PRESIDENT'S CORNER Do you want to take your company to the next level? Are you facing a particularly perplexing problem in your business? Or are you looking for state-of-the-art circulation services? Is your catalog in need of a creative makeover? What strategies are you employing to mitigate the postal increase? Do you need to integrate your marketing channels? With dramatically rising costs and an increasingly meandering path to purchase, it is of paramount importance to fine-tune your contact strategy both for short-term and long-term viability. We can help you do that. All of my partners—Al Bessin, Michelle Farabaugh, Bill Nicolai, Geoff Wolf, Mitch Siegler, and Carol Worthington-Levy—will be available for "Ask the Experts" sessions throughout the conference. We are happy to spend an hour with you at no charge to discuss how we can assist you with increasing company profits and maximizing sales or with any issue in the area of multichannel marketing, contact strategy, circulation management, catalog or web creative, or operations. If you would like to schedule an appointment at the conference, please give me a call at 415-446-2500, ext. 201 or send an email to me at john.lenser@lenser.com. I know that we can make a very positive contribution to your company’s growth and bottom line profits. You truly owe it to yourself to find out why over 60 catalog companies have placed LENSER on monthly retainer to provide strategic consulting and day-to-day marketing services. We hope that you have a very successful conference!FEATURE ARTICLE CASE STUDY CIRCULATION TIP CREATIVE TIP multichannel TIP CLIENT HIGHLIGHT—FRENCHTOAST.COM EMPLOYEE SPOTLIGHT—ANNE EOVINE AFFILIATE FOCUS—ORDERMOTION
PRESIDENT'S CORNER The Annual Conference for Catalog and Multichannel Merchants in Boston (May 21-23) is coming up fast, and the LENSER team would like to meet with you! Do you want to take your company to the next level? Are you facing a particularly perplexing problem in your business? Or are you looking for state-of-the-art circulation services? Is your catalog in need of a creative makeover? What strategies are you employing to mitigate the postal increase? Do you need to integrate your marketing channels? With dramatically rising costs and an increasingly meandering path to purchase, it is of paramount importance to fine-tune your contact strategy both for short-term and long-term viability. We can help you do that. All of my partners—Al Bessin, Michelle Farabaugh, Bill Nicolai, Geoff Wolf, Mitch Siegler, and Carol Worthington-Levy—will be available for "Ask the Experts" sessions throughout the conference. We are happy to spend an hour with you at no charge to discuss how we can assist you with increasing company profits and maximizing sales or with any issue in the area of multichannel marketing, contact strategy, circulation management, catalog or web creative, or operations. If you would like to schedule an appointment at the conference, please give me a call at 415-446-2500, ext. 201 or send an email to me at john.lenser@lenser.com. I know that we can make a very positive contribution to your company’s growth and bottom line profits. You truly owe it to yourself to find out why over 60 catalog companies have placed LENSER on monthly retainer to provide strategic consulting and day-to-day marketing services. We hope that you have a very successful conference!FEATURE ARTICLE LENSER recently took responsibility for catalog circulation for a large home decor marketer. Our client enjoys a very high average order value but has been challenged by an extremely low response rate, which has been declining significantly for several years. The low response rate reflects the fact that the merchandise the company sells is purchased infrequently—typically just once every five to ten years, with the average about every seven years. Our client’s past marketing strategies epitomize classic direct marketing prospecting. For the most part, they had simply rented lists of recent buyers of high-end home décor items which they believed to be synergistic with the merchandise they sell. These lists had been supplemented with a variety of transactional models provided by the cooperative databases. They used tried and true traditional techniques that work for most mailers, most of the time. So, what’s the problem? Our client’s merchandise categories have become highly competitive during the past several years. Internet retailers who enjoy radically lower cost structures have invaded the category by offering similar merchandise without the associated high cost of a print catalog. Furthermore, the infrequent nature of the purchase makes prospecting highly inefficient, as demonstrated by the low response rates. Our conclusion: While propensity to purchase through catalogs is a necessary condition for prospecting success, it is not a sufficient condition. We determined that our client also needs strong triggers—or early indicators—to better identify qualified prospects. These qualified prospects may need to be optimized for propensity to purchase through catalog, but absent the trigger, searching for a qualified prospect in a pool of names from a rented list or co-op database model is the proverbial search for a needle in a haystack. Based on our research and analysis, we determined that these signals or early indicators may include (i) a recent move, (ii) a cash-out refinancing, and (iii) the granting of a building permit for an existing residence. The theory: new movers often need to decorate, and individuals who are refinancing their home or have been granted