April 04, 2010

Dear Catalog CEOs: But That's Not How I Shop!

Dear Catalog CEOs:

I get a lot of feedback from all of you. And lately, the feedback is directed toward how customers shop.

Our discussions begin with the "target" customer. She (or he) is a 45-64 year old customer. We believe the story that we've been told by industry leadership, that all of these customers love receiving catalogs in the mailbox, they sit down next to the fireplace on a winter evening and get cozy with their favorite catalogs (or they do this at a restaurant ... I watched a couple in their mid 60s wait for their dinner by thumbing through catalogs a few weeks ago).

Then there is another customer. This customer, probably younger than 45 but not necessarily younger than 45, approaches her craft in a different manner. Maybe she loves all of the promos in your e-mail marketing activities. Maybe she can't remember your URL so she punches it into Google and you pay Google $0.50 for the right to direct her to your website. Maybe she loves to comparison shop, and uses Google to have five tabs open at the same time, with product from your competitors being synthesized while she evaluates your offering. Maybe her friend from church posted on Facebook that your brand has wonderful merchandise, so she decided to visit your website.

This customer does not shop via catalogs, she simply behaves in a manner that isn't congruent with the classic catalog shopping experience. She uses technology to make choices. Whether you mail a catalog to her or not is largely irrelevant to her.

Your matchback program grossly overstates catalog performance when analyzing this customer, benefiting all of your vendors but costing you profit.

When I explain this other customer to you, you very often respond with the following sentence:
  • "But that's not how I shop!"
Once this declaration is issued, the conversation shifts. We're now talking about the way you, the CEO, like to shop. You like catalog shopping, don't you?! Because you understand the way you shop, because you don't understand the way this "other" customer shops, you sometimes make an assumption. You assume that your customers are like you, and aren't like her.

Maybe the majority (i.e. 60%) of your customers are like you.

The problem, of course, is that the percentage of customers who do not shop the way you like to shop grows, every single day. Technology and Demographics are transforming what marketing and websites and retail mean to customers.

You see this in your customer acquisition results. 70% of you tell me that it is becoming very difficult to acquire customers anymore via your co-ops or your favorite list organization. You show me metrics that suggest response is falling off of a cliff.

That's because 40% of the target audience no longer shops the way that you like to shop. Ten years ago, that number was 5%, so it didn't make any difference. Today, this fact is slowly killing your business.

Here's a fun exercise. Go to your call center, and pull yourself a focus group of nine individuals under the age of 40. Ask these fine employees who they like to shop with. Then ask these employees how the prefer to "interact" with the brands the like to shop with. Ask them what caused them to place their last order with their favorite brands.

Take notes.

Then sit down with your Marketing Executive, and share the results of your informal focus group. Ask the Marketing Executive to build a marketing plan for 2011 that incorporates the things you heard mentioned by your informal focus group.

And then, you're going to ask me to work on a project with you. We'll use Digital Profiles, Multichannel Forensics, and Online Marketing Simulations to filter your audience into three groups.
  • Those who love to shop via catalogs, requiring catalogs to continue to shop.
  • Those who are the fabled "multichannel" customer audience, customers who can receive a reduction in contacts without damaging the top line.
  • Those who "do not shop like you shop"! These customers require a modern marketing strategy, and can receive far fewer catalogs without damaging the top line.
You may not like what you learn when conducing an analysis of this nature. I'm guessing you would like a significant increase in profitability, right?

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