One of the many aspect of the business of catalogs that I have always enjoyed is the fact that everything we do from a circulation and marketing standpoint can be tracked to a specific source (or key) code. When a company runs an image ad (non direct response) in a general interest magazine, it is difficult to know the affect it has on sales. Yet, when a cataloger runs a direct response ad or mails a catalog, a large percentage of the orders can be traced to a source. In other words, marketing and circulation efforts can be measured. This month, I would like to reinforce the importance of using source codes which make it possible for us to track results. I want to provide examples of the common list results we capture and how source coding is used to determine which promotional offers work best. I also want to discuss the ever-so-present non-traceable factor and tracing business to the Internet.

Source codes are like leaving bread crumbs in the snow so you can find your way. Without them, you are lost! Source codes help us know which house file segments to mail, which prospect lists to use (and those to eliminate), the “best” promotional offer to make and much more. A cataloger cannot remain in business very long without using source codes. They are the lifeblood of any catalog business; consumer or business-to-business.

A source code is simply an identifier that goes with a particular house file segment or list. It really does not matter what the code is as long as it is unique to that particular segment and/or list being coded. Some catalogs prefer to build some intelligence into the code while other simply use a sequential numbering system. Alpha. Numeric. A combination of alpha and numeric. It really does not matter. There are certain letters to avoid using such as “I” which can be confused for a 1. Or “O” which might look like a 0. Avoiding these types of letters and/or numbers will reduce your non-traceable factor.  Shown below is a typical source code report which we use to report orders and sales every week.

This report ranks results within each mailed category, i.e., house file, inquiries, cooperative databases, rented lists and bulk copies. Non-traceable results (which we will discuss later) are also shown. The results shown on this report are “raw” meaning they have not been increased or grossed up to include any non-traceable factor. Some catalogers like to increase the results proportionally across all key codes, which is fine. We prefer not to allocate the non-traceable results for the following reasons. First of all, we feel it is good to draw attention to what the non-traceable factor truly is. By knowing this, we have the opportunity to reduce the amount of non-traceable results. What’s more, we are never exactly sure how much of the non-traceable results to allocate to the house file and/or to outside names. For example, should the non-traceable results be allocated based on circulation or should the results be allocated based on some other criteria? By looking at the results “raw” we know the individual list results are better than shown on our report because of the non-traceable factor. This will enable us to forecast list results on a more conservative basis. Of course, we need to include a non-traceable factor in our forecast and we do. We simply prefer not to eliminate the exposure to the amount of non-traceable business we generate by allocating it back across all segments and/or lists.

Now, let’s look at how source codes can help us determine which promotional offer to make to our house file and to prospects. Without source codes, we have no way of knowing how well a particular offer, like free shipping, works to customers and to prospects, for example. We split our mailing into two (2) parts; an “A” group and a “B” group. By doing this, we can make an offer, i.e., Free Shipping vs. no offer at all (our control). The “A” group is our control – no offer. Our “B” group is the offer group. This offer was used to reactive “old” customers and to bring them into a more current R-F-M cell. The use of source codes makes it possible for us to know the affect offering free shipping had on our house file.

Non-Traceable Factor

We know it is not possible to trace 100% of all orders and sales. Therefore, what is the amount of non-traceable orders and sales are we willing to accept as a percent of total orders and revenue? This ratio should be monitored weekly, perhaps even daily. Once it gets out of line, data entry supervisors need to take action. Back to our question of an acceptable non-traceable ratio? Based on our experience, non-traceable results should not exceed 20% of total orders and revenue. A ratio of 10% to 15% is even better.  We should be able to trace at least 80% of our business to a specific source and if we cannot, the telephone sales people or outside call center is not doing a good job asking for source codes. Or, they are taking the easy way out by using a default code just to get the order entered into the system, which is not good either.  Garbage in; garbage out, they say. Therefore, we need to be sure the people on the front line know the importance of asking for the source code. They need to know the importance marketing folks place on the source code. Here are a few ways to increase the amount of business traced to a specific source code:

1. Place the source code in a colored box on the back of your catalog. (Show example of back of catalog).
2. Use as few of digits (alpha or numeric) as possible.
3. Avoid using codes that can be mistaken for letters or numbers (such as our examples earlier).
4. Ink-jet image the source code on the back of the catalog (in the box) and on the order form at centerfold as well. The code must appear both places.
5. Train telephone sales people to ask the customer for the source code.
6. Be sure every catalog is coded including bulk copies used as bounce-back catalogs and to fulfill catalog requests (inquiries).

Tracing Orders Placed On The Internet

Easier said than done! While the Internet represents another way for the customer to order, it presents its challenges in terms of being able to trace the order to a specific source code. Catalogers have not yet found a way to do this. At best, we know how much business came from the Internet but we don’t know where it came from. We do know that every time we mail catalog, our Internet business increases. That’s due to the fact that the catalog is the biggest driver of traffic to the Web. A catalog Website is not a field of dreams — “You build it and they will come”. We have to drive shoppers to our site and the catalog is a major way of doing just that! Driving more business to the Internet will result in less business being traced to a specific key code. Some catalogs request the source code on their Website when the order is placed by the customer. Tracing Internet orders to a specific source (key) code is very difficult to do for most catalogers. Asking the customer to enter their source code does not work for most. The customer simply does not take the time to enter this important marketing information. If you use incentives, there is a better chance that the shopper might enter the code.  For example, you might say “Enter key code from catalog for possible price reductions” (or something like that). The best approach is to “match back” the responders to your original mail tape to see, by code, who responded. Save the original mail tape and once the catalog is 80% + or – complete, match the people who made a purchase since your mail date against the mail tape. If they made a purchase since the mailing, chances are it was due to the fact that they received a catalog in the mail if they also appear on the mail tape. This will tell you which code to assign credit to. It is probably not necessary to do the “match back” after every mailing but by doing this once or twice annually; you will be able to determine the origin of the business by source code.

Keep in mind that test results can be skewed by Web customers. More of the “test” group will tend to enter their source code, where there is no compelling reason for the “control” to enter their source code (therefore, superficially making the test group look even better).

Also, understand that Web unknown volume doesn’t represent your total Web business (especially if you are taking source codes from customers on Web orders). You should have an “order type” which indicates WEB. This will help capture all Web volume whether or not the customer entered a specific source code at the time the order was placed. At least you will know how many orders and the gross demand revenue comes from the Web in total by following this procedure.

Without using source codes, you cannot read your results. And, not being able to read your results will limit your ability to go forward. Source codes are not only important, they are critical to your success. Knowing the specific source or media that is generating the results is the only way you can improve future performance. Be certain to apply source codes properly too in order to read the results of various test offers you make. Know your non-traceable factor too and keep it low as a percent of total orders and revenue. Properly tracing source codes is a basic requirement of any catalog company.