Case Study: How RFM can Improve Catalog Performance

A few years ago, we consulted with a new catalog client that mailed up to 250,000 catalogs several times a year. During the on-boarding process, we learned that they were not using RFM (recency, frequency, monetary) to segment their catalog mail file. Unfortunately, this practice made it impossible to evaluate results.  In order to manage their contact strategy and optimize catalog circulation, we needed insight into how each segment performed.  We started by running a response analysis (this too had never been done before) to get an initial look at matched sales.

At a high-level view, the catalog was generating a good response rate and was profitable. But without RFM segmentation, it was unclear which segments contributed to profitable sales, whether there was potential to mail to more customers, and whether there were any unprofitable segments.

Here are the steps we took:
1. We designed a detailed circulation plan that would answer these questions and provide direction for future catalog mailings.
2. The circulation plan for the first mailing deliberately included small sets of inactive customers to assess their response rates.  We wanted just enough data to make decisions about roll-out potential without spending too much on unproven segments.

The results were eye-opening and really helped shape their circulation strategy for the year:

  • We learned that although their decision to limit catalog requests to 0-12 months was a good decision, this was not the case for their active buyer file.
  • The data showed that the cataloger was leaving money on the table by not mailing deeper into their house file.
  • By implementing RFM and testing inactive customer segments, we added $200,000 of incremental profitable revenue over the course of a season!

Ready to outsource your catalog circulation and maximize its revenue potential? Call us today for a free consult.

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