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).

Page Counts When Bifurcation Hurts All Other Customers

Yesterday we talked about the fact that best catalog customers (a minority of your file) deserve MANY catalogs that are merchandised with...