January 21, 2019

What Is The Right Answer?

Continuing our catalog discussion, I'm going to show you that there isn't a right answer when it comes to "what to do".

Below I illustrate a darn good customer - but an average catalog customer - one generating 50% of demand organically (i.e. without catalogs). This customer receives 22 catalogs a year, at an average of 80 pages each.

But what "should" the customer receive?

Below I feature my "Catalog Optimizer". It determines what the "Right Answer" theoretically is. There's a lot of data in the optimizer. Rows = Average Pages per Contact. Columns = Number of Contacts. The top portion of the table shows catalog-generated demand. The bottom portion of the table shows catalog-generated profit.

Here we go - click on the image so that you can see the profit results:

I want to point out four combinations that generate the same approximate amount of profit.
  • 20 Contacts, 32 Pages per Contact.
  • 14 Contacts, 48 Pages per Contact.
  • 10 Contacts, 64 Pages per Contact.
  •   7 Contacts, 88 Pages per Contact.
This company mailed the customer 22 Contacts at 80 Pages per Contact.

The four examples illustrated here tell us that there is no right way to get to the right answer. All we know is that this company is doing the wrong thing.

Here are a whole bunch of combinations that generate optimal profit (> $4.50, annually).
  • 6 Contacts between 104-152 Pages.
  • 7 Contacts between 64-112 Pages.
  • 8 Contacts between 56-96 Pages.
  • 9 Contacts between 48-80 Pages.
  • 10 Contacts between 40-72 Pages.
  • 12 Contacts between 32-56 Pages.
  • 14 Contacts between 32-48 Pages.
  • 16 Contacts between 32-40 Pages.
  • 18 Contacts between 32-40 Pages.
  • 20 Contacts of 32 Pages each.
Tell me what you observe?

This is a "good" customer. If you are going to mail this customer, you do one of three things:
  1. Few Contacts, Many Pages.
  2. Average Contacts, Average Pages.
  3. Many Contacts, Few Pages.
What doesn't work?
  • The existing strategy of many contacts and average pages.
Tomorrow, we'll look at a great catalog customer ... be ready for a different story.

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