Don’t Worry About The 40X Names, Focus On The 1X Names

Think about what you ask the catalog co-op databases to do. You ask them to find you the best names for your mailings.  Those names are usually buyers at your closest competitor’s catalogs. If  I’m the circulation manager at LL Bean, I want the co-ops to give me names of good buyers from Lands’ End, Orvis, Eddie Bauer and Woolrich.

In theory, this is exactly what happens. If I have made purchases at all those other companies, I would look like a great prospect to LL Bean. My name would float to the top of every model LL Bean receives from their co-ops.  But, what if I’m just not willing to become an LL Bean customer?

These consumers that are actively purchasing from other catalogs have nothing against you. They are simply comfortable with the companies from which they purchase now. In the apparel world, they know that what they purchase from these other companies will fit, and fit the way they like. They don’t need to add another apparel catalog to their fashion mix with the risk of dissatisfaction over an order.

The same phenomenon happens in hard goods and gifts. If I’m strong buyer of Virginia peanuts and Pacific salmon by mail, it doesn’t mean that I’m guaranteed to want Wisconsin cheese or Vermont maple syrup, although my name probably floats to the top of models for those other food catalogs as well.

You have prospects like this too. You have a core group of prospects that you mail over and over because they are either good customers with your competitors or with companies close to your product mix.  You either rent these names directly from those companies, or receive them in your co-op models.  But these consumers are never going to buy from you because either they don’t need you, or they choose to stay loyal to the other brand. You just keep mailing them over and over.

But, that may not be a bad thing.

Datamann builds and maintains prospect contact histories for our clients, which is a database that tracks the number of times you mailed a prospect name (individual or household) before you finally received an order from that consumer, as well as tracking those that have never ordered.

The report shows the optimum number of times to mail a prospect to get the maximum response rate, but more importantly, it illustrates the point at which it is no longer profitable to mail that prospect name. You can suppress these “over-promoted” names from future mailings, as well as send them to the co-ops to have them suppressed from the files you order.

Every client for whom we produce these reports uses them differently. Further, every report we produce has vastly different patterns of response. In the sample report above, there were 67,450 prospects mailed for the 12th time in five years (not consecutively). 3,476 of those prospects finally responded to their 12thth mailing, generating a 5.15% response rate for that group of names – not bad. We always see that the response builds over time, but where it reaches the maximum response differs widely. For some mailers it may occur on the 5th mailing. For others the highest response rate may not be achieved until after the 20th mailing.

It is always shocking for some mailers to see that they have prospects which they have mailed 20, 30, and sometimes 40 times, without ever placing an order. Some mailers thought they were always getting “totally fresh names” with each mailing. But think about this – the co-ops are doing what you asked them to do – which is send you the names most likely to respond, which would be those buying from your competitors. The co-ops are not coordinating with each other to say “Oh, I sent that name last time, so you shouldn’t send it this time.” However, this is not necessarily a bad thing.

If you are a longtime reader of this blog, you know I’m not a big fan of the co-ops. It would be great if they could identify those buyers that are extremely loyal to your competitor’s brand, who are unlikely to ever buy from you, and not send them to you.  But in this case, I’m not sure they ever could, or that you want them to. You need to determine how to structure an offer to these names that you have mailed 20 times, or 40 times, to get them to buy from you. What’s it going to take to get them to buy from you?

Look – this is not rocket science.  The co-ops are NOT analyzing 320 million US residents, sifting through tiny bits of data that reveal a fresh new consumer that no one has ever mailed before, who is destined to become your greatest customer ever. No, if the co-ops are doing their job correctly – meaning they understand who your customer is – then they should be sending you these top prospects that are actively buying from your competitors over and over. Those are the names with the highest propensity to convert to being your next new customer. The problem is that this scenario repeats at every other catalog company too. The catalog that raises their game and determines how to appeal to these active prospects/consumers will be the winner.

Here is the bigger issue I see. Look at the top row – the 1X names. Every time we create this report for clients, we see a similar pattern. The 1X names are two to three times greater than the 2X names. Overall, the 1X names are 38% of the total quantity of names this mailer has ever mailed. Doesn’t that seem odd? The co-ops are supposed to be giving you the best names. They “model” what they send you. You are supposed to be getting the best of the best. That would mean you should be getting more of the same names more often.

