November 15, 2021

Paper Update

The feedback is coming in from many directions now.

Those of you who market via paper are not going to get what you need for some time. This means if you want to stay in business, you need to move away from paper. The vast majority of e-commerce brands don't leverage paper, and somehow they do just fine.

It's common to see the following scenario.

  • $30,000,000 business.
  • $15,000,000 from existing customers.
  • Brand spends $3,000,000 on paper marketing to these customers.
  • Mail/Holdout tests show that 60% of sales is organic, 40% driven by paper.
  • Therefore, $6,000,000 of sales come in via paper.
  • 40% of sales flow-through to profit.
The secret is to know your "organic percentage", measured via mail/holdout tests.

This is the part of the discussion where the reader emails me and says "we can't perform mail/holdout tests because we'll lose sales".

This is the part of the discussion where I'll remind you that your paper reps and printers aren't giving you the paper you contractually agreed to and you will most certainly lose a ton of  sales. Why do you get mad at me about holding out 25,000 customers when your paper partners are canceling 500,000 in circ? Why don't you get mad at them? Be honest, ok?

If you know your organic percentage, you'll create a table like the one below that shows how much you should spend on print to generate optimal levels of profit.

This company is actually losing profit on what they currently execute ... they generate $6 million in actual print-driven sales (as measured via mail/holdout tests) on a budget of $3 million, losing $0.6 million in the process.

A better strategy might be to spend between $500,000 and $1,000,000, reducing the top-line by about $3.0 million but adding about $1.0 million in profit.

I know, you don't want the top-line to slump. Don't yell at me about that ... yell at your paper rep and printer. They're the ones who put you in a bind that now requires you to contact me.

If you want me to take a look at the ad spend / profit relationship, send me an email (kevinh@minethatdata.com), one that includes your housefile print ad spend, your housefile generated sales via matchbacks, and your organic percentage measured via mail/holdout tests. I'll plug the data into my algorithm and share the table above with you. No cost. Is your printer doing that for you? 

Then when you need to score the file to know who to not send paper to, you'll hire me to generate the equations for you, ok?

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