Catalogers typically traced 80% to 85% of their business to a specific source or key code prior to the Internet just a few short years ago. We knew where the business was coming from and we could make good sense of the results as reported by the source code report. We didn’t need to “match-back” Internet and non-traceable results to a specific key. We could simply allocate the non-traceable results proportionally across all key codes. Today with 35%, on average, of the business coming through the Internet coupled with the same 15% to 20% non-traceable factor we have been accustomed to for years, catalogers are lucky to trace 50% of the business to a specific source code. Our column this month deals with the importance of understanding what is really driving the order/revenue demand today. Secondly we will consider how we should treat Internet only buyers. For example, should these Internet buyers be mailed a catalog? What does the match-back tell us about Internet buyers and why is it important. We will attempt to answer questions surrounding Internet buyers as an important component to the multichannel catalog marketing mix.

If you are like most catalogers, I’m sure you have considered reducing mailings to web only buyers as a way to save money. When you look at your source code report it appears these buyers perform horribly!  Even the results of the 0-12 month Internet buyers as reflected on the source code report often do not look good, at least on the surface.   Therefore, it is perfectly logical to assume they should not be mailed a catalog or at least mailed as frequently as catalog buyers who fall within the same R-F-M house file segments. But, is this really the case?

Before you come to any conclusion regarding Internet buyers and whether or not they should be mailed, be sure to have your service bureau do a match-back first. This is the process where your order file is “matched-back” against your recent mail tapes in order to give credit to the proper source code. This will tell you where the business is coming from and which key codes should be given credit for the sale, even web orders. Match-backs are becoming common place and for good reason. They are a way of life for catalogers today and a necessary part of what we do.
I would like to share with you the results from a recent test and match-back we did which point out the value of mailing to Internet only buyers. Reducing circulation to web buyers can have a negative impact on the demand revenue and profit contribution. For most catalog companies, the web buyers normally rank in the bottom 10 cells for house file when we report by key code. After a match-back is done, they rank in the top 10 cells. The clearest example of this happens to be in a holiday mailing; there were no web cells in the top 5 when ranked. However, after the match-back was run there were 3 web only source codes in the top 5 house file segments! The web buyers are very strong responders. They receive a catalog, order on the web and we lose traceability which does not mean they are not buying. This confirms the fact that the catalog is the biggest driver of traffic to the web and these customers need to be mailed a catalog regardless of what method they used to place their order.
The bottom line is we know that the web buyers respond to the catalog. Early this year when we did the split and created a hold out panel, it absolutely paid to mail the Internet buyers a catalog. Back then, we created 2 panels of roughly 25,000. One panel was mailed 7x the other only 1x.  The net contribution for the 7x group was $169,089 compared with the 1x group of $109,318. The additional 6 mailings to the Web buyers generated another $59,772 in profit contribution. Refer to our actual test results below.

When the non-traceable factor ranged from 15% to 20% we could simply allocated the unattributed back across all source codes on a proportional basis. This method of allocating the non-traceable results will not work today. Match-backs have shown us that it is not appropriate to give equal weight to the house file, inquiries, coops, and rented lists. What we have found every time we do a match-back is 50% to 75% of the Internet results should be allocated to the house file … our own customers. Another 10% to 20% of these results should be allocated to outside rented lists (this varies based on how much prospecting a company is doing). The point is, the allocation is far from proportional.

Test Design

Web buyers were split into two equal panels. In drop 1, panel 1 & 2 were mailed. In drops 2-7, panel 1 was mailed and panel 2 was not mailed. The above results reflect the full season activity on the codes above.

There are other benefits beyond tracking web buyers which match-backs provide.  There are often lists that are made up of heavier web buyers and therefore, they may look like they do not work well, when in actuality they are profitable.  In this case, without a match-back you would never know this and any testing would have been without reason.  You might think you have trouble finding lists that work, when in actuality you have some winners to add to your continuations. In addition, you might have lists that look like they are falling off, or your total rentals look like they are trending downward.  This might just be a result of heavier web sales.  It sounds simple, but without truly knowing the level of performance of all segments mailed, you could be lead to some false conclusions that influence your marketing strategy. A match-back will keep you on track and give you the level of confidence in the results needed to make sound judgments.

CONCLUSION

We need to do match-backs on a regular basis in order to understand what is driving the business. This will most likely tell us we should not stop mailing a catalog our web buyers. We have done this study frequently and had similar results every time. Test to be certain your results are similar. Be careful before you stop (or reduce) mailings to web only buyers. After all the catalog is the largest single drive of traffic to the web. Understand the dynamics of the order mix before you draw any conclusions with regard to your mailing strategy.