December 28, 2015

Math Dictates The Response To A Shorter Catalog Life

Larger companies run page count and circulation depth simulations. The simulations allow them to understand what an optimal page count and circulation depth might look like, given different productivity levels.

Here's what your choices might have looked like a few years ago.


The red number in the profit table represents what your strategy looked like ... 1,500,000 circ depth and 128 pages. The green numbers represent optimal profit. You weren't far from optimal profit ... so things were great.

Then, the life of a catalog became shorter. Customers threw out our catalogs, quickly, shortening the effective life of any given catalog. Based on the data I'm evaluating, this results in a +/- 10% productivity hit in the past 1-2 years (mind you, the business isn't taking a 10% productivity hit ... just the catalogs are).

 Now look at what happens to our grid.


Look at the green numbers - the optimal profit numbers. Notice that optimal profit "stretches" in multiple directions. Either circ depth is shallow at high page counts, or circ depth is deep at small page counts. That's it. Those are the two choices. And you cannot prospect with a large piece, as productivity declines - you cannot circulate the larger piece to prospects - the math doesn't work.

Market forces are pushing us toward smaller, more frequent catalog mailings.

Guess what? Here's what the story looks like ... with a 50% productivity hit (hint - 2023).




Well into the future, it's low page counts with modest circ levels ... or almost no circ and large page counts ... should -50% happen to catalog productivity.

If the life of a catalog shrinks more in 2016/2017, we will be left with no choice but to mail small catalogs ... and we will have to greatly bump the productivity of the small catalogs by personalizing the merchandise assortment to each individual customer. I know, that's something that's hard for catalogers to manage ... but we'll have no choice. That's what the math tells us.

The 2016 Catalog Thesis is becoming clear.
  • Housefile names are somewhat protected by increasing organic percentages.
  • Acquisition name performance is not great, and is being impacted by a shortened "life of a catalog".
  • Math dictates that we will have to mail smaller catalogs in response.
  • Smaller catalogs generate less demand.
  • We will have to mail smaller catalogs more frequently.
  • Should the life of a catalog continue to erode, smaller catalogs will struggle to perform well, requiring us to personalize the merchandise assortment to each individual customer, based on customer history (both our history and recent co-op history).
  • In response to these trends, catalogers are going to take one of four paths (more on this to follow).

2 comments:

  1. Kevin, in regards to personalizing the catalog merchandising mix, do you see this having several variations of a catalog (Widget version, Wudget version, Wedget version) and then sending the appropriate version based on previous purchase data), or do you see this has true 1:1 personalization, where no two people receive the same merchandising mix in a catalog? If the later, how does one even begin to approach that?

    ReplyDelete
  2. I have catalog clients who already send 20+ versions of one catalog to customers with different merchandise preferences.

    You can manage this with twenty true, unique versions of a catalog.

    You can manage this like you have 64 unique pages, and based on purchase history, you pick and choose the pages that align with the customer and then print a 36 page catalog, with a unique pagination order based on customer preference.

    You can have the Widget / Wudget / Wedget catalogs, and manage three of them ... still better than 1 catalog with 64 pages ... for the best customers, send all three versions at one time, why not?

    My personal belief is that you will have pages ... 180 unique pages, and you will pick and choose the 36 or 48 or 64 that best align with what the customer previously purchased, and then you'll paginate them in a way that is unique for each customer.

    All of this is going to require a new generation of creative folks - in e-commerce, nobody worries a bit about the fact that every customer sees a different version of the home page or a key landing page. That kind of thinking will merge with printer capabilities.

    That's what I see happening. Of course, we all get to decide what the future looks like, so it won't look like what I am prescribing. But some element of what I am talking about will become normal, the math dictates it.

    ReplyDelete

Fabulous Article

This is maybe a year old, +/-, and is worth a year of consideration if you sell apparel: https://www.bloomberg.com/graphics/2018-death-o...