Dear Catalog CEOs:
Here's a tidbit to help you determine if your matchback analytics are failing you.
Have your analysts freeze the customer file as of 8/15/2009. Take some random RFM segment from four years ago (46-48 month, 1x, $100 AOV). Measure online demand generated without catalog mailings, and generated via catalog mailings as identified in your matchback process. Calculate the percentage of demand generated online by catalogs (say 50%).
Now, have your analyst pull the 0-3 month, 2x+, $100 AOV (or any other high-value recent segment). Measure online demand generated without catalog mailings, and generated via catalog mailings as identified in your matchback process. Calculate the percentage of demand generated online by catalogs (say 80%).
The difference in these two metrics (50% for non-recent buyers ... 80% for high-value buyers) is highly correlated with how much your matchback analytics are over-stating the importance of the catalog.
Once you know the value of the two metrics, remove the 30% excess (in this example) from your catalog p&l at a segment level, and then calculate subsequent circulation plans based on this analysis.
Then hide your head in your hands and duck, because you won't like it when you see just how much your are over-circulating, benefiting every vendor in the catalog ecosystem, while hurting your shareholders/owner.
August 29, 2010
August 25, 2010
Gliebers Dresses: Thank Goodness For Loyalty
From: Lois Gladstone [mailto:lois.gladstone@gliebersdresses.com]
Sent: Wednesday, August 25, 2010 8:03 PM
To: Kevin Hillstrom
Subject: Customer LoyaltyHi Kevin:
You've probably heard by now that Brandon Templeton is out at CEO at Gliebers Dresses. He went "all-in" as he says with a mobile app strategy that failed miserably from a sales standpoint.What I am really proud of, however, is the loyalty program that I shepherded last year. You probably remember the program, we offered free shipping for a full year once a customer purchased four items. Well, how the heck do you think we held on to fifty percent of our sales without mailing a single catalog in July? It HAS to be the loyalty program, don't you think?
So here's what I am wondering. How can we prove that the loyalty program was responsible for holding on to fifty percent of our business in July? Roger's team looked at the percentage of orders that had free shipping in July, it was close to something like 40% of the orders. I should get credit for every one of those orders, right? I mean, those orders should be attributed to my loyalty program.
And then we have the remaining 60% of orders, a decent percentage of those had customers with three items and four items, so those orders should be attributed to my loyalty program as well, because my program is pushing customers closer and closer to free shipping on an annual basis.
Anyway, it would be great if you could jot down a few notes about how to demonstrate that our loyalty program saved our bacon in July.
I don't know if you know this or not ... Roger would like to be the next CEO of Gliebers Dresses. I think he'd make a good leader, he has solid knowledge of the business and he is really up to date with all of the latest marketing strategies, I doubt anybody reads research reports as thoroughly as he reads them. It would be amazing to see him put his theories into practice.
Thanks in advance for your help, I don't think we're looking to pay you anything, we just want for you to do a quick analysis of our loyalty program, maybe a day or two of your time, that's all.
Thanks,
Lois Gladstone
Chief Financial Officer
Gliebers Dresses
A Division of Gleason Investments
August 24, 2010
What The Heck Are We Doing?
By now, you've already read this article about paper prices going up (thanks DMNews) ... couple that with postage increases next year, and one might ask themselves a perfectly reasonable question?
What the heck are we doing?
In the article, one business leader mentioned that 10% of her sales revenue goes to postage expense.
Think about that for a moment.
What could we do with 10% of sales, year after year after year, how might we better reallocate that expense? Or even half of that expense?
This year, my phone has been ringing off the hook with requests for Multichannel Forensics projects, in anticipation of paper and postage increases. Some projects illustrate that, yes, you have to put paper in the mail to generate sales ... in fact, some projects suggest you need to mail more catalogs than ever (that's an interesting message to deliver to a CEO). More than half of the projects indicate that more than half of your sales happen without needing to put paper in the mail.
Take control of your profit and loss statement! Contact me for your own Multichannel Forensics analysis ... I'm taking requests for mid-October and early November projects as we speak. You will get your results in time to take action before the big postage increases happen next year.
What the heck are we doing?
In the article, one business leader mentioned that 10% of her sales revenue goes to postage expense.
Think about that for a moment.
What could we do with 10% of sales, year after year after year, how might we better reallocate that expense? Or even half of that expense?
