Strategy: The Art and Science of the Test
When it comes to catalog marketing, I don’t like to leave anything to chance. Just about everything can and should be tested, including promotional offers, cover designs, minimum-order requirements, etc. Knowing what and how to test and retest is important to the success of any catalog. This month, I’ll review a few basic rules of testing, analyze the impact that a test of purchase minimums has on special offers and show how you might set up a test of your own.
Bucking the Minimum
I often see the minimum purchase to qualify for promotional offers set too high. Instead of encouraging people to order, order minimums can actually have the opposite effect. If your average order size is $65, that doesn’t mean 50 percent of the orders are more than $65 and 50 percent are below. The typical distribution of orders is really as follows:
The chart above shows that 70 percent of the orders (37 percent of the dollars) fall below the average order size. Therefore, if you’re offering free shipping on all orders more than $99, most orders fall considerably below this amount. It’s too much of a stretch for someone to reach the minimum, and it’s still a reach to set the minimum order at $70, slightly more than the average order size in our example.
When you consider the percentage of orders that fall below the promo order minimum you typically set, it makes a great deal of sense to test no minimum. This is a scary thought, but test after test has supported making offers without minimums, or at least setting minimums much lower than your typical average order.
Based on the testing I’ve done, you can expect a significant increase in the revenue per catalog (RPC). Your actual results may vary, but both the response rate and average order size will most likely be higher with no dollar minimum. Most of the benefit comes from an increase in response since more people are able to qualify for the offer. That means more people are ordering and being added to your 12-month buyer file. Shown below is a summary of actual test results for no minimum vs. a $99 minimum vs. the control (i.e., no offer).