Is Your 0-12 Month Customer File Shrinking?

If you’re unsure about the answer to this question, I strongly advise you to pause for a moment and check. In light of the persistent rise in inflationary expenses, many brands are cutting back on their acquisition efforts without closely monitoring the potential shrinkage of their customer file.

To illustrate this point, consider the case of one brand’s decision in 2022, which reduced its acquisition circulation by 34%, resulting in a 24% reduction in the 0-12M customer file. This reduction in the customer file meant they had fewer individuals to target with print materials throughout the year. Consequently, this contraction led to an estimated loss of $1,500,000 in top-line demand for 2023.

There are many ways to dial in your acquisition efforts without aggravating your budget, but below are my top 5 strategies to consider as you plan 2024:

  1. Take a thoughtful approach to evaluating contribution by source across all your marketing programs before making any indiscriminate cuts. You might be pleasantly surprised by the insights your data can reveal! As a connected-channel marketer, it’s essential to prioritize results that deliver high contribution and lifetime value (LTV) over initial cost. While minimizing upfront expenses is important, the long-term value and profitability of your marketing efforts should be the primary focus. Learn more about contribution from this awesome blog.
  2. Assess whether your 0-12 month active file is indeed generating incremental revenue. Within this customer cohort, different customer segments may already be engaged in various digital programs, potentially resulting in diminished incremental revenue. By reallocating resources from such contacts to acquisition efforts that yield a positive contribution, you can optimize your marketing strategy more effectively.
  3. Consider conducting tests with smaller format pieces to replace one or two catalog mailings. Over the past 18 months, CohereOne has conducted extensive testing to determine the customer file’s responsiveness to these smaller pieces. The encouraging news is that smaller print materials often perform well with most customers, resulting in potential mail savings of up to $0.10 to $0.15 per piece. However, exercise caution when mailing smaller pieces to prospects, as they typically don’t respond as favorably as a catalog, potentially leading to lower average order values, lower response rates and negative contribution.
  4. Experiment with eliminating a contact from your 0-12 month active customer list during a season. If you don’t observe any tangible improvements by adding an extra contact within a seasonal mailing plan, reconsider the necessity of including that mailing. Redirect those resources towards customer reactivation initiatives, engaging with internal prospects, and, naturally, expanding your reach to external prospects.
  5. Revisit your prospect model development in collaboration with your co-op team. With the advancements in AI technology, many models are evolving toward more intelligent solutions. However, it’s essential to recognize that while some of these transitions to AI may increase average order values (AOV), they could also compromise response rates– bringing in significantly fewer new customers. Striking the right balance between response-oriented models and AI-driven approaches is key, as the lifetime value associated with new customers can have a substantial cumulative impact on your revenue.

Expanding your customer file not only represents a considerable revenue opportunity but also serves as a catalyst for the upward trajectory of your business. The infusion of new customers is a pivotal driver for augmenting sales and overall revenue. With the continuous growth of your file, you are well-positioned to harness the advantages of economies of scale, facilitating cost efficiencies in crucial domains such as production, marketing, and distribution. Furthermore, a burgeoning customer roster acts as a robust shield against economic fluctuations or unforeseen disruptions, fortifying your business and providing essential support during challenging times.

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