a building permit are likely to be remodeling their home—and also need to decorate. We identified large universes of qualified prospects that have recently moved, concluded “cash-out” re-financings, and/or received residential building permits. In some cases, these lists had the same geographical (zip) overlays as are applied to the client’s other outside lists and models. Generally, names were also optimized at a cooperative database. On head-to-head tests, prospects developed from early indicator sources outperformed average prospects on a revenue per catalog basis by approximately 15%. After giving effect to two early indicator tests that were unsuccessful and will not be continued, the remaining pool of early indicator lists outperformed average prospects by nearly 35%. Initial tests of 0-3 and 4-6 month movers are producing results that are favorable enough to justify relaxing the recency select and testing into 7-12 and 13-24 month segments. Even after stringent optimization, we have been able to mail 50-65% of the 0-3 and 4-6 month segments. We believe it is possible that 60-75% of the client’s prospecting could soon be derived from early indicator sources—up from less than 10% a short time ago. A few caveats: Recency is obviously critical for new mover data. Often, lists that appear fresh are stale by the time the mail piece arrives. For example, names on a “seven-day new deeds” list were estimated to be nearly two months old by the time the catalogs arrived in homes. As a result, we are considering alternative delivery mechanisms to substantially speed up delivery and improve recency. Also, optimization does increase the list cost but the increases in response rate more than justify the additional cost. Be aware that although first-level optimization sometimes provides a significant lift, in certain cases secondary optimization—using the client’s database as an optimization vehicle—is also required. So, if finding new customers is no longer as easy as shooting fish in a barrel, consider putting aside your shotgun, picking up a rifle, and looking for “triggers” or early indicators in your prospecting efforts. To discuss this further, please give us a call.CASE STUDY We recently started working with a large multichannel company that needed to employ this type of processing to help increase the performance of its prospecting. The company has seen a steady decline in response from their prospecting sources over the past five years and needs to figure out how to stop the bleeding. The answer, we discovered, was not who we should select to mail, but rather who we should select to not mail. There were several techniques we identified that would help in finding those names to suppress above and beyond those mentioned above. Note that in the previous statement we say “finding those names” and not “those lists or those sources.” The traditional strategy for a catalog company is to “rest” a list when performance starts to drop, yet this is a mistake. When prospecting with a catalog you are marketing to a person, not to a list. When you rest a list, you are throwing the baby out with the bath water, because you are suppressing the good names along with the bad names. The key to successful prospecting is to find the good names to mail and to find the bad names to throw away. The client we are working with had a couple of immediate suppression opportunities that we identified. Zip Code Suppression We had a basic zip model built by our client’s internal IT/analytics team, which we utilized when ordering select outside lists. Since a zip file can dramatically decrease the available universe of a given source, it was imperative that we only use the zip file suppression on those sources that had a large enough universe to begin with. We were able to apply the model to approximately 50% of the outside list names going into the merge. We did not apply the same zip file to our co-op database sources, assuming that their models would automatically use geography as one of the top variables. When we analyzed the mail files post-implementation of the zip file, it was determined that only .08% of our prospecting was now going to non-productive zip codes. With a simple zip file applied to select outside list sources, we were able to drop our unproductive prospect mailings to under 1%. This low figure also supports our assumption that the databases were already heavily weighting this variable in their models.
Renter Suppression The quickest and easiest strategy at our disposal to identify and suppress renters is to use the USPS to identify what type of building the address is likely to be. The majority of renters will be residing in apartment buildings, which are identified as Multi Family Dwelling Units, or MFDUs. There are going to be instances where an MFDU is not an apartment, but rather a condominium or town home, which is a bit harder to isolate. By suppressing the MFDU addresses, we are being a bit hypocritical by throwing out the baby with the bath water, or suppressing the good names (condos and town homes) along with the bad names (apartments). As seen in the chart below, the net results justify this practice and give us something to work toward in the future, by trying to identify those pockets of gold within the MFDUs that we are suppressing. It’s evident that up to 20% of the prospecting circulation is determined to be an MFDU and those identified names perform at anywhere between 20% and 50% below average. By suppressing these low performing names, our net performance will automatically increase by a significant margin.
