May 03, 2009

The Most Important Catalog And E-Mail KPI: The Organic Percentage

Last week, I received an e-mail from a loyal blog subscriber. This person did the mail/holdout testing that many catalog brands execute. This person learned that more than 70% of the business that you see in best-practice based catalog results analysis happened regardless whether a catalog was mailed or not.

This phenomenon is known as the "Organic Percentage". You execute a mail group and a holdout group, very simple testing.

Organic Percentage: Mail & Holdout Test Groups






This Other Website Total

Catalog Catalogs Demand Demand
Mail Group $3.00 $4.00 $8.00 $15.00
Holdout Group $0.00 $5.00 $9.50 $14.50
Increment $3.00 ($1.00) ($1.50) $0.50
Organic %, Catalog = (3.00 - 0.50) / 3.00 83.3%
Organic %, Total = 14.50 / 15.00
96.7%

This outcome is seldom if ever mentioned by e-mail vendors or catalog marketing vendors. The opposite outcome is mentioned all of the time --- we hear that catalogs and e-mails drive sales across all channels. This outcome is more common than the oft-publicized "catalogs drive sales to all channels" outcome we read about.

Almost nobody talks about reducing marketing expense and increasing profit because we are mis-attributing orders to customers who would have ordered anyway. The vendor ecosystem would be hurt if this outcome were published on a frequent basis.

In this case, 96.7% of customer demand happens anyway .. only 3.3% of the $15.00 is because of catalog marketing.

Quantifying the organic percentage is the single most important thing that catalog and e-mail marketers will do in 2009.

Acting upon the organic percentage is the single most important thing that catalog and e-mail marketers will do in 2010.

At this time, the majority of my Multichannel Forensics projects require me to greatly reduce marketing expense while keeping demand coming in at a high rate. It is likely that you'll be spending a ton of time on this issue in 2010 as well.