Database Special Report: Beyond the Black Box
They create 40,000 mail pieces that can be versioned for three different offers. Customers with low average orders get $10 off any order over $50; typical customers receive $20 off any order over $100; and customers with very large average orders get $100 off any order over $500.
The mail pieces go out, and the campaign is a success. All segments within the 40,000 pieces perform at or above breakeven. Furthermore, the low average order segment had a higher average order than usual, with most spending more than $50. The high average order segment also had a much higher average order than usual. Interestingly, response rates were better than expected in the low average order segment, and about the same in the high average order segment, despite the increase in average order.
Which scenario is a more advanced use of the database? Which is a more effective use of segmentation?
Segmentation by Frequency of Contact
For many direct marketers, business is seasonal. However, the seasonality of repeat purchases may be different than the seasonality of first-time buyers. Some catalogers contact customers year-round, even though they may only prospect in one season or even one month.
For example, a company selling soaps, lotions and candles by catalog mostly contacted customers and prospects around the holidays. It had been in business for about five years, and most customers were one-time buyers.
By reviewing its database, the cataloger discovered that new customers were as likely to buy again, regardless of the time of year, if they received a new catalog. The big difference was recency; customers who didn’t get a catalog for several months were not as likely to make a second purchase as the customers who happened to buy shortly before the next catalog was mailed.
As a result, the cataloger changed its communication strategy. Catalogs now are mailed 10 times a year, even though some mailings are quite small. For some mailings, only buyers from the last 90 days are chosen. For mailings during peak seasons, buyers who haven’t bought for several years may be contacted.