But, almost 40% of the time, the co-ops sent you a name that they subsequently decided was not worth sending you again. Those are the names you need to focus on. Were those “filler” names that the co-ops gave you to get your quantity up? When you are planning your Fall and Holiday circulation this year, ask the co-ops their strategy on giving you names only once vs. multiple times.

Here is another aspect of this report. Let’s assume this mailer is willing to generate a loss of $45 in profit to acquire a new customer. On an incremental basis – looking at each mailing as an event unto itself – this mailer does not reach this threshold until the 34th mailing.  But, what if you looked at this cumulatively? Go back to the 12th row. You did not just mail 67,450 names to get those 3,476 orders.  You mailed 809,395 catalogs (12 x 67,450).  If you include the cost of all those additional catalogs mailed to get those first orders, you actually lost $97 in profit (far right column).  You would attain your allowable profit per new customer (-$45), measured cumulatively, on the 7th mailing.

Should you stop mailing after that 7th mailing? It depends on how you view your “sunk cost” of those cumulative mailings. Most of our clients want to continue mailing prospects as long as it remains incrementally profitable to do so. However, some want to include those “cumulative expenses” in their lifetime value calculations to determine if a customer that required 40 mailings from you to make their first purchase, was really worth it in the long run.

Datamann’s Prospect Contact History is easy to implement, and provides you immediate return because in most cases, there is no testing involved. Your accumulated mailings over the past 5 or 6 years are the actual testing grounds where you mailed all those prospect names. As long as we have your old mail files, we can build a similar database for you. Contact me for details.

If you are not already signed up for emails from this blog, click here.

by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

read more

The Most Dangerous Number in Catalogs Is Getting Bigger

So, you got your wish. The US Postal Service is changing the most dangerous number in cataloging – and they are making it bigger.

That number is 3.3, which is now growing to 4.0.

3.3 ounces is the cut-off established by the United States Postal Service many years ago at which standard (bulk / 3rd class) mail can enter the mail at the “piece rate”. So, it doesn’t matter whether you mail a 12 page catalog, or a 64 page catalog, as long as it is under 3.3 ounces, the postage is the same. Go over 3.3 ounces, and you pay the piece rate and a pound rate.

In 2017, the USPS is giving you an incentive to mail more, and that number is moving up to 4.0 ounces, a 21% increase.

I’ve seen several references online that this is a huge opportunity for catalog mailers, as they can now increase the trim size and/or page counts of their catalogs, or print on more expensive, better quality paper, and the postage is FREE. Ah, yes, the siren call of free postage. Think of the possibilities for your catalog circulation.

You can add more pages of products. You can add more branding pages.  You could even leave some pages blank, and it will not cost you anything more in postage.  You’ve been told for years – correctly – that postage is the most expensive part of mailing a catalog, so this is a gift from the postal gods, right?

Well, not so fast. As one of my clients commented to me recently, “Great, I know what you are going to say. Now I can add 12 more pages of incrementally lousy performing merchandise.” (It’s great that clients are starting to pay attention, and know what I’m going to say.)

Here is the problem as I see it:  Most catalogs are run by managers/ directors / owners that have been doing this for a while. It doesn’t matter their age, what matters is when they started in this industry.   Let’s assume that most of them have been working in catalogs since 1992. Back 25 years ago, there was no internet that impacted consumer or B2B catalogs.

But the internet, mobile and social media are not the problems facing catalogs today. The problem is risk and the unknown. Back in 1992, most consumer catalogs had a 92% known source code capture rate. That means that you knew exactly where 92% of your orders and sales originated. You knew which specific mailing, and which specific list caused the order. You could fine tune the mail dates to improve response. You could fine tune the select on a rented list to improve response. When you did those things, you could actually see the impact in your results on the next mailing – but of course, there was a four to six month lag between making those changes, and when you saw the impact.

Everything was measureable. Everything was efficient. Moreover, there was accuracy – there was no guessing, no matchback, and no attribution. You simply knew every facet that was driving your catalog’s success. We long for those days of accuracy. We are averse to moving our businesses into areas where we are taking an unknown risk, and one which we can’t measure with a special metric.

More important, our catalogs revolved around that one number – 3.3, and unfortunately, that number is still with us, and is now growing to 4.0.

Twenty five years ago, 3.3 ounces ruled our lives. We engineered catalogs to maximize the number of pages that we could squeeze in under that threshold. Depending upon your trim size, and paper weight, most catalogers could mail between 56 to 64 pages and manage to be less than 3.3 ounces. We dropped paper weights to add more pages. We worried about the humidity at the printer (really, we did!) the day the book was printed because it might be enough to cause a postal inspector to charge a pound rate penalty.

We pitied mailers that only had enough merchandise to justify 32 pages. We could not envision a reason why anyone would purposely mail a catalog that did not maximize the number of pages you could squeeze in less than 3.3 ounces, because “the postage is free”.   Response rates were so good, and paper relatively cheap, that we never looked at the incremental paper costs. We just saw free postage.

Now, that mentality is going to take on a whole new dimension, as merchants and creative directors are going to think they can add more pages for free. They will now think in terms of maximizing that 4.0 ounce limit, even though we know we could and should trim pages, and plow some of the paper savings into expanded circulation or even just do more on the web. We won’t do that because we hear FREE postage, and we come running. (Try and find one printer that doesn’t think this is a great idea!)

But what about the other expenses? What about the creative expense (and time) in generating 12 more pages? What about the extra paper expense?  Your cost per catalog is still going to increase, and you will try to cover that extra cost with more marginal product, or worse, “branding” pages which are not selling at all. If you already had 12 page additional pages of truly outstanding products, would you have let the “old” pricing format of piece and pound rate for anything over 3.3 ounces have stopped you from mailing them before?  Probably not. You’re being enticed into adding extra pages of products that are marginal at best, simply because of “free” postage. What does the USPS have to lose? They are coming to your mail box each day anyway. So what if the tray is a little heavier if it encourages catalogers to keep mailing?

My biggest fear is the marketing director or member of upper management that is going to demand that the catalog now print on heavier stock. “No more of that 38lb stuff. Let’s go to 60 lb., with a varnished cover. And a gatefold! The sky’s the limit because the postage is free, and you know, postage is the most expense part mailing a catalog.”

We know we should make our catalogs more of a “web driver” but we won’t. That type of catalog is not appropriate for our customers. Your customers may respond to web drivers in your catalog, but not my customers – they still shop my catalog, page by page.

We love the idea of getting those extra 7/10ths of an ounce of free postage because it can be measured. There is no risk here – we can see that our cost per catalog is going from 52¢ to 55¢ each, because even though the postage is FREE, we have those pesky other costs. But no matter, because we know the old rule of thumb that we heard at a DMA Catalog Conference in 2003 that “if we add 20% more pages, sales will go up 40%. Or maybe it was that they will go up 10%? Oh, it’s been so long since I heard that rule, which way does it go? Sales go up by double the percent of space, or half the amount of space? Who cares, the postage is free.”

This leads to another flaw in our thinking, tied to page counts and postage expenses, which is a mentality that our products have to be in the catalog in order to sell. Consequently, we build merchandise assortments around a mythical number of products that could conveniently fit into a 64 page catalog. We don’t think in terms of having more products on our website, and using the catalog as a vehicle to drive people there to do their shopping. We don’t do this because we never think of our websites as better than our catalogs. Our catalogs are what people want to shop.

As a result, our efforts to sell more products on the website – that are not in the catalog –fail, because we don’t support them adequately online.

4.0 ounces will soon become the most dangerous number in the catalog industry. It causes us to think small, and to be restrictive with our product assortment and consequently, with our ability to acquire new customers. You need to think beyond the benefits of free postage associated with 4.0. Just like the other postage gimmicks that the USPS is offering such as a 2% discount for using QR codes, or a discount for using scented paper, this is not “found” money.  There is a real cost (hard cash) and an opportunity cost associated with making changes to your catalog to pursue a postage savings that comes with other expenses, which you would not otherwise have ordinarily pursued.