Post-Merge Optimization The optimization model was built to segment our merge output into deciles so we could easily shave off the bottom 10% of our prospecting file. Some may argue that this tactic is wasteful and not cost effective since you have already paid for that name and all of its processing. It’s true that you are throwing away some money, especially if that name was actually paid for and didn’t come from an exchange. Yet it is much more cost effective to spend that $.20 for a name that will be suppressed since it won’t ever generate an order, compared to mailing a catalog for $.65 and achieving the same effect—that of not receiving an order. So by suppressing that name to begin with, you are saving yourself $.45 at the end of the day. This all sounds fine and dandy on paper, but the proof is in the pudding and the model has to prove itself out in the real world in order to justify the process. Fortunately it did just that, as you can see in the chart below. Each of the lower deciles was rekeyed and mailed under its own source to track the validity of the suppression model. The model performed as expected and was able to identify 10% of our prospecting file that was going to yield minimal response.
The End Result In order to effectively prospect, you typically need to decide not only who to mail, but also who not to mail. By bringing in only our top prospecting sources on the front end and then applying several suppression techniques on individual names, we are able to greatly increase the performance of our prospects. The end result is that our prospecting metrics will naturally increase and we are reducing our overall costs by suppressing the non-performing names—a win-win situation in our book.CIRCULATION TIP A more logical way to define a trade area is to create a tiered system (Primary, Secondary and Tertiary Trade Areas), then analyze store sales by zip code to define each tier. Perhaps the Primary Trade Area is defined as the zip codes that are driving 70% of that store location’s sales, Secondary = 20%, and Tertiary = remaining 10%. Unless you’re running Wal-Mart, you’re not selling to everybody. Using your customers’ geographic profile to drive your segment definitions is the logical application of database marketing principles for multichannel marketers.CREATIVE TIP Well, I have to admit, it still did A LITTLE, but that heavy, inky smell was virtually gone. What happened?! Asking my sales rep about it, she told me about how Penn was pioneering the technology of soy-based inks because the owner felt that it was about time the printing industry took some responsibility in that area. They had been one of the first plants to develop aggressive recycling of paper scraps, so this was a natural next step for them. So in addition to developing and testing soy-based inks, they were beginning to supply them to other printers who were looking to make that change. Along with doing good environmentally, this was becoming something very good for their business, too. At the time, a printer who converted to soy-based inks was in for a big expense—their presses had to be completely stripped down and cleaned and the costs of the inks were higher. But now, soy-based inks are showing up more and more often. Why? Well, first, it has become less and less convenient to dispose of petroleum-based inks. In addition, as you can guess, the fines for disposing of the petroleum-based inks incorrectly are stiffer than they used to be, and more tightly enforced. Another reason has to do with people: the health of those working in the printing industry was badly impacted by the old inks, and by switching over, printers are now seeing less illness, fewer sick days, and therefore more efficiency per worker. The costs are coming into line now, too. This is because soy has gone from being a product that you only saw occasionally planted to replenish the nutrients in a farmer’s field, or for creating tofu for a small market, to being a huge crop in the U.S. It’s easily replenished. It also takes less energy to process into ink than petroleum does. Another benefit I learned of more recently is how much easier it is to remove soy ink from paper during recycling, leaving the resulting pulp from recycling brighter and cleaner. Plus, less ink is needed for printing, and it runs well in more varied conditions such as higher humidity or dryness, so the cost of ink actually becomes lower! There are a few disadvantages that printers have to contend with, however: The most important one is that the pigments in soy-based inks are still toxic so it’s not like a printer can toss the soy ink waste down the drain—it still requires proper disposal, since it can contaminate soil and streams if indiscriminately dumped. Second, if a printer has been running petroleum-based inks, a complete breakdown of the press and a thorough cleaning is mandatory before converting. Presses need to be dismantled occasionally for maintenance, but in this case the cleanup must be meticulous. This takes time and costs money. But once the press is converted, they’re ready to roll and never look back. So, as a buyer of printing, is this something you should be on the lookout for, and even request? You must answer your own conscience. But if you ask around, you’ll find more and more cost-effective printers are moving to soy-based inks because they feel it’s the right thing to do. You will probably find, once you decide this is the option for you, that you won’t have to up much to take better care of Mother Earth.multichannel TIP For mailers with three or more channels, it can be instructive and beneficial to add crossover or multichannel buyer status to housefile segmentation. Since we know from industry research that multichannel