The Customer Behavior That is Tough to Change

by Bill LaPierre on April 20, 2014

Catalog response rates and performance have been erratic this spring. The national press blames the weather for soft retail sales, although I don’t support that conclusion as being the sole reason. There was an ice storm in Atlanta, and it got cold in Minnesota – so what, that happens every year.

Response rates vary for many reasons, and I’m not going to list them here because you already know the list. But one customer behavior that rarely changes is average order value. Unfortunately very few retailers/catalogers understand this, or know how to influence it.

The two basic elements that drive the size of your average order value are: 1.) your merchandise mix and obviously the relative price points of that merchandise, and 2.) your customer’s expectations from you.

Merchandise mix and related price point is easy. In general, the more expensive the items in your catalog, the higher your average order will be. You can manipulate the average order a little by featuring certain products, or putting all the expensive products at the front of the book. But “gaming” the average order using methods like that is short lived. The old Lillian Vernon catalog was a master at offering “two for” deals, which drove their average order up by 10% to 20%. Say what you want about Lillian, but in her prime as a merchant, she knew how to squeeze every dollar from a sale.

The trouble with pushing your pricing too high – especially if there is not a corresponding value to the product to match the price – is that eventually your response rate dives. I shudder every time a client calls and says that their response rate is down, but average order is up, so their sales per book are right on plan. A red flag goes up because this is rarely sustainable. The reason is because of your customer’s expectations of you.

When I worked at Brookstone, one of our new CEOs (we had 3 in my tenure), a long-time retailer who had worked almost exclusively at large department stores, introduced me to the concept of the customer’s expectation of you as a retailer.

For some of you, this concept is pretty basic. But many of you have never learned it.

This CEO had always employed a team of “pollsters” that stood outside the door to their department store, and asked shoppers what they bought as they left the store. If a woman answered that she had bought a party dress, the pollster would ask if she had also bought fancy shoes with the dress. If the woman answered no, there was a list of questions to probe why the customer would not consider buying her shoes at that store. The answers to those questions helped the store determine what they needed to do to get more of the customer’s “spend”.

Why-Didn't-You-Buy

Stop and think about your own buying patterns and how much you usually spend at certain stores. I go to Wal-Mart once a month to stock up on household staples (paper towels, cat litter) and I always spend about the same amount. I could obviously spend more, but Wal-Mart is not where I think of getting groceries, or clothing. Product choices in those areas are not within my expectations of Wal-Mart.

You can add more and more high priced products to your catalog in an effort to drive average order up, but if they are outside your customer’s expectations of you as a retailer, and outside what they feel comfortable buying from you (somehow buying jewelry from Wal-Mart lacks the same appeal as buying it from Tiffany), the effort will go nowhere.

Said another way, it is really difficult to increase average order and maintain response rate. The more you try to increase your average order, you will alienate your core customer group, even if they have the wherewithal to support those higher prices. They have an expectation of what they were willing to spend with you and it will be tough to budge them. In all my years of consulting, I have rarely seen a catalog successfully increase their average order more than 25%, which in itself is a huge achievement, and requires several years of “nudging” price points and merchandise mix. By “successfully raise their average order” I mean that the company did so without alienating their core customers, and maintained their historic response rates. You can raise your average order overnight – but you’ll lose most of your customers when you do.

Every consumer has an interest or a passion on which they will spend excessive amounts of time and money. For some it is food, for others apparel or books. They may even have a preferred cataloger/retailer for the products that support that passion, and will spend more than that retailers’ average customer. You should be aware of those customers, and play to their interest. But don’t fool yourself into thinking that you can create more of those people, or that you should try to get all your customers to spend at their levels. It does not happen that way. Your average order is consistently average for a reason. That is what your average customer is willing to spend with you.

The better catalog growth strategy is to embrace the average order you have, and use all the tricks in your catalog creative arsenal to drive response around that average order. Employ basic tactics like featuring a product on the front cover which is close to the average order for the catalog. And beware that when you do try to increase your average order, your response rate will suffer.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

The Willing Suspension of Disbelief

by Bill LaPierre on April 13, 2014

I had more comments from readers last week than I’ve had in a long time regarding an observation I made at the very end of last week’s posting, which was not even related to the main subject last week. I remarked that “If you are still including a President’s Letter in your catalog, you should know there are only two people that read it – the copy writer that wrote it, and the President’s mother. And even she just skims it now.”

Evidently, many of you are still trying to convince someone in upper management or your creative team to ditch the President’s Letter.

How do we get stuck in ruts like this? The common answer is that “we’ve always done it that way”. In many instances, that is the only reason necessary to justify doing ineffective things over and over. Or actually, to ignore something that you know is wrong, and are willing to overlook.

But, I often see another reason we fall into a rut with our catalogs – the willing suspension of disbelief.  This was a concept first developed by the poet Samuel Taylor Coleridge in 1817 who postulated that if a writer could inject a “human interest and a semblance of truth” into a fantastic tale, the reader would suspend judgment concerning the implausibility of the narrative.

A non-catalog example would be Star Trek. How come there is no zero-gravity? Why doesn’t Captain Kirk float around the space ship?  Or in the Die Hard movies, how does Bruce Willis get shot 10 times and only need a band-aid at the end of the movie? We suspend our disbelief because it fits with the narrative.

The same thing happens with our catalogs. We believe it when the Creative Director or an outside consultant tells us that we need to “connect with our customer” and build brand awareness. We give them the first spread, sometimes the second spread, and sadly, sometimes even the third opening spread, to build synergy, set the tone, build the brand, etc. Those spreads are full of great inspirational shots, or letters from the founder/owner (often with their photo). And, there is absolutely NO selling because that would detract from the efforts at customer engagement.

