June 22, 2008

E-Mail Marketing And Customers Who Return A Lot Of Merchandise

Sometimes, our instant access to metrics cause us to screw up.

This happens to most of us.
  1. We execute an e-mail campaign on a Tuesday morning at 9:00am.
  2. By 10:27am, we have a forecast for how well the e-mail campaign will perform. We know open rates (or render rates as the experts now say), click-through rates, and conversion rates. We may even know $ per e-mail.
Three weeks later, twenty percent of the customers who purchased from the e-mail campaign returned their merchandise for a refund.

Did the e-mail marketing campaign work?

One of the things we can do is identify customers who are "high returners". I've done this analysis for many companies. Typically, a small subset of the audience (maybe 1% to 5% of your twelve month buyer file) are responsible for a disproportionate amount of returns.

An easy way to address this problem is to identify customers with a high return rate, and see if those customers will have a high return rate in the future. If so, you run a profit and loss statement on future sales. You talk to your folks in finance, folks who know the actual cost to process each item returned to a company.

At Eddie Bauer, we knew that if a customer had ordered at least three times in the past, and returned two-thirds or more of the merchandise she purchased, she would be unprofitable to market to in the future.

In e-mail marketing, this one is a slam dunk! You simply create a suppression list for this tiny subset of the customer file, and don't send e-mail marketing campaigns to this segment.

And then you bask in the glow of the increase in profit you obtain because of your strategy.

You are likely to see a drop in your metrics --- high returns customers are typically your most active customers --- they open e-mails, they click-through to the website, they buy stuff. And given your returns policy, you should let them buy stuff. However, there is no rule that says you must also market to the customer. So generate additional profit for your company. Stop e-mailing customers who return too much merchandise!

The Math Behind Best Customers

Those of you involved in Catalog Marketing run optimization tables, right? Right?? Here's an optimization table for really go...