Post-COVID Mailing Strategy … Be Careful Not to Overmail
The horrific pandemic caused people to stay home most of the year, which created a large spike in orders for many direct-to-consumer companies, both catalog and digital. The increase in demand was so significant that it caused issues for the supply chain. Many retailers scrambled to purchase inventory in order to meet the order demand week after week. While challenging, it was a good problem to have. Most were hopeful the surge in demand would last. Others were more realistic and knew demand would dwindle to a more reasonable level. I still believe orders will stabilize somewhere between 2019 and 2020 levels. Demand won't be as high as 2020, but greater than we saw in 2019. Time will tell. The first half of 2021 is consistent with that belief.
Why did demand surge to record levels in 2020? It didn’t just happen on its own. We need to understand why the surge occurred — i.e., the COVID factors so that we can plan accordingly. The big factor contributing to the increase in demand was due to the fact that people stayed home. Those with office jobs worked from home. They had more time on their hands not having to commute to and from their outside office. Most worked more efficiently from home. They had plenty of free time, but couldn’t go anywhere. So what did they do? They stayed home and shopped their favorite catalogs and websites. They ordered prepared and ready-to-cook food (big product category last year) that helped fill the void of not being able to go out to a nice restaurant. They ordered other merchandise that they may have wanted and needed. They filled a void by shopping from the comfort of their homes.
Some of the increased spend was due to people having more discretionary income. People were going out less, not spending money commuting and purchasing gas, etc. We also feel that people who didn’t rely on direct purchasing in the past grew to trust and appreciate the convenience of doing so. These are all reasons why we expect revenue increases to be above 2019.
Companies and individuals realize that office workers can work from home and they don’t need a physical office. Therefore, some of the work-from-home folks will be permanent. The pandemic caused these people to realize they can work remotely just fine. This belief will help continue the demand for at-home shopping, affording them more free time.
We saw zero to 12-month housefiles grow in 2020, both catalog and web. That growth extended into the first half of 2021. This means there are more customers to mail. The growth in the zero to 12-month category came from older inactive buyers who made the decision to purchase again (i.e., customer reactivation), as well as from new buyers attracted to the offer. 2020 wasn't a normal year and buyer behavior was far from normal, too. There were unprecedented gains in several consumer sectors including but not limited to food, home furnishings, gifts, etc. People stayed home. These people had plenty of time to shop via catalog and online. They enjoyed the experience and so did the many companies that benefited from the spike in revenue.
I've always believed in the power of recency, frequency and monetary value (RFM). It has stood the test of time and no other mailing philosophy has exceeded its performance. These are unprecedented times and should cause us to pause and to, perhaps, alter our circulation strategy. When we return to normal, even to the so-called “new” normal, the performance of consumers who made purchases in 2020 and 2021, especially new-to-file buyers, might have a lower lifetime value. In other words, is it really worth mailing these zero to 12-month buyers as frequently as you normally would?
Customers who were reactivated and buyers who purchased for the very first time may not continue to buy with the same frequency or regularity of a typical zero to 12-month buyer. They purchased during the pandemic because they had a lot more free time on their hands. Gourmet food was a big category that consumers purchased since they couldn't frequent their favorite restaurants. Now that companies and workers know they can work efficiently from home, many will continue to do so. They will continue to have more free time on their hands. Customers were also attracted to catalog and online shopping because malls and retail stores were closed. A certain percentage of these shoppers will most likely return to stores so they can touch and feel the merchandise.
So that these buyers in the most historically responsive RFM group are not overmailed, I’d like to offer a suggestion. While we cannot specifically identify buyers who were motivated by their circumstances changing due to COVID, we can identify customers who purchased masks, hand sanitizer and other related products. It might be a good idea to segment and mail these buyers as a group in order to track their performance. If they perform like zero to 12-month buyers normally perform, then by all means, mail them. If their performance is less, don’t mail them as frequently.
Mailing catalogs requires good circulation techniques. Understand that all buyers may (or may not) be equal. Be cautiously optimistic that customers who were reactivated or who purchased new in 2020 and 2021 may perform just fine, and if so, great! I hope they do. But don’t assume they will. Test to be sure so that you avoid overmailing.
Stephen R. Lett is founder and chairman of Lett Direct, Inc., a catalog consulting firm specializing in digital marketing, circulation planning, forecasting and analysis since 1995. Mr. Lett spent the first 25 years of his career with leading catalog companies; both business-to-business and consumer. He's the author of a book, "Strategic Catalog Marketing." He can be reached at firstname.lastname@example.org.
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Steve Lett graduated from Indiana University in 1970 and immediately began his 50-year career in Direct Marketing; mainly catalogs.
Steve spent the first 25 years of his career in executive level positions at both consumer and business-to-business companies. The next 25 years have been with Lett Direct, Inc., the company Steve founded in early 1995. Lett Direct, Inc., is a catalog and internet consulting firm specializing in circulation planning, plan execution, analysis and digital marketing (Google Premier Partner).
Steve has served on the Ethics Committee of the Direct Marketing Association (DMA) and on a number of company boards, both public and private. He served on the Board of the ACMA. He has been the subject of two Harvard Business School case studies. He is the author of a book, Strategic Catalog Marketing. Steve is a past Chairman of both the Catalog Council and Business Mail Council of the DMA. He spent a few years teaching Direct Marketing at Indiana University in Bloomington, Indiana.
You can contact Steve at email@example.com.