If you want help determining how your catalog can survive on a smaller page count, and to use the savings to expand circulation and acquire new customers, contact me.  Don’t automatically submit to the siren songs of the printer mermaids. You have a lot riding on how this plays out.   You still have time to adjust your catalog growth strategies and catalog circulation planning for 2017.

If you are not already signed up for emails from this blog, click here.

by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

 

read more

Getting to The Core Of Catalog Marketing Advice

I received an email recently from the CEO of a company that, like Datamann, is a supplier to the catalog industry.  He was commenting on one of my recent blog postings, and offered an observation about a problem that he saw within the industry.

He mentioned that many online media outlets are reporting on companies that use Artificial Intelligence (A.I.) in their quest to find new customers and correctly target existing ones. He stated that in most of these articles the term A.I. is misused. The companies profiled are instead using “just predictive models (typically neural networks) and not true generalized ‘artificial intelligence’ at all. But claiming the use of AI is all the rage among Marketing Tech vendors (and the online media reporting on their activities) and causing massive confusion among the marketers I speak with.”

I knew exactly what he was meant. At a company I was previously associated with, every new service or product that was introduced – no matter how mundane – was promoted as having “advanced analytics”.   So we’ve progressed from advanced analytics to artificial intelligence, and both turn out to be an exaggeration.

This vendor went on to describe many of the innovative services and products that his company provides their clients.   Some of them sounded pretty cool – even cutting edge. But he wasn’t trying to impress me or sell me anything. Instead he wanted to make a point that so many of us have to contend with. Some of his products are really meant to make a mailer’s job more efficient and easier. But what is the client’s typical response? “Cool – but now what should I do? Can’t the system just act on these insights for me?”

He bemoaned the death of fundamental marketing skills among most catalog mailers, stating that “the Staples ‘Easy Button’ for marketing has become fully realized and it’s doing far more harm than good at many companies today.”

We all see it. When I polled mailers and marketers for what they wanted to learn at our seminar next week (yes, it is now less than two weeks away), the marketers I contacted almost universally asked for “the five most important metrics I need to run my business.”  When I explain to mailers that those metrics are different for everyone, they lose patience. They don’t want to hear that – they want me to skip to the “best” metrics and reports that everyone else uses.

I can’t blame mailers for not having the patience to understand that their business – as is everyone else’s – is unique. I’ve mentioned before (perhaps ad nauseam) that there has been a talent drain in the catalog industry. Maybe a more accurate statement is to say there just aren’t many staff left at many catalogs. It’s not that the individuals left lack talent – it is simply a fact that in just about every catalog company, the jobs of five people eight years ago are now being done by one or two people. The reasons that this has happened are endless.

It Is Always A Step Backwards

When staff is downsized, it is almost always a step backwards. What happens when someone is downsized or leaves and you are left to do your job and the other guy’s job? You cheat, and take short cuts to get your job done. Maybe cheating is not the right word, because it implies that what you did was ethically improper. That’s not the case. But you need to find a way to get more done, so you look for the easiest route. One of those routes is to outsource your marketing and circulation planning.

There are plenty of consultants in the industry that will do circulation planning and/or modeling for clients. The vast majority of these folks are ex-mailers. They know their stuff, and generally they are all good at what they do.  I perform the circulation planning for a handful of Datamann clients. My methods are no better or worse than those of other consultants. We each have our little quirks that make how we do it different from the other guy – but no one has a secret sauce, beyond experience.

But here is what bothers me. I view circulation planning as being a core function of the catalog. That’s because that was the role I filled as a cataloger. Of course I want to think of my job being “core” to the success of the company. I have always felt it was a mistake for catalog companies to “farm out” their circulation planning. To me it is a relatively easy exercise. But when you have someone else do it, you become that much further removed from the business. Once you start letting someone else plan the circulation, after a few seasons you start to skip looking at the reports that consultants like me provide that show how the last mailing performed, and how the next one is planned. You start to lose touch with how your customer is performing.

