September 28, 2011

Demand Per Full Email, or DPFE

Otherwise known as DPFE, "Demand per Full Email" is simply a metric that standardizes the amount of space an item is offered in an email campaign.

Imagine an email campaign that generates \$0.20 per customer.  The campaign has four items featured.
• Item #1 = 60% of the space, \$0.10 per customer.
• Item #2 = 20% of the space, \$0.05 per customer.
• Item #3 = 10% of the space, \$0.03 per customer.
• Item #4 = 10% of the space, \$0.02 per customer.
We calculate DPFE as follows:
• Item #1 = \$0.10 / 0.60 = \$0.167 DPFE.
• Item #2 = \$0.05 / 0.20 = \$0.250 DPFE.
• Item #3 = \$0.03 / 0.10 = \$0.300 DPFE.
• Item #4 = \$0.02 / 0.10 = \$0.200 DPFE.
Now, obviously, there are problems with the methodology.  That being said, don't you want to know that the featured item was actually the least productive item in the email campaign?

September 27, 2011

Merchandise or Channels?

I recently conducted a study for a company. The results should be of interest to you.
• After controlling for purchase frequency, each additional merchandise division a customer purchased from was worth ten times as much as each channel the customer purchased from.
Nobody in the marketing world publishes this type of information.

This is not uncommon, folks.  The range of benefit changes (sometimes 2x as important, sometimes 10x as important, sometimes 25x as important).  Still, the following holds true:
• Merchandise is usually more important than Channels
Go do something positive with this fact!

September 26, 2011

You have many customer segments.

One of the segments that is in decline is the "1x Existing Buyer" segment.  These are customers who purchased just one time last year, and were existing customers (i.e. were not acquired last year).

Healthy businesses are able to grow loyal buyers.  They are also able to grow infrequent buyer segments.

We're conditioned to look for decreases in loyal buyers as a sign that we are failing.  Look at 1x Existing Buyers ... declines in customer counts in this segment represent a leading indicator of future business problems.

September 25, 2011

Dear Catalog CEOs: We Have Nothing New To Say

Dear Catalog CEOs:

I recently overheard this comment from one of your peers.
• "Honestly, the merchandise assortment is old.  We have nothing new to say to our customers that they don't already know about the merchandise assortment."
Oh boy.

There are at least two things to consider here.
1. To your new customers, everything is new ... they don't know anything yet.  If your annual retention rate is under 40%, then you are constantly speaking to new customers, so you have to repeat a message that you believe is old and stale.
2. If you don't have anything new to say, find a marketer / copywriter / merchant / blogger, and let them do the speaking for you!!  Somebody in your organization has passion for the product, let them exude passion!
If you are out of great things to say about your products, why should the customer care?

September 21, 2011

A Month Of Groupon Subject Line Headers

Here's what you see in your inbox, on a daily basis.  Remember, the email vendor community preaches "timely, relevant contacts".
• 53% Off Massage (that's better than two days ago).
• 55% Off Car Wash & Detail.
• Half Off Massage.
• Up To 60% Off Hair Packages.
• Up To 68% Off Rock Climbing.
• Up To 53% Off Corn-Maze Admission.
• 55% Off Facial.
• 66% Off Coffee-Preparation Course.
• Up To 54% Off Cooking Class.
• Half Off Housewares.
• Up To 79% Off Hot Yoga (good thing I didn't take advantage of the 69% off offer two weeks ago).
• Up To 55% Off Wood Fired Pizza.
• 51% Off Bicycle Tune-Up.
• Up To 71% Off Auto-Detailing.
• Up To 51% Off Tomato Battle (where you and your friends dodge having the vegetable/fruit thrown at you).
• Up To 63% Off Handyman Services (Again? It's the old-school catalog remail!)
• 54% Off Mosaic Art Lessons.
• Up To 53% Off Auto Detailing.
• Up To 54% Off Golf.
• 69% Off Hot Yoga.
• \$10 For Burgers And Milkshakes.
• Up To 52% Off Segway Tours.
• 75% Off Furniture.
• Up To 67% Off Baseball Outing For Two (Minor League).
• Up To 51% Off To See Blink 182 Perform.
• 73% Off Oil Change.
• 52% Off Pilates Reformer Classes.
• 67% Off Photography Classes.
• Up To 63% Off Handyman Services.
Question for you, the email marketing expert:
• How would you attempt to make this more relevant to the end user?  Use the comments section to describe what your strategy would be, and how you would mitigate the revenue you would lose as you become more targeted and relevant.

September 20, 2011

The HiPPO

If you were at the Shop.org conference last week, you heard a keynote presentation from Bill Bass, e-commerce guru at Charming Shoppes.

One of the terms he used in his presentation was "HiPPO", or "Highest Paid Person's Opinion".  This is a term that generates a lot of oxygen out on Twitter.  Data-driven individuals love to point out the folly of the "C-Suite", where decisions seem to not be made based on facts, but rather, on the gut instinct of the person with the biggest salary.

Every one of us have experienced this issue. We get especially frustrated when the opinion is different from our opinion, we seldom point the issue out when the opinion is in agreement with our point of view.

As an analyst/manager, from 1988 - 1997, I railed against the concept of "The HiPPO".  I couldn't believe how decisions were actually made.  I couldn't believe how the departments that I worked in were underfunded while VP positions were being added in large quantities.  I felt frustrated that my data-driven ideas, all seemingly iron-clad and backed up with thousands of pages of tables and charts representing actual customer behavior, were not adopted.

As a Vice President, from 2001 - 2007, I became "The HiPPO".  I hosted hundreds/thousands of meetings, meetings where data was presented, data that I either didn't believe was accurate, or had a philosophical difference of opinion with the presenter of information, leading me to decide something contrary to what the data suggested.

You have to be a VP/SVP/EVP/President/CEO to understand why data-driven arguments are ignored.

And you have to be an Analyst/Manager to understand how frustrating it is to not be listened to.

So let's try to bridge the gap.

