Economics must dictate how you invest in your customers
Are all customers truly equal? Should you really treat them all the same? Under normal circumstances, yes—but not when investing in marketing.
That may seem shocking at first. In reality though, you make these types of decisions every day.
The first thing to keep in mind is that the foundation for all of your advertising should be catalogs. Catalogs drive more revenue, more traffic or more goodwill than email, social media and any other form of advertising. Sending catalogs regularly to your customer base is vital to the success of your store. Believe it or not, after a number of years without their big book, J.C. Penney is getting back into the catalog business. The company realized it was missing a significant piece of the multichannel approach to reaching its customers.
I’m not suggesting you don’t need to send emails or post on Facebook. I am saying, however, that those functions need to be stacked like building blocks onto a solid base of printed catalogs. Your first priority should be to regularly send catalogs to the consumers most likely to respond, then reinforce them by other means.
But, as I said, you can’t treat all of your customers the same when it comes to sending them something as significant as a catalog. Mailing a catalog isn’t as inexpensive as other marketing vehicles, so you need to make sure you’re taking as much care as possible when deciding which customers to invest in. How picky should you be though? Should you mail based on who has spent the most money this year? Or how recently and frequently they’ve shopped? On the surface, some combination of these factors seems to make sense.
But what if I told you that when it comes to how likely it is for someone to respond to a catalog, the data shows that the distance the customer lives from your store is twice as important as how recent they’ve shopped? Or that the number of times they shopped in the last three months carries as much weight as the number of times they shopped a year and a half ago? This might drastically change how you think about your mailing strategy.
Let’s assume you can easily pull customer lists using this information. How deep into your mailing list should you be mailing each month? For this example, I’m going to call customers “active” if they have shopped in your store in the past 18 months. Looking at this subsection of your mailing list, you need to know that the bottom half of these customers only generate about 10% of your revenue. That’s a lot of customers for a tiny bit of revenue. Yet mailing to each of those “halves” takes the same amount of investment. Yes, you need to periodically mail to those customers, but I would not recommend doing it more than once a year unless you’re already mailing to the top half of your list every month.
In addition, keep in mind that your mailing list is one of your most valuable assets. Are you consistently asking your customers for their email addresses? Have you taken advantage of email-append services that will help you locate your customers’ emails? Are your associates verifying address information? Keep your list clean to reduce catalog waste.
Because of the way catalogs are mailed, many are thrown directly in the trash due to a lack of forwarding. But keeping your list updated by utilizing National Change of Address (NCOA) services from the U.S. Postal Service will take your list cleaning to another level. Some stores have NCOA services available to them through their mailing partners, helping to get catalogs into their customers’ hands even if they’ve moved. These services will update addresses for customers who have moved as far back as four years ago, and then that data can be pushed back into your POS system so your in-house list is as current as possible. And after making NCOA updates, you can then determine which customers you want to mail to, even based on how far away they live.
Having enough resources to invest equally in every single customer would be wonderful, but that isn’t the reality of today’s retail model. When your customers walk in the door, each and every one is on the same footing, but when it comes to investing in them, it’s crucial that your decisions are based on all the data you have and that you’ve taken advantage of every tool available to you. Data can make a huge difference in the success of your catalog mailings—if you use it wisely.
In the next issue, I’ll be writing about using data to maintain promotion-stocking levels of every product in your catalogs and also how to evaluate the success of a catalog. Feel free to contact me with any questions, comments or potential topics at firstname.lastname@example.org
Erik Ernstrom has worked in the Christian products industry for 24 years. He started as a receiver in the backroom of an independently owned Christian retail store, eventually managing that store. He has also managed a customer service department that served 300 Christian retail stores. He now works for The Parable Group, managing the business analytics department that yielded nearly 100 million customer contacts last year.