Know Your Housefile
Most catalogers know the broad brush strokes of their housefiles: that is, how many 12-month buyers, 24+ month, etc.
But to really know the impact your marketing and merchandising efforts have on the file in time, do a detailed houselist inventory at least once a year. This also will become your road map for planning future marketing and merchandising efforts.
Producing the summary is easy and in many cases can be done by your database manager or merge/purge company. To make the inventory even more effective, put it into a chart that consists of cells to hold counts in each of your segments for recency, frequency and monetary (RFM) value. (See the charts on this page for examples.) Use average monetary value (AOV), not lifetime, to get a better picture of customers’ responses to your individual marketing offers.
A chart can help you easily compare your current housefile to your previous ones and determine the effect in time. You also can identify current problem areas and develop plans to address them.
The most important goals of doing the inventory are to understand if your marketing and merchandising efforts are producing the desired outcome; to continue finding areas that need improvement; and to develop specific efforts for these problem areas.
The desired outcome is an increase in counts for your best segments and a decrease in counts for your worst. While a theoretical goal might be to move all your customers to your best segments, practically speaking, this won’t happen. Instead, put most of your efforts into maintaining or growing your counts in the “sweet spot” of
the RFM, while also producing a slight increase in your best segments and a slight decrease in your worst.
The Sweet Spot
The sweet spot is the segments (or segment) that drive the highest amount of total contribution dollars. These may not actually be the most-profitable segments on a percentage basis, but they’ll drive most of your profits. Ensure that your marketing and merchandising programs are designed to continue keeping the counts of buyers in these segments by maintaining a high response rate within that sweet spot.