May 12, 2013

Dear Catalog CEOs: Decoupling of Demand

Dear Catalog CEOs:

It's happening ... and it's happening largely opposite of what you were told.

I remember being at Eddie Bauer, way back in 1998.  Our e-commerce business went from a million in 1996 to something like five million in 1997 to about fifteen million in 1998.  We observed a funny thing about that fifteen million in demand in 1998.
  • It was heavily skewed to male-gender merchandise.
In other words, the demand generated online reflected the audience that was using the internet in 1998.  And when demand launched toward sixty million in 1999, well, those thoughts went out the window.  Demand was more reflective of total direct channel demand, and the concept of "multi-channel integration" was born.

That's what folks focused on.  Integrate the business.  Make everything the same, same merchandise, same offers, same creative ... same same same.

This made sense (to some) as the baton was handed from old-school cataloging to modern e-commerce.

But once the baton was formally passed, a funny thing happened.

The trends that we observed at Eddie Bauer, way back in 1998, have reappeared ... in reverse.

E-commerce now dominates the share of demand generated by the vast majority of catalogers.  But go take a look at the items that customers shopping your call center purchase.

You remember your call center, right?  It's the building with old-school corded phones that took in 90% of orders in 1996 ... that same building that now captures 2% to 22% of orders today (unless your customer is June, of course).

Rank-order all items that sell at your contact center ... first to number one hundred.  Then compare those items against the top-selling items from your pay-per-click program, or the top-selling items from your email marketing program.

Yup, they're different.

In other words, we're in the process of decoupling demand.  All of the integration activity of the past ten or fifteen years is becoming much less important, as small tribes of like-minded customers pick and choose the channel that they prefer.

This is our future ... it's opposite of what we were told.  Small tribes of customers, with unique preferences, shopping the way they want to shop, buying the merchandise they want to purchase.  Our job, of course, is to respond to this trend in the most profitable way possible.  

Sameness seldom results in the most profit.

It's time to get busy serving unique cohorts of customers.

Profit per New Customer

It's common for folks to measure cost per new customer. Total Marketing Cost = $10,000. Total New Customers = 130. Cost per New C...