May 16, 2017

I Don't Believe My Eyes

About two years ago, I got into a real "rhubarb" with a VP at a Major Catalog Vendor that my catalog readers know and love.

This person, who knows math, decided to ignore the simple math of a year-long mail/holdout test outcome.

The results are listed in the table here ... dummied up to protect the innocent.

In total, the test showed that for this retail brand with a catalog channel the organic percentage was 83%. In other words, if you didn't mail catalogs to a 12-month housefile buyer for a year, 83% of the volume would remain. Worse, because so much of the volume was organic, the $17.00 of incremental sales (after subtracting the holdout group from the mailed group) was unprofitable. Finally, the test results showed that the catalog was terrible at driving retail sales ... with 92% of retail sales being organic and just 8% driven by a catalog.

I told the Vendor Executive that this is why this client had cut back on catalog circulation ... you simply run the p&l at a segment level and it made no sense to send 12 catalogs a year when you could send 2-3 catalogs a year.

That's when the Vendor Executive went off.

"You don't actually believe the results of the test, do you? I don't. I don't believe my eyes."

The Vendor Executive then executed the strategy that catalog vendors love to execute. The Vendor Executive used "Mail" results to defend profit.
  • Mail Results = $101 * 40% Profit Factor - $12 Mailing Cost = $28.40 Profit.
This, of course, is Lizard Logic.

You don't look at how the mailed group performed, you look at how the mailed group performed vs. how it would have performed if it had not been mailed.

You look at your results this way, right? 

If we look at results this way, the Vendor Executive loses a lot of money.

The Vendor Executive doesn't want to lose a lot of money.

So the Vendor Executive told me that I should follow industry best practices and "protect" $28.40 profit. Which (of course) I told the Vendor Executive was not the right way to analyze the situation.

The Vendor Executive then told me that they had signed a contract with this retailer and that they would put in the "new" method of analyzing results ($28.40 profit) and that my services were no longer needed.

Think about who gets paid when results are read "incorrectly".
  • The USPS makes more money.
  • Boutique Catalog Marketing Agencies make more money.
  • Merge/Purge vendors make more money.
  • Your Paper Rep makes more money.
  • Your Printer makes more money.
  • Your Co-Ops (3+) make more money.
Who makes less money?
  • You.
Who are you in business to protect?
  • You.
It's time we started choosing to support our own co-workers and our own company ... prioritizing our co-workers over the vendors we pay to provide services ... especially when vendors tell us to sub-optimize our results so that their results are optimized.

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