There are many reasons why seemingly good ideas are rejected in favor of the opinion of a high-paid Executive.
1. Incorrect Data:  I cannot tell you how many times I sat in meetings, and quickly noticed errors in the data being presented by Analysts/Managers.  The Analyst/Manager believed the data was accurate, but twenty years of experience told me different.  This isn't talked about enough ... audit your results, folks!!  If an Executive doesn't accept your data-driven argument, it is entirely possible that the Executive doesn't believe your data is accurate, and doesn't want to publicly humiliate you.  I've probably done this a thousand times ... after a meeting, I'd speak to the individual in private about the error instead of humiliating the individual in front of his peers.  To the folks in the meeting, I was just a dumb HiPPO.  Please, I'm begging you ... audit your results!
2. Incongruent Strategy:  You're a VP, hosting a meeting, and your Analysts/Managers are presenting something that is 100% opposite of the direction your CEO wants to take the company.  Now, you're in a dilly of a pickle here.  Do you tell your team what your CEO is thinking?  Do you criticize your CEO?  Do you protect your CEO?  Well, it depends, doesn't it?!  So often, you're forced to make a quick decision in a meeting, and that decision results in the rejection of a data-driven argument from an Analyst/Manager.  How you communicate your thoughts to your team might make you look bitter, might make you look like a gossiper, might make you look authentic, or might make you look like a HiPPO.
3. External Data:  This one comes up a lot.  I was recently in a meeting where an Analyst/Manager used Forrester Research data that predicted a mobile/social dominated marketing landscape ... and used this as an argument for making significant changes to today's marketing strategy.  The Executive mentioned after the meeting, to me, that she was looking for the Analyst to find ways to drive sales increases this Fall, not in 2016.  The Executive did not shame the Analyst in the meeting.  Analysts/Managers fall into this trap, it's a confidence trap ... we use external data to try to communicate that we aren't the only ones who are thinking a certain way.  Where possible, Executives seem to value internal customer behavior over external customer research that may not be applicable to the company.
4. P&L Accountability:  This one is hard for the Analyst/Manager to understand.  When an Executive promises to deliver \$50,000,000 net sales and \$5,000,000 earnings before taxes, the Executive isn't going to want to risk not delivering on this promise.  When the Analyst/Manager presents a data-driven idea that, in the eyes of the Executive, has a 50% chance of success, well, you've got problems.  What if the idea results in a 5% reduction in net sales and a 20% reduction in profit?  Yes, the Executive gets fired!  The Analyst/Manager, however, does not get fired.  Given the risk/reward ratio, the Executive is unlikely to side with the data-driven argument.  By the way, Executives operate under the fear of being fired all of the time ... they're not going to tell the Analyst/Manager that one more mistake results in being canned, they're simply going to reject a solid data-driven argument and not communicate why.  And Executives with job security are not necessarily more likely to accept data-driven arguments, either.  The risk/reward relationship in each company is different.  The Analyst/Manager simply needs to understand that the risk/reward relationship is much riskier to the Executive than it is to the Analyst/Manager ... this isn't right/wrong, it "just is".  If you want your data-driven argument to have a better chance of succeeding, publish a predicted net sales / profit range associated with your idea ... for instance, you expect net sales to increase by between \$1,000,000 and \$2,000,000 a year and you expect profit to increase by between \$400,000 and \$800,000 a year.  This frames the argument for the Executive.  Heck, be willing to publish the probability of failure ... you expect your strategy to generate a positive return on investment 70% of the time and you expect it to fail 30% of the time.  Your Executive will likely appreciate your candor.
5. Repercussions:  This is a big deal.  Back in 1994 at Lands' End, I was a Manager recommending a strategy that had significant repercussions on the company ... my recommended strategy was more profitable, but would result in the loss of jobs, among Executives, Managers, Analysts, and Call Center / Distribution Center staff.  My recommended strategy had painful repercussions, and was ultimately rejected.  Nobody wants to go through pain, and people sure don't want to lose their job so that the company can be more profitable!  In other words, you may have a great idea, but some "HiPPO" goes with gut feeling because she knows what the repercussions of your data-driven strategy are.
6. Risk and Comfort and Bridges:  How many times have you heard somebody say "that's not how we do things around here?"  Sometimes, the Analyst/Manger doesn't have the experience to "build a bridge" between the past and the future ... the Analyst/Manager simply blurts out a data-driven strategy that has risk associated with it, and is uncomfortable to the Executive.  Think about your mobile phone ... your phone was the end result of a chain of events over two decades that allowed you to feel comfortable purchasing something via m-commerce.  Take your Android phone and introduce it to somebody in 1992, and you'd cause that individual to freak out!!  A "bridge" was built between land lines and cell phones, between old-school commerce and e-commerce and e-mail and m-commerce, enabling you to see the future and feel comfortable.  An Analyst/Manager is well served to build a bridge between "the way we've always done things" and "the future".
7. Pure Evil:  You are going to run into this.  There are Executives who operate under self-interest.  They lie, the deceive, they manipulate, they do everything possible to benefit their own agenda.  Believe it or not, there are Analysts/Managers who operate this way as well.  In the short-term, Evil has a way of winning.  In the long-term, Good tends to prevail.  Where possible, identify whether you're dealing with typical human shortcomings and forgive typical human shortcomings, or identify the behavior as Evil and deal with it accordingly.
"The HiPPO" problem isn't really a problem, it's a myth that inexperienced folks on Twitter like to perpetuate ... it doesn't address the real issue.

The real issue is "communication".

We have Executives who are unable to or unwilling to communicate what is really going on.

We have Analysts/Managers who are inexperienced, and are unable to communicate effectively.