This phenomenon of losing contact with your customer is even more pronounced when you have someone doing your circulation planning via modeling. At least with RFM, if you wanted to, you could see how each customer segment is performing. But modeling requires a huge leap of faith. You are often mailing huge swaths of your customer file in very large segments, simply defined as Segment 1, Segment 2, etc. Yes, you can see a difference in response between the segments, but can you tell which portions of your customers are not responding?  Do you even take the time to ask the modelers, or do you simply assume that they are doing the best job that can be done?

It’s one thing to hire a consultant like Kevin Hillstrom or Frank Oliver to come in and provide you with an assessment of what you are doing. Maybe even have them build you a model. But, consultants like Kevin, Frank and me are always willing to teach you, the mailer, how to do what we just did for you, so you can replicate it and carry on the process when we are finished with our assignment. Rarely do mailers want to do that. They want that “Easy Button”.

I’m not knocking companies that do hire outside modelers. There are many of you that are big enough to justify modeling, but not big enough to hire your own in-house statistician to do it.  The problem is that it is not that much of stretch to go from the “easy button” of modeling to being confused by discussions of artificial intelligence to think that your model should be able to “learn by itself” what to do next.

I don’t see this as an issue with every mailer. People that have been “around for a while” know what is, and what is not, possible. It’s the younger professional, mostly from the ecommerce side of the business that suddenly find themselves also responsible for the catalog that think there should be an algorithm for everything. “Facebook can determine what kinds of people are most desirable to view my ad, why can’t your model just figure out the 2% of the people that are going to respond, and mail to them”.   They of course understand that Facebook’s response is not going to be 100%, but can’t understand why the postal model should not be attaining 100% response.

In my opinion, there is no “easy button” to catalog marketing. You have to be involved. You can hire others for their expertise, but don’t become too reliant on them. If you put too much of your business on “autopilot”, you will lose touch you’re your customer, and what they are doing. Your company will become an example of the old joke about the guy that jumped from a 10 story building, and people kept hearing him say as he passed each floor “Okay so far”.

If you are not already signed up for emails from this blog, click here.

by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

read more

There Are Still Some New Tricks

A few weeks ago, I wrote about the death of the catalog media, like Multichannel Merchant magazine. In preparation for doing so, I went out to the loft in my garage where I keep old catalogs and old copies of Catalog Age (predecessor to Multichannel Merchant) to get one to use a photo of in the posting.

I looked through a few old issues of Catalog Age from the late 1980s and early 1990s. There were articles that went into great detail explaining the benefits of NCOA, using an 800 number, talk time in the call center, mailing to Canada (that topic never seems to go away), and the best way to allocate multis on a remail. It was a nostalgic trip back to the topics that were so important when I first started in cataloging 30 years ago.

Now where are we? All of these marketing wonders of years past are now taken for granted, or are misunderstood. We no longer debate the pitfalls of desktop publishing, whether to include a FAX number on the order form (most of you don’t even have an order form), and your list broker, who you counted on to negotiate your list deals, has retired. We can’t even count on the likes of Hershell Gordon Lewis and Don Libey to warn us of our excesses and mistakes.

There are still many neat tricks that you can do with a catalog to drive response. But, just like I’m sure a lot of great blacksmithing secrets went to the grave when cars replaced horse and buggies, so too are the many secrets of cataloging going to disappear.

So let me give you a new one for your circulation planning.

Most of you segment your file by RFM, which is fine and adequate for many of you. You further segment by channel – typically by whether a buyer purchased by mail or phone (typically labeled “catalog buyers”), or whether they ordered via your website (typically labeled “internet buyers”). You may also break out your retail store buyers and Amazon-only buyers (which I recommend).

But, it’s the web/internet buyers that can be further segmented to improve your response rate when mailing a catalog. During matchback, those “web buyers” that matched a mailed catalog can be identified as “catalog from web buyers”. These buyers are not true web buyers – they still used/needed the catalog to respond. They will perform better in future mailings than the pure web buyers (customers acquired through SEO, PPC, email, etc.) with whom they were previously grouped.

When Datamann identifies these customers for clients, we keep these “catalog from web” buyers separate from those catalog buyers that ordered over the phone, partly because they perform at a slightly lower response than mail/phone buyers, but also because in the future, they may be the customer to whom you can mail a smaller catalog aimed at driving these buyers to the web.

