May 30, 2021

Dear Catalog CEOs: Paper, Product, Prices

This letter is for the third(ish) of my audience that have a strong heritage in catalog marketing. If this isn't your thing, delete, and come back tomorrow.

Dear Catalog CEOs:

Let's see if I've got this right.

  1. You got your panic-centric email from Midland Paper. I have a lot of opinions about the printing industry, none of those opinions are productive.
  2. Your merchandise is sitting on a ship off the coast and you're being asked to pay more to ship stuff from China that may end up sitting on a ship off the coast.
  3. You're going to have to increase prices to offset increased costs.
The paper issue is the least of your problems. Ignore it. You have your mail/holdout test results, and you could cut 40% of your circulation and not see much impact while being so much more profitable. Stop worrying about your vendor partners and start worrying about your customers.

Speaking of customers, when you pass along all of these added costs, you're going to have a difficult situation. That situation is called "inflation". I went to Safeway a few days ago and two bags of groceries cost me $114. Needless to say I am more careful now, buying fewer items. As prices increase, items per order decrease. In other words, you offset the gains generated via price increases by driving down rebuy rates, orders per buyer, and items per order.

Ultimately, your paper problems and your pricing problems become the same problem.
  1. You may well be forced to increase prices.
  2. The increase in prices depresses customer response.
  3. Depressed customer response requires you to save money somewhere ... that's where you will put less paper in the mail ... allowing you to balance profitability.
The wild card?

Post-COVID, customer response may temporarily surge, masking the impact of potential inflationary issues.

Or, Post-COVID customer response may revert back to February 2020 levels, multiplying the impact of potential inflationary issues.

Analyze the living daylights out of this issue, folks.

Look at rebuy rates, orders per buyer, items per order, and price per item purchased by merchandise category. Build a relationship between price and overall customer productivity. Make sure you understand the Customer Development issues associated with inflationary concerns.

P.S.:  The digital gurus are at it again ... this time Amazon is going to take the bandwidth you purchase ... up to 500mb per month, and potentially allocate it to Amazon devices in nearby homes (click here). It's the modern version of a neighbor asking you if you have a cup of sugar ... but with the twist that the neighbor doesn't ask for it while a third party does it behind the scenes and vacuums up the data for their own benefit. What could possibly go wrong?

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