So instead of labeling somebody as a "HiPPO", think about the reasons that decisions are made, decisions that are opposite of what data suggests.  Could you (Executive or Analyst) communicate differently, in order to facilitate a more reasonable outcome?

September 19, 2011

Three For Two

In the old days of the National Basketball Association, you got three free throws to make two shots.

We need to pay attention to this type of trend.

It is better to mail three 80 page catalogs than it is to mail two 128 page catalogs.

It is better to acquire three online customers at \$10 future profit per customer than it is to acquire two 55+ rural shoppers via print at \$14 future profit per customer (heck, it is better to do both!).

It is better to send three email campaigns per week to your most loyal email subscribers than it is to mail two email campaigns per week to everybody.

Think about the ways you can maximize three smaller events over two bigger events.

September 18, 2011

Dear Catalog CEOs: Comp Segment

Dear Catalog CEOs:

1. Catalog Response Rates.
2. Online Traffic and Conversion Rates.
3. New Customer Counts
None of these metrics do an acceptable job of answering a very important question.
• How is my merchandise offering performing?
Catalog response rates are impacted by channel shift, by competing catalogs, file quality within a segment, offers/promotions, and pages offered in a catalog.  The same concepts hold for your online metrics.  And new customer counts are directly impacted by your customer acquisition strategy.

I'm frequently confronted by business leaders who don't understand how their merchandise offering is performing.  Too often, external factors and strategies impact how merchandise performs ... you offer 30% off and all of a sudden your merchandise is selling 25% better, well, that's not because of the merchandise you are offering the customer, is it?

I like to look at this a bit different than everybody else.  It's going to be hard to eliminate the impact of your promotions and the economy and your marketing strategy and all that stuff.

Here's what I do.
1. I like to isolate a segment of customers ... frequently 0-12 month 2x (in the past year) buyers, as of a date (say August 31).
2. Then, I measure average spend per customer in this segment in the next month (\$9.00).
3. Finally, I compare this metric (\$9.00) against a comparable segment of customers in the prior year in September (say \$10.00).  The difference (9/10)-1 = -10%, this is the "comp segment performance".
This is about as close as I've been able to get to measuring how good customers behave and evolve over time.  Sure, there are a million other ways to do this, so go ahead and use whatever technique you want to use.

That being said, this methodology allows you to clearly identify when business is improving, and when it is tanking.

If you average the performance of each segment across a year, you'll see interesting trends as well.

In almost all of my projects, I'm asked to perform some level of a "comp segment analysis", in order to help the CEO understand how well the merchandising team is performing.

So why not have your analytics guru give this a try?  You'll clearly be able to see the impact of the collapse of the economy, and any perceived improvement in the economy in the past two years.

September 14, 2011

Five Questions To Ask The Experts At NEMOA

You'll probably attend NEMOA's fall conference next week.  We should be thankful for NEMOA, quite honestly, because they didn't abandon the catalog industry, did they?

When you're meeting with experts at NEMOA, here are five questions to ask them.
1. If the average organic percentage for a cataloger with a 55+ rural audience is between 25% and 50%, how does knowing that matchbacks significantly overstate true catalog performance change your approach to catalog marketing?
2. Yet another company is going to a free shipping model.  How do your non-competitive colleagues plan on using the organic percentage to save money that can be used to fund free shipping?
3. If the USPS went to three-day delivery, how would that impact your business model, if at all?
4. Now that so many catalogers possess a 55+ rural audience, what does the catalog customer look like in 2016?  2021?  What is your strategy for dealing with a rapidly aging customer base?
5. Find a catalog brand with at least \$50,000,000 in annual sales who grew by more than 20% in the past year.  What non-catalog strategies enabled this business to grow?  What catalog strategies enabled this business to grow?

September 13, 2011

The Little Guy

When I started this forum in 2006, my goal was to "take care of the little guy".

You, for instance, are the little guy.

• You own a catalog business.
• You are a web analyst.
• You are a marketing executive.
These days, "the little guy" is being pummeled.  You have to buy paper so far in advance that you cannot react to profitable decisions, or you have to have a 68 page catalog because it is "efficient", discouraging you from innovating with a 36 page catalog.  Your software focuses to you to focus on conversions instead of customer relationships.  Or worse, you're a marketing leader who pays your vendor, then your vendor pays for ad space on a trade journal blog where articles are written that make fun of you for not marketing in a way that enables deep, personal marketing connections with customers ... your dollars are used by others in the ecosystem to mock you.

The little guy, in aggregate, has a lot of power, especially when you spend your money with trusted partners that have your best interests at heart.

It might be time to stand up to forces that are trying to align your money with their interests/survival.  Without your money, they have nothing, and are ultimately silenced.

September 12, 2011

Hard Decisions: A Vendor Summit

Ok, you ran your mail/holdout test for a quarter, and you found out that 50% of your housefile demand happens without mailing any catalogs.

I realize that nobody believes this.

Your database provider does matchbacks, and they tell you that you're interpreting the data wrong.  You aren't interpreting the data wrong.

Your printer tells you that you'll get big discounts and efficiencies if you pump up your page counts.  They'll tell you to remail your catalogs to save even more money.  All of this advice, of course, is contrary to what your test results tell you ... your test results tell you to mail fewer catalogs and fewer pages.

Your paper rep tells you that you can get big discounts if you mail more frequently, and if you buy paper well in advance.  You need to be nimble, making decisions closer to in-home dates.

You co-op rep will tell you that if you cut back on customer acquisition, you'll shrink and die.  You know that the organic percentage has nothing to do with customer acquisition, and you also know that it's getting harder and harder to acquire customers with large catalogs.

In other words, it is time to make some hard decisions.

It is time to hold a vendor summit.

Share with them the realities of your business.  Show them your mail/holdout results.  Yes, they're going to tell you how wrong you are.  You aren't wrong, you're only showing them how your customers behave.

Tell them that you don't need to shave another 3% off of their costs.  Tell them that you need solutions that meet the needs of a catalog business in 2012, not solutions that meet the needs of a catalog business in 2002.

It's time to make some hard decisions about our business.  Bring the vendor community in, and share the realities of modern customer behavior with them.

September 11, 2011

Dear Catalog CEOs: Smaller Page Counts

Dear Catalog CEOs:

Last week, we talked about how the organic percentage changes your view of profitability.  We learned that, by and large, your matchback analytics are significantly over-stating the importance of your catalog mailings.  We learned that somewhere between 30% and 65% of your housefile demand will happen if you don't mail any catalogs anymore.

As a result, you're going to mail fewer catalogs to many customers.  You're going to be much more profitable.  And you're going to generate less demand if you do not reinvest the ad cost you save.

Another possibility is to mail smaller catalogs, more often.

Remember, we had an example where we were mailing a customer 12 times a year.  At a 40% organic percentage, only 4 catalogs per year is optimal.

Here's what demand looks like at different page counts.

 Table with a 40% Organic Percentage:  Demand Pages Catalogs 32 64 96 128 0 \$12.00 \$12.00 \$12.00 \$12.00 1 \$14.04 \$14.69 \$15.16 \$15.55 2 \$15.31 \$16.37 \$17.14 \$17.76 3 \$16.40 \$17.80 \$18.82 \$19.65 4 \$17.38 \$19.09 \$20.34 \$21.36 5 \$18.28 \$20.29 \$21.75 \$22.94 6 \$19.14 \$21.42 \$23.08 \$24.43 7 \$19.95 \$22.49 \$24.34 \$25.85 8 \$20.73 \$23.52 \$25.55 \$27.20 9 \$21.48 \$24.51 \$26.72 \$28.51 10 \$22.21 \$25.47 \$27.84 \$29.78 11 \$22.91 \$26.40 \$28.94 \$31.00 12 \$23.60 \$27.31 \$30.00 \$32.20 13 \$24.27 \$28.19 \$31.04 \$33.36 14 \$24.92 \$29.05 \$32.05 \$34.50 15 \$25.56 \$29.89 \$33.04 \$35.61

