Techniques to Find and Cut Unprofitable Circ
The old saying is, “98 percent of your prospecting circulation won’t respond to your next catalog. So the trick is to find the 2 percent that will and just mail to them.” Another way of approaching this dilemma is to isolate as many as possible of those 98 percent who won’t respond and stop mailing them.
The last few months have been a roller-coaster ride, with response rates trending downward due to our economy's struggles. No one knows if/when we're going to hit a plateau, but almost everyone agrees that response rates are taking a hit. Smart mailers are looking to cut wasted circ through aggressive suppression opportunities.
Here are some techniques to find households that won’t respond:
- NextAction is offering a modeling product to suppress marginal prospecting circ. Does it make sense to optimize your prospecting circ and suppress households that won’t respond? Catalogers have been successfully optimizing older housefiles for suppression and reactivation, so the next logical step is to optimize your prospects. As Robin Opie, NextAction’s vice president of analytics, explains, “We saw a tremendous opportunity to add value with a strong suppression product and have been working for well over a year to develop an entirely new set of analytical methods that are engineered from the ground up to identify those customers that are least likely to respond to a given offer. The most promising of these methods is a nonregression-based approach that borrows many of its analytical methods from today’s best spam filters.”
- Model at your co-op database your marginal housefile names, and suppress the households that won’t break even. Smart mailers have been suppressing and reactivating old housefile names for some time now.
- Segment your singles and multis, and drop the singles if they respond below breakeven.
- Look at the two-time, three-time and four-time-plus multibuyers from marginal lists, and only mail those multibuyers that are above breakeven.
- The co-op databases can identify households that have become dormant and have little or no mail order activity in the past six months. These households are suppression opportunities.
- Use a ZIP table to suppress geographic areas where your catalog does poorly.
- Find databases of foreclosures and bad credit to suppress those households who've run out of money.
- Look at geographic areas that have been hit hard by the recession, such as Florida, Las Vegas and parts of California, and suppress those distressed areas.
- Tighten your retail market areas, and mail closer to your retail stores. Cut the fringe areas where driving time and expense may make people reluctant to visit your stores.
- Combine the optimization scoring from co-op databases with your own RFM segmentation of older house segments (e.g., one-time vs. two-time and $50), and cherry-pick house segments to suppress.
Cutting the fat from your proven prospecting circ is a better option than simply cutting circ across the board, dropping mailings or cutting your merchandise margins. Set a goal of cutting a percentage of your proven circ, and see if you can maintain your historical dollar-per-book revenue from each of your proven lists.