This year, my phone has been ringing off the hook with requests for Multichannel Forensics projects, in anticipation of paper and postage increases. Some projects illustrate that, yes, you have to put paper in the mail to generate sales ... in fact, some projects suggest you need to mail more catalogs than ever (that's an interesting message to deliver to a CEO). More than half of the projects indicate that more than half of your sales happen without needing to put paper in the mail.
Take control of your profit and loss statement! Contact me for your own Multichannel Forensics analysis ... I'm taking requests for mid-October and early November projects as we speak. You will get your results in time to take action before the big postage increases happen next year.
August 23, 2010
Summer Segmentation: New Technology
In your data warehouse, create segmentation variables for any customer using any form of new technology.
Then take an old-school campaign ... like a postcard mailing, and overlay those who, for instance, those who have used an iPad to access your website and buy merchandise. You are likely to see that those who use new technology are less responsive to old technology (like a postcard).
Just like that, you have a suppression variable for subsequent old-school campaigns!
By the way, folks, say you are, oh, I don't know, maybe Gap. And maybe you have some trendy new promotion where you give up all of your gross margin in a way that drives a ton of sales and greatly benefits some new business model that needs you to give up gross margin to benefit their business model.
If you were in that situation, wouldn't it make sense to code the customers that took advantage of the new technology in your database, and then follow them for three months or a year to see if they ever interact with your brand again in a full-price, profitable manner?
Then take an old-school campaign ... like a postcard mailing, and overlay those who, for instance, those who have used an iPad to access your website and buy merchandise. You are likely to see that those who use new technology are less responsive to old technology (like a postcard).
Just like that, you have a suppression variable for subsequent old-school campaigns!
By the way, folks, say you are, oh, I don't know, maybe Gap. And maybe you have some trendy new promotion where you give up all of your gross margin in a way that drives a ton of sales and greatly benefits some new business model that needs you to give up gross margin to benefit their business model.
If you were in that situation, wouldn't it make sense to code the customers that took advantage of the new technology in your database, and then follow them for three months or a year to see if they ever interact with your brand again in a full-price, profitable manner?
August 22, 2010
Dear Catalog CEOs: New Audiences
Dear Catalog CEOs:
Even the post office is looking for new audiences to promote products and services to, products and services like catalogs.
One of the tragedies of the Great Recession was the dramatic shift away from prospecting.
Here's what I see, over and over again. A business used to retain 40 out of 100 customers, then acquired/reactivated 65 customers, so that next year, the business has 0.40*100 + 65 = 105 customers.
When the recession hit, the business instead retained 37 out of 100 customers, and prospecting efforts became less effective, causing the business to acquire/reactivate 59 customers. Next year, the business has 0.37*100 + 59 = 96 customers.
But prospecting efforts became so unprofitable during the recession that prospecting efforts were cut back, cut WAY back!! Now, the business acquired/reactivated 52 customers. Next year, the business has 0.37*100 + 52 = 89 customers.
It's here that the "struggles" kick in. Next year, the brand will "go halfway" in increasing prospecting, acquiring/reactivating 56 customers. Retention rates improve to 39%. Two years from now, the business has 0.39*89 + 56 = 91 customers. In year three, using the same metrics, the business has 0.39*91 + 56 = 91 customers.
The popular answer to this problem is to "make customers become more loyal", as if you can somehow force a customer to do something that the customer does not have a natural inclination to do ... just "force" the customer to buy two more items!!
The practical answer is to expand prospecting efforts. Most of us don't work at Wal-Mart, where you aren't going to find new customers. Most of us work for businesses that have less than 1% of total market share, so expanding prospecting efforts is a logical and strategic way to grow a business. It is, of course, contrary to most of the advice were given.
Even the post office is looking for new audiences to promote products and services to, products and services like catalogs.
One of the tragedies of the Great Recession was the dramatic shift away from prospecting.
Here's what I see, over and over again. A business used to retain 40 out of 100 customers, then acquired/reactivated 65 customers, so that next year, the business has 0.40*100 + 65 = 105 customers.
When the recession hit, the business instead retained 37 out of 100 customers, and prospecting efforts became less effective, causing the business to acquire/reactivate 59 customers. Next year, the business has 0.37*100 + 59 = 96 customers.