And here's what profit looks like at different page counts:
 Table with a 40% Organic Percentage:  Profit Pages Catalogs 32 64 96 128 0 \$4.20 \$4.20 \$4.20 \$4.20 1 \$4.64 \$4.76 \$4.81 \$4.84 2 \$4.82 \$4.96 \$5.00 \$5.02 3 \$4.93 \$5.07 \$5.09 \$5.08 4 \$5.00 \$5.14 \$5.12 \$5.08 5 \$5.05 \$5.18 \$5.11 \$5.03 6 \$5.08 \$5.19 \$5.08 \$4.95 7 \$5.09 \$5.18 \$5.02 \$4.85 8 \$5.10 \$5.15 \$4.94 \$4.72 9 \$5.09 \$5.11 \$4.85 \$4.58 10 \$5.07 \$5.06 \$4.75 \$4.42 11 \$5.05 \$5.01 \$4.63 \$4.25 12 \$5.02 \$4.94 \$4.50 \$4.07 13 \$4.98 \$4.86 \$4.36 \$3.88 14 \$4.94 \$4.78 \$4.22 \$3.67 15 \$4.90 \$4.69 \$4.07 \$3.46

Instead of four 96 page catalogs, you could mail six or seven 64 page catalogs ... more contacts, more profit.

Your printer is going to fight you on this ... they are going to make the economics look so poor that they will try to force you into higher page counts.  You'll be presented with charts that suggest "efficiencies".

It's time you did what is right for your customer, not what is right for your printer.  If you do what is right for your customer, you'll generate more profit, and that's what is right for everybody.  If everybody stands up and demands better pricing for the page counts that are, by and large, working more efficiently, then we'll receive more efficient pricing on non-standard page counts.

September 07, 2011

How Do You Deal With The Organic Percentage?

In many of my projects, there are two significant outcomes.
1. You have customers that you are actually under-circulating ... the 55+ rural audience comes to mind.
2. You have the majority of your customer base that you are significantly over-circulating.
At this point, you have choices.
2. You can re-invest the profit in new customer acquisition.  Often, it's better to acquire a new customer at a \$20 profit loss per newbie than it is to reactivate a lapsed housefile buyer at a \$20 profit loss per customer, because in the newbie instance, you have two customers on your file instead of just one.
3. You can re-calibrate your catalog contact strategy.
Point #3 is an important one.  As your organic percentage increases, you will find yourself needing to mail fewer and fewer catalogs.  This will frustrate your catalog marketing team, as they will feel like their contribution to the business is being de-emphasized, and trust me, they don't want to feel like they are being de-emphasized!!

As the organic percentage increases, you'll learn that your page counts will be driven down.  You'll get by with 64 pages instead of 124.

Your printer is going to fight you on this.  They're going to tell you that you achieve "efficiencies" at higher page counts, so they will push you bigger, even though your customer is pushing you to a smaller page count.

Always listen to your customer first, your printer second.  Profit is going to be harder to come by in 2012 and beyond.  The entire delivery infrastructure of our business model is literally crumbling under decreasing volumes and increasing expenses.  We need to do what is right for our customers, not what is right for a crumbling delivery infrastructure.

Remember, as your organic percentage increases, your page counts are going to be driven down.

September 06, 2011

How Organic Demand Plays Out

Once you've executed your mail/holdout groups, you'll realize what your organic percentage is.

