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Measuring Incremental Sales Per Catalog is the Key to Optimal Buyer Frequency
September 2, 2014
How often should you mail your buyer file? Some mailers over mail the marginal segments of their buyer file and may be mailing below breakeven. Catalogers can make the mistake of mailing their house file down to breakeven sales per book. What they fail to take into account is, if you are mailing your buyer file frequently, that you’ll get substantial measurable sales from the “tails” of previous catalogs even if you don’t mail your marginal list segments. How can you measure how often to mail to your house file?
Setting up a test to measure the incremental sales is straightforward.
Split marginal housefile segments in half.
Mail half of the test panel and do not mail the other half.
You measure the difference by matching back the catalog orders against the mail file (and the “no mail” test panel.) Say your breakeven is $1.00/catalog and the mailed portion of the house file segment yields $1.25/catalog and the “no mail” test panel yields $.50/catalog from demand created from previous catalogs.
Your true incremental demand is ($1.25 minus $.50) $.75/catalog. If you breakeven at $1.00/catalog, your initial measurement of the catalog sales of $1.25 is wrong and should not have mailed this segment which is being mailed at a financial loss.
Knowing the incremental demand for your house file segments is important to know where to draw your breakeven line for mailing house file segments. You will have other sources of orders in addition to your catalog mailings—-web orders, orders from previous catalogs and orders you would have received “over the transom” even if the customers had never received the follow up catalogs.
Which segments should you be measuring the incremental demand with mail/no-mail tests? Measure those house file segments that are close to breakeven. Pay close attention to:
* Pure web segments that came to you through the web rather than as a result of catalog mailings.
* One-time buyers who haven’t made a second purchase even though they have received multiple house file mailings after their first purchase.
* Low ticket buyers whose average order means they may have a marginal lifetime value.
You don’t need to split each marginal house segment into mail and no mail segments. Set up some test panels to track the incremental sales from aging web buyers, 1x buyers and low ticket buyers and use the results to draw assumptions across the buyer file. Also set up test panels to measure the rate of decay over time when older house file segments are not mailed any catalogs over a long period of time.
The data will tell you that your breakeven sales per book for house file segments is higher than you think. The data will also tell you that the buyer frequency strategy may be quite different for web buyers compared to traditional call center/mail order buyers or for 1x or low ticket buyers. You trim some unprofitable house file circulation and increase your profits by paying close attention to the true demand coming from each catalog mailing to your house file.