Contributions to Profit: Plan for 2007, Part III

Editor’s note: This will be Jim’s final Contributions to Profit column. In October, CatalogSuccess.com launched his blog, Profitable Cataloging. He posts a new entry every Tuesday, and based on reader comments, responds throughout the week. Visit CatalogSuccess.com/blogs/JimGilbert.bsp, and post your questions or comments about catalog marketing.
In addition to being my final print column, this also is the third in a three-part series on the hierarchy of customer status. A quick review: I’ve defined the behavioral groupings of prospects and customers as suspects, prospects, triers, buyers and advocates. Then I discussed strategies to turn prospects into single buyers (triers). Now, onto the next step: conversion.
1. Profitability: getting the second order. Once customers place a second order with you, a psychological change takes place. With each purchase, a customer becomes increasingly loyal to your brand. In the catalog business, it’s normal for the cost of acquiring customers to exceed the income generated from their initial orders. As for P&L, converting single buyers to multis is critical to your return on investment. Multibuyer revenue drives profitability in the catalog business.
2. Set up two orders at once. I came across a catalog recently that contained a money-off offer (good on an initial purchase), plus a second offer good for the customer’s next purchase.
Other conversion methods can be simple, such as placing a bounceback catalog in the product shipment (it always works) or elaborate, e.g., sending “thank you for your order” letters with an incentive for the next order to first-time buyers. Measure your results carefully by splitting a segment of your new customers in half. Send half the customer segment a letter with an offer, and do nothing for the other half. Study the reorder rates of each group. Make sure the sales increase isn’t outweighed on a P&L basis by the additional cost of sending the letter that generated that order.

Jim Gilbert has had a storied career in direct and digital marketing resulting in a burning desire to tell stories that educate, inform, and inspire marketers to new heights of success.
After years of marketing consulting, Jim decided it was time to “put his money where his mouth was" and build his own e-commerce company, Premo Natural Products, with its flagship product, Premo Guard Bed Bug & Mite Sprays. Premo in its second year is poised to eclipse 100 percent growth.
Jim has been writing for Target Marketing Group since 2006, first on the pages of Catalog Success Magazine, then as the first blogger for its online division. Jim continues to write for Total Retail.
Along the way, Jim has led the Florida Direct Marketing Association as their Marketing Chair and then three-term President, been an Adjunct Professor of Direct and Digital marketing for Miami International University, and created a lecture series, “The 9 Immutable Laws of Social Media Marketing,” which he has presented across the country at conferences and universities.