November 22, 2009

Dear Catalog CEOs: The Big Book

Dear Catalog CEOs:

Just like that, the inevitable happened. JC Penney discontinued their "big book".

A quick scan of the homepage of DMNews showed no link to the article, as of last Thursday. Multichannel Merchant did have a small link on their homepage, though the link was about 1/4 the size of the heading of a competing article titled "Harness The Power Of Employee Bloggers".

Let that sink in for just a moment. JCP canning the venerable big book is less news worth than is harnessing the power of employee bloggers.

Oh, sure, the multichannel pundits will spin this any of a number of ways. They'll tell you that this decision in no way impacts the vital importance of print marketing in the multichannel marketing arsenal. They'll remind you that Sears eliminated their big book in 1993, and their business struggled ever since. They'll cite metrics from research organizations that suggest something like 7 in 10 online purchases are influenced by offline marketing techniques, with print and radio leading the way.

Neil Stern is quoted in the article as saying that "Penney had the name, infrastructure and broad product reach to become an instantly formidable player in what is essentially transforming retail in this century. The big book effectively helped them build that bridge."

It took twenty years to build the bridge that allowed the big book era to end.

The next question that must be asked is "How many years will it take for the targeted catalog mailer era to end?"

Thanks to Google, direct marketing has become ruthlessly efficient. Waste kills the profit and loss statement.

Now if you are marketing to a 68 year old woman in North Dakota, by all means, enjoy the myriad fruits of your catalog labor.

But if you are marketing to customers under the age of 50, it is time to calculate that all-important metric called the "organic percentage". Take 10% of your twelve-month buyer file, and divide it into two segments. The first segment receives catalogs as they normally would, for the next six months. The second segment is not allowed to receive one single catalog. At the end of six months, compare the sales of the two groups.

  • Group Mailed Catalogs = $50.00.
  • Group Not Mailed Catalogs = $40.00.

The "organic percentage" is calculated as $40.00 / $50.00 = 80%. Simply put, this is the most important metric you will ever calculate. In this example, catalogs only generated $10.00 of incremental volume ... the other $40.00 happen without catalog mailings, a full 80% of the total happening organically, independent of catalog mailings. Run a profit and loss statement on the $10.00 of incremental volume, not the $50.00 that your matchback vendor is telling you catalogs generated. You may not like what you see.

This is the little secret that the catalog vendor community, and your co-op matchback vendor in particular, don't want you to know. They want you to keep renting names at $0.06 a pop, they want you to keep mailing catalogs, falsely attributing sales to print.

A few weeks ago, I mentioned this methodology (test/control and organic percentage calculation) to a Catalog CMO. The Chief Marketing Officer told me that "... if what you are suggesting is so useful, why aren't the co-ops recommending this to us, after all, they are the thought leaders in our industry?"

Good question. A really good question.

Now that "The Big Book" era has ended, it is only a matter of time before targeted catalog mailings face the music. Granted, this evolution may take another twenty years. But in the meantime, there's billions of dollars of profit sitting out there, waiting to be picked up off the ground.

I'm begging you. Execute the test mentioned earlier. Calculate your own "organic percentage". Run a profit and loss statement based on demand only attributed to catalogs. Find the audiences that no longer respond to catalog marketing, and stop mailing them. Then enjoy watching semi-truck trailers packed full of greenbacks pull up to your Finance department door.

As always, I am here, ready to help you through this transition.