent of the customer file turns over and is new. If 60 percent of customer acquisition comes from co-op databases, within just two years, half of the active customer file is from the co-ops.

Catalog CEOs shouldn’t downplay a situation where half of their active customer base is sourced from statisticians working for co-op databases. If for some reason these customers have slightly different merchandise interests than the rest of your customer base, you have a huge managerial challenge ahead of you, and should ponder the following:

* Do you adjust your merchandise assortment so customers obtained from co-op statisticians are responsive?

* Or do you have a merchandising vision consistent with your brand and then find customers who like the merchandise you offer?

* Who truly owns your brand?

Catalog CEOs must challenge their circulation teams to analyze merchandise performance from co-op database-acquired names, rented lists and all other sources. If there are significant differences in merchandise productivity for co-op-sourced names, hold a meeting with co-op database leaders to discuss the role co-op databases play in the future direction of your brand.

The catalog CEO: An opportunity
Ten years ago, the catalog circ team played a major role in determining the profit and loss of a catalog brand. The CEO understood the role the circulation team played.

Today, the CEO needs to have more of an open line of communication with the circ team. The CEO must actively participate in mailing plans and hold-out test results across different customer audiences. These test results drive different catalog contact strategies for each audience. Once the catalog strategy has been determined, by audience, customer acquisition strategies must be managed. The co-op databases have, in many cases, taken a seat at your executive table given the influence its names have on your merchandising and marketing strategy.

If catalog CEOs are willing to expand their level of partnership with catalog circ teams, together they can arrive at profitable marketing and merchandising decisions. Then they can form strategies that allow them to capitalize on multichannel marketing in 2008.

Kevin Hillstrom is president of MineThatData, a consultancy company focused on database marketing. He can be reached at kevinh@minethatdata.com .