Geoff Wolf, EVP Client Strategy
Twenty years ago, we discovered the power of transactional data. Lo and behold, it turned out that certain aspects of human behavior were very predictable. Once a consumer’s wallet was opened and purchases were made, certain details of those transactions, known as RFM, turned out to be very trustworthy indicators of future purchases.
Fast forward to the present… We can predict human behavior in new ways, as neuroscience and database technology team up to provide us with human behavioral indicators. For catalog circulation strategies, scoring these new mailing indicators was less tangible until now. We are on the edge of more discoveries and already have a new frontier to test when it comes to mailing catalogs. This time around the metrics are driven by human behavior itself rather than by transactional data only.
WARNING – The rest of this post delves into the nitty-gritty details of catalog circulation (and may not be suitable for children). If you can’t afford to spend time reading into the details, here is the key takeaway – new indicators for getting the most value out of catalog mailings (an expensive investment) are now within reach for your brand. Make sure your team is exploring the new frontier!
For those willing to read on into the painful micro-details, pour yourself a cup of coffee, tea or a shot of tequila… and here we go.
Segmentation is the key marketing practice behind the success of our methodologies for making catalog-mailing decisions. This happens on two levels:
1) On a macro level, most brands usually have two or three significant groups of purchasing behavior to be cognizant of. Data allows us to identify different records for targeting these groups. What’s important here is that we are essentially managing records of transactional data tied to a single customer or prospect identification number. These records are divided up into large segments of records that we can act on differently with both content and contact strategies.
Examples of this are “self versus gift “ and “consumer versus business” purchasing. What drives the macro grouping or segmentation is that human behavior varies greatly from group to group. We all know that the feeling of buying something for ourselves is significantly different from the feeling of being thanked for a gift we purchase for someone else (and how we are perceived by others because of that gift). Similarly, business behavior is totally different from consumer purchasing with all its complexities around knowing who influences the buying decision and how that affects job performance evaluations.
2) On a more granular level, inside the macro segments are combinations of recency, monetary value and frequency elements derived from transactional records that allow us to divide the files into enough segments to make our heads hurt. Since the early days of using transactional data, other key elements such as channel of purchase and product category have been added to the segmentation opportunities to round out transactional data opportunities. For some brands, all of these elements are leveraged for mailing decisions. And for others, only the appropriate key performance indicators are used. Either way, these pieces of transactional data allow us to make decisions about who to mail and who NOT to mail.
With the cost of postage locked into an uphill path, mailing decisions and how they fit into budgets are becoming more important than ever. Here is the opportunity: Within all segments created by transactional data are records that do NOT need to be mailed, most likely 90% of them. Unfortunately, we still have to mail them to make sure the ones that will order receive a catalog. However, if we can improve our response rates 2-5% by reducing circulation without affecting the top-line sales, this success translates into a significant improvement in catalog investment ROI.
Human behavior can now be measured to develop scoring indicators that help find those records inside the segments that challenge ROI acceptability. These metrics, which reflect a brand’s unique purchasing behavior, help us find catalogs NOT to mail as well as records that should be mailed but are missed by RFM practices alone. For customer acquisition mailing decisions, we can provide our list partners with the same behavioral metrics and challenge them to use them to meet acceptable acquisition cost targets.
The way we behave when making purchasing decisions is reflected in answers to survey questions, our demographics, our web browsing behavior, and other accessible data such as magazine subscriptions and compiled data. Decades of marketing experience allow us to score all this data, interpret the results, and come up with new key performance indicators that guide mail versus no mail decisions. The best news is that these indicators exist separately from attribution complexities.
Whether catalog circulation is handled in-house or it’s outsourced, someone is responsible for choosing which records to mail and which records not to mail for a catalog program. For those of us involved in these rather risky and expensive decisions, a new opportunity awaits us when we combine human behavioral key performance indicators with the “old-fashioned” transactional elements. What an exciting time it is for catalog circulation practitioners.
Yes, there is a new frontier to take RFM circulation practices and squeeze more value out of them. Are you new to the possibilities of developing behavioral indicators? Give Geoff Wolf, EVP of Client Strategy a call at 913-236-2401 or email geoffw@jschmid.com to discover the future of catalog marketing – we’ll gladly beam you aboard.
Tags: analytics, catalog industry, catalog marketing, circulation, Customer Behavior, data, Geoff Wolf, human behavior, Strategy, transactional data