October 22, 2006

Catalog and Online Marketing Strategy, You Decide!

Your business mails a catalog every November to 100,000 customers. It has been tradition to mail 50,000 housefile names, and 50,000 prospects.

Over the past three years, the performance of the November catalog has not met expectations. The database marketing folks do a good job of measuring results in the catalog and online channel. They don't follow the approach of allocating online orders to the catalog channel simply because the customer received a catalog. Instead, the database marketing folks execute mail and control tests, measuring the true incremental benefit of the mailing across channels.

Here are the results over the past three years, and the planned results for 2006. Each year, 100,000 catalogs were mailed.


November Catalog Performance











Catalog Online Total Total Profit Total

Sales Sales Sales Cost Factor Profit
2006 Plan $200,000 $100,000 $300,000 $115,000 33.0% ($16,000)
2005 Results $250,000 $75,000 $325,000 $110,000 32.0% ($6,000)
2004 Results $300,000 $50,000 $350,000 $105,000 31.5% $5,250
2003 Results $375,000 $25,000 $400,000 $100,000 31.3% $25,200


The online marketing folks also execute November campaigns, including email, online marketing, search and affiliate programs. The next table illustrates their results.


November Digital Marketing Performance










Catalog Online Total Total Profit Total

Sales Sales Sales Cost Factor Profit
2006 Plan $2,000 $150,000 $152,000 $30,000 33.0% $20,160
2005 Results $2,000 $80,000 $82,000 $12,000 32.0% $14,240
2004 Results $2,000 $30,000 $32,000 $3,000 31.5% $7,080
2003 Results $2,000 $10,000 $12,000 $1,000 31.3% $2,756


In total, multichannel campaigns have not met profit expectations. Here are the total results:


Total November Marketing Performance










Catalog Online Total Total Profit Total

Sales Sales Sales Cost Factor Profit
2006 Plan $202,000 $250,000 $452,000 $145,000 33.0% $4,160
2005 Results $252,000 $155,000 $407,000 $122,000 32.0% $8,240
2004 Results $302,000 $80,000 $382,000 $108,000 31.5% $12,330
2003 Results $377,000 $35,000 $412,000 $101,000 31.3% $27,956


You have been promoted to the position of Vice President of Database Marketing, reporting to the Chief Marketing Officer. The Chief Financial Officer assigned you the task of dramatically improving the profitability of marketing activities.

Your Chief Executive Officer strongly believes in the multichannel power of catalog mailings. Her thirty years of experience in catalog marketing fuel her belief that catalog is an effective tool in communicating the brand.

Your boss, the Chief Marketing Officer, is an online hipster with five years of total marketing experience. She wants to take catalog marketing dollars, and move them into the online channel, significantly increasing the presence of the brand online, and via email.

There probably aren't any right or wrong answers to this situation, though we would all agree that it is important to continue to increase sales and profit.

Let's discuss your 2007 marketing strategy. How would you change the mix of advertising spend between catalog and digital channels? How would you navigate the political challenges between the Chief Executive Officer, the Chief Financial Officer, and the Chief Marketing Officer?

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