July 15, 2018

Catalog Craig Paperman on the Amazon Toy Catalog

Yes, this is business fiction. If this isn't your thing, take a break and read this article about Build-A-Bear and their promotion that generated so much demand that they ran out of product and became the punching back of the trade journal fraternity for being so successful.


Kevin:  Craig, you look like you just found out that your adjustable rate mortgage is about to adjust to 10%. What's wrong?

Catalog Craig Paperman:  I'm just stunned.

Kevin:  Stunned?

Craig:  I can't believe that Amazon is going to put out a toy catalog. It's proof that the omnichannel thesis was right all along. 

Kevin:  Oh stop it.

Craig:  The catalog will be handed out at Whole Foods. It's pure omnichannel strategy played out on the World's Largest Stage.

Kevin:  You look like you are about to pass out.

Craig:  Can you imagine what happens when that thing drops? They'll need help. They'll need somebody like me to make sense of the catalog. Delivery stats. Do you think they'll be able to forecast what percentage of the book has been delivered by noon of Tuesday of the in-home week?

Kevin:  Do you think they'll care?

Craig:  Key codes. Who is guiding them on their key code strategy?

Kevin:  What is this, 1998?

Craig:  How will they track how successful the catalog is? Do you think they know that they need a credible matchback strategy? And how will they acquire new names? Do you think they'll take names from the co-ops? Will they contribute their names to the co-ops? Will we finally get access to Amazon names? Oh my God, I'm getting dizzy thinking about the possibilities.

Kevin:  I'm sure they'll have sophisticated mail/holdout tests to read the results.

Craig:  No, I mean matchbacks. They need matchbacks. Mail/Holdout test results are for geeks. You lose demand when you hold out names. Everybody knows that.

Kevin:  If they mail the entire housefile then the matchback strategy will say that all orders in the United States are due to the catalog.

Craig:  Yes. YES!! Omnichannel strategy truly does work. Finally, finally we have validation for a decade of shouting into the wind.

Kevin:  And to think this may never have happened had Private Equity folks not employed an omnichannel strategy coupled with a debt load that allowed Amazon to take just enough share to plow Toys 'R Us into the ground.

Craig:  It's beautiful.

Kevin:  Is it?

Craig:  Yes.

Kevin:  Can you think three steps ahead and see what happens to a traditional catalog brand in 2021 when Amazon gets all the paper and the cataloger is priced out, or are you locked into an omnichannel gaze?

Craig is not responsive.

Kevin:  Craig?

Craig:  Do you think Amazon will offer me stock options if I consult with them?

Kevin:  Your vendors are killing you off while they boost up Amazon, can't you see that?

Craig:  $300,000 a year plus five million dollars of stock options paid out in 25% annual installments. Ohhhhhhhh.

Kevin:  Your printers constrain demand so that they can squeeze more money out of you and then Amazon enters the market and that will only cause paper prices to increase. How does that help you?

Craig:  Do you think Amazon has a credible square inch analysis strategy? In house? Would anybody there be smart enough to know they need one?

Kevin:  The USPS really seems to see that their future aligns with Amazon, don't you think?

Craig:  I could bring RFM to Amazon. They don't need AI or Big Data or Machine Learning. They just need RFM.

Kevin:  Alright.

Craig:  Do you think Amazon knows all the postal discounts they get if the ramp-up the page counts? Somebody has to tell them. That somebody could be me. Me!!

Kevin:  Can you imagine how quickly the Seattle-based paper rep will lobby to move into their offices on Pill Hill? 

Craig:  Do you think Amazon knows that they need to stuff the first twenty pages of the catalog with winners? Will they leverage URL callouts on the bottom of each page, driving customers to their website? Will an Amazon Go store know I've received the catalog when I enter the store? Ohhhhhhhhh!!!!

Kevin:  You aren't listening to a word I'm saying, are you?

Craig:  Maybe they'll ink-jet a message on the back cover to take the catalog in to your closest Whole Foods store to get a discount on organic orzo. Think of the omnichannel possibilities. Dot-whacks. They could employ snipes and dot-whacks. Targeted inserts. 

Kevin:  That's what you are thinking about?

Craig:  They could push a digital version of the catalog to my Kindle Fire. My knees just buckled.

Kevin:  Didn't you always hate Amazon?

Craig:  Who is going to manage their catalog request program?

Kevin:  You said that Amazon was the "Evil Empire".

Craig:  They'll keynote a session at Cohere One's event next year, titled "Catalogs, The Final Piece Of The World Domination Puzzle, Sponsored By Quad Graphics and Epsilon and Belardi-Wong and Forty Other Industry Vendors Who Want A Small Piece Of The World Domination Puzzle".  

Kevin:  That sounds about right.

Craig:  And you couldn't blame the vendors because they need to survive and Amazon could be their meal ticket to success.

Kevin:  That's how capitalism works.

