Web Buyers Are Changing the Catalog World, Part 2 of 3
In part two of this three-part series on the analytic metrics necessary for catalogers to evaluate their multichannel businesses, this week I offer tips on how to effectively manage catalog circulation when factoring in Web buyers.
(For part 1, click here.)
In general, pure Web buyers — those customers whose demand has been created online and whose order has been placed online — respond to follow-up catalogs at a much lower rate than traditional call-center buyers and catalog-driven Web buyers. It’s typical for pure Web buyers to respond 25 percent to 75 percent less than traditional catalog buyers with the same RFM segmentation.
Therefore, if you treat pure Web buyers the same as traditional call-center buyers, one of two things will happen: You’ll either overmail or undermail your pure Web buyers or traditional call-center buyers because these buyers are different and require different circulation strategies and frequencies! Below are several tips to help you determine how best to manage circulation, factoring in the influence of Web buyers.
* Use matchbacks to measure response or sales per book for each segment. Source codes are becoming harder to capture because so many orders are being taken online in shopping carts, which often don’t capture source codes. In the good old days, catalogers could just add a percentage (say 15 percent) to their tracking reports for each segment mailed for those orders that came without source codes. This yielded a relatively accurate measurement of total demand.
But pure Web buyers respond so differently to catalogs than traditional buyers with the same RFM characteristics that you no longer can just assume a common factor of “unknown” orders for each list segment you mail. Pure Web buyers tend to place almost all follow-up orders on the Web site’s shopping cart, so these buyers will have a much lower source code capture because of the much higher proportion of orders that are flowing through your shopping cart.
It’s not uncommon for 90 percent to 95 percent of a segment of pure Web buyers’ orders to flow through your shopping cart, where a traditional buyer segment may see 50 percent to 80 percent of their orders taken in the call center with their source codes captured.
Because source code capture rates vary so dramatically between pure Web buyers and traditional catalog buyers, looking only at source code data rather than the richer data from a matchback is worse than incomplete. It’ll almost certainly be wrong in telling you the all-important metric of the relative sales and profitability of each house buyer segment you mail.
* Another invaluable metric for maximizing the profitability of your Web buyers is to model pure Web buyers at your co-op database to find those pure Web buyers who should be suppressed from mailing lists because they’re not active, robust catalog shoppers. The co-op databases have literally billions of catalog transactions at their disposal. The optimization modeling process at a co-op database compares your buyers against those billions of transactions and segments your buyers by each household’s annual dollar spend in mail order, the number of annual mail order transactions, the number of different mail order merchants they’ve purchased from and the merchandise categories where each household buys.
This modeling identifies both high-grade active mail order households, as well as the households that simply don’t buy much through the mail order/Web channel. Suppress that large portion of pure Web buyers who aren’t very responsive to follow-up catalogs. You’ll save on costs and improve profitability by identifying households that simply won’t respond to frequent mailings.
* To understand all your buyer segments, test the incremental sales generated by a catalog mailing. After mailing a catalog and running a matchback to determine the full demand generated during the life of that catalog, you’ll inevitably ask yourself, “But what sales would we have gotten even if we hadn’t mailed a catalog?” Or the equally valid question, “What percentage of these sales during the life of the catalog should be allocated to marketing online, including search engine optimization, e-mail programs, affiliate marketing, etc.?”
The metric of incremental sales tells you the true breakeven of house buyer segments. If you break even with sales of $1/book and find that during the life of your catalog you would’ve gotten 50 cents from each buyer even if you hadn’t mailed those customers a catalog, then your true breakeven is $1.50/catalog. If you mail to house buyer segments responding below $1.50/catalog, you’ll be mailing below breakeven, and your profits will decline.
Also, by setting a baseline for catalog sales during a given time frame, you’ll know what sales are not coming from your catalog, allowing you to allocate that pool of revenue that’s not catalog-generated across your various online marketing programs.
Next week in the final installment of this three-part series on the analytic metrics necessary for catalogers to evaluate their multichannel businesses, I address some common issues that arise when managing the catalog circ of Web buyers.
Jim Coogan is president of Catalog Marketing Economics, a Santa Fe, N.M.-based consulting firm focused on catalog circulation planning. You can reach him at (505) 986-9902 or jcoogan@earthlink.net.
