Dear Catalog CEOs: Order Starters

Dear Catalog CEOs:

We've talked about this before, but it bears repeating.  The first twenty pages of your catalog are pretty important, especially among the 55+ rural audience that spends a lot of money when catalogs are mailed.


If your customer database is calibrated in a way that allows you to conduct the analysis in this manner, be sure to do this:

1. If an item appears in the first row of an order, it is the "order starter", it is the item the customer wanted most in the order (yes, this is an assumption).
2. Rank-order each item based on the ability of the item to "start orders".
3. Look at the items featured in the first twenty pages of your catalog, this year vs. last year.  If your catalog is not performing terribly well, is there a change in "order starters"?

Frequently, catalogs (and e-mail campaigns) perform well when the catalog is front-loaded with order starters.  E-mail campaigns can work well when the items featured are those that are known to start orders.


So have your analytics team give this analysis a try ... see what has changed in your business!

More Arguments Against MineThatData

Earlier this week, I discussed The Arguments Against MineThatData.

Apparently, there are plenty more, gotta love a minority of individuals in the vendor community!  So, we "pick up the conversation" from Tuesday with a new list, some of which were forwarded by the esteemed @amyafrica, so thanks to her, and some of which were forwarded by others of you kind enough to add your $0.02.

Issue:  Don't buy his books.  One of his books has 70 pages of computer code, who wants that?

• The folks who want that book are the folks who like to compare code, so that they can implement that type of work in their own environment.  There was also a link to the code, so that it could be copied into your environment.
• I thought I was being nice to include the computer code that I spent close to a year writing, all for the low cost of $7.95 via Kindle.  You get a year of work for $7.95.

Issue:  Kevin doesn't favor a channel, and that's not good for catalogers.

• I always favor the customer, and I favor profitability.
• I favor the survival of your company.
• I favor an honest assessment of your business.

Issue:  Kevin hates search, e-mail, and all forms of modern marketing like mobile/social, have you ever read his comments about social?  He's biased in favor of catalog marketing.

• This comes up a lot.
• This is exactly opposite of the issue just mentioned.
• I always favor the customer, and I favor profitability.
• I will say this, I hate open/click/convert as the measurement technique for e-mail, as it is almost always wrong, when compared with the more accurate method of using mail/holdout tests to measure e-mail.
• I have no idea where people get the idea that I don't like search marketing.

Issue:  Don't work with Kevin, he makes fun of catalogers with that stupid Gliebers Dresses series, and he doesn't even know how to use an apostrophe for crying out loud.  Oh, and he thinks everybody owns a Kindle, which is just stupid.

• If you've read the Bible, for instance, you already know that parables are used to explain issues without specifically taking issue with an individual.  
• Gliebers Dresses is a parable.  It is a series meant to teach in an entertaining manner.
• The apostrophe is missing, in deference to Lands' End, where the apostrophe was incorrectly printed incorrectly in the early days of the brand, causing the owner to use the mistake strategically.

Issue:  Kevin doesn't like discounting, he either doesn't understand the business model or he blasts discounters while praising his former company when it discounts merchandise.

• Allow me to make my stance very clear.
• I don't have a problem with discounts/promotions being the core "strategy" of a brand.
• I don't have any problem with events, activities where you create a reason for the customer to purchase.  If you have three sale events per year, every year, well, again, that's a strategy, isn't it?
• Having sale events 30 out of 52 weeks is not a strategy, it is not an event.  I am against this.
• I have a huge problem with measuring promotions only during the promotion period, because that seriously overstates promotion performance, causing folks to offer more promotions.  Ask yourself why you offer promotions all the time now, and you didn't back in 2000, and your annual retention rate is still the same, and orders per buyer are still the same, and you're struggling to acquire new customers??
• Offering 20% off plus free shipping randomly because business is bad is not a strategy, and I am against that, unless you have no other way to clear inventory.
• Offering free shipping 24/7/365 is a strategy, and I support that.
• I am against Cyber Monday, a concept developed by a trade organization.  Add your total sales two weeks prior, and two weeks after, for the past ten years, does the holiday boost actual sales?
• In other words, I support a strategic approach to discounts and promotions.
• And, yes, you can sell merchandise at full price.  Marketers feel like they don't have a job if they don't add frosting (discounts/promos) to the cake, take your ego out of the equation and get busy selling merchandise, not selling your fancy promotions!

