August 01, 2007

Investment In Compiled Lists

Note: Response to Tuesday evening's "Multichannel Manifesto" is very positive. No comments, but a ton of page views for just that specific article ... thanks for taking time to read it and share it with others!

When industry experts suggest that more than half of catalog prospecting occurs via various compiled lists, you know the world of catalog marketing has irrevocably changed.

In all likelihood, you are measuring the lifetime value and multichannel evolution (i.e. multichannel forensics) of the customers you acquire via compiled list activity. You probably know if these names become online buyers, are responsive to catalogs, or eventually shop your stores.

What you may not be measuring is the "type" of customer you are prospecting to.

When I arrived at Eddie Bauer, my first job was to build statistical models that determined which housefile customers would receive catalogs. Our catalog manager had faith that I was doing what was 'right' for the business. However, she wanted to know "who" my models were mailing. She felt like she had just lost control of her business ... 'she' used to decide who would receive catalogs via RFM segmentation.

So, I had to develop reporting to "prove" to her that my models were choosing good customers ... I had to develop a lot of reporting that convinced her that I was doing a good job.

And when you do that, you identify problems. A small number of customers had "bad data" in the database. This meant that the models would not score the customer, would not select the customer for mailings --- but, the customer purchased recently and deserved to receive a catalog.

Compiled list modelers are generally talented, so this should not be an issue.

From a practical standpoint, a catalog executive really wants to know 'who' it is that the models are selecting out of the database. Having been a catalog executive, I've been pummeled by leadership over participation in compiled lists, and I've been challenged to prove that I am acquiring customers that match the target demographic of the company I worked for.

Maybe your compiled list vendor is already providing you this information.

I would want to learn the following characteristics about the prospects the compiled list vendor is choosing for my mailings:
  • An 'RFM' style report that tells me how many names are available by months since last purchase, number of twelve month purchases, and average order size. I would want to see the percentage of names from each segment the model selected for my prospecting efforts. I would want to see this report on a rolling eighteen month basis, so I could compare file counts year-over-year. I would also want to do a time-series analysis of the change in the file and models used to select customers.
  • A report that tells me share of catalog dollars, share of online dollars, share of retail sales by RFM segment, and change in share over time.
  • A report that tells me, by RFM segment, how many times that name has been selected for prospecting purposes by other companies in the past three months.
  • Instead of RFM, I'd want to see all reporting above for a "RC" scheme, recency by month and "# of catalogers" the customer purchased from in the past year.
I could go on an on ... but this should get a discussion started.

Over the next five years, the number of true "catalog buyers", those who purchase via a 1-800 number, will continue to decrease. If more names are being pulled from compiled lists by more catalogers --- pulled from a decreasing base of prospects, prospects in the compiled list database will be significantly over-mailed. This will drive down catalog response, confounding challenges related to postage and paper costs.

Maybe more troubling is the fact that most catalog companies have a completely new twelve-month buyer file every three years. Three years from now, most catalogers will have a housefile that is at least 50% to 75% comprised of compiled list names.

In reality, the compiled list vendor community will determine the future success of your cataloging efforts --- we as business leaders have made the decision to use this medium to determine who our future customers are.

Are these customers aligned with the target audience of your catalog brand? Have your compiled list vendor representative demonstrate to you that the prospects they are choosing for you meet your target customer, your target demographic.

The reality of this situation will demand transparency on behalf of the compiled list vendor. It's been my experience that compiled list industry leaders respond to market conditions, and respond to honest questions from catalog leaders who value collaborative relationships.

So if many catalogers communicate the need for better reporting and greater transparency, there will be a positive response from your compiled list vendor.

Your thoughts?