HP’s Hot Prospects

THERE ARE OBVIOUS PLACES ONE MIGHT LOOK FOR home electronics catalog prospects. Lists of electronics trade show attendees are a logical choice, as are files of digital photography enthusiasts and college-bound students. And, of course, there are the bicycle riders.

Huh?

It turns out that technological savvy and 10-speeds go hand in hand. That kernel of knowledge opened up a new prospecting source for HPShopping.com, the 8-year-old online and direct marketing arm of electronics manufacturer Hewlett-Packard. In 2004, the company kicked its data analytics use into high gear and discovered bicycling magazine subscribers, among other potential targets.

“It's an important reminder to us, to keep in mind how customers are going to use [products they purchase],” says Catherine Paschkewitz, HPShopping's director of consumer marketing.

The firm's analytic work has resulted in a more robust catalog channel. From its 32-page, 1 million-copy beginning in 2002, current books boast 64 pages, with a total annual circulation well into eight figures — a 350% increase over 2004.

THERE ARE OBVIOUS PLACES one might look for home electronics catalog prospects. Lists of electronics trade show attendees are a logical choice, as are files of digital photography enthusiasts and college-bound students. And, of course, there are the bicycle riders.

Huh?

It turns out that technological savvy and 10-speeds go hand in hand. That kernel of knowledge opened up a new prospecting source for HPShopping.com, the 8-year-old online and direct marketing arm of electronics manufacturer Hewlett-Packard. The division has mailed a catalog of one sort or another since 2002, but it wasn't until two years later that its data analytics use kicked into high gear and discovered bicycling magazine subscribers, among other potential targets.

“It's an important reminder to us, to keep in mind how customers are going to use [products they purchase],” says Catherine Paschkewitz, HPShopping's director of consumer marketing. “It's not just, ‘Here's the processor speed and hard-drive size,’ it's ‘Here's how this will help you do the things you do in your life.’ You can keep track of how many miles you log, use the computer to get onto various forums, share information, look for new trails.”

HPShopping's association with Wunderman New York allowed the agency to bring data from AmeriLink, a consumer file it runs, to bear on the HPShopping customer database. This provided many new clues about the average customer.

“A lot of it was lifestyle,” says Barry Silverman, vice president and account director at Wunderman New York. “There's an affinity for cooking and culinary arts as well as cycling and the outdoors. We also found that it's not just about price: Customers care about quality and how these solutions fit into someone's life.”

The catalog's images have changed to reflect this.

“For instance, we show holiday images with the kids using the portable camera and the printer,” says Paschkewitz. “We show them having fun and being able to print their pictures, and the simplicity of how it all works together.”

But the research revealed how to use even free-floating images more effectively. Through focus groups with Hewlett-Packard customers and non-customers, as well as overlay data, HPShopping isolated several discrete shopper groups, based primarily on the amount of product information they expect from a catalog.

This analysis brought about a rethinking of the catalog's layout. On a single page, readers were offered merchandise configurations that appealed to tech-savvy shoppers, as well as a basic setup for those interested in a simple, cost-effective unit. But the book's redesign last December acknowledged a third group: Those who didn't want to spend the maximum amount on their equipment, but still wanted to feel good about the products they bought.

“That choice reinforced the purchase,” says Silverman. “It also allowed the customer room to grow toward incremental products and purchases.”

Wunderman's reworking of the catalog gave it an oblong format that, according to preliminary results, has been embraced by recipients.

The result of all this repositioning has been a more robust catalog channel for HPShopping. The 2002 book ran 32 pages and went to 1 million names. The 2005 version had 64 pages, and a circulation well into eight figures — a 350% increase over 2004. The boost in page count is the result of adding products and increasing the amount of information on each page.

All this paid off: Year-over-year catalog revenue rose by more than 225%, raising HPShopping's total revenue by 30% over the previous year.

The catalog's mission has changed, too. It was launched as a retention-marketing tool, one geared toward deepening the relationship between HPShopping and its customers. But by 2004, the book was starting to become more of an acquisition vehicle. And HPShopping's list criteria are demanding: From the get-go, an acquired customer must be profitable. Paschkewitz doesn't believe in taking an initial loss in the name of building a long-term customer.

So far, her strategy is working; despite this requirement, the response rates for prospect mailings have doubled.

Paschkewitz acknowledges that a paper catalog might not be the most obvious acquisition vehicle for an online operation. But, she adds, the book was profitable from its inception, and initial mailings exceeded targets by 40%. “It showed that print is not dead, in terms of being another way to work with the consumer.”

Based on buying pattern analysis (and the catalog's success), HPShopping has upped the number of mailings it does each year. From an initial frequency of five drops, it's moved to nine. The additional four allow the catalog to have a more prominent in-home presence during the busiest times, such as the December holiday and back-to-school periods.

“The key seasons are the key seasons, but there are subtleties within them,” says Paschkewitz.

These times are especially good for cyclers and the other enthusiasts among HPShopping's target demographic. The catalog's sales have not only bettered their own marks, but during last fall's back-to-school season — the most recent for which the company had crunched all its data at deadline — HPShopping's average order was 10% larger than purchases made at its retail stores.

And analytics have helped HPShopping tie catalog activities to other channels. For instance, it's found that coordinating e-mail with catalog mailings, while keeping the same key offers and creative efforts, yields a 40% lift over mailing the catalog alone. HPShopping continues to integrate channels, and is focusing on blending Web site browsing data with other design influences.

It hasn't all been smooth riding, however. HPShopping tested a retail sales list from a store that reflects its customers' interests. The list failed. Why? “They weren't mail order buyers,” explains Silverman.

Future plans call for an increase in versioning, primarily between prospects and existing customers, although the company may allow for subtle differences between messages sent to one-time buyers vs. those with whom it has an ongoing relationship.