I’m optimistic that 2009 will be a better year for multichannel merchants, even though the experts say our recovery will be gradual. There are bright spots within given merchandise categories, such as religious goods, pet supplies and hobbies — all of which are doing well — just to name a few.
There are other reasons for my optimism, as well. Selling expense-to-sales ratios should stabilize, perhaps even decline, due to three main factors: postage, paper prices and response rates.
Postal rates will remain stable in 2009 with no large increase on the horizon.
Paper prices are expected to decline, because demand is soft and the dollar is more favorable with respect to foreign markets.
We’re no longer seeing frequent paper price increases, and it’s quite possible that they’ll start to decline early this year.
Paper and postage costs combined represent 60 percent to 80 percent of total selling expenses. We should see an increase in response as consumer confidence improves. This will have a favorable impact on selling expense-to-sales ratios.
With all that in mind, here are my suggestions when planning catalog circulation for this year:
1. Absolutely continue prospecting. Don’t stop. Stay focused on growing your 12-month buyer file. If the count declines, it’ll be difficult and costly to reverse that trend.
Catalogers who’ve been cautious while sticking to a plan of growing, or at least maintaining, their 12-month buyer files have been impacted less by the downturn. If your 12-month buyer count declines, sales also will decline by approximately the same percentage.
2. Prospect vs. housefile circ. Control the ratio of prospecting to total circ, being careful not to cut too much. Mailings to prospects should represent approximately 60 percent of your total circ depending on the season. Don’t get overly aggressive by increasing the ratio of prospecting to housefile mailings. At the same time, avoid cutting the amount of prospecting you do and relying too heavily on your housefile.
3. Spread prospect mailings. Don’t put all of your prospect circ in one drop. Instead, spread your prospect lists over multiple drops. This way, you’re covered if an unexpected event — e.g., natural disaster, the stock market tumbles, more consumer bad news — impacts sales. The economy is fragile and subject to daily news reports, so mailing all of your prospect lists, or even just your best performing lists, at the same time is like putting all of your chips on one roll of the dice. Spread your risk.
4. Narrow prospect list selects. Tighten the select on prospects — i.e., average order size, recency of last purchase and so forth. Add a multibuyer select, or tighten the recency select so you mail to the more recent buyers, for example. The tighter the select, the better the list should perform. This will increase your list costs but should improve results while taking some of the risk out of mailing to outside prospects.
5. Prioritize prospect lists. Look at your list relationship reports, which show how lists “hit” against each other, from the output of your merge/purge. If there are prospect lists that “hit” at a high rate to each other, mail these lists in different drops for higher net. This maximizes the quantity of your better performing lists within any given mailing.
Don’t change the number of contacts; separate them if you can. If they perform well, don’t mail them less often.
6. Negotiate list rates. Don’t pay or accept list datacard pricing. Tell your broker what you want and/or need to pay for the list to make the cut, depending on your own incremental break-even criteria. This is an honest and effective way to negotiate list prices. Instead of asking for the list owner’s best price, let your broker know how much you can afford to pay for that list.
7. Maximize your housefile. Add a mailing — i.e., consider adding a drop or two to certain buyer segments based on their RFM behavior. Reactivate “old” buyers. Don’t reduce your RFM. Do everything possible to leverage your strongest asset: your housefile.
If selecting dollar by list or average dollar, make normal selects, and then go back and select high life-to-date buyers that weren’t already selected. It’s difficult to overmail certain segments of
8. Don’t take a leap of faith — test. Just about everything can be tested. Don’t eliminate your bind-in order form/envelope, for instance, without running an A/B split test. Don’t convert to a slim-jim format without testing that first, too. And don’t convert from coated paper to super cal without seeing how it will impact the bottom line.
Small mailers can test, too. Catalogers often are motivated by the amount of money they can save without consideration to the impact these choices can have on results. What you give up in gross profit dollars can more than offset any cost savings.
Stay the course! Those who cut circ, reduce page count and make other radical changes without testing will pay the price. Maintain your 12-month buyer count, and don’t let it drop below the previous year. Don’t adjust mail dates to try to save money. Remain focused on growing your business.
Stephen R. Lett is the president of Lett Direct Inc., a catalog consulting firm specializing in circ planning, forecasting and analysis. He’s the author of the Catalog Success-published book “Strategic Catalog Marketing.” You can reach him at (302) 539-7257 or email@example.com.