Introduction

Clients have asked us here at the Rimm-Kaufman Group,

“How fast will my catalog business grow?”

We respond that growth depends on new customer acquisition and on the health of your 12 month housefile. By “12 month housefile,” we mean the list of all customers who have bought from you within a year.

We thought this article by Stephen Lett does an excellent job explaining the importance of the 12 month file. With Steve’s permission, we’ve reprinted his article here. Steve has no formal relationship with the Rimm-Kaufman Group, save that we respect his work and writing.

We hope you find Steve’s insights useful.

Success Depends on the Growth of Your 12-month Housefile

The rate you can grow your business depends on the increase in your 12-month buyer file.

If your housefile is growing, your revenue likely will increase, and vice versa.

No doubt you pay a lot of attention to your catalog’s daily and/or weekly demand report. Is it up from last year? How does it look against budget?

But you probably don’t pay enough attention to the increase/decrease in your 12-month housefile.

In this article I’ll examine why this file is critical to your growth rate. And I’ll offer strategies to grow your file and explain what it means if you don’t.

Your Revenue Growth Will Track Your Housefile Growth

Here’s a rule of thumb:

Your revenue growth, expressed in percentage terms, will follow the growth of your 12 month house-file, also expressed in percentage terms.

This means if you grow the file by 10 percent, your revenue also should increase by about the same percentage. The change in your 12-month buyer file is a key indicator as to how well your business is doing.

So if you focus on adding new buyers and bringing previous buyers forward into a more recent RFM (recency, frequency and monetary value) cell, your business will grow.

In the following chart, “Consumer Catalog Housefiles”, I compare the 12-month buyer counts for 10 consumer catalog companies on Dec. 31, 2003, vs. Dec. 31, 2004. Also shown: the percentage increase in order/revenue demand for the same time period. Note the relative consistency of the growth percentage compared with the increase in number of buyers added to their files.

In the example, the 12-month buyer file increased from 65,839 to 92,844, or about 41 percent.

This large increase resulted in a 35 percent growth in the order/revenue demand. (Again, these are averages from 10 companies.)

Predicting Your Revenue Growth

When comparing your own housefile-growth rate, it’s best to compare the same time periods if possible, thereby eliminating the seasonality factor.

For example, determine the buyer count on Dec. 31, 2004, compared to Dec. 31, 2003; or Feb. 28, 2005, vs. Feb. 28, 2004. Always pull your numbers from the same point in time, if you can.

This rule of thumb assumes your average order values (AOVs) remain fairly constant.

A change in AOV, for example, will cause the rule not to hold true.

For example, the 12-month housefile depicted in the chart “One Cataloger’s Housefile and Demand” increased almost 39 percent, yet the demand increased 25 percent. The cataloger made merchandising changes to the book, which caused the AOV to decrease from $80.45 to $72.80, a 9.5 percent drop.

A nice rate of growth was achieved, but the rule didn’t hold true.

Following are seven ways to increase your 12-month housefile rates.

Target And Reactivate Customers Who Haven’t Bought In 3 Years

Target and try to reactivate customers who haven’t bought in more than 36 months.

Encourage them by offering incentives to buy. Segment based on recency and dollar amount.

You may find that the high dollar RFM cells need to be mailed.

However, there will be several cells in the older recency and lower dollar spender cells that are good targets for reactivation.

Encourage them to buy again by offering free shipping (always the No. 1 offer) or a dollar amount off their next orders.

Goal: Bring these previous buyers into a recent zero-to-12-month RFM cell.

Convert Catalog Inquirers

Catalog requesters are an excellent source of prospects.

Review your remail strategy. How many times should you be mailing to nonconverting inquiries?

More than likely, three, four, five or more times.

Takeaway tip: After you’ve maximized mailings to the nonconverting inquiries, have one of the cooperative databases model the remaining names. They’ll identify which inquiry names to remail.

Target One Time Buyers

Target one-time buyers.

Catalogers often treat one-time buyers like they do all buyers. Yet a large percentage of the file includes those who’ve purchased only once.

Segment and target this group by offering an incentive to encourage one-time buyers to become multibuyers.

Again, the goal is to bring these one-time buyers into a more recent zero-to-12-month segment.

Mail Cooperative Catalog Databases

Use cooperative databases like Abacus and Prefer.

Each has a slightly different twist on modeling, and each will identify qualified prospect names another one missed.

So don’t just stick with using one; you can use them all cost effectively.

Mail Outside Prospect Lists

Tap outside prospect lists.

Of course you must rent and/or exchange others’ customer lists, because the universe of names available from the co-ops will be somewhat limited.

Takeaway tip: When examining your results from list rentals/exchanges, look at lifetime value and not just the conversion rate from one mailing.

Expand Your Product Offering and Page Count

Expand your product offering and increase page count to boost your response rate, which will encourage more people to buy.

Bounceback Catalog In Every Box

Include a bounce-back catalog with every outgoing order.

Increase response by making a special offer to customers who reorder within, say, the next 30 days.

Takeaway tip: Be sure the catalog is the first thing customers see when they open the box. You’ll hinder your results if the catalog is on the bottom.

Conclusion

The goal of most catalog businesses is to increase revenue.

Rather than focus solely on this end objective, focus on increasing your 12-month buyer count.

If you do, the revenue will take care of itself.

Be sure you have everything in place to grow your file, and your revenue will increase!