May 10, 2017

Sending Catalogs To Drive Increases In Retail Sales

With traditional retail in full "implosion mode", it's simple common sense to try to use catalogs to push a customer into a store. Vendors love this stuff - and for good reason ... think about the partnership between boutique agencies and paper reps and printers and the USPS ... all folks who get paid when they tell you what you should do.

Pretend you are J. Crew - you send a veritable plethora of catalogs to customers. Do catalogs push customers into stores? Sometimes.

There are many things that a company like J. Crew would evaluate.

Step 1 = Mail / Holdout Tests:  Vendors ask you to "match back" retail purchases to the four-week life of a catalog. They'll tell you that you are generating a whopping $10.00 per mailing, and then they'll tell you that catalogs are the "linchpin" in your omnichannel strategy. Nonsense. Your catalogs may be important, but their effectiveness is measured via mail / holdout test cells. If the mailed group spends $10.00 in stores and the holdout group spends $9.25, then the catalog drove an incremental $0.75 ... and was most likely unprofitable. Congrats!! But at least you are reporting honest results. It's darn hard to get a customer to get in a car and drive to a store.

Step 2 = Geography:  The best retailers know that catalogs (and email) play a different role via distance to a store. If a customer lives 0-5 miles from a store, the catalog is more likely to drive traffic into the store. If the customer lives 25 miles from a store it is more likely to drive a customer online. If the customer lives 50+ miles from a store and is in a rural area, well, that catalog might drive a customer to the call center. Your mileage will vary, but these are general truths learned across many different projects over the past decade.

Step 3 = Proper Variables:  You'll want historical purchase variables for each marketing channel ... weighted by history. You'll often find that recent online orders are not significant or have negative coefficients ... meaning that a recent online order does not lead to a future in-store order.

Step 4 = Size Matters:  Ignore vendor-industry nonsense and do what is right for your business. Just because the USPS gives you discounts doesn't mean you should have more pages ... you're still paying for paper / printing, right? Maybe a postcard is best, maybe 500 pages is best. Simply do what is right for your customer. I don't have a horse in this race. Just do what is right for the customer (and your p&l).

Step 5 = Merchandise Matters:  Ignore vendor-industry nonsense about an integrated product assortment across channels. Every retailer knows that merchandise purchased in stores is subtly different than what is sold online. If you send out a catalog designed to drive a customer to the call center, don't be surprised if the effort fails to inspire a customer to drive to a store. Merchandise a retail-centric catalog and send it to retail-centric customers. Ignore omnichannel theories that have been proven to not work for a decade (but get vendors paid).

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I See Dead People

From LinkedIn, where I wrote this on Sunday: