6 Questions to Ask When Cutting Catalog Circ, Part 3

(Here's question six from the list. For part 1 and questions one through three, click here; for part 2 and questions four and five, click here.)

6. How do you allocate sales and costs across the multiple channels in which you interact with your customers? The following is a list of tips and questions to help you correctly answer this question:

• Build control groups to measure the difference in response between mailing buyers once, twice or three times in a season. Build holdout panels to measure sales from buyers if you don’t mail them at all. Measure how long it takes those buyers’ sales to decay once you stop mailing them.
• Consider allocating all e-mail sales to the e-mail campaign. Does it make any difference when none of those sales are allocated to the catalog? Usually the answer is that it makes no difference to catalog profitability.
• Are the different multichannel campaigns in conflict? The most common conflict is for e-mail promotions to lessen or end the long tail of catalog sales. Make sure e-mail promotions aren’t stealing response from catalogs. Are customers being trained to wait for e-mail promotions because they find better deals in the e-mails than in the catalog?
• Is the catalog doing the best job possible in driving customers to the Web? Is the Web site effective at converting the catalog-driven traffic?
• Can you identify “pure” Web orders coming from price comparison engines, e-mails, affiliate programs, search and other Web order flows? If so, flag those customers as “pure” Web buyers. Are there enough orders coming from these programs to warrant segmenting these customers? For example, buyers who purchase through price comparison engines are notoriously poor catalog buyers. They respond poorly because they're loyal to price rather than your brand.
• Are newspaper inserts and traditional media such as newspaper ads, TV and radio being measured? Are they profitable or just being done out of inertia?
• Is your organization “channel agnostic”? Do you have common metrics to look at the cost to acquire a new customer between various channels?
• Does your business know the potential to scale sales and profits between catalog circ and the Web? Do you know which Web programs have the potential to scale in the next fiscal year? Are resources being allocated according to the scalability of the various multichannel marketing efforts?
• Does your company measure channel shift? Channel shift is the percentage of orders being driven by each channel (catalog, Web and retail), and by the programs within each channel.
• Do you track “new-to-file” customers by channel? Where are the new customers coming from?
• Are the Web buyers different than traditional catalog buyers? How can customers’ differences be understood and exploited?
• Is your company allowing enough budget to test cutting-edge Web programs like behavioral marketing through pay-for-performance models, such as acerno, e-mail programs to convert abandoned shopping carts, improved e-mail marketing programs, among other things? There's a need for organizations to test new Web programs where catalog circ is usually pretty mature.

It's difficult to know the cumulative effects of layers of marketing programs aimed at the same buyer. But if you apply the straightforward business rule of not mailing any circ that's below breakeven, you’ll preserve profitability. And if you push up the break-even point by giving reasonable allocation of sales across channels, you can take a conservative view of your catalog circ and trim it so you're only mailing the circ that is clearly profitable.