In general terms, these would be the difference in magnitude in response you would experience between these groups of buyers, when comparing equal RFM segments:
Mail/phone buyers = 3%
Catalog from web buyers = 2.75% to 2.50%
Remaining (pure) web buyers = 1.75% to 1.25%

If you model your names for mailing, your models probably already take this performance by source into consideration. If you use traditional RFM for your mailings, this adds an additional set of segmentation for buyers, and requires an additional step (identification of the names through matchback), but the added value in the difference in response is worth the effort.

Finally, by identifying those web names that in theory, needed no catalog to respond, you have identified those names to which you potentially do not need to mail a catalog, and have potentially reduced your overall circulation expense.

There are still some good tricks to employ to drive response with your catalog. This one is simple to identify, easy to implement, and very profitable. Go to it.

If you are not already signed up for emails from this blog, click here.
by Bill LaPierre
VP – Business Intelligence and Analytics
Datamann – 800-451-4263 x235
blapierre@datamann.com

read more

The Private and Lonely Database

The allure of a private prospecting database has attracted many large catalog companies over the year. Years ago, Williams-Sonoma created one for use on their multiple titles. Just as I was exiting the list industry, American Girl talked of creating one, and I don’t know if they ever pulled it off.

I bring this up because the only response to my posting in early November on the need for the catalog industry to act in a more collaborative manner (We Are No Longer Competitors) was an email from a list manager, sharing the news that Bluestem Brands was creating a private prospecting database for their catalog titles.

In 2015, Bluestem acquired a dozen of the Orchard Brands titles, including Appleseed’s, Haband, Norm Thompson, and Wintersilks. A few weeks ago, Bluestem sent a letter to list owners and list managers detailing their plans to create a proprietary prospecting database, seeking participation in that database by these list owners.

Here is the most important part of the letter “The primary objective of this initiative is to consolidate, enhance and model the prospect lists used by the individual brands listed above with the goal of driving increased prospect list usage and new customer acquisition across all brands, with an explicit focus on expanding the usage of non-cooperative database list sources. Over the past several years the cooperative databases have become a larger share of the new customer acquisition mix, however the productivity of co-ops has eroded over that timeframe resulting in increased new customer acquisition costs. We anticipate that by enhancing our prospect universe data and through the application of modeling technologies, we will be able to increase the usage of list universes from non-cooperative database sources.”

I don’t begrudge the Bluestem folks behind this initiative at all. It makes perfect sense for them to do, as they need to protect their investment, and grow their titles. If they can pull it off, more power to them.

Let’s be clear though on one point – this is a database for their 12 titles. It is not going to be a shared industry resource. Again, I have no problem with this, although it does run counter to my comments about the industry needing to be more collaborative (more on this in a minute).

But take note of why they are doing this: “the productivity of co-ops has eroded over that timeframe resulting in increased new customer acquisition costs.” Wow! The customer base and demographics represented by 12 Orchard Brands’ titles are what the co-ops know best – older Baby Boomers, middle-class female apparel buyers. These 12 titles are custom made for the co-ops’ target household. And yet productivity is eroding. In case you needed to hear it from someone else, and proof from a company that has a lot of skin in the game with 12 large titles, the co-ops are dying.

I have no doubt that Bluestem will successfully create some form of proprietary database. Based on the roadblocks I recall Williams–Sonoma faced, Bluestem’s efforts may not proceed as smoothly or as quickly as they had initially planned. But they have time and size on their side.

But what happens to the rest of you?  Let’s assume that Bluestem is able to create this proprietary database. Let’s assume they pull all of their customer records out of the co-ops, or at least significantly reduce the number of buyer records they are contributing to the co-ops. What happens to the rest of you trying to reach that same audience? As if Amazon wasn’t sucking enough transactions out of the co-ops, you just had another significant reduction in the potential prospect audience to which you can target.

As more multi-title catalog companies experience the same rise in new customer acquisition costs, there will be additional efforts to create other private prospecting databases, which will only put more stress on the existing co-ops, and more stress on the solo-titled catalogs still trying to survive on their own. Any of the new companies trying to start new co-ops will simply wither on the vine. Oh, what a vicious circle.