Craig:  And then NEMOA, they'll be at Spring NEMOA 2019 and we'll give a 24 year old at Amazon an up-and-coming catalog professional award and the record-attending crowd of 1,740 will give Amazon a standing ovation. The industry will bathe Amazon with love.

Kevin:  They'll give a standing ovation to the company who just two months ago the industry agreed was running them out of business?

Craig:  Yes, because Amazon will be part of the family.

Kevin:  What family?

Craig:  The Catalog Family.

Kevin:  That's what this is about?

Craig:  They're executing like we want them to execute. That's all that matters. That's why we've loved L.L. Bean and all of the other New England based catalogers all these years. 

Kevin:  #ohboy

Craig:  Catalog Craig Paperman ... Managing Editor ... Amazon Catalog Division.

And with that, Catalog Craig Paperman loses consciousness ... 

July 11, 2018

What Is Your Version Of The $1.50 Costco Hot Dog?


Now discuss what your version of the $1.50 hot dog is at the company you work for. 

Merchandise can be a low-cost / no-cost customer acquisition or customer awareness tool.

July 09, 2018

The Secret To Success In Business Is Doing Something That Nobody Wants To Copy



Time will tell if this yields sales/profit.

But it gets the job done in terms of low-cost / no-cost awareness.

And it's not something you are likely to copy, right?

July 08, 2018

Sales Tax

You've been told that having to collect sales tax will kill your business.

Think about it this way. You buy from Amazon ... you pre-pay for shipping, more than a hundred dollars a year ... then you pay sales tax in most states on many products, and you're not getting 40% off, are you? Has it stopped you from buying from Amazon? Has it stopped Amazon from becoming "Amazon"?

I've spent more than twenty years studying what happens when a retail brand opens a store in a new market and has to collect sales tax in that market (on online transactions). There's a modest, short-term hit to online business (mostly because customers shift behavior from online to the new store) followed by normal sales trajectory online.

When we sell something the customer wants to buy, sales tax is largely irrelevant. 

Don't let third parties freak you out. Their narrative/agenda is designed to improve their business. Your job is to improve your business. Find some merch that your customers love and try harder to sell it, ok?


July 02, 2018

What Is The "Right" Investment Window?

There are six sub-tables in the table displayed here.


The first sub-table shows you how much profit you generate per year by acquiring customers at a PPNC (profit per new customer) of +$10. This is a no-brainer, isn't it?

The second sub-table shows you how much profit you generate per year by acquiring customers at a PPNC of $0. This is a no-brainer, isn't it?

The third sub-table shows you how much profit you generate per year by acquiring customers at a PPNC of -$10. You lose money acquiring the customer, then you generate profit thereafter. This is also a no-brainer, you generate enough money within a year to offset the loss and still make money. Most of my client base is willing to do this.

The fourth sub-table shows you how much profit you generate per year by acquiring customers at a PPNC of -$20. You lose money acquiring the customer, you break-even after a year, and then you make money in subsequent years. Most of my client base is willing to do this.

The fifth sub-table shows you how much profit you generate per year by acquiring customers at a PPNC of -$30. You lose money acquiring the customer, you do not make up the loss within a year, and then you make money in following years. Most of my client base is UNWILLING to do this.

Look at the sixth sub-table, at the bottom of the image.

When you sum all profit, you learn that the best thing for long-term health is to lose a ton of money acquiring customers. After five years, you make an additional $5.5 million by acquiring customers at a loss of $30. In order to do this, you have to sub-optimize your business today ... you'll lose more money this year in order to make a ton of money long-term.

This is the "Amazon" strategy ... losing money forever or breaking-even forever and then all of a sudden you own the world and everybody is stunned into silence.

You run these scenarios with your business, right?

RIGHT?

You have no choice but to run these scenarios for your business.

When you come back from the July 4 holiday, be sure to run the scenarios and find out what the best strategy is for your business, ok?

July 01, 2018

Investment Window

Let's run a little simulation, ok?

Let's say that you can acquire customers in 100,000 customer chunks. Your profit per new customer is as follows:
  • Best Sources = $10 profit per new customer.
  • Good Sources = $0 profit per new customer.
  • Average Sources = -$10 profit per new customer.
  • Below-Average Sources = -$20 profit per new customer.
  • Poor Sources = -$30 profit per new customer.
Let's also say that each new customer pays you back a specific amount of profit per year.
  • 1st Year after 1st Purchase = $20 profit.
  • 2nd Year after 1st Purchase = $14 profit.
  • 3rd Year after 1st Purchase = $10 profit.
  • 4th Year after 1st Purchase = $7 profit.
  • 5th Year after 1st Purchase = $5 profit.
What is the "right" new customer acquisition strategy to maximize the potential of your business?

Do your homework, and we'll look at possible results tomorrow.

Catalog Craig Paperman on the Amazon Toy Catalog

Yes, this is business fiction. If this isn't your thing, take a break and read this article about Build-A-Bear and their promotion t...