Use Holdout Tests to Measure Incremental Catalog Sales
Direct mail is expensive. Up to 97% of the catalogs sent do not convert. How do you determine which customers warrant the investment of mailing your catalog? Holdout tests.
What is a holdout test?
A holdout test measures the profitability of a catalog mailing relative to a customer segment. For a mailing, a small group of customers from your mail file is marked to withhold from the mailing. The sales are measured, after a set time period, for the group of customers in the mailed group compared to the group that did not receive the catalog (holdout group). The difference in profit from the mailed group versus the profit of the holdout group leads to data-driven decisions about which groups to mail next.
Considerations:
- Right Size Your Holdout Group
- Big enough for statistical significance.
- Small enough to limit impact to potential buyers.
- Scalable – there are enough similar customers to make a meaningful change to your mailing plans when you mail next time.
- Make Sure A Holdout Group is Held Out
- Consider householding your mailing at the address level. If one person at an address receives the mail piece, your holdout contact may see it too. This factor will muddy your test.
- Consider whether or not you intend to holdout all communication (direct mail, email and phone calls) or simply suppress the single catalog.
- Give it Time
- Allow the full sales cycle for B2B purchases – if the decision is not made within 30 days, the test will not be valid within 30 days. Let the process unfold to see the difference
- Retail catalogs should have shorter windows. If you see a significant spike after a mail drop, you may be able to close your test within 4-6 weeks.
The most important factor in constructing holdout tests is to design your test well in advance of your mailing, be diligent in creating “like” groups and be patient for the results. With a solid holdout test strategy, you are on your way to identifying the most profitable strategy for mailing your catalog.
Need help with designing a successful test? Give us a call and let Hansel Group Marketing help you optimize your mailing strategy.
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