September 09, 2012

Dear Catalog CEOs: Recent Questions

Dear Catalog CEOs:

There have been many, many interesting questions over the past few weeks.  Let's address some of your questions.

Question:  You frequently talk about Judy, Jennifer, and Jasmine.  Sometimes you talk about Jadyn, a future customer who is currently 10-15 years old.  Do you think we can train Jadyn to love direct mail the way we love direct mail?  Well, maybe.  What do you think the probability of a younger customer falling in love with direct mail is?  Be honest!  We know that when Jasmine was 10-15 years old, we couldn't possibly have imagined that she would be using Facebook and Twitter and Pinterest ... for they didn't even exist when she was 10-15 years old.  So we can't possibly forecast what Jadyn will do, nobody can.  But we can probably surmise that her future is more closely aligned with modern technology.

Question:  I love direct mail, but your constant discussions about Judy, Jennifer, and Jasmine suggest that there is a limited window of opportunity for direct mail professionals. This has significant implications for my career.  It almost suggests that there is a limited window of opportunity for my career aspirations, as well.  What will happen to me?  Oh boy.  You know, I see the world the way I see it because I perform what are called "annual analytics".  I analyze how customers are evolving and changing over the past five years.  This allows me to see things that folks who analyze marketing campaigns never get to see.  I can clearly see a shift.  Jennifer is aligned with Amazon, discounts, promotions, that kind of thing.  Jasmine is clearly not direct mail responsive, though there are always exceptions.  What I have learned is that there is a lot of sand to play in, when it comes to the "how is the customer transitioning" realm.  I've learned that more people want you to explain how the transition is happening than people who want you to learn all of the skills that are currently being learned by modern, younger marketers.  Find a reason to be relevant.

Question:  Why do you talk so much about merchandise?  I recently told somebody that merchandise analysis is a lost art.  I sat in meetings at Lands' End in the early 1990s, where we put each spread in a catalog up on the wall, color codes ... Gold (30%+ profit rate), Green (20% - 29% profit rate), Blue (10% - 19% profit rate), and Red (< 10% profit rate).  Marketers, Merchants, Inventory Leaders, and Creative Staffers were all in on the discussion.  The transition to e-commerce eliminated this level of rigor.  Oh, sure, we can easily use a heat map to show what customers clicked on, but that doesn't tell us what drives our business.  Show me a heat map that links customer behavior to company profitability ... go ahead, I'll sit here and wait while you find a link on the internet to such a map.  Merchandise productivity is the secret sauce that fuels our businesses.  Analyzing merchandise productivity should be the top priority of marketers/analysts.

Question:  Why are you so devoted to new customer acquisition?  Everybody knows it costs eight times as much to acquire a new customer as it costs to retain an existing customer.  Why not focus on keeping loyal customers?  I've worked with more than eight-five companies since starting MineThatData in early 2007.  I can point to clients who increased sales by close to 50% within twelve month by focusing on profitable new customer acquisition programs.  I can point to clients who increased sales by close to 20% by focusing on merchandise productivity.  I cannot point to one client who increased sales by focusing on customer loyalty programs.  You can always improve customer loyalty within the context of a campaign.  Unfortunately, campaigns simply shift demand, they seldom create a lasting impact on annual retention rates, orders per buyer, items per order, or price per item purchased.

Question:  You don't share the same marketing attribution reasoning that other share.  Why is that?  Don't you think that attribution is really, REALLY important?  Well, sure, it is important.  But how many attribution practitioners utilize mail/holdout tests?  If you don't know the percentage of sales that happen with no marketing, then all of your attribution work is simply wrong.  When I review attribution work, almost all of it is simply wrong.

Question:  What is the next big idea?  I keep attending conferences and reading the trade journals, and nothing gains traction anymore, meaning nothing new causes a 30% jump in annual net sales.  What is the next big idea?  I think it is time for you to invent the next big idea!  Why do we keep waiting for others to take risks, so that we can copy their successes?  I recently met with a guy who grew his business from $0 to around $2,000,000 in annual sales in just a couple of years, by doing things I haven't seen before.  He copied things other people are doing, then just put his own twist on things and created something unique and different.  I'm not confident there are any big ideas left in catalog marketing, there's mostly discipline that most of us choose to ignore ... if we chose to have discipline around catalog marketing, we'd increase sales and profit immediately, and we could use that profit to invest in creating the next big idea.  I've yet to work with a catalog marketer that takes profit from catalog marketing, and reinvests it in search of the next "big idea".

Ok, your turn.  What questions do you have?

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