But prospecting efforts became so unprofitable during the recession that prospecting efforts were cut back, cut WAY back!! Now, the business acquired/reactivated 52 customers. Next year, the business has 0.37*100 + 52 = 89 customers.
It's here that the "struggles" kick in. Next year, the brand will "go halfway" in increasing prospecting, acquiring/reactivating 56 customers. Retention rates improve to 39%. Two years from now, the business has 0.39*89 + 56 = 91 customers. In year three, using the same metrics, the business has 0.39*91 + 56 = 91 customers.
The popular answer to this problem is to "make customers become more loyal", as if you can somehow force a customer to do something that the customer does not have a natural inclination to do ... just "force" the customer to buy two more items!!
The practical answer is to expand prospecting efforts. Most of us don't work at Wal-Mart, where you aren't going to find new customers. Most of us work for businesses that have less than 1% of total market share, so expanding prospecting efforts is a logical and strategic way to grow a business. It is, of course, contrary to most of the advice were given.
August 19, 2010
Visualization of Multichannel Forensics: Wired Magazine, "The Web Is Dead"
Take a peek at the article from Wired Magazine (The Web is Dead). Look at the image at the top of the chart.
This is what we are seeing with classic catalog and e-mail marketing in the majority of my Multichannel Forensics projects ... the new channels come, but they don't fully replace the old channels, leaving business leaders in a bit of a pickle.
Fortunately, you can make a boatload of profit by cutting back on old-school advertising to customers who have made the transition to newer channels!
And by the way, read each viewpoint in the article ... please, read each viewpoint. An evolution that is going to swamp e-commerce is well articulated on each side of the spectrum in the article.
This is what we are seeing with classic catalog and e-mail marketing in the majority of my Multichannel Forensics projects ... the new channels come, but they don't fully replace the old channels, leaving business leaders in a bit of a pickle.
Fortunately, you can make a boatload of profit by cutting back on old-school advertising to customers who have made the transition to newer channels!
And by the way, read each viewpoint in the article ... please, read each viewpoint. An evolution that is going to swamp e-commerce is well articulated on each side of the spectrum in the article.
August 18, 2010
New Nordstrom Website: The Evolution of E-Commerce
Click here for a preview of the new Nordstrom e-commerce website. Take a look at the difference in the way that merchandise / "the brand" is presented to the customer.
In spite of what the trade journals and conference agendas communicate, e-commerce is under siege.
History has a way of providing us with a forecast for the future. In the 1970s, Catalog Marketers leveraged "big books" ... some of you remember these, Spiegel, Montgomery Wards, Sears, Penney, 600 page monsters that offered the customer "everything". These brands exploited the "long-tail" thirty years before the term became trendy.
In the 1980s, we had "specialty catalogs" ... smaller catalogs from Lands' End / L.L. Bean or tens of thousands of catalogers that were possible because of the magic of database marketing ... science made it possible to send a targeted merchandise assortment to a targeted audience ... clearly, this was a far more profitable proposition than sending every single item to every single customer.
In the 1990s, e-commerce bursted onto the scene. In the embryonic stages of e-commerce, you needed offline advertising to drive traffic online. In other words, you needed small vehicles (catalogs, e-mail) to drive traffic to large vehicles (e-commerce website).
In the 2000s, we learned all about the "long-tail". E-commerce went the way of the 1970s catalog, once again, you had to share everything with the customer. In the last decade, technology fused search (on-site search and Google/Bing) with a "long-tail" based website, so clearly the end result is different than in the 1970s, but the concept holds ... it was again fashionable to aggregate everything under the sun, having 20% of items driving 80% of sales while finding ways to make the remaining 80% of items profitable. Good luck to the inventory manager responsible for managing long-tail inventory!
In the 2010s, the pendulum is swinging back to the 1980s ... this time, Mobile is the vehicle that is driving the change. In the 80s, the computer decided who received a smaller, targeted assortment. In the 10s, the customer and the computer will use Mobile to "go small" once again. Mobile demands that the merchant edit the assortment ... in fact, Mobile is pointless unless the merchant uses Mobile to significantly edit the assortment for the customer. Combine Mobile with localization (Foresquare / Facebook Places), and we're going really small now, aren't we?
E-commerce is the "big book" catalog of the 1970s, and it will be forced to evolve in order to compete with Mobile. You are going to hear the pundits talk about a "multi-channel" solution ... they will tell you that Mobile and E-Commerce are Peanut Butter and Jelly ... just like Catalog Marketers who said that Specialty Catalogs and E-Commerce were like Salsa and Chips back in the 2000s.
