February 06, 2019

What Does Bifurcation Actually Look Like At A Typical Catalog Brand?

The table below shows the results of a typical Catalog Circulation Simulation (you'll need to click on the image to see it properly - heck, print it and put it in your office for easy reference).

The housefile is grouped into segments of 5% of the 0-60 month file. They were ranked as of January 31, 2018 ... then I measured actual performance in the year ending January 31, 2019.

Finally, I ran my Catalog Circulation Simulation to quantify the optimal number of catalogs to mail, after factoring in organic demand (demand not driven by catalogs).

Again, I'll ask two questions ... because if you answer yes to each question you already know what I'm about to say.
  1. Do you measure your Organic Percentage?
  2. Do you run Catalog Circulation Simulations?
Look at Rank = 1 ... the best 5% of the catalog file:
  • Currently mailed 14.4 catalogs per year.
  • Could be mailed 50.0 catalogs per year.
These customers are so darn profitable that this brand is woefully under-contacting the customers.

I know, I know, 85% of my catalog audience is going to balk at this finding. Well, I learned the simulation strategy when I worked at Nordstrom and we mailed our best customers more than a hundred times a year and I scoffed at what we were doing and demanded mail/holdout tests and then learned that the very top of the file could practically be mailed an infinite number of times.

Ok, but that only works for the "best-of-the-best" ... and each brand has a different number of customers that fit this criteria. Most catalogers have an "actionable" number of customers that can be acted upon.

Look at how customers were contacted.
  • Rank 1 = 14.4
  • Rank 4 = 12.6
  • Rank 7 = 10.5
  • Rank 10 = 8.5
  • Rank 13 = 7.0
  • Rank 16 = 5.6
  • Rank 20 = 3.1
You like that nice, smooth-looking curve, don't you? It's what you've become accustomed to over the past thirty years.

Get ready to be angry with me. Here's what the simulation shows for an "optimal" solution.
  • Rank 1 = 50.0
  • Rank 4 =   8.0
  • Rank 7 =   3.0
  • Rank 10 = 2.0
  • Rank 13 = 1.0
  • Rank 16 = 1.0
  • Rank 20 = 1.0
This is the very definition of BIFURCATION. 

The file has literally split into two pieces.
  1. A small number of crazed catalog shoppers who should be contacted weekly.
  2. A huge number of customers who "shop the brand" and could care less about catalogs.
In the simulation above, the brand makes about $5.6 million more profit by figuring out how to take care of the best customers ... and then makes about $3.8 million more profit by figuring out how to mail far fewer catalogs to everybody else. On a hundred million in annual sales, the brand makes more than $9 million in incremental profit.

Your mileage will vary.

But I've run enough of these simulations to know that I'll be able to demonstrate the same dynamic in your brand.

Catalog Marketing has been split in two ... gradually over twenty years, all-of-a-sudden in the past three years. 

Alright, I've shared this information with you for free ... time for you to tell me why you will or will not implement the findings ... contact me at kevinh@minethatdata.com and share your thoughts - especially if you don't plan on acting on what has been shared here ... what stops you from implementing the findings?

P.S.: Also let me know if your favorite catalog vendor isn't breaking down your door tomorrow to get you to mail more to your very best customers, ok? It says something about the industry if your favorite catalog vendor isn't sitting in your office at 9:00am tomorrow morning asking you to act on what I've shared here.

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