What Does It Mean?

Here's our test results.

We know that the catalog isn't generating profit as a whole. Now, if you run a dozen tests like this and get comparable results, you have a series of decisions to make, don't you?

At a segment level, your matchback results consistently lie to you.

At a segment level, after taking credit for just 30% of what the catalog appears to generate, you can't believe your own eyes, can you?

Each row represents a customer segment - the segment via matchback reporting (the Matchback column) converts demand to profit (the MB or Matchback Profit column). Only the segment generating $1.00 per book is unprofitable. That's the world many readers live in today.

However ... look at the "Test True Gain" column. Here we only take credit for the 30% of demand that the test tells us we can truly take credit for. Fewer than half of the segments are profitable.

Instead of being able to mail nine out of ten segments ... we can only mail four out of ten segments. Circulation would have to be cut by 1 - 4/9 = 55%.

This is the point in the discussion where catalog professionals become angry with me.

• "We can't cut circulation by 55%, why are we even mailing catalogs at that point?" Good question!
• "If we cut circulation by 55%, we'll lose sales, and we can't contract the top-line. No smart company achieves success by getting smaller".
• "What if you are wrong, Kevin?" Nobody ever wants to answer the question "What if the catalog professional is wrong?"

From here, there's all sorts of obscurification. 

• "We have to retest". 
• "I just don't believe you".
• "I'm not laying off half of my call center just to make you happy."
• "My catalog marketing agency told me to not listen to you, that test results are not a best practice given that matchback analytics have been around for twenty-five years."
• "My paper rep said he'd give me a discount to entice me to keep mailing catalogs. And the USPS is running a 10% off promotion. I'd rather band together with other catalogers and do what is right."

All of that, of course, ignores the reality of the situation.

• The catalog is not generating profit.
• The catalog professional could make decisions to make his/her company a fortune.
• What would the CFO think if she knew that the catalog professional was purposely not maximizing profitability?

Tomorrow, we'll wrap up this mini-series with a discussion of digital marketing channels.