Turn One-time Buyers Into Multis

Catalogers spend loads of time and money acquiring one-time buyers. But there’s more you can do to get these individuals to purchase again. Typically, fewer than half of your first-time buyers make a second purchase.

With the high cost of mailing catalogs today coupled with lower response rates, most catalog companies acquire new buyers at an incremental loss. Catalogers must be willing to make an investment in acquiring a new buyer to grow, knowing the payback will come sometime in the future.

The amount of time to payback the investment — normally one year — can be reduced by developing a strategy to convert one-time buyers to two-time (or more) customers. More can be done with this large group of buyers than simply re-mailing them as part of your normal mailing cycle.

Don’t Think Short-term
I’ve always felt catalogers take a short-term view with respect to prospecting by focusing mainly on the initial results. For example, catalogers expect a particular prospect list to achieve breakeven the first time it’s mailed. Often the list or segment is dropped if it doesn’t.

But what about the lifetime value of buyers acquired from that list? How much do they return over time, and what can be done to accelerate the payback? As catalogers, be more concerned about getting one-time buyers to buy again and less concerned about your initial results.

There are too many one-time buyers on most housefiles. Or, said a different way, too many individuals buy only one time. Some move and leave no forwarding address. Others buy based on a one-time need never to buy again. Some buyers didn’t have a satisfactory buying experience with your company. Others die.

Needless to say, some reasons are in our control; others aren’t. If you can give a single buyer a reason to buy again, you’ll dramatically change the economics of prospecting as well as your bottom line.

In the accompanying table, look at the number of single buyers typically on a consumer housefile. I’ve divided this chart into 0- to 12-month buyers and 13- to 24-month buyers.

In our example, approximately 61 percent of the 0- to 24-month buyers have purchased only one time. Yet, we continue to mail the single buyers with the same frequency as the two-time-plus customers. Assuming a catalog cost in the mail of 60 cents per book and a 10-times-a-year mailing schedule, the investment in mailing these single buyers would amount to approximately $12 per buyer in two years.

With a total of 156,828 single buyers on the 0- to 24-month file, the total selling or marketing expense mailing to these individuals would amount to almost $1.9 million! And, not one repeat order from this group either. Once again, if we can increase the percentage of one-time buyers who buy again, or if we can better identify those buyers most likely to make a second purchase, our investment in future mailings can be reduced.

Eight Conversion Tactics
Obviously it’s not realistic to think that 100 percent of your first-time buyers are going to purchase a second time. The percentage of one-time buyers on the file, however, can be reduced if programs are developed and implemented to convert these individuals to customers. Here are a few proven ways:

1. Bounceback offer. Include a bounceback offer to first-time buyers to encourage them to buy again. This can be in the form of a promotional mailer or a catalog that accompanies the buyer’s outgoing order. A bounceback can come in many forms. It can be a promotional sheet, a flyer or a full-size catalog. Someone who just purchased is the best prospect to make a repeat purchase.

2. “Welcome New Buyer” announcement. Pack a letter or sheet that welcomes all new buyers in their outgoing orders. This will make new buyers feel special and let them know how much you appreciate their business. It may encourage them to buy again. (This idea can be incorporated in point No. 1 above.)

3. Mail first-time buyers more often. At least initially, you might want to mail first-time buyers more frequently than you ordinarily do. Make two or three extra and more frequent mailings to first-time buyers as a way to encourage them to purchase again.

4. Optimize single buyers. Using one of the cooperative databases, optimize your single buyers and mail the group that’s most likely to purchase again. Do this after you’ve mailed the single buyers a few times and converted those you can. Then, send the remaining group to a co-op to help you select who should (and should not) be mailed again.

5. Long-term value prospect response model. Wiland Direct has a new lifetime value response model that focuses on converting one-time buyers to two-time-plus customers. This model is produced using a proprietary modeling method that studies repeat-purchase patterns.

It identifies prospects who have an above-average tendency to buy and then make numerous repeat purchases.

6. Improve your customer service programs. Good customer service practices build loyalty and therefore promote repeat purchases. Check your own customer-friendly policies and procedures. Have your telephone sales reps welcome first-time buyers. They, too, can make special offers to first-time buyers to encourage them to buy again.

7. Segment your one-time buyers from the rest of your RFM (recency/frequency/monetary). If your file size isn’t large enough to split out by dollar and frequency, segment the singles by date of last purchase, e.g., 0-6, 7-12, 13-18 and 19-24 — or 0-12 and 13-24. Track the performance of the one-time buyers and focus on this group.

8. Try an e-mail strategy. Send an e-mail to your first-time buyers about a week after they’ve received their order. Make them a strong offer, e.g. free shipping, on their next order for a limited time only.

Stephen R. Lett is president of Lett Direct Inc., a catalog consulting firm specializing in circulation planning, forecasting and analysis. You can reach him at (302) 537-0375 or at www.lettdirect.com.