November 26, 2007

Who Benefits From Flawed Matchback Analyses?

This is my final discussion about matchback analyses for awhile, as I'm sure many of you are ready to read about other topics. But I got chewed on, I was told to stop talking and get on the multichannel bandwagon. That bandwagon may be financially hurting some catalogers. Somebody needs to talk about that.

Let's think about the industries that benefit from incorrectly executed matchback analyses. Mind you, I'm not picking on any specific individual --- I've observed many folks in these industries who counsel clients in a positive way.

The USPS: Ever wonder why it seems like there are more catalogs in your mailbox these days, compared with a decade ago? Here's a secret ... if you mail every one of your internet buyers a catalog, a matchback analysis might tell you that the catalogs drove all online orders within twelve weeks of the catalog mailing ... even if search and e-mail marketing and organic demand were truly responsible for the orders. The USPS (and now the good folks in the UK as well) commission studies that "prove" that catalog mailings drive online orders. I'm not saying catalog mailings don't drive online sales --- I'm just saying we are significantly overstating the importance of catalog mailings via flawed matchback algorithms.

The Co-Ops: Catalogers love co-ops these days. Catalogers get names that perform better, and get them at a lower cost than via list vendors. So co-ops have a financial incentive to promote flawed matchback algorithms (though some truly try their hardest to do a good job). By "proving" that catalogs drive online orders, catalog clients order more names from the co-op, driving co-op sales and profit. An even bigger conflict of interest occurs when co-ops actually execute the matchback algorithm for the client.

Merge-Purge Houses: The cataloger gets matchback results from the co-op, orders more names, names that are merged at the merge-purge house, driving increased sales and profit for the merge-purge house. Also, many merge-purge houses run matchback analyses for catalogers, earning $$$ for their efforts.

Printers: If catalogs are "proven" to drive 70% to 80% of online sales (which does occasionally happen, but not as often as we're being told), then printers benefit, too. The cataloger mails more catalogs than they normally would, which drives sales and profit for the printer. If the printer delivers catalogs deep into the mail system, then the printer can earn more $$$ too.

Paper Industry: Some of my feistier conversations have been with folks in the paper industry. More catalogs means more paper, which means more $$$ for those in the paper industry.

List Industry: I'm much less critical of the list industry, because by and large, these folks acted with integrity for the past decade, recommending that clients shift names from lists to the co-op industry, knowing all-too-well that it would result in the death of the list industry. But flawed matchback analyses help those in the list industry as much as they help the co-ops.

Trade Journals: We read about multichannel marketing and matchback analyses in trade journals. These publications depend upon the vendor community for advertising revenue. The vendor community depends upon the trade journal to "get the word out". This symbiotic relationship benefits from promotion of matchback analyses that may not accurately reflect the "truth".

So, let's look at the ecosystem that depends upon matchback analyses that are sometimes flawed.

Co-ops and merge-purge vendors do the matchback analysis, attributing too many online orders to the catalog channel. This causes the cataloger to order more names from co-ops and list vendors than they should, financially helping co-ops and list vendors. These names go into the merge-purge process, financially helping merge-purge vendors. Next, the names go to the printer. Paper reps financially benefit from over-mailing, as do printers. The printer delivers the catalogs deep into the mail system, where the USPS benefits by delivering too many catalogs to customers. Then trade journals tell us all about multichannel customer behavior, funded by the profits the vendor community get from matchback analyses.

It looks to me like the entire catalog ecosystem benefits from flawed multichannel matchback analyses. The only parties who don't benefit are customers, who may not want the catalogs, and catalogers who over-mail catalogs, causing harm to the profit and loss statement.

This is why I've been told to stop talking, to "get on the multichannel bandwagon". This is why I try hard to freely share information with catalogers and multichannel retailers.