Actions to Take (or Not Take) When Response Rates Decline
Catalog response rates have been flat or trending down the past few years … or so it seems. The web is certainly a factor, but there are several other reasons why this is the case. When response rates start trending down, what action should you take? How should you alter your print circulation to compensate for lower response rates? Often, the actions management take are the opposite of what should be done.
There's a natural tendency to pull back when response rates decline. For example, some catalogers may feel they need to reduce page count, mail less frequently and/or cut circulation. These actions can accelerate the decline and here's why.
"Pages" increase response rate — i.e., the more pages (more SKUs), the higher the response rate. Sales will increase by approximately 50 percent of the percentage increase in page count. The opposite is also true. When page count is reduced, the response rate goes down. A good strategy for declining response rates is to increase the page count by offering a greater assortment of merchandise. The larger the store (i.e., catalog), the higher the response rate. Adding pages assumes merchandise availability. It also means maintaining the same product density.
Mailing less frequently will result in reduced sales. While the response rate may increase, sales and profit contribution won't be realized. It's difficult to overmail any given housefile. There are portions or segments of your housefile that can be mailed profitably every time. Therefore, reducing a mail drop will likely reduce profitability (contribution).
The shift from all catalog to a combination of catalog and digital marketing spending (e.g., pay per click) will decrease print catalog response rates. However, look at your total business. It's not catalog vs. web or visa versa. In an omnichannel world, it's the total business being generated that's important.
I want to point out the impact of promotions on response rates. Promotions such as free shipping, a dollar amount or percentage off the order, etc., have become commonplace because these offers increase response rates if structured properly. If your competition has an offer and you don't, it can hurt your response rate.
There continues to be a growing shift from ordering via an 800 number to buying online. Therefore, some of the declining response rate is actually a decline in order tracking. Even with a matchback process in place, you might miss tracking sales to the catalogs that are actually driving the orders. The response rate decline you're seeing might not be as severe as you think.
Be sure to do your homework before you decide to take action that could accelerate declining response rates. Adding pages, using promotions or finding a spot in your circulation plan to add an extra drop to your housefile are a few things to consider to reverse the trend.