January 17, 2019

Page Counts When Bifurcation Hurts All Other Customers

Yesterday we talked about the fact that best catalog customers (a minority of your file) deserve MANY catalogs that are merchandised with MANY pages.

Earlier this week, we discussed the fact that all other customers (a majority of your file) deserve FEW catalogs.

How many pages do you think these customers deserve?

Look at the optimization table. You run optimization tables, right?

Right??

You make a penny of profit at 120 pages.

You optimize profit at 48 pages.

Do you understand what the bifurcation of your customer file means, dear Catalogers?
  1. It means that best catalog buyers are being under-optimized. These customers deserve MANY catalogs that feature MANY pages.
  2. It means that all other buyers (the majority of your file) are being under-optimized. These customers deserve FEW catalogs that feature FEW pages.
  3. It means that your current catalog contact strategy is ALL MESSED UP!!
It means that the world has changed.

It means that having a static contact strategy with "x" mailings per year is ENTIRELY WRONG for your business.

It means that your paper rep and printer have just become MORE VALUABLE than they've ever been, because they must work in tandem to help you execute a VARIABLE CONTACT STRATEGY where best catalog buyers (the minority of your customer file) deserve a weekly contact with many pages while all other buyers (the majority of your customer file) deserve at best a quarterly catalog with few pages.

Are you ready to move your catalog business into the future?

More on this topic next week.

January 16, 2019

Page Counts When Bifurcation Helps Best Customers

Yes, your catalog customer file bifurcated ... with a minority of best customers needing more catalogs and a majority of your total file requiring far fewer catalogs. Go measure the dynamic, you're guaranteed to see it in practice.

In our example, we could go from mailing best catalog customers 20 times per year to 50 times per year.

How many pages should these customers receive?

In our example, customers were receiving 120 pages.

Our optimization table tells a different story.

You run page count optimization tables, right?

Right??

Now, the catalog costs in the table are not entirely accurate, nor do they have to be for our example. Your printer and the USPS offer prices that are not linear in nature. However, the point should be "well taken" here.

At 120 pages, an individual catalog generates $1.45 profit.

But at 200 pages, an individual catalog generates $1.71 profit.

In other words, the bifurcation that results in best catalog customers (a minority of your file) needing MORE catalogs per year also results in best catalog customers needing MORE pages per catalog.

Again, your paper rep and your printer should be demanding a presence in your office within 10 minutes of seeing these findings ... if they aren't, ask 'em why they don't want to make more money?

And from your standpoint, this means that your contact strategy is all mucked-up. You need to respond to bifurcation by having a strategy that yields a weekly catalog with many pages, and the pages need to align with the merchandise preferences of the customer. In other words, you feature the stuff at the front of the catalog that is new and your best catalog customers love ... this will likely be different merchandise for different best catalog customers.

What about the bifurcated customers who are no longer interested in catalogs?

More on them tomorrow.

January 15, 2019

The Math Behind Bifurcated Customers Who Have "Moved On" From Catalogs

Yesterday we talked about a classic, outstanding catalog customer ... and how that customer needed MORE mailings on an annual basis.

Presented today is the exact same quality of customer - expected to spend the same $150 in the next year ... but instead of a 20% organic percentage this customer has a modern 75% organic percentage.

In other words, the old-school catalog-centric buyer will spend 20% of future demand outside of catalogs ... while the modern e-commerce buyer will spend 75% of future demand outside of catalogs.

The 20% organic percentage buyer needed fifty (50) mailings per year (or more).

What does our optimization table say about the modern e-commerce buyer?
  • Five (5) mailings per year optimizes total annual profit.
These two customers are IDENTICAL in terms of future value ($150 demand to be spent in the next year).

And yet, one customer deserves fifty (50) mailings per year ... while the other buyer deserves five (5) mailings per year.

This bifurcation is happening at all catalog brands in 2019. This is the biggest story of 2019 ... and you won't hear your vendors talking about it ... and that's absolutely ridiculous because your paper reps and printers should absolutely LOVE the fact that some customers need fifty (50) mailings per year.

Do you understand the ramifications of this issue?

This means you are employing the absolute wrong contact strategy. You need two strategies.
  1. A strategy to optimize 50 mailings per year (i.e. your printer can help you dynamically create a weekly mailing for best customers based on what best customers previously purchased ... featuring a ton of new merchandise).
  2. A strategy for the 80%+ of your customer file that has maybe four mailings per year ... one featuring winning merchandise that raises catalog productivity to a point where you can circulate deeply.
More on (1) and (2) above tomorrow and Friday, ok?