Issue:  Don't work with Kevin.  He pimps his books to the #measure community on Twitter, that's not ethical, #measure is "all about the community".

• The very people who are angry with me are people who either work for companies that promote themselves in that community, or they actually promote themselves within that community.

Issue:  Don't work with Kevin, his activities are outside the best practices established in our industry.  Work with people like me instead, people who execute proven and classic direct marketing tactics.

• A competing consultant, a classic direct marketer, left this comment on my blog.  Geez.
• Again, my methodology delivers an average of $1,000,000 profit per year for a $100,000,000 catalog brand.  
• And yes, my methodology is not an industry-standard best practice.

Issue:  Kevin's ideas only work with companies that have unique product and add 30% new product each year.  His ideas do not work with companies that sell the same crap as everybody else.

• How could you, the person who said this to an individual, possibly know this?  Be honest, how could you know this?
• I've worked with companies that sell the same stuff as everybody else.  The issue isn't the merchandise, the issue is how your customers respond to advertising.

Issue:  Kevin doesn't know B2B marketing, don't work with him.  B2B marketing is a special discipline requiring special people.

• I'll be the first to say that I know more about B2C than B2B.
• That being said, B2B isn't rocket science.  You mail catalogs, you send e-mail messages, customers respond.
• Furthermore, in the projects I've worked on in B2B, the organic percentage is usually higher than it is in B2C, allowing the B2B brand to cut even more catalogs.  Yes, that's accurate.  Often, the organic percentage is 85% or greater, and your vendors are greatly over-stating the value of catalog marketing to your business ... when vendors do this, it benefits the vendor, not you.

Issue:  Kevin doesn't know the gift industry, don't work with him.  He only knows apparel marketing.

• This one comes up a lot.
• The only fundamental difference for a gift business is the seasonality of purchasing, coupled with "ship-to" activity ... very easy to account for.
• I can promise you that I've delivered above-average results for gift marketers.

Issue:  You need a consultant who has too much work to do.  Kevin spends all day writing books or tweeting, so he probably doesn't have any clients.

• I've worked with 63 brands in the past 53 months.
• I limit my clients to 2 per month, maximum, to give each client maximum attention.  In other words, there are times when I am turning business away or deflecting it to later months.
• Allow me to teach you something about how I do my job.  I write computer code ... about 6,000 lines (+/-) of code per consulting project, about 84,000 lines of computer code per year.  
• In other words, I type a lot faster than the average person types.
• The computer code is used to re-shape and analyze customer transactions.
• In an average project, I'm analyzing about 10,000,000 customer transactions.
• When I run a program, it takes anywhere between thirty seconds and thirty minutes for the program to run.
• While a program is running on my laptop (yes, I do all of this on a laptop), I'll write a blog post, or I'll tweet something to the 3,000+ folks following on Twitter.  In other words, activity is happening concurrently ... the computer is running a 10 minute program while I write several pages in an upcoming book, for example.
• I work about 13 hours a day, six days a week.  My wife is ok with this, my dog resents my utilization of time.
• All of this leads to an average of $1,000,000 annual profit for the $100,000,000 brand that hires me.

Issue:  Kevin spent too many years working for big brands.  He doesn't understand how hard it is to make things work at a $50,000,000 catalog brand.  Kevin only knows fancy, big-company solutions that don't work at small companies.

• My median client has annual sales of $50,000,000.  About 20% of my client base is above a billion dollars a year.  About 20% of my client base is under $20,000,000 a year.
• I have many clients in many different life-stages. 

Issue:  Kevin knows nothing about social media.  Look at Victoria's Secret, they've got a million fans on Facebook.  Simply put, it works.

• FYI, from 2007 - 2010, 70% of my projects were sourced from my blog (that's social media, right)?
• In 2011, 45% of my projects are sourced from my blog.
• Social media works for individuals and small businesses.
• For large brands, go find a single 10-Q or 10-K statement where the Management team attributes even 3% of total annual net sales to social media.  Go ahead, I'll wait right here.

Issue:  Kevin doesn't know anything about mobile.  Work with a web analyst, those folks know mobile.

