August 13, 2007

Prospect Catalogs

The concept of special catalogs used to minimize prospecting expense is not a new one. Given the increases in the expense structure facing most catalogers, it is a concept worth revisiting.

Simply put, the prospect catalog is merchandised with the best products, products that perform well in the short-term, and cause customers to be acquired that spend a lot in the future (i.e. high lifetime value).

The prospect catalog features a proven creative presentation, there is no time for experimentation in prospect catalogs. However, be concerned if at least half of your circulation is in compiled lists like Abacus or Z24. If you prospect in these universes, you don't have as much control over who receives your catalogs, based on the models the compiled list vendor uses. It is possible you are prospecting to the same name repeatedly --- this can be a problem when using the same creative and same merchandise presentation. Ask your compiled list sales representative to provide reporting for you that proves the same prospects are not being mailed repeatedly,

Liquidation and sale merchandise is typically avoided as a merchandising strategy. This is a customer acquisition tool, not an inventory management platform.

Many marketers apply lower price points on the items in the prospect catalog. Many marketers use free shipping or a percentage off orders achieving a certain hurdle in order to entice customers. If this is an effective short-term and long-term strategy, feel free to use these tactics in the prospect catalog.

The prospect catalog is often half the size of the main catalog being mailed, with a minimum of forty-eight pages of merchandise offered.

Circulation managers employ three different circulation strategies with prospect catalogs. The starting point is to determine how productive a catalog half the size of a main catalog will perform. Typically, you'll get seventy percent of the demand on fifty percent of the pages, though it is not uncommon to achieve ninety percent of the productivity on half the pages. If you find that you are getting half the sales you get on half of the pages, you know your merchandise and creative strategy is not appropriate for a prospect catalog.

One strategy is to send the prospect catalog to everybody. This results in a highly productive mailing mailed very deep into the housefile and prospect list. This can be a better strategy than wrapping an existing catalog with new cover and back cover (i.e. a remail), though adequate testing is required to prove this.

Another strategy is to mail your housefile and outside lists to "breakeven", or whatever your lifetime value threshold is. After that point, you mail the prospect catalog to customers down to "breakeven", or whatever your lifetime value threshold is.

A third and more profitable strategy is to simultaneously compare which catalog is more profitable across every segment you plan to mail. This strategy results in a shallow circulation depth for your main catalog, with the majority of your circulation in your prospect catalog.

As always, it is important to track online orders driven by main and prospect catalogs. It is not uncommon for a smaller catalog to drive just as much volume online/in-stores as a larger catalog.

One limitation of prospect catalogs surrounds the average order size of the prospect catalog. With fewer pages, customers tend to place orders that are between ten and twenty percent smaller than in the main catalog. As we all know, customers with initial order sizes that are smaller than average tend to have lower lifetime value than customers placing average or above-average initial order sizes.

As you develop your Spring and Fall 2008 mail plans, it may make sense to sit down with your creative team, merchandising staff, compiled list vendor, outside list broker, and print vendor to discuss the opportunities surrounding prospect catalogs. There are cost efficiencies in leveraging existing creative, and your printer can help you understand cost efficiencies at various page counts.

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I See Dead People

From LinkedIn, where I wrote this on Sunday: