November 24, 2007

Organic Demand

One of the least understood concepts in cataloging is the concept of "organic demand".

A long time ago (aka 1994), catalogers controlled every aspect of their business. Sales were not generated unless a catalog was mailed.

Conversely, retailers thrived almost entirely on the concept of "organic demand". In other words, because there was an Ann Taylor store at the Galleria, sales were going to be generated. Ann Taylor could do absolutely no advertising whatsoever, and yet, the store would have loyal customers shopping every few months.

Back in 1994, you analyzed all customers who purchased in 1993. For catalogers, the relationship looked like this:
  • Normal Mail Stream = $150 spent in 1994.
  • Do Not Mail Catalogs = $0 spent in 1994.
Back in 1994, the relationship looked like this for retailers:
  • Normal Advertising Campaign = $150 spent in 1994.
  • No Advertising At All = $130 spent in 1994.
For catalogers, advertising meant everything. For retailers, advertising marginally increased sales.

Starting in 1995, e-commerce ruined each discipline.

See, e-commerce is a true hybrid of cataloging and retailing. Today, a cataloger might have the following relationship:
  • Normal Advertising Strategy = $150 spent in 2007.
  • No Advertising At All = $70 spent in 2007.
In 2007, cataloging incorporates the concept of "organic demand". Customers will purchase from Cuddledown, regardless whether catalogs are mailed, e-mails are delivered, or paid search campaigns are executed. Without advertising, customers will simply visit http://cuddledown.com and buy merchandise.

And this is where we, as direct marketers, fail miserably. We want to "attribute" every single order to one of our marketing strategies. We are systematically frustrated by the customer who simply types http://cuddledown.com and buys something.

So we do a matchback analysis, and claim that a catalog mailed eight weeks ago must have been responsible for this order.

If you work for a cataloger, and struggle with the concept of "organic demand", demand that occurs without any advertising, set up an appointment to meet with a non-competitive retailer. If you work at Cuddledown of Maine (an example, not a critique of this wonderful brand), why not call the folks at a non-competitor like Best Buy, and arrange for a two day field trip? Learn how retailers cope with the concept of organic demand by spending time with folks who deal with this concept, a concept that requires a fundamentally different style of measurement.