• 95% of analysts struggle to measure the way channels interact with each other.
• My specialty is measuring the way that channels interact with each other.  I will tell you how mobile customers interact with the rest of your business.

Issue:  Kevin focuses on comp-segment performance as a key customer metric, while best practices suggest that campaign performance is the best indicator of marketing effectiveness.  Don't listen to him when he starts talking about geeky comp-segment measures.

• If campaign performance was a leading indicator of solid business performance, then why have we increased campaigns across all channels by about 1,000% since 2000, and yet, our annual customer retention rate remains constant?
• When your annual retention rate is bound by a 10% range, over the course of a decade, then comp-segment performance is a very solid indicator of actual customer behavior.

Issue:  Kevin only knows how to deal with loyal customer behavior.  We'd all like to have customers like Nordstrom has, customers who repurchase at a 75% rate and buy seven times a year.  Kevin knows nothing about companies with 30% annual repurchase rates, and that's why he's always saying those business need to acquire new customers.

• 50% of my client base has an annual repurchase rate of 38% or lower.  I know a little bit about managing these situations.

Ok, that's the latest list.  Go ahead and forward the complaints and arguments offered to you by the vendor community and by consultants who compete with me, I'll continue to address them for you.

But I'm Only Losing $0.03 Per Catalog Mailed!

There are days when you realize that we're failing at math.

Here's the argument, as presented to me.

1. Company has 1,000,000 lapsed buyers (last purchase 13+ months ago).
2. On average, 1% of these customers respond to a catalog, if mailed, after matchback.
3. On average, if the company mails these customers, the company loses $0.03 on every catalog mailed.
4. Company only mails these customers ten times out of twenty annual mailings (whew).
5. We're only losing $0.03 per catalog mailed, that's not so bad, and they are our existing customers, so why not boost our customer file???!!!
6. The long-term value of a reactivated buyer is $20.00 profit, so we only lose $0.03 to gain $20.00 profit.

Here's the argument, as presented by me:

1. You are mailing 1,000,000 * 10 = 10,000,000 catalogs.
2. Only 1% respond, after matchback (and we've debunked that one a million times on this blog, right), meaning that 10,000 customers purchase.
3. You actually lose $0.03 * 1,000,000 * 10 = $300,000 profit, per year.  $300,000 profit.
4. You actually lose $300,000 / 10,000 = $30.00 profit per reactivated buyer.
5. You actually lose $20.00 long-term gain - $30.00 reactivation profit = $10.00 per reactivated buyer.
6. Strategy = DON'T DO THIS!!

Pennies are seductive.  It's so easy to make the decision to lose a few pennies, who's going to notice?

Well, pennies are the difference between being a highly profitable company, and being just plain average, or below average.

Yes, pennies.

What would Kevin do (WWKD)?

1. Realize that half of the customers you are mailing would have reactivated anyway, due to your organic percentage being around 50%.
2. This means that you are actually reactivating half of the customers you think you are reactivating, meaning that you are actually losing $60.00 profit to reactivate a name, a rate of profit you'll never make up with $20.00 of future profit.
3. I would pocket half of the profit now, and re-invest half of the profit in new customer acquisition, growing your customer file more profitably in the process.  I mean, be honest, you're not losing $60.00 of profit acquiring new names from Abacus, right?  So spend a bit more with Abacus, be willing to lose $12.00 to acquire a customer that generates $20.00 of future profit, and you come out way ahead.

The difference between industry-leading profit and average profit is pennies ... pennies per catalog mailed.  When you say you're willing to lose a few pennies here and there, you're deciding to be average.

But If I Cut, I Could Lose Market Share, Right?

There are many arguments against working with me.  Cutting circulation is one of them.

The argument goes something like this.

1. Kevin recommends we cut circulation by 25%.
2. Kevin says this will result in a 6% drop in demand.
3. Kevin says this will result in an increase in profit of $1,000,000.
4. Kevin recommends reinvesting half of the money in new customer acquisition.
5. Company (or trusted vendor) suggests that this is bad, because instead of generating $50,000,000 in annual net sales, the company will now generate $47,000,000 in annual sales, even though company profit increases from $2,000,000 per year to $3,000,000 per year.
6. Company says that it is a terrible thing if infrequent buyers are not mailed, because this means that the customer file will be weaker in the future.

