April 29, 2019

Hillstrom's Targeting: It Works For Catalogs Too!

You've heard me talk about the "Organic Percentage" ... over and over again. It's the percentage of sales that are not caused by catalog marketing. Smart catalogers figured this stuff out fifteen years ago (we studied this at Lands' End in the early 1990s ... we called it Cannibalization back in the day).

From a targeting standpoint, you want to do the following:
  1. Mail catalogs to customers with a LOW organic percentage.
  2. Greatly reduce catalogs to EVERYBODY ELSE.
It turns out that our targeting framework works very, very well when evaluating the Organic Percentage.

In our dataset, here are customers with Quality = "A" ... they're the very best customers. I segmented the customers based on prior Weighted Organic Percentage, and then measured in the next month how much customers spent ... organically and via print. Here's the table.

Again, these are the best customers ... and look at what happens in the High Weighted Organic Percentage segment ... those customers generate 79% of future demand organically. Now, because these are best customers, you'll still mail 'em catalogs.

Here's the same table for customers with Quality = "C".

Look at the High Weighted Organic Percentage segment ... they generate 75% of future demand organically. This means they'll only generate $1.19 because of catalogs ... whereas Low Weighted Organic Percentage customers generate $4.26 because of catalogs. If you mail the High segment twice a month, you're doomed!!!!

So please, get a High / Medium / Low Weighted Organic Percentage variable into your targeting framework ... and then capitalize on it!!!

And if you don't have the resources to do that, contact me (kevinh@minethatdata.com) and I'll do it for you, ok?

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