October 02, 2008

Williams Sonoma: Catalog And E-Mail Circulation Optimization

Courtesy of the folks at Multichannel Merchant, this article about huge circulation cuts at Williams Sonoma stimulates some thought, doesn't it?

The article mentions digital direct marketing as an alternative to catalog marketing. When you have a retail presence, it is much easier to go down this path, and sometimes it is more profitable to go down this path.

If you're a traditional cataloger, without a retail presence, life is more challenging. One of the things we have to do is more testing --- testing what happens when we combine catalog marketing with e-mail marketing.

Check out the sample test results, measured over a three month period of time to customers who receive both catalogs and e-mail marketing campaigns.

Catalogs E-Mails Phone Online Total Profit

6 Yes $6.50 $6.50 $13.00 $0.92
6 No $7.50 $4.75 $12.25 $0.69
4 Yes $5.50 $6.25 $11.75 $1.68
4 No $6.50 $4.50 $11.00 $1.45
2 Yes $3.50 $6.00 $9.50 $2.10
2 No $4.50 $4.00 $8.50 $1.78
0 Yes $0.00 $5.50 $5.50 $1.90
0 No $0.00 $3.00 $3.00 $1.05

This is the style of test our industry can capitalize on. We compare combinations of catalog marketing contacts and e-mail marketing contacts, searching for the most profitable strategy. In this case, receiving two catalogs over the course of a quarter, coupled with a weekly e-mail marketing strategy, is most profitable.

Notice that this strategy doesn't yield the best result, in terms of total sales volume.

Also notice that sending no catalogs, and no e-mails, still causes customers to spend money. This might be the most important metric for you to obtain --- what percentage of volume happens if you don't execute any traditional direct marketing (catalog / e-mail)? Do you know this percentage? It's an awfully important one to know.

Where are we heading: We will slowly back off on traditional direct marketing --- and we will re-invest the advertising dollars we save in untested online marketing strategies. And over time, we'll identify online micro-channels that recoup the sales we lose by cutting back on catalog marketing, and we'll be more profitable!