Dear Catalog CEOs:
This one comes up a lot. I'm analyzing customers who last purchased forty-eight months ago. On an annual basis, you'll mail these customers six times a year. On an annual basis, I'll measure that you're losing $2 of profit (per customer) mailing these customers. On an annual basis, I'll find other customers (those who last purchased 33 months ago or 42 months ago or 61 months ago) where you are losing a boatload of money.
On an annual basis, I'll calculate that 50% of the demand generated by this audience is "organic", generated without the aid of catalog marketing.
On an annual basis, I'll find you a half-million or a million dollars of profit, by cutting way back on the number of catalogs you send to this audience.
And that's when you start to howl at me about my recommendation!
- "It's foolish to get a little more profit. We need to mail these folks, or maybe they won't ever come back" (ignoring that I just said that half of their demand happens anyway if you don't ever mail those customers again).
- "We like losing money here because it is cheaper to lose money here than to acquire a new customer by renting names from Abacus" (we like losing money?).
- "If we don't mail these customers, we'll have a weaker housefile three years from now" (remember, half of these customers buy without mailing catalogs, take your savings, and go find a new customer ... now your file is growing, not shrinking).
- "Online customers aren't very profitable, we need to keep mailing these loyal catalog buyers" (remember, this customer hasn't purchased in four years, just exactly how loyal is this customer?).
In 2011, the world is very different.
After excluding the 65+ rural customer, your customer base always has the opportunity to visit your website and purchase something. Why do you view this as being a bad thing?
Instead of mailing 148 pages six times a year to a customer that has almost no chance of buying, why not craft a strategy that saves 75% of the ad cost, maintains 85% of the purchases, and increases profit?
- Eliminate 148 page contacts.
- Add 48-64 page contacts.
- Properly account for the "organic percentage" ... ignore flawed matchback results by executing proper mail/holdout tests.
- Increase profit.
Or hire me, and I'll help you modernize the process, increasing profit as well!
Thank you for a awesome article.You have given me some ideas and a different way to to write articles.ReplyDelete
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