Ok, a couple of points for all of you to consider.

1. How does Zappos, without a catalog, get infrequent customers to purchase?  And don't tell me that "they are different, so they don't count"!!!
2. How does a retail store brand without a catalog marketing division (say Napa Auto Parts) get an infrequent customer to purchase again?

One of the least understood concepts in modern catalog marketing is the concept of the "organic percentage".  This is the percentage of customers who purchase again, without the aid of catalog marketing (or, if you are Zappos, without the aid of any marketing).


Back in 1995, when you stopped mailing a customer, you stopped generating demand from that customer.  This caused your future housefile to weaken, as you did not have enough customers to fuel future growth.


In 2011, when you stop mailing a customer, you face a different challenge.  Assume that the organic percentage for an online-centric audience is 58%.

1. In the next six months, you lose maybe 35% of the demand the customer would generate.
2. In months 7-12, you lose maybe 40% of the demand the customer would generate.
3. In months 13-24, you lose maybe 45% of the demand the customer would generate.

The secret, then, is to mail this customer infrequently enough to save a ton of money, generate a lot of profit, but remind the customer that you're still around.  The customer continues to generate 58% of the demand generated on a full diet of catalogs.

In 2011, this is what happens if you frequently mail 100 infrequent customers:

• 2011 = 100 customers with a last purchase of 13-24 months ago.
• 2012 = 90 customers with a last purchase of 25-36 months ago, 10 customers with a last purchase of 0-12 months ago.

In 2011, this is what happens if you infrequently mail 100 infrequent customers:

• 2011 = 100 customers with a last purchase of 13-24 months ago.
• 2012 = 94 customers with a last purchase of 25-36 months ago, 6 customers with a last purchase of 0-12 months ago.

In 2011, if you re-invest some of your profit in new customer acquisition, even at a loss, this is what happens:

• 2011 = 100 customers with a last purchase of 13-24 months ago.
• 2012 = 94 customers with a last purchase of 25-36 months ago, 6 customers with a last purchase of 0-12 months ago, 4 new customers with a last purchase of 0-12 months ago for a total of 10 customers with a last purchase of 0-12 months ago.

Re-investment can protect market share, if done appropriately.  Think about it.

The Arguments Against MineThatData

Many of you tell me about the arguments folks use to encourage you to not hire me.  Let's address a few of these issues.

Issue:  His experience came from Nordstrom, Eddie Bauer, and Lands' End.  They are retailers.  He doesn't know anything about a pure catalog business, and furthermore, anything he learned about killing a catalog division at Nordstrom isn't relevant because they're a retailer with a proud brand heritage, what he learned there won't work for you.  Simply put, his experiences don't translate to your business.

• The most common argument used against me!
• Always remember that Lands' End was a pure cataloger during my tenure there.
• I've never said that the Nordstrom experience was relevant.  I've always said that we measured what would happen with mail/holdout tests, and those tests told us what was possible.  I'm asking you to think, to execute mail/holdout tests.  
• Since 80% of you don't execute mail/holdout tests, I've developed a routine to estimate what would happen if you did execute mail/holdout tests ... a routine that helps you increase profit, on average, by $1,000,000 per year for a $100,000,000 business.
• Ask a classic direct marketer if they have a methodology for understanding what happens if you stop marketing within a channel?

Issue:  He's going to tell you that your annual retention rate is 38% and therefore, you need to acquire new customers.  Everybody knows that it is seven times more expensive to acquire a customer than to retain a customer.  Work with us, we know of breakthrough multichannel campaigns that jump-start businesses so that you don't have to acquire new customers.  Have you heard about QR codes, for instance?  There's a fascinating link between print, mobile, and e-commerce!

• Yes, I'm going to tell you that your annual retention rate is 38%.  I'm going to tell you that because, in all likelihood, your annual retention rate dictates your growth strategy.  I'm just being honest with you.  The most successful clients I work with accomplish 50% of their success by having low-cost customer acquisition programs.  I'm going to be able to tell you what you need to do, in order to grow, and nine times out of ten, it's going to require you to revamp your customer acquisition marketing strategy.
• Ask yourself an important question.  If all of the multichannel campaigns that you've been working on for more than a decade were so important, then wouldn't your annual customer retention rate have grown from 38% in 2000 to 48% in 2011?

