B-to-B Cataloging: Data Purchases That Make Sense

Buying data to append to your housefile can seem like a risk. How can you be sure that your investment will pay off? And perhaps more importantly, how can you be sure you’re not squandering your IT department’s limited time in uploading the appended data?

Your answers to these questions will depend on how you plan to use the data you buy. Some data purchases, such as National Change of Address, have a clear and measurable return on investment (ROI). You can directly account for the expense of the data purchase and upload, then compare that expense to the new or additional revenue received.

Other data purchases are for strategic research and development. You likely won’t be able to rationalize the expense with a clearly defined ROI target, but that doesn’t mean the expense isn’t justified. You just want to have clearly defined reasons for buying the data and an action plan for using them.

Your Best Data Investment: NCOA

Regardless of whether you’re a consumer or a b-to-b cataloger, one of the smartest data purchases is National Change of Address (NCOA), because it’s one of the easiest purchases to cost-justify. Standard metrics indicate that a 3 percent hit rate pays for NCOA’s expense. (A hit rate is the percentage of address changes that result from the NCOA list-cleansing process.) Your file’s increased deliverability may boost your mailing’s revenue to cover the cost of the NCOA processing. Once you have a hit rate of more than 3 percent, you start making additional revenue that you otherwise would’ve left on the table.

But to maximize your investment in NCOA, you have to do more than just mail the new addresses: You have to upload the address changes to your housefile. Otherwise you won’t reap the full benefit of your data purchase. You would have to repeat the NCOA process (and its accompanying expense) the next time you pull your housefile.

Another benefit of appending your housefile with NCOA: increased list-rental income (that is, if you rent your list). NCOA will improve your list’s hygiene, which in turn may improve its results when compared with other lists on the market.

How frequently should you run NCOA processing on your housefile? To determine, schedule NCOA processing to coincide with your largest mailing seasons. Then, rather than setting an arbitrary guideline for frequency, use the above-mentioned 3 percent figure as a rule of thumb. For example, if you ran your NCOA six months ago, and your new NCOA shows a hit rate of less than 3 percent, this processing frequency probably isn’t paying for itself. You may be able to extend the time between the next NCOA processings to nine or 12 months.

But if you significantly exceed the 3 percent target after six months, begin a quarterly schedule for NCOA. Adjust the timing of your NCOA processing to hit the 3 percent target.

SIC Codes

B-to-b catalogers often benefit from buying the SIC codes for their housefiles and prospect lists. Since many b-to-b catalogers don’t rent their housefiles, the technique of selecting SIC codes remains a standard prospecting strategy for them.

Typically, catalogers will send their housefiles for appending of the SIC codes or other firmographic data (e.g., number of employees, company revenue). Then they’ll analyze and compare these appended data to their sales history. Of course, if you sell, say, equipment for one industry, the SIC codes will fall into a predictable pattern. But by also analyzing other data — for example, your customers’ numbers of employees and corporate revenues — you may discover additional information to help improve your marketing efforts.

If you offer generic products that cross over various industries, looking at SIC codes also can help focus your marketing efforts. For example, b-to-b gift mailers may find their products appeal to a specific type of industry or size of firm.

With additional analysis, you can take these data to a more sophisticated level. Often, specific combinations of SIC code and, say, employee size or company revenue will rise to the top of your analysis. Those targets may be more likely to respond than other combinations. These firmographic data then can be used to target prospects. A benefit of this approach: You can use it for selecting compiled lists that otherwise wouldn’t be usable for your prospect mailings.

Multichannel Data Purchases

Standard demographic data often don’t have a direct application in cataloging. Catalogers typically are most interested in recency, frequency and monetary (RFM) data when targeting prospects. After all, purchasing history, as defined by RFM, remains the most accurate predictor of someone’s future behavior. However, b-to-b multichannel marketers, specifically those with a retail presence, should test more traditional demographic data to drive traffic to their stores.

Try mass targeting as a way to introduce new customers to your brands. Here’s how: Send your customer records to a data company for a demographic append. Typically the data company issues a report on your buyers, essentially profiling your housefile according to age, income, home ownership and purchasing behavior.

With this customer profile, you can use third-party marketing services that specialize in saturation mailings to targeted demographics. To strengthen the mailing, you can select prospects within a desired proximity to your store locations. The benefit: Your offer can be better targeted to your prospects.

A great offer may drive store traffic, but will those new customers convert to frequent buyers? An offer that works in a direct mail environment may be cost prohibitive in a mass mailing. By using the mass targeting approach, you limit your risk and typically find prospects to convert to buyers.

Data Appends

Another reason for buying data is to sell data — specifically for increasing list revenue. If you’re a niche b-to-b cataloger, a data append can be an excellent way to increase your list revenue.

A data append — some people refer to it as a data overlay — represents transactional and/or demographic data that are appended to a customer list. These data can make your list usable for an off-category mailer due to the additional list selects made available from the appended data.

Buying data appends/overlays to boost your off-market list rental income is a straightforward investment that can directly tie in to your ROI. Tracking your overlay expense compared to your rental income of overlays is a simple dollars-in vs. dollars-out calculation. (When calculating the ROI, include the run charges from your service bureau.)

If you append your masterfile, you’ll often find that mailers are interested in testing your list beyond your 12-month buyers. This can increase list revenue for a segment of your file that’s getting less profitable as each month passes. Before investing in an append, talk to your list manager to determine if mailers likely would be interested in overlays on your file. In addition, your list manager can recommend the data companies that have given their clients the best service.

When in Doubt, Test

As a direct marketer, you project ROIs for mailings to determine the risk vs. rewards of an investment. When deciding on a data purchase, use that same process to determine if the expense is worth the risk for future gain. In direct mail, when you don’t know an answer, you test. The same process applies to data purchases. Don’t let the unknown aspects of purchasing data dissuade you from making inquiries and running test mailings. Apply the same rigors of direct mail to your data purchases, and you’ll be headed in the right direction.

George Hague is senior marketing strategist at J. Schmid & Assoc., a catalog consulting firm in Mission, Kan. You can reach him at (913) 236-8988 or e-mail: georgeh@jschmid.com.