January 14, 2019

The Math Behind Best Customers

Those of you involved in Catalog Marketing run optimization tables, right?

Right??

Here's an optimization table for really good catalog customers. This brand mails really good customers 20 times per year, for the obvious reason that the brand has 20 in-home dates per year and they mail the best customer every single in-home date available.

How many catalogs should this brand mail this good catalog customers?

Look at the table.

Profit still increases as we go from 45 annual catalogs to 50 annual catalogs.

Do you understand what this means?

This catalog company is sub-optimizing profit among best catalog customers by a whopping $5 profit per customer.

This is a major trend for 2019 for catalog marketers. Bifurcation is overwhelming the catalog customer file ... with a small minority (i.e. 20% of the twelve-month buyer file) requiring MANY MORE catalog mailings ... and everybody else requiring FEW/NO catalog mailings.

Run the darn optimization table above and see if bifurcation is impacting your business.

Again ... this is a MAJOR TREND for the vast majority of classic catalog marketers. The math strongly suggests that catalogers are undermailing the best catalog-centric buyers.

January 13, 2019

Bifurcation

A brief detour before heading to Circulation Theory ... the detour is critical to our upcoming discussion about Circulation Theory.

One of the big stories of 2019 is "Bifurcation" ... the point or area where something branches into two different parts. I see it happening all the time in my analytical work.
  • In Retail, the customer file split five years ago into commodity/convenience/online buyers and experience/in-store buyers. Folks used to label this "omnichannel" and today they label it as the "customer experience". It's so much more important than that.
  • In E-Commerce, the customer file is spitting into old-school desktop/laptop buyers (smaller quantity) and modern phone-centric buyers (larger quantity).
  • In Catalog Marketing, the customer file split 15 years ago (catalog vs. online) ... and what is left is now "re-splitting" into high-contact buyers and low-contact buyers.
In all three cases above, the last thing you do is apply an "omnichannel approach" and offer all customers the same merchandise and same treatment in all channels ... that's the fastest way to sub-optimize your total business. You have to do the opposite of what the pundits tell you to do. Remember, pundits get paid by getting you to apply their strategies via vendors, which allows pundits and vendors to get paid. Your job is to maximize sales so that you get paid.

Instead, when your customer file is bifurcating (you measure this stuff, right?), you have to treat customers DIFFERENTLY.

Back to Catalog Theory.

In modern Catalog Marketing, you are dealing with a customer file that has bifurcated. A significant minority of customers deserve MANY/MORE catalogs ... while the vast majority of your customer base deserve FEW/NO catalogs.

A classic catalog brand with 24 in-home dates is completely sub-optimizing the entire enterprise? Why?
  • A small number of customers deserve 50 in-home dates.
  • Almost everybody else deserve 0-4 in-home dates.
In other words, the classic catalog brand needs to develop concurrent strategies to appeal to each audience.

Tomorrow, I'll share the math behind the theory.

January 10, 2019

Next Week

Next week I'll spend time discussing old-school catalog circulation theory.

For the majority of you who are not catalog marketers, feel free to breeze by the content ... or just enjoy the content because the math might be fun to follow along with.

Sound good?

January 09, 2019

Delta Between Price And Cost Of Goods Sold

Marketing Margin is significantly impacted by Cost of Goods Sold.

An Electronics merchant might sell items that have an 80% cost of goods sold. This means that for every $100 sold, there's only $20 of marketing margin available. The Electronics merchant cannot afford expensive catalogs or expensive discounting or expensive loyalty programs, simply because there won't be any profit left.

An Apparel merchant might sell items that have a 35% cost of goods sold. This means that for every $100 sold, there's a whopping $65 of marketing margin available. It is any wonder that marketers want a piece of that?

The delta between price and cost of goods sold determines the marketing strategy used by a brand.
  • High COGS brands must employ low-cost marketing strategies, because there isn't money available to be invested in marketing strategy.
  • Low COGS brands can generate a TON of profit if the marketer team does not absorb the delta between Price and COGS via marketing spend.
A smart CFO questions every marketing dollar spent ... because if the marketing dollar fails to increase profit dollars, then an investment opportunity has been lost.

Page Counts When Bifurcation Hurts All Other Customers

Yesterday we talked about the fact that best catalog customers (a minority of your file) deserve MANY catalogs that are merchandised with...