October 11, 2009

Dear Catalog CEOs: Filtering and The Death of the Mailbox

Dear Catalog CEOs:

My most enjoyable Multichannel Forensics projects have two components.
  1. Predict the future.
  2. Filter the audience into actionable segments that increase the amount of profit you generate.

When I filter the audience into actionable segments, I receive interesting feedback.

  • "You're telling me I shouldn't mail 12,000 of my best customers? That's crazy!'
  • "If I reduce contact frequency, I'll reduce sales. My business needs to grow, not shrink!"

We live in interesting times. Never before have we had to deal with something like "The Death of the Mailbox".

This week, do an experiment. Take every piece of mail you receive, and divide it into three piles.

  • Pile #1 = Bills.
  • Pile #2 = Stuff You Don't Want Or Didn't Ask To Receive.
  • Pile #3 = Communications You Asked For Or Wanted To Receive.

At the end of the week, count every piece in each pile. Divide the quantity in Pile #3 by the total quantity of mail you received. What is the percentage of mailbox content that you want to receive, that you are excited to receive?

We fight battles on three fronts.

  • Customers increasingly communicate digitally, first via e-mail and SMS/text, then via social networks, and increasingly to the real-time web.
  • Customers increasingly purchase digitally, via e-commerce, and eventually, purchasing via emerging three-dimensional trends like hologram marketing ... heck, 3-D television is here next year. Just think about a 3-D web experience that integrates holograms in a Twitter/Facebook kind of way. Oh boy.
  • The signal-to-noise ratio in the mailbox degrades as customers continue to shift habits online.

Strategically, we have to have a response to The Death of the Mailbox.

Tactically, we can become more profitable, starting tomorrow, by finding ways to reduce the number of catalogs to customers who have moved beyond the mailbox. We do this by keeping track of the following (what I call 'filtering'):

  • Telephone Orders (skew to catalog).
  • Online orders in the first seven days after catalog in-home date (skew to catalog).
  • Online orders on days farthest away from in-home dates (skew to online).
  • Source of acquisition = Abacus, other co-ops (skew to catalog).
  • Paid/Organic Search on days away from in-home dates (skew to online).
  • Clicks on e-mail campaigns (skew to online).
  • Non-catalog merchandise purchased (skew to online).
  • Uses discount code to purchase, obtained online (skew to online).
  • Urban customer (skew to retail).
  • Referring URLs from social media sites, Twitter, Facebook (skew to the future).
  • Uses your mobile website (skew to the future).

There are an endless number of attributes to focus on. In my projects, I model these attributes, and create a score (called the "organic percentage" ... the percentage of demand not generated by catalog marketing activities).

This helps us solve The Death of the Mailbox. We get to have our cake, and we get to eat it, too. For the audience that loves catalog marketing, we get to keep doing what we've always done. For the ever-increasing audience that has moved online, or is moving in an endless combination of unpredictable micro-channels, we mail far less often, saving our company a bunch of expense and generating a lot of profit, profit that we re-invest in new customers or in new products or the development of micro-channels.

My average client generates between seven and one-hundred times more profit than the cost of a typical Multichannel Forensics project, just on the filtering component of the project alone. In other words, a $15,000 project yields $100,000 to $1,500,000 profit ... most often around $500,000 profit for a $15,000 project, depending upon the targeting strategies already employed by the client.

In other words, filtering works. And your team can do the filtering on your own, the tools are available!

The Death of the Mailbox doesn't have to be a bad thing. We just have to be strategic about it ... keeping our existing strategies in place for the customers who like this style of relationship --- using filtering strategies to cut back on mailings to the audience that is moving away from the mailbox, while employing online micro-channels that truly increase profit.

We'll get through this transition!

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