My experience with postcard programs is that they're profitable. Their potential scale is set by the size of the profitable universe of website abandons that a company’s website traffic generates each month. Therefore, the good news is that sending a postcard to a website abandon is profitable; the bad news is that these programs are limited by the number of website abandons a company has each month (which is a function of the website traffic and the number of unique visitors the website generates). So these programs might increase overall revenue by 2 percent to 5 percent, but their scale is limited. The catalog needs to be big enough that a 2 percent increase in profitable revenue is important to the bottom line and also big enough that the vendor running the post card program can cover the fixed costs. A cataloger generally needs at least 100,000 unique visitors per month to work with a postcard bounce-back vendor.

Postcard bounce-back programs have similar limits on scale as the prospecting universe from cooperative databases.

All these limits on scale mean that the size of a postcard program is quickly defined and the plateau is quickly reached. This is similar to the plateau from website and cart abandon programs from providers like Criteo.

The companies running postcard programs to website abandons run their own internal matchback programs where they measure the postcards mailed against their response rate. The incremental sales from the postcards are measured by having holdout panels where a portion of the universe isn't mailed and the response rate for that unmailed universe is also measured. The true response rate for those mailed postcards is the incremental revenue between the unmailed and the mailed sets of the website abandons that are in the universe to be mailed postcards.

Smart catalogers are also expanding their use of postcard marketing. Best practices can include:

Profitable postcard programs have opened up catalogers' eyes to this channel. Postcards can be printed in much smaller quantities than catalogs; it's hard to cover the fixed costs of catalog press runs if printing less than 100,000 or 200,000, whereas postcards can be printed with press runs starting at 1,000 (or less!). With smaller press runs, catalogers are finding opportunities to mail to merchandise niches within their customer base, special promotion offers, or to the very best or most recent buyers. Catalogers ask the question: What small segments can yield profitable incremental sales from a marketing contact with a postcard?

Catalogers’ best business practice for prospecting for new customers is to mail all prospecting universes that respond above breakeven and not mail prospecting universes that fall below breakeven and aren’t cash flow positive.

Catalogs are expensive to put in the mail. Print paper and postage add up to $.70 to $1.00 or more to mail. Therefore, a catalog with 50 percent merchandise margin needs to have prospects respond at $1.40 to $2.00 per catalog mail to hit its breakeven and to be cash flow positive. The  typical catalog business model is to have the objective of mailing any and all prospects that respond above breakeven.

Why is “breakeven” the typical objective? If you mail below breakeven you lose a lot of money quickly. If you mail above breakeven your prospecting yields new buyers at or above breakeven. Catalogers say that you break even on prospecting and make the lion’s share of your profits by mailing your buyer file.

Breakeven is measured in the catalog world as the catalog cost divided by the merchandise margin. So, you break even when response rates yield a dollar per book that cover the merchandise cost and the cost of the catalogs mailed (hard cost of printing, paper and postage.) Breakeven is measured in match backs where the mail file is matched to the response file of customers and each segment mailed is measured in terms of dollars per book.

How do catalogers find prospecting lists? The website abandon programs take the names of those who abandon the site and send them a postcard. However, the largest prospecting universe typically comes from models created at the catalog databases. The co-op databases take catalog buyers and model them against other names in their database of catalog buyers.

How big are co-op database catalog universes? Depends on the merchandise category, but it's straightforward to test into co-op prospecting universes by mailing down deeper into segments until the last segment falls below breakeven.

How do catalogers scale these proven prospecting universes?

How the co-op databases build models determines the size of the profitable models they create. The co-op databases are very good at finding profitable prospects for catalogs. Typically, they start with a table of similar catalogs and start with mail order customers who have bought within the specific merchandise category. To be a prospective buyer you need to have purchased before by mail inside the merchandise category. Therefore, the universe of woodworkers starts with all those who have previously bought from a woodworking catalog. Same for plus-size women’s apparel, gardening, men’s high-ticket apparel, food as gift, power tools, vitamins for your horse, etc.

Then the universe of buyers within the merchandise category is refined. Recency of purchase, dollar amount spent annually on mail order purchases, and history of buying from multiple catalogs are key variables. Then the co-ops run a series of models to find which households rise to the top. Those households that rise to the top in several of the models are typically the best prospects over a household that only scores high in a single model. The next step is to rank the model segments and test down into the segments to see the relative response rates of the segments and how far down into the model names can be mailed profitably. This determines the profitable prospecting universe. Scale for a co-op database of proven, profitable prospecting households is limited. The universe size can be increased by mailing more often or by taking names from multiple co-ops (or taking prospecting names from any other proven source of profitable prospects).

A cataloger’s best practice is to employ any and all marketing programs that deliver new customers above breakeven. Postcard programs to a direct marketer’s website abandons are proving to be profitable, measurable, scalable, and easily manageable.

The programs are testable and catalogers should explore how much these programs can add to their top line, their bottom-line profits, and the number of new-to-file customers that can be acquired profitably.

Jim Coogan is the founder and president of Catalog Marketing Economics, a consulting firm focused on catalog circulation planning.

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