Are you among the many companies neglecting proven methods for increasing your profitability?
The Mailorder Gardening Association’s 2003 Benchmark Study done by Jill Fielder of Black Dog Direct uncovered a surprising number of such overlooked opportunities. Here are a few of the most common ones.
More than 1 in 4 companies in the MGA Study never or rarely analyze results after their mailings. Each mailing presents an important opportunity to learn what your customers and prospects respond to, so you can improve each successive mailing. Without reviewing the effect of variables such as lists, creative, offers, seasonality and other elements, you’re spending your hard-earned cash on pure guesswork.
Calculate the Lifetime Value of a Customer
Only 26% of the respondents to the MGA Study track the lifetime value of their customers. Without knowing how much a customer is worth to you, it’s hard to make an informed decision about how much you can afford to spend to acquire a new customer.
You may define “lifetime” as 1, 2, 5, or 10 years, but without knowing how much customers spend over time, it’s nearly impossible to assess the profitability of your advertising.
Determine Your Cost Per Customer
The other side of the profitability equation is how much it costs you on average to acquire each new customer. An astonishing 40% of those companies surveyed didn’t know that number. The figure is simple to calculate, and vital to analyze the success of your marketing programs.
Clean Your List
According to the post office, 14% of the population moves every year. If you don’t update your records and consequently mail to customers who have moved, you effectively double your mailing costs in five years.
The post office licenses service bureaus to run their National Change of Address file. NCOA, as it’s called, can verify the addresses on your list and provide corrected addresses when available. The cost to run the program is pennies per name. The savings in undelivered and misdirected catalogs can be tremendous.
What’s more, by mailing to customers at their updated address, you’re making the most of a name that you’ve paid good money to acquire. Indeed, new movers are often the best buyers.
Segment Your House File
Not all customers are alike. If you want to maximize profits, it pays to contact your best customers often. But if you mail to less active customers with the same frequency as your best customers, you could end up in the red.
Most companies know they can improve results by considering recency, frequency and monetary variables when marketing to their house files, but many companies don’t segment their lists at all. According to the MGA study, only 60% segment by recency, 43% by frequency, and 51% by monetary parameters.
If you put all your customers in the same marketing pot, try doing some basic segmentation for your next mailing. You’ll probably be pleasantly surprised by your bottom line.