April 18, 2017

Sure The Catalog Co-Ops Appear To Be Dying - But What Does It Mean?

When I attend a catalog-centric conference, a theme emerges (this has happened each of the past three years).
  • The catalog co-ops are dying.
  • What do I do about it? I need new customers!
It's common to see 10% to 15% annual performance declines over each of the past three years.

It is also common for a cataloger to generate 60% of their new customers from catalog co-ops.

So what does it mean to the future health of a catalog business when catalog co-op performance falls off of a cliff?

Let's run an example ... say your business retains 37% of last year's customer file, so you need 63 new + reactivated buyers. You get 53 new buyers and 10 reactivated buyers, for a total of 63. If this is true, then your customer file remains flat each and every year. Your business isn't growing, but you aren't dying either. Every year, you have 100 buyers.

Ok, now let's drop the quantity of co-op sourced buyers (say 30 of the 53 new buyers) by 15% per year, each year, for the next five years.

2017:
  • 100 Buyers * 0.37 Rebuy Rate = 37 Retained Buyers.
  • 10 Reactivated Buyers + 37 Retained Buyers = 47 Retained/Reactivated Buyers.
  • 23 New Online Buyers + 30*0.85 = 26 New Catalog Buyers = 49 New Buyers.
  • Total File = 47 + 49 = 96 Buyers.
Do you see what is coming? No? Let's keep running our forecast out for four more years.

2018:
  • 96 Buyers * 0.37 Rebuy Rate = 36 Retained Buyers.
  • 10 Reactivated Buyers + 36 Retained Buyers = 46 Retained/Reactivated Buyers.
  • 23 New Online Buyers + 30*0.85*0.85 = 22 New Catalog Buyers = 45 New Buyers.
  • Total File = 46 + 45 = 91 Buyers.
2019:
  • 91 Buyers * 0.37 Rebuy Rate = 34 Retained Buyers.
  • 10 Reactivated Buyers + 34 Retained Buyers = 44 Retained/Reactivated Buyers.
  • 23 New Online Buyers + 30*0.85*0.85*0.85 = 18 New Catalog Buyers = 41 New Buyers.
  • Total File = 44 + 41 = 85 Buyers.
2020:
  • 85 Buyers * 0.37 Rebuy Rate = 31 Retained Buyers.
  • 10 Reactivated Buyers + 31 Retained Buyers = 41 Retained/Reactivated Buyers.
  • 23 New Online Buyers + 30*0.85*0.85*0.85*0.85 = 16 New Catalog Buyers = 39 New Buyers.
  • Total File = 41 + 39 = 80 Buyers.
2021:
  • 80 Buyers * 0.37 Rebuy Rate = 30 Retained Buyers.
  • 10 Reactivated Buyers + 30 Retained Buyers = 40 Retained/Reactivated Buyers.
  • 23 New Online Buyers + 30*0.85*0.85*0.85*0.85*0.85 = 13 New Catalog Buyers = 36 New Buyers.
  • Total File = 40 + 36 = 76 Buyers.
Oh. My. Goodness.

If the co-ops are able to properly help you, you have 100 customers five years from now.

If the co-ops continue to erode at a 15% rate per year, you have 76 customers five years from now.

If I told you that your customer file would be 24% smaller five years from now because of the performance of the co-ops, would you do something about it?
  • Would you call every co-op into your office and demand better performance?
  • Would you start trying every trick in the book to find new customers?
  • Would you start building better relationships with Google and/or Facebook?
  • Would you share the findings with your Executive Team?
  • Would you teach every employee at your company what is happening, and then ask every employee for ideas to help reverse the trend?
  • Would you create an incentive structure to reward every employee who reverses this trend?  15% spot bonuses?  Promotions?
You'd do something, right?

That's why we have to forecast what the future looks like.

Let me know if you need forecasting scenarios run for your business (kevinh@minethatdata.com). We need to see what tepid co-op performance is doing to the future health of our businesses, right?


"Forecasting outcomes are the sum of all analytics and marketing knowledge possessed by your company."