June 21, 2016

All In The Same Boat

I want to show you something that came out of recent research I performed.

Here's an equation for customers who have yet to purchase from Brand A.
  • Brand A Next Year Demand = 0.920 + 0.05*(Weighted Brand B Dollars) + 0.04*(Weighted Brand C Dollars) + 0.08*(Weighted Brand D Dollars).
Weighted dollars are based on recency (send me an email and I will show you how I calculate the weights).
  • Orders 1 Month Ago = Demand * 1.000.
  • Orders 2 Months Ago = Demand * 0.886.
  • Orders 3 Months Ago = Demand * 0.784.
  • Orders 4 Months Ago = Demand * 0.695.
  • Orders 5 Months Ago = Demand * 0.615.
  • Orders 6 Months Ago = Demand * 0.545.
  • Orders 7 Months Ago = Demand * 0.483.
  • Orders 8 Months Ago = Demand * 0.427.
  • Orders 9 Months Ago = Demand * 0.378.
  • Orders 10 Months Ago = Demand * 0.335.
  • Orders 11 Months Ago = Demand * 0.297.
  • Orders 12 Months Ago = Demand * 0.263.
  • Orders 13-24 Months Ago = Demand * 0.127.
  • Orders 25-36 Months Ago = Demand * 0.030.
  • Orders 37-48 Months Ago = Demand * 0.007.
Let's say that a customer purchased from Brand B one month ago, spending $100, and has no other purchases.
  • Brand A Next Year Demand = 0.920 + 0.05*(100*1.000) + 0.04*(0) + 0.08*(0).
  • Brand A Next Year Demand = $5.92.
Ok, now let's assume that the customer lapses, and has not purchased in two months from Brand B.
  • Brand A Next Year Demand = 0.920 + 0.05*(100*0.886) + 0.04*(0) + 0.08*(0).
  • Brand A Next Year Demand = $5.35.
In other words, if Brand B fails to keep this customer highly recent, then this customer is less likely to buy from Brand A - about 10% less in this example.

Now, let's pretend that the customer buys from Brand C, spending $100 in the past month, and spent $100 three months ago from Brand B.
  • Brand A Next Year Demand = 0.920 + 0.05*(100*0.784) + 0.04*(100*1) + 0.08*(0).
  • Brand A Next Year Demand = $8.84.
This is what the co-ops are dealing with. Because many catalogers have had considerable merchandise productivity problems in the past year, the co-ops are dealing with a bunch of customers worth $5.35 each. If all catalogers had merchandise productivity gains, the co-ops would be feeding you $8.84 value names.

Again, this is not longer the fault of the co-ops. The co-ops are a mirror of all catalogers and shared cataloger merchandise productivity. Because cataloger merchandise productivity has not been great, the co-ops select names for you that are worth less.

Catalogers no longer compete with each other.

Catalogers are all part of a Shared Catalog Brand Ecosystem.

When one cataloger improves merchandise productivity, all other catalogers in the Shared Catalog Brand Ecosystem benefit. This means we are all waiting for the first catalog leader to stand up and improve merchandise productivity significantly and lift the industry on her shoulders.

You (the reader) are capable of fixing the sluggish performance that some/many of you are experiencing. When you improve merchandise productivity, everybody else benefits. When your peers at other companies improve merchandise productivity, you benefit.

And best of all ... the Online Brand Ecosystem does not want your customer base. That ecosystem (except for Amazon) has largely shut out the 55+ year old customer.

The Mobile Brand Ecosystem completely ignores your customer base. They do not want a customer who purchases merchandise while wearing tri-focals.

So the average catalog customer is 55+, and is all yours!! (and yes, I get it, some catalogers cater to a 47 year old customer ... but the vast majority don't, so let's please be realistic here).

This means you are responsible for fixing the problem.

And you can fix the problem - I have faith in you!!

The solution is to find merchandise that the 55+ year old customer loves, merchandise that the Online Brand Ecosystem and the Mobile Brand Ecosystem doesn't want to sell. Then, you use the skills you've acquired over a career to market to your 55+ year old customer.

You are all in the same boat.

And you can solve the challenges yourself.

Time to get busy collaborating with each other, don't you think?