Response rates to outside prospect lists have been declining for many catalog companies the past few years. Last year was no exception. In some cases, results to tried and true continuation lists are off by as much as 50%. This is not a trend that is likely to reverse itself anytime soon. This month, we will look at some of the reasons why response rates have declined and what you can do to compensate for it.

The question is why are response rates to prospect lists on the decline? There are several factors to consider such as unseasonably warm weather during this past fall and holiday buying season, large amount of consumer debt (which has been an on-going issue), low consumer confidence, etc.  Aside from all of these legitimate reasons, the most significant reason why we feel response rates are flat (or declining) is due to the lack of housefile growth. Last 12-month buyer file counts are flat and/or declining from year-to-year; a trend that is not easy to reverse quickly or without cost to the list owner. Therefore, when you mail continuation lists, i.e., prospect lists you have used previously, you are mailing many of the same names over and over again. The same people who did not purchase before are still not purchasing today. And, those that did purchase are now on your housefile and duped out of the prospect lists you are mailing which lowers the response due to the names that remain on the file. This a simple case of list fatigue which is most certainly impacting the response rates to outside lists. The cream is being scraped off the top and many of those people who remain on the lists you are using continue not to convert at the same rate of response. To grow a file means the list owner will have to prospect to marginal or less productive outside lists. Response rates from many of the cooperative databases are off too. Flat or declining 12-month buyer counts cause a ripple effect with the coops. Like outside prospect list results, the coops depend on fresh new-to-file names to help enhance and/or refresh the results.

Let’s take a look at some actual results to outside rented lists compared with a year ago (please refer to the chart below). These actual results are after a match-back was done in order to allow for any Internet attribution. As you can see, the same lists with the same select and similar mail dates are trending down.

In our example above, we have shown the actual results to three outside prospect lists; two rented lists and one co-op list. As you can see, these lists are trending down. We are seeing a decline in list continuations. We are not saying that all lists are trending in the downward direction. What we are saying is that catalogers need to continue to do everything possible to maximize prospecting results.

The question is, what can you do about declining prospect response rates and how can you reverse this trend for your business? While this is easier said than done, there are a few take away points that you might want to consider as follows:

1. Test the use of Zip Models –  Build zip (code) models to know which zip codes to mail and which ones not to mail. You can find companies who will build zip models for no charge. They charge approximately $15 per thousand for the selected names.
2. Expand your Merchandise Offering – If you are a niche marketer, you might want to consider expanding your product offering to include more general type merchandise. This will expand your prospecting universe.
3. Optimize Rental Singles – This method is used post-merge to identify and suppress the rental singles (one-time buyers). After the merge, you can optimize the rental singles and suppress the worst scoring 10.0% to 20.0%. This method should yield a 5.0% to 15.0% (or higher) lift. (It is always good to mail a 5,000 to 10,000 back-test cell to monitor the suppression results in order to measure the exact lift you achieve.)
4. Take a Break –  If you have a list continuation that you were able to mail in each drop, but it has fallen off in performance, you probably don’t have to drop if from your mail plan entirely. Try mailing it every other drop, or just in your best prospecting drops. This should lessen the impact of list fatigue.
5. Test Single vs. Multis – This applies to lists that have declining results to see if the singles or new-to-file outperform the multis. You might not have to drop a list that has fallen off in performance in its entirety. Mailing the singles (buyers) and/or new-to-file names could be the answer.
6. Drop Non-Codeable Prospects – These are records that the service bureau cannot assign a zip+4 to and are less deliverable. Often, these perform well below the rate of the list they are being dropped from. If you clear this in advance, you can adjust these out of your list rental invoice and reduce your rental expense.
7. Check Data Cards for Your Continuations – If the list owner’s 0-12 month file is shrinking, this could be an advanced warning that the performance will also decline. Your outside list performance is dependent upon the strength of the files you are using.
8. For New Tests – Check the 0-6 month count as a percent of the 0-12 month count.  If it’s more than 50%, they are most likely prospecting at a healthy level.  If it’s much less than 50%, they are probably not prospecting a lot. You want to test lists from companies that have new to file names. Note: You must consider the seasonality of the mailer when you review this information.

Don’t Drop Co-op Models

Your representative will work with you to develop ideas and ways to improve the performance of the various models.  They might have to tighten their parameters.

How much you want to grow your business is dependent upon the growth rate of your 12-month buyer file (March 2005 issue of Catalog Success Magazine).  If your 12-month buyer file is growing, your revenue will most likely increase too. If your 12-month buyer file is decreasing, your revenue will probably decrease. Rule of Thumb: The percentage of revenue growth will approximate the percentage increase in your 12-month buyer file. This means that if you grow your 12-month file by 10%, your revenue should also increase by approximately the same percentage.  The change of your 12-month buyer file is a key indicator as to how well your business is doing (or not doing).

Response rates have certainly been impacted the past several years. The fact that files are not growing resulting in list fatigue is certainly a big factor. While you can use various techniques to improve response rates, growth will continue to be an issue due to the lack of “new” catalog buyers.