How to Make List Prospecting Work (1157 words)
By Steve Trollinger
For business-to-business (b-to-b) catalogers, the basic prospecting process using lists consists of several steps. In this article, I'll focus on three of them:
- understanding what you can spend on a customer;
- identifying the potential prospect universe; and
- using your merge/purge reports.
These general steps include the key elements of getting through list prospecting in a way that gives you the most information and greatest opportunity for success.
Expense Per Customer
Understanding lifetime value, or even 12-month payback, is the first step in the customer-acquisition process, no matter what method you use to get new clients. Determine what return on investment you must make to bring in a new customer.
One way to do this is to look at an estimated 12-month payback from a newly acquired customer. By forecasting the number of mailings, estimated response rate, average order value (AOV) and average catalog cost — and knowing your contribution margin — you can do just that.
Let's assume that in the full year after a customer is added to the file, he or she will be mailed seven times.
* Number of mailings in 12 months: seven
The average response rate during the course of those seven mailings is 8 percent. That is, for each mail drop the customer segment generates an 8-percent response on average. Estimate the response rate by looking at how one-time, 0-to-12-month buyers historically have responded, on average, to mailings for a 12-month period.
* Average response rate for all mailings: 8 percent
Look at the AOV during the course of those mailings just as you did the response rate above. I'll assume the AOV is $250.
* AOV for all mailings: $250
Determine how much your catalogs cost "in the mail," (e.g., paper, printing, postage, manufacturing, data processing). For this example, I'll assume $.80 per piece mailed.