March 24, 2013

Dear Catalog CEOs: Answers To Your Questions

Dear Catalog CEOs:

Last week, I asked you to submit questions that you wanted me to answer via a blog post.  You responded!  Let's address your questions.

Question:  How will Big Data impact my catalog business?
  • There are several answers to this question.  First, you've been using Big Data for twenty years.  Co-ops are Big Data, always have been, always will be.  This means that the behavior of your competition dictates how your business evolves.  When your competitors do well, especially within certain product categories, your business is influenced as well.  Big Data, a generic information technology term, suggests that what we've observed in catalogs will now take over mobile and social, but much faster.  In other words, when catalogers / co-ops interact, the impact is almost glacial.  When data providers harvest social/mobile activities in real-time, your business will evolve faster.  By the way, 90% of what you hear/read about Big Data is going to be completely meaningless.  Look for depth of meaning in what you read.  Finally, look for actionable information ... just because your customer is within 1.0 miles of your retail store doesn't mean the customer wants a 10% off notification to visit your store.
Question:  Do I have to worry about Amazon?
  • The answer, quite honestly, is that we had to worry about Amazon from 2000 - 2005.  We largely ignored Amazon during this timeframe.  Now, it's almost too late to "worry". I want you to think about something for a moment.  You ask me how you should calibrate free shipping offers (hurdle, no hurdle, channel-specific, with or without a percentage off).  Amazon gets customers to pay $79 (or whatever the number is) for shipping a year in advance of any possible purchase.  You are trying to figure out how to give shipping away.  Amazon has figured out how to charge the customer for shipping before purchases have ever been placed.  It's time to pick another fight.  I know, this isn't the easy, tidy answer you were looking for, but there are many ways to attack giants.
Question:  Can I sell merchandise that isn't featured in my catalog?
  • You bet!  Go analyze your mail/holdout tests.  You execute mail/holdout tests, right?  Right?!  Analyze items featured in catalogs, comparing mail/holdout performance.  Then analyze items that only appeared online during that timeframe, comparing mail/holdout performance.  Many of my clients find that between 10% and 40% of incremental demand comes from items that did not appear in catalogs.  The job of the catalog, in 2013, is to stimulate purchasing, and to tell a story.  Your job is to find items that stimulate purchasing, and to find items that tell a story.
Question:  What benefits do you get when you re-purpose offline marketing on tablets?
  • This is a multi-step process, and the process benefits the employee and the company.  From an employee standpoint, do you remember 1996 - 2000?  This was a time when e-commerce accounted for almost nothing.  And yet, those working in e-commerce put in 10,000 hours.  This became an insurmountable experience difference between 2001 - 2005, when the e-commerce folks took all the good jobs at catalog companies.  Employees need to test channels like tablet commerce.  If the channel ever takes off, the employee is the subject matter expert.  In our modern economy, you MUST be the subject matter expert at something.  From a company standpoint, the current iteration of tablet commerce is not going to last, regardless what your printer or vendor tells you.  Somebody is going to figure out HOW to sell on a tablet at scale (i.e 10% or more of annual sales).  The form (current website, tablet website, mobile website, app aggregators like CoffeeTable and Catalog Spree) will be decided by the customer.  You can wait until the battles have been decided, or you can jump in with low risk and use analytics to learn as much as you can about how customers interact with a hybrid of your catalogs and technology.  Go learn something!  Go learn something that might be applicable to other channels.
Question:  What is the appropriate email contact frequency?
  • The individual asking this question links us to this article (click here).  Here's the thing.  Out of 100 projects, I can't think of 10 where somebody told me that they've tested email marketing frequency and know the optimal number of email messages to send to customers, on a weekly basis.  When I apply my findings, it is common to learn that a business under-mails - it sends one campaign a week when it could send three a week.  Of course, there's a law of diminishing returns here ... $0.20 for the first campaign, $0.10 for the second, $0.06 for the third ... but why not get the additional $0.16?  But make that decision after doing a few tests ... it only takes a month and you'll have the answer.  And if critics get upset, test for a year and satisfy them, why the heck not?
  • Here's another way to think about this ... folks will tell you that you can't have opt-outs. Let's assume that you go from one campaign a week at $0.20 each, to three campaigns a week at $0.12 each.  You've increased demand from $0.20 a week to $0.36 a week ... or by 80%.  Eighty percent!  This means that if you lost more than half of your email file, you'd still generate more sales at 3x contacts a week.  Just do the math, folks.  Do the math!
Question:  How do I perform a square inch analysis in the age of the internet?
  • You don't.  That train left the station in 2005.  Perform a quarterly profit and loss statement by item, factoring in all advertising channels and marketing spend.
Question:  How does the omnichannel movement impact catalogers?
  • The omnichannel movement is going in two opposite directions.  First, retailers are going to encourage omnichannel as a way to drive customers into stores.  Long-term, retailers may have challenges (high debt + tepid sales = low profit), so they will leverage every possible channel (hint - mobile + social + big data) to push customers into stores.  That's the first half of the movement.  The second half of the movement comes from online marketers that now realize just how little customer behavior they've actually measured in the past decade.  Their omnichannel objective is to align strategy across channels (like catalogs & retailers a decade ago in the multichannel movement), and then measure every single customer breadcrumb.  They're going to learn that 95% of the breadcrumbs are stale, and useless!
  • From a data standpoint, omnichannel will impact Jasmine more than anybody.
  • For Judy, omnichannel is likely to have little meaning.  Judy, at age 60, isn't going to be using six digital devices before buying in-store after receiving a relevant email marketing message.
  • In other words, omnichannel is the e-commerce / digital version of multichannel, and is more likely to impact Jasmine, not Judy ... and therefore, be of less importance to catalogers who already integrated operations and creative.
  • That being said - ask good questions.  Did your business explode when you aligned channels?  Not many did.  Keep an eye on those who claim to be making omnichannel progress, and ask them to validate results via sales/profit data.