George Hague, vice president, J. Schmid & Assoc
“My printer told me to call you,” the man blurted, with obvious panic in his voice. “I’m on press and I need to cut circ. What should I do?”
“How much?” I asked.
“I don’t know.” (No surprise.)
His situation was more urgent than most, but many B-to-B catalogers are experiencing similar dilemmas. Faced with a sudden and unexpected decline in response, they need to cut circ but don’t know by how much. Cut too many pieces, or in the wrong place, and you end up hurting your bottom line more than helping it.
For this year, let’s strip your mail plan segmentation to bare bones and categorize your circ into three segments: the must-mail, should-mail, and want-to-mail.
Must-mail segments generate immediate profits. Usually this is your active housefile, some requestors, and top-performing rental lists. Select your profitable segments, and create a contact strategy and projection based on each segment’s size, response, and average order value.
Now you have enough data to project how the economy affects response. Discount your historical response and average order values based on current trends. Trim negatively performing segments. The contact strategy for your housefile ebbs and flows more than usual. Previously profitable segments may have to be mailed less often.
If you run projections based on these must-mail segments, your bottom line is probably solid. But your sales projections likely fall short of what your catalog needs.
Determine bottom-line projections for your profitable must-mail segments. The difference of your needed bottom line and what your housefile is overprojecting is your starting budget for additional circ.
Apply this budget amount to your should-mail segments. Your should-mail segments are rented files that respond at an acceptable acquisition cost or housefiles that respond at an acceptable reactivation cost. Start with segments that provide the lowest cost per order, and run your projections, with discounts as mentioned above, until you’ve exhausted the budget surplus defined by the response from your must-mail segments. Work your way through as many of your should-mail segments as you can.
Is there budget left? Focus next on your want-to-mail segments, which should be mainly test lists.
You may not be able to bridge the entire gap between your sales objectives and your response realities. You can manage your mail plans effectively for your bottom line, however, while still maximizing circ.
—Source: All About ROI March 1, 2009 (www.allaboutroimag.com). George Hague is vice president of J. Schmid & Assoc., a catalog consultancy. You can reach him at (913) 236-8988 or at GeorgeH@JSchmid.com.