But, I see this as a start. The need to be more collaborative among catalogs will only grow. Yet, let’s be realistic.  I never would have expected any company to raise their hand and proclaim “Yes, we will lead the way. We will weather all the hardships and criticism to help the entire industry, not just our title(s), to grow in a collaborative way.”  No, history shows that companies would do exactly what Bluestem (and others before it) is doing, which is to go it alone – at first.

However, eventually, if more companies do what Bluestem is doing, something will have to give, because all of these individual prospecting pools will be missing the vibrancy that comes from having the entire industry involved. They cannot exist for long as isolated pods of names.

What’s the lesson here? First, you are going to be left behind if you are not aggressively developing new methods of customer acquisition. Second, don’t wait for the co-ops to implode because I fear that implosion is coming faster than many of you expected.

Finally, don’t email me complaining that I gave you vague advice to “find new methods of customer acquisition”, without providing you with a detailed list here of inexpensive, sure-to-win methods of catalog customer acquisition specifically aimed at your catalog. You are a marketer. If you are really talented, use the gifts that the marketing gods gave you to figure this out on your own for your company. This is what you get paid to do. You do not get paid to be friends with the co-ops or the other vendors that you are cozy with now, and ride their ship under the waves with them. Get moving. Try new things. Be aggressive. Push back on those that are so tied to sales forecasts that they won’t take a risk.

If you are not already signed up for emails from this blog, click here.

by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

read more

Cute – But Not $50 Cute

I have my wife to thank for giving me the idea behind the topic of today’s posting. We’ll get to that in a minute, and you’ll have to watch the video at the end of this posting to understand today’s title.

In the last 10 days I’ve had three mailers (two of them not Datamann clients) contact me with the same question – “Our co-op performance is down this Fall season. Are we the only ones seeing this, or is it industry wide?”

Before I answer that question, let me relate an incident that happened this past week. One of Datamann’s UK clients came to New York for meetings with many of their vendors, and the consultant with whom we work with for this client. They met with all their co-ops; during those meetings, their printer, who graciously hosted these meetings in their New Your office, sat in and listened to what the co-ops were saying.

After those meetings, the client met with me, and when I was all done, that printer asked a very poignant question, which I will come back to in a minute (along with my wife’s inspiration).  Yes, I know – I’m stringing you along, but there is a reason.

I started out my discussion with the client by asking if the co-ops acknowledged that the universe of catalog shoppers in the co-ops was shrinking.  Did they acknowledge that Amazon was sucking transactions out of the pool which the co-ops used for modeling names? Did they say that as the number of viable names to which you can profitably mail a catalog decreased, they were going to make a corresponding decrease in the number of names in each model decile they provided the client?   The answer was “no” to all of these questions, although one co-op did acknowledge that Amazon was having an impact, but they had yet to determine how to respond.

I then asked, did the co-ops state that they were growing, adding more mailers, and more importantly, more viable names? The answer was “yes”.

I understand that the co-op sales reps must be under a huge amount of pressure to sell. (“Always Be Closing”). I also understand that even if the co-op sales reps truly know what is happening with the universe counts of buyers within their respective databases, they can’t reveal that bad news to clients. We’d all like to think they could and would tell us, but that would be touching the third rail of selling co-op names, which these sales reps cannot do.

I then got on my soapbox, and gave my view to the client of what I see happening in the industry this season. Co-op performance is down, and it is pretty much industry wide. Yes, a few mailers are probably up, but in general, response to co-op segments is down.

The reason is obvious – the universe of viable catalog buyers which the co-ops receive is shrinking. They will deny it. They will tell you that they are adding more and more names – and they are. They are adding retail shoppers, grocery store buyers, car buyers and as mentioned in my blog last week, lots of long since dead people.  The fact that someone bought some cat food and a gallon of milk last week is of no value to catalogers like you.

