Showing posts with label Standardized Multichannel Performance. Show all posts
Showing posts with label Standardized Multichannel Performance. Show all posts

## January 15, 2008

### Standardized Multichannel Performance (SMP)

Sometimes, it is difficult for a CEO/Owner to understand whether catalog productivity is increasing, or decreasing.

Let's look at a Spring catalog, over the past three years, plus the forecast for 2008 (sales volume in 000s):

 Four Year Performance For The Spring Catalog Year Pages Circ Phone Online Stores Total 2005 124 800 \$1,900 \$800 \$500 \$3,200 2006 116 1,000 \$1,950 \$850 \$624 \$3,424 2007 132 1,200 \$2,175 \$1,100 \$663 \$3,938 2008(p) 140 1,300 \$2,425 \$1,350 \$675 \$4,450

In 2008, the circulation team wants to increase pages and increase circulation, citing increased volume across all channels.

Sound good?

Let's find out if the plan is good.

I introduce a metric called "Standardized Multichannel Performance", or "SMP".

For this business, we standardize the performance of each catalog to a 100 page catalog circulated to 1,000 households. By doing this, we can theoretically compare each catalog on a "comparable" basis. We do this adjustment if we don't have any good "comp segment" information to compare.

Step 1: Calculate an adjustment factor as follows:
• ((100 pages / actual pages) ^ 0.5) * ((1,000 circ / actual circ) ^ 0.5).
• 2004 example: ((100 / 124) ^ 0.5) * ((1,000 / 800) ^ 0.5).
• 2004 example: (0.806 ^ 0.5) * (1.25^ 0.5).
• 2004 example: (0.898) * (1.118) = 1.004.
Step 2: Multiply the adjustment factor by actual multichannel sales volume.
• Adjustment Factor * Multichannel Sales Volume
• 1.004 * \$3,200 = \$3,213.
In this catalog were 100 pages, mailed to 1,000 households, it would have generated an SMP of \$3,213, just over \$3.2 million dollars.