September 06, 2011

How Organic Demand Plays Out

Once you've executed your mail/holdout groups, you'll realize what your organic percentage is.

Let's take an example where a business sends 12 catalogs a year, and after matchback, believes that it generates $30.00 across the twelve catalogs.  Assuming zero to fifteen possible contacts, here's what catalog demand actually looks like:


Catalog Demand Table



Organic Percentage
Catalogs 20% 40% 60% 80%
0 $0.00 $0.00 $0.00 $0.00
1 $4.21 $3.16 $2.11 $1.05
2 $6.85 $5.14 $3.42 $1.71
3 $9.09 $6.82 $4.55 $2.27
4 $11.12 $8.34 $5.56 $2.78
5 $13.00 $9.75 $6.50 $3.25
6 $14.77 $11.08 $7.39 $3.69
7 $16.46 $12.34 $8.23 $4.11
8 $18.07 $13.55 $9.03 $4.52
9 $19.62 $14.72 $9.81 $4.91
10 $21.12 $15.84 $10.56 $5.28
11 $22.58 $16.94 $11.29 $5.65
12 $24.00 $18.00 $12.00 $6.00
13 $25.38 $19.04 $12.69 $6.35
14 $26.73 $20.05 $13.37 $6.68
15 $28.06 $21.04 $14.03 $7.01

Here's what organic demand actually looks like:


Non-Catalog Demand Table



Organic Percentage
Catalogs 20% 40% 60% 80%
0 $6.00 $12.00 $18.00 $24.00
1 $6.00 $12.00 $18.00 $24.00
2 $6.00 $12.00 $18.00 $24.00
3 $6.00 $12.00 $18.00 $24.00
4 $6.00 $12.00 $18.00 $24.00
5 $6.00 $12.00 $18.00 $24.00
6 $6.00 $12.00 $18.00 $24.00
7 $6.00 $12.00 $18.00 $24.00
8 $6.00 $12.00 $18.00 $24.00
9 $6.00 $12.00 $18.00 $24.00
10 $6.00 $12.00 $18.00 $24.00
11 $6.00 $12.00 $18.00 $24.00
12 $6.00 $12.00 $18.00 $24.00
13 $6.00 $12.00 $18.00 $24.00
14 $6.00 $12.00 $18.00 $24.00
15 $6.00 $12.00 $18.00 $24.00

Make sense?

Here's what total demand looks like:


Total Demand Table




Organic Percentage
Catalogs 20% 40% 60% 80%
0 $6.00 $12.00 $18.00 $24.00
1 $10.21 $15.16 $20.11 $25.05
2 $12.85 $17.14 $21.42 $25.71
3 $15.09 $18.82 $22.55 $26.27
4 $17.12 $20.34 $23.56 $26.78
5 $19.00 $21.75 $24.50 $27.25
6 $20.77 $23.08 $25.39 $27.69
7 $22.46 $24.34 $26.23 $28.11
8 $24.07 $25.55 $27.03 $28.52
9 $25.62 $26.72 $27.81 $28.91
10 $27.12 $27.84 $28.56 $29.28
11 $28.58 $28.94 $29.29 $29.65
12 $30.00 $30.00 $30.00 $30.00
13 $31.38 $31.04 $30.69 $30.35
14 $32.73 $32.05 $31.37 $30.68
15 $34.06 $33.04 $32.03 $31.01

And finally, here's what total profit looks like:


Total Profit Table




Organic Percentage
Catalogs 20% 40% 60% 80%
0 $2.10 $4.20 $6.30 $8.40
1 $3.08 $4.81 $6.54 $8.27
2 $3.50 $5.00 $6.50 $8.00
3 $3.78 $5.09 $6.39 $7.70
4 $3.99 $5.12 $6.25 $7.37
5 $4.15 $5.11 $6.08 $7.04
6 $4.27 $5.08 $5.89 $6.69
7 $4.36 $5.02 $5.68 $6.34
8 $4.42 $4.94 $5.46 $5.98
9 $4.47 $4.85 $5.23 $5.62
10 $4.49 $4.75 $5.00 $5.25
11 $4.50 $4.63 $4.75 $4.88
12 $4.50 $4.50 $4.50 $4.50
13 $4.48 $4.36 $4.24 $4.12
14 $4.46 $4.22 $3.98 $3.74
15 $4.42 $4.07 $3.71 $3.36

If, for a given customer, the organic percentage is 20%, then 12 catalogs is the right number to send to the customer.

If, for a given customer, the organic percentage is 40%, then just 4 catalogs is the right number to send to the customer.

If, for a given customer, the organic percentage is 60%, then just 1 catalog maximizes profitability.

And if, for a given customer, the organic percentage is 80%, then you are better off not mailing any catalogs to the customer.

Can you see how you end up dramatically over-circulating to your housefile when you believe in your matchback analytics?

On Thursday, we'll talk a bit about what you do with the money you save when you learn how significant an impact the organic percentage has on your business.

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