Why Can't I Reactivate Or Acquire Customers Anymore?

The theme of the fall is this:

1. It has become really difficult to acquire new customers.
2. It has been difficult to reactivate lapsed buyers for a couple of years now.
3. Consequently, the customer file is being starved.
4. If the customer file is being starved, it is going to be really hard to grow in the future.

In catalog marketing, it is now clear why it has become so hard to acquire new customers.

1. The cataloger focused on a 50 - 75 year old customer ... and has for the past decade.
2. The co-ops spun 50 - 75 year old customers to catalogers "at scale", creating an unprecedented level of laziness and comfort among catalogers. It takes almost no work to order 1,000,000 names from a co-ops.
3. Today's 50 - 75 year old customer was a 40 - 65 year old customer ten years ago ... and the younger half of that generation from ten years ago learned how to shop online. Today, those customers shop online, via online marketing (hint - Amazon), and are not responsive to catalogs like the half-generation ahead of them still respond.
4. Therefore, the co-ops still spin a 50 - 75 year old customer, but a third of this audience (those age 50 - 60) lean toward the online channel, and consequently, do not respond to catalogs like those age 60 - 75.
5. Catalogers, in a thirst to be multi-channel / omnichannel, aligned the whole business around the 60 - 75 year old customer. This means that the merchandise they sell is preferred by customers age 60 - 75, further shutting out younger customers.
6. As a consequence, catalogers need co-ops more than ever for access to older, rural Americans, creating increased competition for the 8,000,000 names that the co-ops routinely spin at catalog brands, lowering response further.

The result is a looming catastrophe, one nobody wants to talk about or acknowledge.

Here's how the catastrophe develops.

• Say you have 100,000 12-month buyers, and a 45% repurchase rate.
• Say you convert 30,000 reactivation candidates to a purchase.
• Say you acquire 25,000 new customers, annually.
• Next year = 100,000 * 0.45 = 45,000 + 30,000 + 25,000 = 100,000 customers next year.

See, that looks ok, right?

Here's what I'm seeing in 2014:

• 100,000 12-month buyers @ 45% repurchase rate = 45,000 customers.
• 25,000 reactivation candidates (down 17%).
• 20,000 new customers (down 20%).
• 2015 File = 100,000 * 0.45 + 25,000 + 20,000 = 90,000 customers.

And here's what that means by the end of 2015.

• 90,000 12-month buyers @ 45% repurchase rate = 40,500 customers.
• 23,000 reactivation candidates.
• 18,000 new customers (down 20%).
• 2016 File = 90,000 * 0.45 + 23,000 + 18,000 = 81,500 customers.

This is the dynamic that is developing.

I've analyzed 29 catalog businesses this year. This is the overriding theme.

1. A twenty-year partnership with the co-ops now results in utter dependency upon the co-ops for new names.
2. The co-ops are spinning 60-75 year old names at catalogers at scale.
3. 60-75 year old customers love merchandise targeted to 60-75 year olds.
4. Names 50 and younger do care about the merchandise targeted to a 60-75 year old customer.
5. This causes the merchandising assortment to evolve faster-than-average, toward the 60-75 year old customer.
6. Therefore, individuals age 40-59 do not respond to the merchandise assortment, when sent a catalog. This forces down reactivation rates, and new customer response.
7. Co-ops respond by further optimizing models for 60-75 year olds.
8. Catalogers respond by mailing more 60-75 year olds.
9. 60-75 year olds receive an ever-increasing number of catalogs, further diluting response.
10. Customer files begin to shrink.
11. Smaller customer files mean the co-ops have fewer names to spin back at catalogers, thereby further diluting performance and increasing competition and reducing response.

This is why so many (not all) catalogers are struggling so mightily in 2014 to find new+reactivated customers.

And e-commerce fanatics ... your time is coming ... mobile is going to ultimately create a similar dynamic in your world. Mobile is siphoning off customers < age 30. Give that trend a decade, and see what happens.