Mobile and E-Commerce are not Peanut Butter and Jelly. Mobile is going to cause a fundamental transformation within E-Commerce, one that many E-Commerce experts are not ready to deal with.
I predict (and I clearly have a good chance of being wrong) that E-Commerce will become far more entertainment-based, and far more social ... it has no choice, it has to evolve given the simplicity and personalization offered by Mobile. I sincerely believe that E-Commerce will look more and more like a highly polished cable television program over time ... I believe that E-Commerce will get a layer of frosting that goes on top of a crowded, link-based, sku-intensive website that is explored via search. Without this, the customer will chose the simplicity of the Mobile presentation. The history of Catalog Marketing points us in this direction, doesn't it?
Take a peek at the evolution of the Nordstrom website, and tell me if you think they are headed in that direction, or share your thoughts in the comments section if you think I'm nuts ... and if you think I'm nuts, send links to facts that support your personal hypothesis about what you think will happen in the future!
In spite of what the trade journals and conference agendas communicate, e-commerce is under siege.
History has a way of providing us with a forecast for the future. In the 1970s, Catalog Marketers leveraged "big books" ... some of you remember these, Spiegel, Montgomery Wards, Sears, Penney, 600 page monsters that offered the customer "everything". These brands exploited the "long-tail" thirty years before the term became trendy.
In the 1980s, we had "specialty catalogs" ... smaller catalogs from Lands' End / L.L. Bean or tens of thousands of catalogers that were possible because of the magic of database marketing ... science made it possible to send a targeted merchandise assortment to a targeted audience ... clearly, this was a far more profitable proposition than sending every single item to every single customer.
In the 1990s, e-commerce bursted onto the scene. In the embryonic stages of e-commerce, you needed offline advertising to drive traffic online. In other words, you needed small vehicles (catalogs, e-mail) to drive traffic to large vehicles (e-commerce website).
In the 2000s, we learned all about the "long-tail". E-commerce went the way of the 1970s catalog, once again, you had to share everything with the customer. In the last decade, technology fused search (on-site search and Google/Bing) with a "long-tail" based website, so clearly the end result is different than in the 1970s, but the concept holds ... it was again fashionable to aggregate everything under the sun, having 20% of items driving 80% of sales while finding ways to make the remaining 80% of items profitable. Good luck to the inventory manager responsible for managing long-tail inventory!
In the 2010s, the pendulum is swinging back to the 1980s ... this time, Mobile is the vehicle that is driving the change. In the 80s, the computer decided who received a smaller, targeted assortment. In the 10s, the customer and the computer will use Mobile to "go small" once again. Mobile demands that the merchant edit the assortment ... in fact, Mobile is pointless unless the merchant uses Mobile to significantly edit the assortment for the customer. Combine Mobile with localization (Foresquare / Facebook Places), and we're going really small now, aren't we?
E-commerce is the "big book" catalog of the 1970s, and it will be forced to evolve in order to compete with Mobile. You are going to hear the pundits talk about a "multi-channel" solution ... they will tell you that Mobile and E-Commerce are Peanut Butter and Jelly ... just like Catalog Marketers who said that Specialty Catalogs and E-Commerce were like Salsa and Chips back in the 2000s.
Mobile and E-Commerce are not Peanut Butter and Jelly. Mobile is going to cause a fundamental transformation within E-Commerce, one that many E-Commerce experts are not ready to deal with.
I predict (and I clearly have a good chance of being wrong) that E-Commerce will become far more entertainment-based, and far more social ... it has no choice, it has to evolve given the simplicity and personalization offered by Mobile. I sincerely believe that E-Commerce will look more and more like a highly polished cable television program over time ... I believe that E-Commerce will get a layer of frosting that goes on top of a crowded, link-based, sku-intensive website that is explored via search. Without this, the customer will chose the simplicity of the Mobile presentation. The history of Catalog Marketing points us in this direction, doesn't it?
Take a peek at the evolution of the Nordstrom website, and tell me if you think they are headed in that direction, or share your thoughts in the comments section if you think I'm nuts ... and if you think I'm nuts, send links to facts that support your personal hypothesis about what you think will happen in the future!
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