The Board Wants To Know What Matters

You’re giving a presentation to your Board of Directors next week on the current state of your business, focusing on a review of the recently completed Spring/Summer season and a preview of Holiday. The Board has asked you to focus on “what matters”.

You have this aching feeling that presenting the same data you’ve been doing for years is not what they want. It was the kind of data that mattered and was important before, but does it matter now? What should you do?

Here are the things I would skip, which most cataloguers have traditionally presented as “being important”, followed by the things which I think matter today.

Things you Should Skip:

  • Skip any reference to the creative post mortem from the Spring and Summer 2019 books: it doesn’t matter that your Creative Director was disappointed with the cover shot on the prospect version – you are not going to realise a 10 per cent lift in response because you come up with a more dramatic cover shot in 2020. You certainly don’t want to share your Creative Department’s idea for testing different logo colours on the Holiday catalogues.
  • Skip any reference to the square inch analysis: all it shows is how good you were at allocating space. It doesn’t help you determine what product categories to grow.
  • Skip any reference to what you’ve been told by your data co-op reps: what are they going to tell you that you don’t already know? Performance and counts continue to trend down as more transactions flow to online sources like Amazon, chocking off your old source of names. And no, don’t ask anyone for a study of in-home dates of competitors to share with the board – it doesn’t matter.
  • Skip any reference to your matchback if you didn’t do hold-out tests: unless you have been doing hold-out tests to determine your “organic per cent of demand” (the amount of sales generated without aid of a catalogue), your matchback results are overstating the impact of the catalogue. Or, at least seek permission to do those hold-out tests in 2020.
  • Skip any reference to the Merchandise Committee’s selections for 2020: If you select which products go into the catalogue or on the website by “committee”, you’re killing response. You open up the floodgates for choosing products by consensus, which always comes at a cost of what the customer wants when everyone internally is perceived as a stakeholder. The Board doesn’t care about consensus – they care about results.

Things That Matter in 2020:

These are some of the metrics I would present to a Board of Directors for review to determine how my company was doing:

  • How has your per cent of organic web sales (not traffic) changed over the past 3 years? These are the sales that occur online without aid of a catalogue, or PPC. They are the sales that occur because you have customers that love your products/service, and turn to you when they need more of what you sell. Actual organic sales generated is a better measure of potential survival than fans on Facebook or followers on Instagram. It is how much unaided actual sales growth you had.
  • What is the rebuy rate among buyers by channel of original purchase? How do the web originated buyers perform vs the catalogue buyers when promoted to again by channel? Do the web buyers respond better to emails? Do they respond at all to catalogues? What is your potential for growth from these buyers by channel?
  • In the past 12 months, how many co-op names did you mail for the 30th time vs. the 1st time? We know that our clients continue to receive the same names over and over from the co-ops, but that is not necessarily bad. They often have a high response rate. The problem comes with the names that you receive only once – those names the co-ops “slip in” to meet your target mail quantities. Are you getting more of those, and do they perform at all? If the per cent of 1X names is growing, that is a measure of the further deterioration of the co-ops.
  • What per cent of your marketplace buyers (Amazon, Wal-Mart) are converting to buyers in other channels (catalogue, web)? Many cataloguers see Amazon as a great revenue stream, which it can be. But rarely do more than 5 per cent of those customers acquired from Amazon convert to being buyers in other channels. You need to manage your Board’s expectation on marketplaces like Amazon, reinforcing that they are a revenue source, but not a source of new customers for the rest of the company.
  • How has the per cent of proprietary products (to your total product assortment) changed over time? If it is growing as you invest more resources into developing, sourcing and manufacturing your own products, that’s a great story to share. An even greater story to tell is whether those proprietary products are generating a greater per cent of sales than their non-proprietary counterparts.
  • How has the per cent of web-only products SOLD changed over time? Not too long ago, cataloguers said “it has to be in the catalogue to sell”. But that was because they only put products that were “dogs and overstocks” on the web. In order to survive, you have to have strong products which are only found on the web.
  • Aside from RFM, what is the number one attribute that drives response for your buyers? It is rarely things like demographics such as age. It is usually product driven. If a customer bought product X, there is a 40 per cent likelihood they will never purchase from you again. Or, if someone’s first purchase was from category A, there is a 60 per cent likelihood they will purchase again.
  • What is the Lifetime Value (LTV) of newly acquired customers based on source, channel, product category? The LTV of a mobile customer maybe 25 per cent lower than that of a catalogue-sourced buyer. But if there is the potential to acquire five times as many buyers via mobile than the co-ops, your board needs to understand that is where you are putting your attention.
  • What costs go away if the catalogue goes away? How much have your fixed costs gone down related to sales? Did you eliminate a mailing, or some staff? For online companies that start catalogues, the catalogue is a variable expense, because if it fails and goes away, there is still the online revenue stream. You need to move toward a point where your catalogue is a variable cost

All of these items may not apply to you and your company. But they are examples of the types of metrics you need to supply your Board and upper management to show how you are managing the growth of the company.

by Bill La Pierre, Datamann USA

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