AVOIDING FOOL’S GOLD WHEN PROSPECTING
As we work with our clients to optimize their circulation strategies, we are keenly aware of the major hurdles they face in today’s marketplace:
- The number of competitors is increasing, particularly due to online marketers, which can cause housefiles to shrink
- Costs of marketing are increasing – paper costs, postage costs, data management
- Reliable sources of new names/prospects are more difficult to identify
- Managing the increasing sophistication of technology can be unwieldy (see The Next Mile)
To combat decreasing 12 or 24 month files and increasing costs, Marketsmith offers guidance on how to identify the most effective prospecting sources.
- Start with an analysis of your business. How is it performing relative to the competition? Is the housefile growing or shrinking versus the competition’s files?
- Then carefully analyze historical performance. Look at three years worth of performance data by source, across all channels.
- Calculate the profitability of each original source, irrespective of purchase channel, individually, down to the contribution level, factoring in all variable marketing costs, cost of goods sold, returns/cancels, and fulfillment costs. Looking at sales per book or per piece or per word does not give the full picture.
- Look at inquiries and gift recipients as individual sources as well. And older housefile names can be included in the review.
- Determine the lifetime value of all sources. We generally look for payback within a twelve month period to justify the cost of a source. Sources include lists, paid search, affiliates, and advertising. Organic search generally has minimal costs associated with it. And email tends to be a retention tool rather than a prospecting one.
- Sources which cover their costs within one year can generate valuable prospects.
- Consider co-op names modeled on housefile best customers. Use those models to evaluate the giftee, inquiry, and 36+ names also.
- It is important to test all new sources to determine their effectiveness. Make sure tests are versus control groups so results can be validated and form the basis for a strategy moving forward.
Careful analysis and attention to actual contribution delivered after all variable costs are covered will identify which sources are most likely to perform at profitable levels.
Tags: circulation marketing, circulation strategy, database marketing, datamanagement, houefile, marketing, Marketsmith, prospecting Category: News, Newsletter Articles. Responses are currently closed, but you can trackback from your own site.