buyers—i.e., those who use multiple channels such as phone, web, and retail when purchasing—are more valuable than single-channel buyers, it’s worth segmenting out those who have ordered from two or three channels (or more, if your buyers have other ways of ordering from you). Definitely test it first, but normally you should be able to mail deeper into your crossover buyers than single-channel buyers. This is yet another great way you can use refined segmentation to identify and successfully reactivate older buyers in addition to RFM and such already discussed techniques as pander hits, NCOA hits, and multi status.CLIENT HIGHLIGHT—FRENCHTOAST.COM EMPLOYEE SPOTLIGHT—ANNE EOVINE At LENSER, Anne’s versatile skill set and strong attention to detail has greatly benefited our organization and our clients, especially in LENSER List Services. Michelle Houston notes, “Anne’s experience was greatly needed as our company continued to grow. Client list billing is a complicated process and she learned the nuances early and helped our bottom line by keeping an eye on many of the accounting details.” She also provides much of LENSER’s financial reporting, planning and analysis, preparing financial statements and performing internal audits. “I don’t have much interaction with the clients personally but can appreciate the diversity and find them interesting in different ways,” says Anne. “What keeps me motivated are my co-workers, the company growth, and my ability to contribute to these efforts. I thoroughly enjoy working with such a talented and knowledgeable group of staff and management. It is a close-knit group that shares camaraderie in the workplace as well as during outside activities.” Of course, the California weather suited Anne’s love of golf—here it’s a sport to be played year-round. Her love of the sport also introduced her to the Executive Women’s Golf Association, where she now serves on their Board of Directors. In addition to playing golf and her duties on the EWGA board, Anne enjoys hiking and sightseeing, art—both doing and viewing, traveling, movies, and time spent with friends. If you are ever in the area and want to play a round of golf, Anne’s ready to tee up! To learn more about Anne, please visit her bio.AFFILIATE FOCUS—ORDERMOTION Imagine processing orders, managing customer contacts, and handling all aspects of your commerce business through one platform. Now imagine doing that without any investment in staff, software, or expenses related to building your infrastructure. Instead, imagine managing it all with your web browser through the internet. You have just imagined OrderMotion—the web-based, end-to-end order management, customer service, and fulfillment system—with most of the standard bells and whistles available on an enterprise order management system. Sound too good to be true? Well, you haven’t heard the best part yet. OrderMotion employs a transaction-based fee structure aligned to your needs. That means eliminating the cost-prohibitive capital needs required for a typical in-house system and support structure. It also means that your costs flow when your cash flows. No matter how quickly your business grows, OrderMotion can support it thanks to an unparalleled configuration that can process 50,000 orders as easily as it can process 10. Since there is no software to buy, maintain, or customize, you can realize up to a 90% reduction in average maintenance, IT, and administrative costs, plus benefit from all the latest system upgrades and feature enhancements. “OrderMotion offers up a true on-demand order management, customer service and fulfillment system that you pay for as you need,” says Donny Askin, CEO of OrderMotion. “Taking the IT infrastructure out of the equation allows the merchants to focus on merchandising and the marketers to focus on marketing—and the company overall to focus on growth and profitability. Our variable cost model allows the small- and medium-sized e-tailer, direct marketing, and multichannel retail company to compete with the same tools as the big guys.” “We don’t host the shopping site, we are not the e-commerce engine, and we don’t publish the catalog or furnish the store. Rather we are ‘everything behind the buy-button,’ irrespective of the commerce channel. We now have nearly 300 clients representing well over 1,000 brands,” says Donny, “and yes, our sweet spot is the smaller, perhaps lesser known, emerging e-tailer, although we have some very large, well-known clients, too. It is the middle market that has yet to really discover OrderMotion, but they will.” “While OrderMotion is not the solution for everyone, in particular clients requiring more customized solutions to satisfy their business needs, you cannot beat the combination of scalability and functionality that OrderMotion brings to the table,” says John Lenser, “Especially for the early-stage companies and divisions within larger companies, where managing daily cash flow can be critical to their success. It is a very viable solution that should be considered along with the others offered by our affiliates when evaluating your order processing needs. “ As we continue to strengthen our breadth of services, LENSER has identified and carefully screened key vendors to support its clients, representing the best in their areas of expertise. As part of the LENSER promise, each of these companies will keep its fees competitive and “always go the extra mile” for LENSER clients. We have successfully partnered with OrderMotion to our clients’ direct benefit. To get in touch with OrderMotion or any of our other affiliates, please call Michele Salmon at 415-446-2500 ext. 211 or email her at michele.salmon@lenser.com.NEWS BRIEF
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