Issue:  Kevin gives content on his blog away, for free.  First of all that's anti-competitive, intellectual property is worth something.  Second of all, if he's giving all of this stuff away for free, how valuable can it really be?  Work with us, we have distinct intellectual property that is valuable and needs to be protected.

• Yes, I'm going to give away a lot of freebies on this blog, in fact, I have always given away all of the frameworks I use for methodologies, for free.  
• That's not anti-competitive, that's being nice, it's what we should all be doing, we should all be helping each other.
• If a vendor tells you that what I'm doing is wrong, then ask your co-op why they so willingly help you give away your customers to your competitors for free?
• An average client generating $100,000,000 in annual sales yields a $1,000,000 annual profit on one of my projects.  So what I'm sharing with you must have some value, right?

Issue:  Don't work with Kevin, he steals business from us.  We treat him nice, then he undercuts our project costs.  Simply don't work with him.

• This one is a 100% fabrication.
• I have no idea what it costs for a competitor to execute a project.  When a potential client asks me to bid on a project, I do so in a vacuum, without knowledge of who I am competing against, without knowledge of what competing vendors charge for comparable projects.
• Based on feedback I get, I suspect my costs are cheaper than what competing vendors charge, or I wouldn't hear complaints.
• I have never, ever, attempted to steal a client from a vendor.  Never.  
• This is a fabrication, one coming from industry veterans that you know and respect.

Issue:  Kevin has no idea what will truly happen if you reduce catalog mailings.  Don't fall for his charming mathematical voodoo.  We have housefile optimization models that find the very best customers for your mailings, allowing your business to grow, not shrink.

• I have a pretty good idea what happens if you reduce catalog mailings.  I've analyzed somewhere between 500 and 1,000 catalog and e-mail mail/holdout tests in my career.  I know a little something about what happens when you don't mail catalogs to a customer.  
• Hint --- what happens is very different than what the vendor community tells you will happen.

Issue:  Kevin doesn't care about market share, so don't work with him.  You want to grow, and we'll help you grow.

• If you define market share as total net sales, then yes, I don't care about market share.
• If you define market share as profit dollars generated, on an annual basis, then I care deeply about market share.
• I'd rather your business be $30,000,000 in annual sales with $3,000,000 profit than to see you be at $50,000,000 in annual sales with $2,000,000 in annual profit. 

Issue:  Kevin isn't accurate enough. If he tells you that the organic percentage is 52%, and it really is 47%, then you've made catastrophic mailing mistakes that will cost you a fortune.

• This one comes up a lot from analytical folks and consultants who compete with me.
• It is an argument that comes from a lack of understanding of the dynamics of actual customer behavior, it comes from having expertise at analyzing campaigns and/or analyzing customers without regard to advertising channels.
• I can be off by 10 points (i.e. 42% instead of 52% organic percentage), and it does not fundamentally change the accuracy of the ranking model, or the amount of profit.  Remember, matchbacks are so grossly overstating demand (i.e. are so terribly wrong) that my percentages do a great job of optimizing profitability.
• I'm seldom off by 10 points, FYI.  And when I am off, the organic percentage is usually greater than what I estimate ... I purposely estimate the organic percentage a bit low, to minimize any problems.

Issue:  Kevin knows nothing about modern digital marketing, he's old-school.  Modern digital marketing experts have advanced KPIs that help you understand how to manage your business.

• I care about customers, customer profitability, and the profitability of your business.
• Can your digital marketing expert calculate profit?
• Can your digital marketing expert tell you your annual retention rate?
• Can your digital marketing expert link data across channels?
• Can your digital marketing expert analyze mail/holdout tests across channels in e-mail marketing?
• Can your digital marketing expert predict the size of your customer file, in any channel, five years from now?
• Can your digital marketing expert predict the size of your customer file five years from now if you decide to double your e-mail marketing frequency today?
• Can your digital marketing expert predict what happens if your catalog is increased from 96 to 124 pages?
• Can your digital marketing expert predict what happens to customer value if a customer adds/eliminates channels?