What a bunch of crap! We know deep down that the people telling us this stuff haven’t got a clue about what they are talking about.  But we suspend our disbelief because we think “Well, maybe there’s a chance it will work for us. Maybe we will be that one in 32,000 catalogs for which not featuring products on the opening three spreads will work better for than actually trying to sell something on those three spreads.”

We believe it when merchants tell us that a new product is going to do well, even though we have a gut feeling that the merchant is living in a fantasy world. Or when the merchant tells us that the item can sell for $80, when everyone in the room says they would only pay $28, at most, for the item. The merchant gives us an impassioned rationale on why they thing it will sell, and why it will sell at $80, and slowly we start to suspend our collective disbelief. What we need is for someone to say “Are you smoking crack?”

Let me give you some real world examples. Every year, during the first week of April, I get an LL Bean Home catalog. Every year for as long as I can remember, it has featured an Adirondack chair on the cover. This years’ cover is on the left, last year on the right.

Bean-Home-2014-2013-COvers

LL Bean must sell a ton of these chairs (although since they are the most uncomfortable chair in the world, they should sell them as something you let guests sit in that you hope won’t stay long). But as a consumer, I look at this cover and say “same old chairs, nothing new here”, and often don’t even bother to look further.

The folks at LL Bean are smart people. I’m sure they have data that proves that response is best to this catalog when they feature the same chair, year after year. But I have to believe that what is happening is “collective willing suspension of disbelief”. No one is asking whether the long term impact is that they are boring their customer to death.

The Adirondack chair on the front cover could be a subjective issue – but this next example is certainly not. Every year, during the first week of February I receive a kids catalog from both LL Bean and Lands’ End. When our son was the age that matched the products in those two catalogs, my wife bought a lot of our son’s clothes from each.

Bean-Kids-LE-Kids

Our son turned 14 this week. He is almost 6 feet tall, and wears a men’s small. We haven’t purchased from either catalog in about 6 years. Moreover, we purchase much of his clothes (men’s small) from each company’s respective main books. You’d think that someone would have noticed that over a course of 14 years, our purchases from these catalogs had peaked and then stopped, followed by a corresponding move by someone in the household to buying men’s small products from the core catalog (which sure isn’t me). Maybe someone at each company could do a simple “customer age progression”.

Instead what I suspect is happening is that in each company, our family’s RFM score looks fantastic, since we are active buyers from each. Thus, someone in the modeling/circulation department is practicing “willing suspension of disbelief” and figuring that maybe we’ll come back to buying from the kid’s catalog again.

We all do things in our organizations that make no sense because we believe in our heart that they are true, even though we know in our head that there is no possible way it could happen.  We believe because someone who seems like they should know what they are talking about told us so. This has always been our catalog growth strategy.

However, listen to your first instinct. Listen to that little voice that is saying “no way is that going to happen”. Stop doing stupid things because you think everyone is going to jump down your throat for suggesting change, or at least, suggesting a catalog strategy that differs from the accepted norm.   Change is good, and change is never ending. But common sense still trumps all.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

We Hardly Knew You

April 6, 2014

I have a box of catalogs under my desk, and two more boxes in the loft of my garage, labeled “Catalogs No Longer Mailing”.  The historian in me led me to start collecting these books years ago. Even as I sit and look at them today, I can only vaguely recall some of them, and […]

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The Amazon Implosion

March 30, 2014

I make no pretense at being able to predict the future or foretell what will happen in just the coming months. However, I believe that taking a long view of history can provide insight into future events, as the historical view often leads to different conclusions than popular beliefs. For example, I believe, based on […]

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The Revolving 12-Month View

March 23, 2014

I’m going to venture into the extreme minutia of circulation planning today, because a number of clients have questioned me lately on a specific aspect of circulation planning which I believe has tripped up mailers for years. It is also a sign of how we get trapped in doing things the same old way. When […]

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Observations on NEMOA 2014

March 16, 2014

This is my 100th posting for Datamann’s blog on catalog trends and catalog survival.   I don’t know how Keven Hillstrom manages to do his blog daily, but writing a weekly blog has proven far easier than I expected, and has been very beneficial for Datamann.   I think it fortuitous that this 100th posting coincides with […]

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How Can Anyone Be Awed by This Insipid Drivel?

March 9, 2014

Did you get a catalog from Build.com this week? You would think that by this point in the evolution of catalog strategies, companies would know how to create a piece that would drive response. That is what this catalog from Build is – simply a pure web driver. It was meant to get me to […]

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Put the Odds In Your Favor

March 2, 2014

Time for me to be crass and talk about profits, those things that you take to the bank. I saw a t-shirt this past Christmas season in a catalog that said “I would have had a really great job right now, but instead I chose to be ____ major.”  Apparently, you fill in the blank […]

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Amazon is Out To Get You

February 23, 2014

Over the next few weeks, I’m going to explore some of the themes presented at Datamann’s Analytics for Marketers seminar, which we sponsored last Thursday for the VT/NH Marketing Group. By all counts, it was a great success with over 35 Datamann clients and over 120 total registered attendees traveling to Concord, NH for our […]

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Brookstone’s Corkscrew Mentality

February 16, 2014

An article in the Wall Street Journal last Friday confirmed what had been rumored for weeks – that Brookstone was close to bankruptcy. Coming out of a disastrous Christmas season of poor sales, Brookstone does not have enough cash to make interest payments on $125 million in debt. This is not first time the company […]

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