Let's take an example where a business sends 12 catalogs a year, and after matchback, believes that it generates \$30.00 across the twelve catalogs.  Assuming zero to fifteen possible contacts, here's what catalog demand actually looks like:

 Catalog Demand Table Organic Percentage Catalogs 20% 40% 60% 80% 0 \$0.00 \$0.00 \$0.00 \$0.00 1 \$4.21 \$3.16 \$2.11 \$1.05 2 \$6.85 \$5.14 \$3.42 \$1.71 3 \$9.09 \$6.82 \$4.55 \$2.27 4 \$11.12 \$8.34 \$5.56 \$2.78 5 \$13.00 \$9.75 \$6.50 \$3.25 6 \$14.77 \$11.08 \$7.39 \$3.69 7 \$16.46 \$12.34 \$8.23 \$4.11 8 \$18.07 \$13.55 \$9.03 \$4.52 9 \$19.62 \$14.72 \$9.81 \$4.91 10 \$21.12 \$15.84 \$10.56 \$5.28 11 \$22.58 \$16.94 \$11.29 \$5.65 12 \$24.00 \$18.00 \$12.00 \$6.00 13 \$25.38 \$19.04 \$12.69 \$6.35 14 \$26.73 \$20.05 \$13.37 \$6.68 15 \$28.06 \$21.04 \$14.03 \$7.01

Here's what organic demand actually looks like:

 Non-Catalog Demand Table Organic Percentage Catalogs 20% 40% 60% 80% 0 \$6.00 \$12.00 \$18.00 \$24.00 1 \$6.00 \$12.00 \$18.00 \$24.00 2 \$6.00 \$12.00 \$18.00 \$24.00 3 \$6.00 \$12.00 \$18.00 \$24.00 4 \$6.00 \$12.00 \$18.00 \$24.00 5 \$6.00 \$12.00 \$18.00 \$24.00 6 \$6.00 \$12.00 \$18.00 \$24.00 7 \$6.00 \$12.00 \$18.00 \$24.00 8 \$6.00 \$12.00 \$18.00 \$24.00 9 \$6.00 \$12.00 \$18.00 \$24.00 10 \$6.00 \$12.00 \$18.00 \$24.00 11 \$6.00 \$12.00 \$18.00 \$24.00 12 \$6.00 \$12.00 \$18.00 \$24.00 13 \$6.00 \$12.00 \$18.00 \$24.00 14 \$6.00 \$12.00 \$18.00 \$24.00 15 \$6.00 \$12.00 \$18.00 \$24.00

Make sense?

Here's what total demand looks like:

 Total Demand Table Organic Percentage Catalogs 20% 40% 60% 80% 0 \$6.00 \$12.00 \$18.00 \$24.00 1 \$10.21 \$15.16 \$20.11 \$25.05 2 \$12.85 \$17.14 \$21.42 \$25.71 3 \$15.09 \$18.82 \$22.55 \$26.27 4 \$17.12 \$20.34 \$23.56 \$26.78 5 \$19.00 \$21.75 \$24.50 \$27.25 6 \$20.77 \$23.08 \$25.39 \$27.69 7 \$22.46 \$24.34 \$26.23 \$28.11 8 \$24.07 \$25.55 \$27.03 \$28.52 9 \$25.62 \$26.72 \$27.81 \$28.91 10 \$27.12 \$27.84 \$28.56 \$29.28 11 \$28.58 \$28.94 \$29.29 \$29.65 12 \$30.00 \$30.00 \$30.00 \$30.00 13 \$31.38 \$31.04 \$30.69 \$30.35 14 \$32.73 \$32.05 \$31.37 \$30.68 15 \$34.06 \$33.04 \$32.03 \$31.01

And finally, here's what total profit looks like:

 Total Profit Table Organic Percentage Catalogs 20% 40% 60% 80% 0 \$2.10 \$4.20 \$6.30 \$8.40 1 \$3.08 \$4.81 \$6.54 \$8.27 2 \$3.50 \$5.00 \$6.50 \$8.00 3 \$3.78 \$5.09 \$6.39 \$7.70 4 \$3.99 \$5.12 \$6.25 \$7.37 5 \$4.15 \$5.11 \$6.08 \$7.04 6 \$4.27 \$5.08 \$5.89 \$6.69 7 \$4.36 \$5.02 \$5.68 \$6.34 8 \$4.42 \$4.94 \$5.46 \$5.98 9 \$4.47 \$4.85 \$5.23 \$5.62 10 \$4.49 \$4.75 \$5.00 \$5.25 11 \$4.50 \$4.63 \$4.75 \$4.88 12 \$4.50 \$4.50 \$4.50 \$4.50 13 \$4.48 \$4.36 \$4.24 \$4.12 14 \$4.46 \$4.22 \$3.98 \$3.74 15 \$4.42 \$4.07 \$3.71 \$3.36

If, for a given customer, the organic percentage is 20%, then 12 catalogs is the right number to send to the customer.

If, for a given customer, the organic percentage is 40%, then just 4 catalogs is the right number to send to the customer.

If, for a given customer, the organic percentage is 60%, then just 1 catalog maximizes profitability.

And if, for a given customer, the organic percentage is 80%, then you are better off not mailing any catalogs to the customer.

Can you see how you end up dramatically over-circulating to your housefile when you believe in your matchback analytics?

On Thursday, we'll talk a bit about what you do with the money you save when you learn how significant an impact the organic percentage has on your business.

September 05, 2011

Dear Catalog CEOs: How You Over-Circulate

Dear Catalog CEOs:

Be honest, you love your matchback algorithms, don't you!

And for good reason.  Matchback algorithms validate the need for a catalog.  We like the belief that we mail a catalog to a customer, and then the customer visits your website to place an order.

This hypothesis works as long as you mail the customer once or twice a year.

Once we mail the customer at least nine times a year, we make a critical mistake.  You see, each matchback window is about six weeks long, so we assume that any online order is associated with a catalog.

At seventeen mailings a year, you have a whole bunch of three week matchback windows, so every single online order is credited to a catalog.

The reality is that once you mail a customer nine or more catalogs a year, you make many mistakes, mistakes that cost you a half million, a million, or two million dollars of profit per year.  The vendor community doesn't mind this, because the more mistakes you make, the more you use their services ... you buy more paper, you print more catalogs, you rent more names, you pay for more postage.  The entire vendor ecosystem benefits every time you over-credit your catalogs with online demand.

And because you don't want to lose demand, you and your marketing team won't execute holdout tests.  As a result, you never get to see just how much demand still happens when you stop mailing catalogs to housefile customers.

My clients and I, however, do get to see how much demand still happens when you stop mailing catalogs.  If you're an old-school cataloger with a 60+ year old customer base, you'll still get 30% of your housefile demand (your mileage will vary ... knowing the exact percentage is really important).  If you're an average cataloger, you'll still get 45% of your housefile demand.  And if you have a younger customer base, you'll still get 65% or more of your housefile demand.

This means that you're wasting a ton of money ... maybe 20% to 30% of your housefile ad costs don't need to be spent.  That's a lot of bacon!

Do me a favor.  Set up a three month holdout test.  Randomly sample 10% of your 12-month buyer file, and split it into two groups.  The first group receives catalogs normally.  The second group is not allowed to receive one single catalog for the next three months.

At the end of three months, measure the difference between the mailed group, and the holdout group.  Then come talk to me about how we determine the optimal number of catalogs to send to a customer.

Tomorrow, we'll take a look at what the optimal contact strategy might look like.

September 01, 2011

Gliebers Dresses: The Connecticut Mail Order Association Fall Conference

You're heading into a Holiday weekend, so why not enjoy a little content from your old friends at Gliebers Dresses?

In this episode, the Leadership Team gives the keynote at the Connecticut Mail Order Association Fall Conference.  See what happens when Roger Morgan, Meredith Thompson, and Lauren Fetzer are peppered by an energetic audience of Catalog Industry Executives.

And if you want to see how the team got to this point, purchase the e-book ... Gliebers Dresses, Catalogs on Trial (click here to purchase).

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