I say this is obvious, but some of you are choosing to ignore it, so let me explain it a different way. Stop and think about this for a minute. Amazon is now the largest seller of apparel online. These are not incremental sales – they are stealing sales from you. All of the hard good mailers have known this for at least the past 5 years, but now Amazon has caught up to the apparel sellers. None of those Amazon buyers or their transactions flow back into the co-ops. (I’m not even going to get into the fact that several of the co-ops – but not Wiland – are in turn selling your data to these online giants like Amazon, who in turn add nothing back to the co-op.) This cycle is killing your business and you are willingly feeding it.

No one – with the exception a few people like Kevin Hillstrom and me – will acknowledge this. (And both of us are getting tired of bringing it up, and many of you wish we’d stop).

As more transactions have moved online, and don’t flow back to the co-ops, has the size of your co-op model segments shrunk accordingly? NO! In order to maintain the volume of names the co-ops have been historically sending you, they “fill-in” with garbage names. Your performance goes down (but not your costs!) and the co-ops keep telling you that it is your catalog’s fault, because they are doing well, and that they are growing.

Datamann has done some things for our clients to improve the performance of the co-op names. We segment the names more prior to sending the files to the co-ops and generate more models based on our segmentation. We track the number of times the co-ops have supplied the same names to our clients, and suppress the names that are simply being mailed over and over that have no likelihood of responding.  The co-ops do not like either of these initiatives because it means our clients are taking fewer names from them. Although these programs help with response, they cannot stop the inevitable decline of the co-ops.

The Printer’s Question:

Which brings me back to the poignant question asked by the printer at last week’s meeting, which I’m going to paraphrase. He said “Bill, I sat through all the co-op presentations, and they certainly paint a different picture of the future of catalogs than you do. If the co-ops are as bad as you say, then what is the alternative?”

The alternative is testing/doing anything and everything, but mostly the alternative is creating some change. If you buy into my argument that the co-ops are dying, then you recognize that you have to change and try something else to acquire new customers. Or you will disappear.

This is the part to which we should all be rejoicing – it means that we get to do new things. Maybe the answer is TV: Vistaprint, Wayfair and Shoedazzle had back-to-back ads on our local TV station the other night, and they have been running these ads for more than a year. Maybe the answer is FSIs in the Sunday paper. Maybe it is doing an exchange of package inserts with a similar mailer. I don’t have the answer for every mailer – no one does. But that is why you hire people like the consultant that works with this client, a consultant who has the ideas and support from a team of companies like Datamann to effect that change.

Liz Kislik, a catalog industry consultant who deals with human resource issues, wrote me earlier this summer when I had commented in this blog about companies not changing quickly enough.  “Sometimes people want what they want more strongly than they want what will actually work, particularly if our recommendations as consultants will take longer, take too much persistence, or challenge something they hold dear.” Sage advice…

Cute – But Not $50 Cute

So, now the question – what did my wife do to inspire this posting this week? She “liked” the following video on Facebook, which I spotted, and immediately thought to myself “this video encapsulates what is happening in cataloging”.

Stop Wasting Time Making Photo Books (you have to watch this video to understand the significance of “Cute – But Not $50 Cute”.)

I immediately identified with this woman’s frustration with creating photo books. As the “family historian” I create an annual photo album of the prior year’s family activities. It is time consuming. It is frustrating as the website I use freezes up or loses my saved jobs.

But what makes this video so significant to catalogs is that it was not too long ago that the “photo book” websites like Shutterfly came about. Now, they are being replaced, or at least circumvented, by something that is even easier to use, and more relevant. Change comes fast.

This is the alternative. This is bringing change – in this case, working with Instagram to create instant photobooks. This solves a problem for the customer. When was the last time you introduced a change in your catalog, or a product, that solved a problem for your customers?

This is what will help you grow. Not joining another co-op, not doing another cover test, not debating whether you should offer 10% off or 15% off on Black Friday.

Changing, embracing change, making change stick at your company and finding alternatives to the catalog co-op databases.  These are some of the topics we covered at our Datamann catalog seminar last year – and ones which you will never hear presented at a conference sponsored by the catalog co-ops. We will be touching on these subjects again at our seminar in March 2017.

to-err-is-human

If you are not already signed up for emails from this blog, click here.

by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

read more