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.

6 comments:

  1. Agree with the post Kevin - it seems the entire catalog ecosystem does benefit from the matchback process. There's room for improvement!

    On a related note... this blog (forgive me if I'm wrong) hasn't dealt a lot with the environmental impact of catalogues and print marketing. With environmental issues gaining importance (recently water shortages, global warming, organic foods, excess waste) - when do we expect the cataloging industry to be placed under the microscope?

    As a business person, I'm perhaps most motivated by the P&L considerations regarding matchback and over-catalogging consumers, but there is a environmental consideration as well. Catalogs add to the landfills and require trees to produce... Anyone have thoughts on the importance of this piece?

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  2. Ray, there will be a day when the environmental impact of print marketing becomes a key issue.

    It is sort of like the price of gas ... if gas gets above $6.00 a gallon, people will not be able to afford to drive. Hybrids and high-mileage cars take over at that point. But until there is financial incentive to cause people to change, people won't change.

    Cataloging is similar, in my opinion. As long as the public isn't being hurt in the pocketbook (or being pressured by Congress0 because catalogers are sending half of British Columbia's trees to your mailbox, there won't be a groundswell of concern.

    But there will be a day when something happens, and people say "oh my, those catalogers are bad". Then change will happen, and happen in a very rapid manner.

    Until then, we can point out the catalogers that use a lot of recycled paper, like Norm Thompson.

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  3. Anonymous12:07 AM

    I have the best matchback algorithm in the industry and you are completely wrong. 90% of our orders are sourced to catalogs mailings, we get about 5% from emails. Why dont you show us a graph of your brilliant algorithm that shows how emails drive more sales. You don't have one because you don't know what you're talking about.

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  4. Anonymous12:34 AM

    This is the most retarded thing I've ever seen. Anyone can tell just from the order flow that catalogs drive virtually all the sales (all the orders come in right after a catalog drops). Who benefits from your airhead analysis? Emailers?

    [Retard Analysis Below]
    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

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  5. Anonymous --- thank you for your feedback. We can, of course, agree to disagree. And in your specific case, you may be right. Please be open-minded enough to consider that there are 22,000 other catalog companies out there, companies with different outcomes than the specific case you cite.

    Please consider sharing your name and company next time. Would you not benefit from having the industry recognize your brilliance?

    And why not read the other 1,180 blog posts I've written, blog posts where I've outlined case studies? At Nordstrom, more than 90% of my volume happened outside of matchback --- my order curves proved that. And when we stopped mailing catalogs, the orders kept coming in. Why didn't you take the initiative to read about the dozens-plus times I've written about that?

    Or why didn't you read about the other case studies I've written? Or where were you when I just completed an analysis for a client, one that showed that 60% of the orders would happen without catalog mailings --- we did mail and holdout tests --- the actual order curves from the holdout groups proved it?

    Please do your research before being so mean. Please take the time to follow my blog, instead of doing a search and then taking potshots without sharing your name and company.

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  6. As for the anonymous post-- there is no BEST system of matchbacks--it is basically a set of compromises that try to emulate the results of the old 'capture the source code' techniques used to such great effectiveness in the past.

    Another way to analyze the influence of a catalog on web sales is to do whatever matchback you have available --then take the internet sales you matched back to and the internet sales you did not--sum the results by week. Then sum you direct call center catalog results by week and look at the correlations--its a poor proxy for using holdout samples--but it does give you some insight into how much of your web business is independent of the catalog.

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