When Should You Prospect

Here’s how to answer those questions.

Prospecting for new buyers enables you to maintain a set level of revenue from year to year and grow your business. In simple terms, if you stop prospecting, sales and buyer counts will decline.

It’s important to prospect at least to a level that will maintain your 12-month buyer count. And if you want to grow your business, you have to prospect for even more.

As you know, it’s difficult to achieve incremental break-even prospecting given today’s cost structures and response rate levels. So, when is the best time to prospect in order to maximize results and minimize the investment needed to acquire new buyers? Should you prospect at all in the off season? When should new lists be tested or rolled out? This month we’ll explore the answers to these questions.

Prospect When the Fish Are Biting

It’s been said a catalog company will grow by the percentage increase in its 12-month housefile. For example, if your 12-month file grows by 10 percent, your revenue should grow by roughly the same. I’ve tested this theory, and it seems to hold true. Focus on growing your buyer file to increase revenue.

You look at the orders/sales report every day. However, it’s also important to monitor the growth of your 12-month buyer file, at least monthly. Tracking its growth is key to the health of your business.

The best time to prospect depends on the market you serve. If you’re a business-to-business cataloger, you prospect at about the same level all year. Apparel mailers prospect heavily in spring and fall. Food mailers prospect later in the season (i.e., October and November). Gift mailers obviously prospect heavily September through early December. It’s always best to go fishing when the fish are biting! By doing so, you’ll maximize your investment in acquiring new buyers.

Catalog seasonality also influences your results. Typically, holiday is the best season for consumer catalogers, as indicated by the 100 percent shown on the chart Catalog Seasonality (below). This means you’ll see the highest response during the holiday season. Your fall results will be 70 percent to 75 percent of your holiday results. Spring is 65 percent of holiday, and the slower summer months equal 60 percent of holiday.

Why is that important? It tells you that if you’re a typical consumer gift mailer, for example, you’ll maximize your prospecting results during the holiday season — so that’s when you should do the bulk of your prospecting.

Let’s say a particular prospect list generates during the holidays a response rate of 1.88 percent and $1.17 per catalog mailed (revenue per catalog, or RPC). Let’s also assume that the incremental break-even point is $1 per book. The response rate for this same list mailed during the summer will be about 1.13 percent with an expected RPC of 70 cents per book, which is way below the incremental break-even point. As you can see, you can prospect to this list above the incremental break-even point during the holiday season. But if you use this same list in summer, expect an incremental loss!

Does this mean you should prospect for new buyers only during the holiday season? No. Prospect all year long as part of a well-planned circulation strategy. Some of your better prospect lists will perform fine during the off seasons. I’m simply suggesting that you not test new lists or out-of-category lists during the off months.

Test During Your Best Season

Should you test new lists or continue to use the proven winners? Of course it’s important to test new lists. Continue to plant seeds to expand your prospecting universe. Out of 10 new test lists, two or three will be worthy of continuation. It’s really a matter of when to test, not necessarily what to test.

I recommend testing new lists during your best season. If the holiday season, for example, represents 100 percent of your results, test during that time. If you test new lists during the off season, chances are you’ll never roll out a single list, because the results won’t justify it. If response rates and the RPC mailed are maximized in October, test new lists in October. This is a true test and will yield results you can read and roll out with confidence.

Shown in the chart Catalog In-home Data Analysis by Two Categories (above) are typical in-home dates for gift/general merchandise and apparel catalogs. The chart, compiled by list management and brokerage firm Mokrynski & Associates, points out when these catalogers typically mail. Again, it’s best to prospect during the months with more mailing activity to take better advantage of the buying season. Yes, there’s more competition during these months — with good reason. This is when consumers are making their buying decisions.

Curtail the amount of prospecting you do in the slower season, concentrating primarily on your best list. Don’t eliminate prospecting. Simply focus on your best lists. Tighten up on list selections, and don’t test new lists or lists considered out-of-category.

Prospect deeper in your better season, and test new lists. Test new list categories and other segments of proven lists, as well.

Conclusion

If your business is in a growth mode, you should prospect all year long, despite the risks of mailing aggressively during the off seasons. If you’re more profit-oriented, prospect more heavily and test new lists during your best season. This isn’t an all or nothing situation. It’s simply a matter of maximizing contribution to profit and overhead.

Too many catalogers find themselves in financial trouble when they try to prospect and grow too quickly. Prospecting is critical to the success of any catalog business. Customer file counts don’t remain constant, and they’ll decline if they’re not replenished. It’s not a matter of whether you should or shouldn’t prospect; it’s a matter of when to prospect and how much prospecting you can afford to do.

Stephen R. Lett is president of Lett Direct, a catalog consulting firm specializing in circulation planning, forecasting and analysis. He spent the first 25 years of his career with leading catalog companies. He can be reached at (302) 537-0375, or by e-mail via his Web site: www.lettdirect.com.