Issue:  Kevin is completely wrong about the organic percentage.  Listen to him, and you'll be out of business in six months.  You have to advertise to customers, or they won't buy from you.  Period.

• This is one that can easily be answered by a mail/holdout test.  Simply execute the test.  If 98% of customer demand is generated by catalog mailings, then your organic percentage is 2%, and the critics are right.  If your organic percentage is between 35% and 65%, like it is for most of the people I work with, well, then there's something to what I'm preaching/teaching.
• Is it possible that there are other ways to advertise to customers?
• Have you heard of this thing called "the internet", where you can make your products and services available to customers?
• Is it possible that customers love your brand so much that they buy from you, even when you don't advertise?

Ok, your turn.  What are the arguments the vendor community uses to suggest that you work with different solutions providers, arguments you'd like for me to refute?

Borders, RIP

Yup, Borders is finished ... see Gawker for details by clicking here.

The pundits told us we had to do "bricks 'n clicks".  Had to.  They told us what the future would hold, and it held this multichannel nirvana where customers were researching online and buying in stores, so having "bricks 'n clicks" would result in a competitive advantage of unparalleled proportions.

I'm not saying that customers don't research online and buy in stores ... they absolutely do, more than ever.

It's the "your sales will grow" proclamations of consultants, trade journals, vendors, and other folks who've never worked in retail that represents the problem, here.  For the most part, across most businesses ... multichannel customers are the best customers ... but being "multichannel" has not resulted in the sales increases promised by consultants, trade journals, and vendors with a vested interest in selling solutions that benefit them.  If the sales increases existed, you'd have observed huge increases in your annual retention rate and purchase frequency over the past decade, right?

Retail is for big boys, or for small, local folks, there's no in-between.  And if you're going to be a big boy, you're going to be told by another set of pundits that you need to finance a fleet of stores with debt ... lots and lots of crippling debt.

I recall a Retail CFO telling me about how Wall St. would "beat down the stock price" if he paid down debt.

Debt > Strategy.

And when sales drop, by as little as 5%, debt becomes a really tough burden to recover from.

Oh, I know, some of the lemonheads are going to say that Borders didn't respond to changes in technology.  That's a pithy response, one that is easy to have in retrospect.  How many times have you made strategic mistakes in your job?  Never?  How many times have your strategic mistakes been made public, so that all marketing experts can openly criticize you?  Imagine being an employee at Borders, for just a moment, especially a non-Executive.

You can overcome strategic problems when you're not saddled with debit.  Heck, you know this, right?  What happens to your mortgage when you suffer a 15% reduction in salary (or you lose your job)?  That mortgage payment becomes onerous, doesn't it?

Debt > Strategy.

Pay close attention to the future of books in a retail environment.  How do the parallels there apply to your business?

Dear Catalog CEOs: The Screen

Dear Catalog CEOs:

Times have changed.

These days, people toss micro-channels all around you.  Your cell phone, your tablet, your television, your laptop ... plenty of screens.

Yes, screens.

Social media is nothing more than a way to communicate across/between screens.

When viewed through that context, there's no such thing as e-commerce or f-commerce or m-commerce ... there's s-commerce, screen commerce.


Catalogers are being cornered by screens.  Customers used to get information from the mailbox, once a day.  Now, customers get information via screens, 24/7/365.

Marketing via the mailbox is very different than marketing via screens.  Early in this evolution, we were taught to use the mailbox to drive business to the screen.  Increasingly, it seems like we're going to have to figure out how to drive business to the screen, independent of the mailbox, if we want s-commerce to thrive.  And no, I'm not talking about the pundit version of mobile (gamification, Apple vs. Google, tablets vs. phones, Facebook, Twitter integration, blah blah blah blah blah blah), because that's like having a discussion in 1995 about Netscape vs. Internet Explorer vs. AOL.  And I'm not talking about putting a catalog on a tablet, that's not likely to be what the customer migrates to over time.


No, I'm talking about having a holistic strategy for how a brand is represented on "The Screen".  We need to start thinking about our screen strategy, content, programming, commerce ... the cataloger is essentially a media company.

All of this, of course, is a precursor to h-commerce ... hologram commerce, right?

Or, we can continue to plan the spreads in our March 2012 catalog.