As a general rule, dollars per name—or how much was sold on average to each name contacted—is a better measure than response rate alone. It is a combination of questions No. 1 and No. 2, and marketers who measure results both by response rate and dollars per name tend to rely more heavily on the latter.
An understanding of lifetime value will help target customers and potential customers who will pay off in the long run, even if response rates and dollars per name look sub-par in the short term.
What Offers Are Likely to Be Appropriate?
Constructing unique offers for different segments requires an understanding of the needs and behaviors of each segment. It leads to testing and defines reasons to test different offers. Here are some of the questions you should be able to answer to have reasons to test:
• Is the average order substantially different among segments? Should buyers spending $50 each purchase get a different offer than buyers spending $500 each purchase?
• Are different segments buying different things? Are “best buyers” simply buying expensive items, and average buyers buying cheaper items?
• Are different segments buying more types of things, while some buy only one or two things? In general, customers who buy a greater variety of items are more valuable.
Offers can then be fit to specific goals. If a segment is buying one item, and loyal buyers are buying many items, offers can be constructed to get buyers to try different items. If a segment has a low average order, offers can be constructed to raise the average order by a reasonable increment. For example, $50 buyers might get an offer of free shipping on orders over $75, while $500 buyers might get 10 percent off an order over $750.
Which Customers Are Likely to Be Most Valuable?
Knowing which customers have the potential to become more valuable helps to grow loyalty within the housefile. Here are some of the things you need to look for to spot a target ready to move up to a more valuable segment: