Catalog And Retailer Differences In Matchback Strategy And Contact Strategy Optimization

There's this huge shift in multichannel marketing strategy in recent years, with catalog matchback algorithms playing a significant role in the shift.

Fashion retailers (Neiman Marcus, Saks, Bloomingdales, Nordstrom) either eliminated traditional catalog marketing programs, or are in the process of significantly reducing circulation. Folks at Williams Sonoma are significantly trimming circulation.

When I talk to some of you, you tell me that these folks can cut circulation because they are retailers --- the retail channel somehow generates brand awareness that fuels a brand in a way that minimizes the need for advertising. You might be right, we simply cannot test your hypothesis.

Mechanically, retail brands are better at developing a testing discipline.

Here's an example. We randomly sample twenty customers, ten receive a catalog, ten do not, and measure performance across channels during the three weeks that a catalog is active. Here's what we observe:

Mailed			Holdout
Cust 1	Buy Store		Cust 11
Cust 2			Cust 12
Cust 3			Cust 13	Buy Online
Cust 4			Cust 14
Cust 5	Buy Phone		Cust 15
Cust 6	Buy Online		Cust 16
Cust 7			Cust 17
Cust 8			Cust 18
Cust 9	Buy Online		Cust 19
Cust 10			Cust 20	Buy Online

Here's the fundamental difference between the retailer and the catalog brand.

The retailer will compare the mailed group and the holdout group. In the mailed group, four out of ten customers responded --- in the holdout group, two out of ten customer responded. The retailer calculates response as (4 - 2) / 10 = 20%.

The cataloger does not execute the test. Instead, the cataloger takes the mailed group, identifies the four responses, matches the responses back to the mail file, and calculates response as 4 / 10 = 40%.

Again, notice the significant difference in response, using the two methodologies.

• Retailer = 20% Response Rate.
• Cataloger = 40% Response Rate.

In this comparison, the organic percentage is 20% / 40% = 50%. Half of the demand would happen without any advertising.

This fundamental difference in approach causes a shift in strategy.

• Retailer = Cut Circulation, Re-Allcoate Marketing Dollars Elsewhere, Learn!!
  
• Cataloger = Maintain Circulation, Ask For Additional Funding For Online Marketing, And Significantly Over-Spend In The Catalog Marketing Channel, Driving Down Profit.
  

This problem is systemic across the catalog industry. Matchback vendors aren't trying to rip you off, they simply aren't. But there isn't an incentice to create a "best practice" that accounts for the differences that retailers observe when executing contact strategy testing and what catalogers measure via matchback analytics.

A simple solution for catalogers is to execute a test similar to the one designed above. Do not tell the matchback vendor about the holdout group. Have the matchback vendor run the control group through the matchback algorithm, and see how many orders are allocated to the holdout group. Subtract the results of the holdout group from the results of the mailed group, and you have true incremental demand as illustrated in the retail example at the beginning of this post.


Hillstrom's Contact Strategy Optimization: A New E-Book.

Hillstrom's Contact Strategy Optimization On A Budget

Hillstrom's Contact Strategy Optimization On A Budget is a new e-book and spreadsheet available from the MineThatData Store at Lulu.com.

Contact Strategy Optimization is not a new concept. During my time at Lands' End in the early 1990s, we worked with a team of IBM researchers on an optimization solution that formed the embryonic version of the solutions offered by Decision Intelligence.

During the past two weeks, many of you told me that you don't want to spend tens or hundreds of thousands of dollars on black box algorithmic solutions that optimize the number of catalog contacts to various customer segments. That being said, you told me you want a solution ... one that can be implemented by Business Leaders, Analysts, and Managers ... one that can be implemented on a budget.

So I wrote this e-book, outlining a reasonably simple approach to identifying the most profitable combination of catalog mailings and e-mail marketing messages to different customer segments.

What Do You Get, What Will You Learn?

• You'll learn that matchback algorithms over-state the importance of catalog marketing, causing us to mail too many catalogs to our customers.

• You'll learn that the "organic percentage" is the most important metric to understand when considering an appropriate contact strategy.

• You'll learn that contact strategy testing is critical to understanding multichannel customer behavior.
  

• You'll learn how cannibalization between catalog mailings and e-mail marketing messages directly influence a profitable contact strategy.

• You'll apply versions of the "square root rule", identifying profitable strategies.

• You'll receive access to a URL where you can download a spreadsheet that allows you to play "what if" games using your own assumptions and your own customer segment performance.
  

This is not meant to be an elegant or mathematically perfect solution. This e-book and spreadsheet are written for you, the Executive or Analyst who has to come up with solutions on a limited budget.

Do you not have a quarter of a million dollars to spend on an optimization solution, but have access to $79? If so, purchase "Hillstrom's Contact Strategy Optimization On A Budget"! For those of you who criticize me for giving away too much information, you'll be happy, because the contents of this e-book will not be made available on this blog.

$79 is a fair price, considering you'll be given tools that could result in hundreds of thousands of dollars of annual profit, don't you think?

So visit the MineThatData Store on Lulu.com, and download this e-book for the nominal fee of $79.

Williams Sonoma: Catalog And E-Mail Circulation Optimization

Courtesy of the folks at Multichannel Merchant, this article about huge circulation cuts at Williams Sonoma stimulates some thought, doesn't it?

The article mentions digital direct marketing as an alternative to catalog marketing. When you have a retail presence, it is much easier to go down this path, and sometimes it is more profitable to go down this path.

If you're a traditional cataloger, without a retail presence, life is more challenging. One of the things we have to do is more testing --- testing what happens when we combine catalog marketing with e-mail marketing.

Check out the sample test results, measured over a three month period of time to customers who receive both catalogs and e-mail marketing campaigns.

Catalogs	E-Mails	Phone	Online	Total	Profit
6	Yes	$6.50	$6.50	$13.00	$0.92
6	No	$7.50	$4.75	$12.25	$0.69
4	Yes	$5.50	$6.25	$11.75	$1.68
4	No	$6.50	$4.50	$11.00	$1.45
2	Yes	$3.50	$6.00	$9.50	$2.10
2	No	$4.50	$4.00	$8.50	$1.78
0	Yes	$0.00	$5.50	$5.50	$1.90
0	No	$0.00	$3.00	$3.00	$1.05

This is the style of test our industry can capitalize on. We compare combinations of catalog marketing contacts and e-mail marketing contacts, searching for the most profitable strategy. In this case, receiving two catalogs over the course of a quarter, coupled with a weekly e-mail marketing strategy, is most profitable.

Notice that this strategy doesn't yield the best result, in terms of total sales volume.

Also notice that sending no catalogs, and no e-mails, still causes customers to spend money. This might be the most important metric for you to obtain --- what percentage of volume happens if you don't execute any traditional direct marketing (catalog / e-mail)? Do you know this percentage? It's an awfully important one to know.

Where are we heading: We will slowly back off on traditional direct marketing --- and we will re-invest the advertising dollars we save in untested online marketing strategies. And over time, we'll identify online micro-channels that recoup the sales we lose by cutting back on catalog marketing, and we'll be more profitable!

Contact Strategy: A Starting Point

Those of us in the multichannel catalog and retail world like to "optimize marketing spend".

If you're a cataloger, you become obsessed with "incremental" or "cannibalization" rates. If you're an online marketer, you love comparing CPA's across various marketing activities. Retailers ... well, it's a lot harder to accurately measure the incremental impact of various retail marketing activities, isn't it? Not impossible, but harder.

There are a few ways to think about optimizing marketing spend. If you have deeper-than-average pockets, you might work with the folks at Decision Intelligence. You'll get your money's worth from the mathematical wizardry they offer.

For those of us looking for a simpler solution, let's think in the most basic of terms. Let's offer a starting point for thinking about contact strategy management.

Catalog-Only Customers: On average, these folks won't buy unless they are advertised to. Via mail/no-mail tests, it is a straightforward exercise to figure out the right amount of advertising spend per customer segment.

• No Advertising = 5% Repurchase Rate.
• 50% Advertising = 41% Repurchase Rate.
• 100% Advertising = 50% Repurchase Rate.
• 150% Advertising = 56% Repurchase Rate.

Online-Only Customers: These folks will buy without advertising. We are frequently misled by these customers, thinking our e-mail and catalog marketing activities "caused" them to purchase. In reality, we have to divide spend into "organic" spend that happens without advertising, and spend that only occurs when the customer is advertised to. We only learn this by executing tests, or we estimate it via a Multichannel Forensics simulation.

• No Advertising = 28% Repurchase Rate.
• 50% Advertising = 36% Repurchase Rate.
• 100% Advertising = 40% Repurchase Rate.
• 150% Advertising = 43% Repurchase Rate.

Catalog + Online Customers (aka "Multichannel" Customers): Easily the most flummoxing segment of customers on the planet. Catalogers think their marketing activities drive 85% of the activity with this segment. E-mail marketers believe they manage the customer relationship with this segment. Search marketers feel they drive increases in sales and profit. The reality, however, is that the customer "combines" none/some/all of these activities when buying merchandise. As a result, you feel like you're stuck mailing the catalog, delivering multiple e-mail campaigns, and paying for various keywords in order to facilitate a purchase. Are you?

• No Advertising = 41% Repurchase Rate.
• 50% Advertising = 58% Repurchase Rate.
• 100% Advertising = 65% Repurchase Rate.
• 150% Advertising = 70% Repurchase Rate.

Your starting point is to figure out the baseline repurchase rate, spend per repurchaser, and revenue (repurchase * spend) for each customer segment.

Next, you estimate (using relationships like the square root rule, or better yet, using test/holdout results) what happens when you advertise at 50%, 100% or 150% of normal ad-dollars (and increments in-between).

Once you estimate the optimal spend level, identify the most effective marketing activities. In many cases, this requires a decent amount of testing (e-mail and catalog contact strategy testing). Among "multichannel buyers", carefully analyze how many marketing channels are combined in each purchase, when various marketing activities are withheld from the customer.

At some point, you obtain a baseline of knowledge that allows you to do one of three things.

1. Try your own contact strategy optimization.
2. Hire experts like the folks at Decision Intelligence.
3. Go halfway, using tools like Multichannel Forensics to simulate the long-term impact of short-term ad-spend decisions.

Most important is the starting point, folks. Segment the customers, understand that "organic" demand occurs for many customers, and estimate if you are over/under spending.

Contact Strategy Evolution

Pretend you are a loyal customer of a leading catalog brand. Let's see how the leading brand might have contacted you, over the years.

1965:

• You enjoyed receiving your three big books a year, 600 page monsters featuring the entire store. You mailed your order to the brand on October 1 along with a check covering the purchase amount, hoping the merchandise would arrive in 4-6 weeks.
• Total marketing contacts = 3.

1985:

• You stumbled across a "specialty brand" that mails you twelve catalogs a year, smaller monthly reminders averaging 124 pages each. You phone your order in on October 15, giving a credit card for payment.
• Total marketing contacts = 12.

1995:

• Your favorite specialty brand "branched out" into other product classifications, sending you twenty-four catalogs a year.
• Total marketing contacts = 24.

1999:

• E-commerce, the dot-com craze, and Y2K preparedness dominate the landscape. In addition to 24 catalogs, your favorite specialty brand started sending a monthly e-mail campaign, and has a website where you can purchase merchandise. You visit the website on a quarterly basis.
• Total marketing contacts = 36.
• Consumer-driven contacts = 4.
• Total interactions = 40.

2002:

• The surprising rise of Google allows you to "shop around". You use Google once a quarter for shopping purposes. Your favorite brand has upped e-mail contacts to 24 a year. You visit the website on a monthly basis.
• Total marketing contacts = 48.
• Consumer-driven contacts = 16.
• Total interactions = 64.

2005:

• Google owns the world, having become your starting point for your shopping habits. You use Google once a month to research product offered by your favorite specialty brand. Your favorite specialty brand ramps up the e-mail program to one per week, and maintains 24 catalog contacts per year. You visit the website once every three weeks.
  
• Total marketing contacts = 76.
• Consumer-driven contacts = 29.
• Total interactions = 105.

2008:

• Your leading specialty catalog brand adds RSS feeds to the mix, allowing you to see new and exciting merchandise offerings once every three days. E-mail contacts have increased to three every two weeks. You visit the website once every three weeks, and you use Google to search for comparable merchandise once every three weeks.
• Total marketing contacts = 102.
• Total pull-based contacts (RSS) = 17.
• Customer-driven contacts = 34.
• Total interactions = 153.

During my twenty years in this industry, I haven't observed significant gains in annual repurchase rates or annual purchase frequency. I observed significant decreases in response to catalog and e-mail marketing activities.

Then I step back, and truly see how we contact customers. It all makes sense. We simply average high response in a dozen activities across a hundred activities, yielding low response.

Sure, customers can opt-out of catalog and e-mail marketing ... but once the customer is in, we make sure we're in their mail-box/in-box a couple times a week.

As leading brands, we work out tail off to make each interaction, each contact, as productive as possible. We are driven, using real-time metrics, to employ "best practices" that maximize ROI. We micromanage metrics like click-through rates, never stepping back to see if all the changes in click-through rate actually cause an annual increase in repurchase rate.

At the end of a year, we've saturated the customer with more than a hundred contacts ... contacts that produce the exact same annual repurchase rate, the exact same number of purchases per year.

And then we wonder why customers are fed up with spam and junk mail, when this process is repeated across the five brands the customer purchases from on a regular basis, not to mention another fifty catalog brands that try to entice you into purchasing via unsolicited customer-acquisition-based mailings.

When Somebody Steals Your Work

Many years ago, it was my job to create a catalog marketing strategy that would significantly increase the profitability of my division.

I worked hard at developing something new, innovative, and different. Mysteriously, I came up with something that 'worked'!

I shared the plan with a member of our executive team. This person showed moderate disinterest in the plan.

Nearly eight weeks later, I was on vacation when I received a phone call from one of my analysts. My analyst informed me that the executive came to my team, told my team they needed to re-work the entire catalog contact strategy and sales forecast, and gave them a plan to implement before the end of the week.

It was my plan.

The executive either planned to do this, or circumstances forced the executive to do this, or it was an honest mistake.

Regardless, my work was stolen by this person. This person got the credit for a strategy that was several million dollars a year more profitable than what was being done at the time.

There are many times when you 'want' your work to be stolen by others. When you are in Database Marketing, it is your job to 'influence' others, you don't lead the merchandising or creative team. So, you float ideas and concepts out there that other executives run with. This happens all the time. The best Database Marketers are utterly gifted at this style of management.

But there are times when your work is blatantly and brazenly stolen. When that happens, how should you react?

Are there instances in your career when somebody stole your work, and received credit for it? How did you handle the situation? How did the situation resolve itself?

Three Ways To Increase E-Mail Sales

Businesses with customers who purchase fewer than three times a year seldom benefit from trigger-based e-mail marketing campaigns (with the notable exception of shopping cart prompts, which often work well).

There are at least three key factors that can be managed, to grow e-mail sales.

Factor #1 = Incremental List Size, Managed By Contact Frequency

Factor #2 = Incremental Demand Per Contact, Managed By Contact Frequency

Factor #3 = Demand Per E-Mail, Managed By Number Of Targeted Versions


Incremental list size is ultimately determined by the number of e-mail campaigns sent per week. When a customer is contacted too often, too many customers unsubscribe, driving down the total size of the e-mail list. Strategically, management may choose to execute "x" campaigns per week. Mathematically, the number of e-mail contacts per week can be determined by the number that still cause a healthy increase in the number of valid names available to be e-mailed. In the table below, you'll see that two e-mails per week are optimal, as the e-mail list continues to grow.

Incremental demand per contact is also important. As you increase e-mail frequency, you will decrease the performance of any one e-mail contact. Increased frequency will probably cause cannibalization between e-mail campaigns. The table below shows that the combination of unsubs and performance dictate two e-mail campaigns per week.

Targeted versions of an e-mail are important as well. Few retailers have the ability to dynamically create unique e-mail campaigns for each customer. As a result, management creates "x" versions of an e-mail campaign, offering different merchandise in each version. The analytics team decide which version of an e-mail campaign the customer receives, on the basis of past purchase behavior, stated customer preferences, clickstream history, and other factors. From a staffing standpoint, it could be a challenge to produce numerous versions.

In the table below, I assume that a company managed one version of an e-mail, one time per week, to the entire e-mail file. This strategy yielded $20,700 of demand per week.

Going from one campaign a week to two campaigns per week kept the file size increasing, reduced volume per e-mail, but resulted in $30,030 of demand per week. Clearly, this is a better strategy than sending just one e-mail campaign per week.

Going from one version per campaign to nine versions per campaign drove $40,040 of demand per week. Assuming this strategy can be managed with existing staff at minimal cost, this strategy could work.

Notice that the combination of list size (dictated by frequency), demand per contact (dictated by frequency), and version contribution cause a doubling in e-mail volume, on a weekly basis.

Catalogers have long mastered this type of analysis, assigning profitability to each strategy. With e-mail, profitability is not as big an issue, so if one can avoid the fixed costs associated with incremental staffing, a move to moderate frequency with increased versions can yield a significant increase in e-mail sales.

Obviously, there are many ways to increase e-mail volume. These three basic strategies almost guarantee a positive return on investment.

No Targeting Strategy
Contacts	List	New	Unsubs	Net	$ per	Weekly	Total
per Week	Size	Subs	& Invalids	Names	E-Mail	Demand	Demand
1	100000	1000	650	100350	$0.20	$0.20	$20,070
2	100000	1000	900	100100	$0.15	$0.30	$30,030
3	100000	1000	1150	99850	$0.12	$0.36	$35,946
With Targeting Strategy: 2 Contacts Per Week
Targeted	List	New	Unsubs	Net	$ per	Weekly	Total
Versions	Size	Subs	& Invalids	Names	E-Mail	Demand	Demand
1	100000	1000	900	100100	$0.15	$0.30	$30,030
5	100000	1000	900	100100	$0.18	$0.36	$36,036
9	100000	1000	900	100100	$0.20	$0.40	$40,040

Contact Strategy Profitability

During a two-week period of time, you conduct an experiment. Customers are divided into four groups. The customers in each group are all "equal", in terms of quality.

Group 1 receives one catalog, and each of two weekly e-mail campaigns.

Group 2 receives one catalog, but does not receive any of the weekly e-mail campaigns.

Group 3 does not receive the catalog, but does receive each of the two weekly e-mail campaigns.

Group 4 does not receive the catalog, and does not receive either of the two weekly e-mail campaigns

The table at the bottom of this article illustrates the findings of the experiment. Which strategy would you employ (the strategy from Group 1, Group 2, Group 3, or Group 4), and why? Or, do you recommend a different strategy? Are you missing any information that you need to make this decision?

	Phone	Online	Total	Profit
Group 1 = Catalog + E-Mail	$4.39	$5.94	$10.33	$1.56
Group 2 = Catalog	$4.62	$5.71	$10.33	$1.58
Group 3 = E-Mail	$0.19	$4.46	$4.65	$1.14
Group 4 = No Marketing	$0.20	$3.99	$4.19	$1.05

A Brief History Of The Internet, And Leadership Development

In 1995, I accepted a job at Eddie Bauer as Manager of Analytical Services. One of my 'demands', was to have a personal computer with internet access, and an e-mail account. One could sense that the internet channel was about to change the way we worked.

Within a year, we had individuals focusing on internet marketing. If I remember correctly, we called the channel 'I-Media'.

Our Vice President of Marketing would kid our 'I-Media' person. "How many orders did we get yesterday, six or seven?" he would joke. The 'I-Media' person would just plug along, doing work that none of us really understood.

Six or seven orders a day became an annual total of $65,000,000 three years later. Vice Presidents paid attention to that number. These sales appeared to be largely 'free'. We didn't have to spend $10,000,000 marketing to the customer to get these sales ... at least on the surface, it didn't appear that way.

In 1999, I was Director of Circulation for a $500,000,000 catalog business that was stumbling along. Sales were no longer increasing, in fact, catalog demand was decreasing year-over-year, on a comp basis. But we had $65,000,000 of 'I-Media' demand. What's not to love about that? The P&L looked great. We earned nice bonuses.

By late 1999, the 'I-Media' channel was garnering attention at Eddie Bauer. The E-Mail and 'I-Media' folks were moved to another building, to focus on growing sales in the online channel. The rest of us were sequestered in our building, trying to figure out why we couldn't grow sales in the catalog channel anymore, in spite of the fact that 'customers buying from multiple channels are the best customers'. If those customers are the best customers, why do they keep spending less and less in catalog? Today, we know why. Back then, it was a bit of a mystery.

I don't know if these trends happened at other companies. What I do know is that, in many cases, the internet marketers and e-mail marketers developed their analytical tools, marketing strategies, and a network of co-workers/friends outside of the regular processes within our businesses.

While the rest of us tried to maintain a robust profit and loss statement by cutting costs, circulation and pages --- by shifting management of customer acquisition to businesses like Abacus, the online marketing folks were frequently off in their own world, building relationships with CheetahMail, Google, AOL, Yahoo! and MSN. They literally built their own businesses, independent of the core business.

Over the past five years, there has been an enormous focus on integrating the internet channel into the rest of the business, across all of our multichannel businesses. Our failure to integrate the business sooner caused us to spend too much time developing skills in our specific niche. We didn't build enough skills across functions or channels. Couple this fact with an ever-decreasing number of 30-40 year olds in our businesses, and we're now heading for talent trouble.

The only folks who tried, in some way, to integrate business units were merchandisers. Customers liked buying merchandise online, in catalogs, or in stores. The merchandising folks, keenly aware of the importance of growing sales, probably did the best job of understanding how merchandise sold across channels. They didn't understand how the channels worked together, but they did get to see how merchandise sold across channels.

The rest of us were busy tackling unique issues that caused us to not have the skills necessary to lead a business in the year 2007.

Catalog folks focused their energies on a dying business model, trying every technique possible to improve efficiency and profitability, becoming more and more like a fossil in the process.

Retail folks feared that the online channel would cannibalize their sales, and viewed the internet as an enemy, never understanding that so many of their customers were researching merchandise online before coming into the store.

Online marketing folks, never knowing the pain of having the distraction of managing a downturn in business, integrated their businesses with Google, to a point where they depend on the search channel for between ten and forty percent of their sales. More on that in a future post.

Like everything else in the first decade of the 21st century, we fragmented ourselves into targeted niches. Not enough of us built General Management skills to manage a fragmented, multichannel business, in the year 2007.

The result is an utter lack of General Management talent in the multichannel retailing industry. There simply aren't enough people who know the entire business. There are plenty of people who know one specific aspect of the business.

A decade of focusing on keywords yielded thousands of talented individuals who know exactly how to work with Google. These folks have not been given the experiences to manage anything outside of a relationship with Google.

A decade of writing copy that is search friendly yielded thousands of talented individuals who know exactly how to write copy that is appealing to Google. These folks were never given an opportunity to write copy that romanced a customer.

A decade of writing catalog copy that romances the customer yielded thousands of talented individuals who know nothing about writing copy that is appealing to Google. These folks were cut off from the future of the business, and failed to acquire necessary skills for the future, through no fault of their own.

A decade of reducing catalog expenses yielded thousands of talented individuals who know how to communicate to Abacus what type of model they want built for catalog customer acquisition. These folks don't have the tools necessary to understand what type of customer they are acquiring with their catalog mailings. They are giving up management skills, in exchange for the skillset of working with Abacus.

A decade of managing open rates, click through rates, and conversion rates yielded thousands of talented individuals who know how to send an e-mail that converts a customer to a sale today. These folks were never given an opportunity to build something that lasts, something that customers save --- as evidenced by the fact that 75% of people don't even bother to open a marketing e-mail.

Because merchandisers had to sell product across all channels, we now focus our leadership opportunities on these folks. Leadership jobs in the multichannel industry are likely to go to merchandisers over the next five years.

Our businesses must do a better job of cross-training our highly talented online marketing individuals, so that they can assume leadership positions in our multichannel organizations.

If we don't do this, we simply yield more control of our business to algorithms, Darwinian-style evolution of merchandising strategy, Abacus, and Google. At some point, we must grow our talented online marketers, giving them broad cross-functional opportunities to become leaders. If we don't do this, we're subject to a world where merchandisers tell us to tell Abacus and Google what to do. We won't be left with a meaty, meaningful job.

Multichannel marketing is moving ever-closer to an algorithm-driven business that lacks warmth, humanity, and gut instinct. We need to begin adapting to this trend now, and need to begin developing marketing leaders capable of doing more than working with Google and Abacus.

Best E-Mail Contact Strategy? You Decide

You are the marketer at a multichannel retailer. You decide to survey your customers about your e-mail practices, because pundits suggest that customers are now in control over your marketing activities.

Your customers surprise you. Instead of the one e-mail campaign you send them each week, customers overwhelmingly tell you they want a monthly e-mail, and maybe three additional campaigns for major sales events.

You eagerly set up a three month test, to understand the financial impact of the strategy your customers advocate. The results below are extrapolated to represent an entire year of campaigns.

E-Mail Test Results, Annualized To Total Housefile
	52 E-Mails	15 E-Mails
	Per Year	Per Year
Average List Size = 100,000
Average Open Rate	20.00%	25.00%
Average Click-Through	30.00%	33.00%
Average Conversion Rate	3.50%	3.80%
Purchase Rate	0.21%	0.31%
Average Order Size	$230	$235
Sales per E-Mail	$0.48	$0.74
Total Net Sales	$2,511,600	$1,105,088
Gross Margin	$1,255,800	$552,544
Less Marketing Cost	$15,600	$4,500
Less Pick/Pack/Ship	$376,740	$165,763
Variable Operating Profit	$863,460	$382,281

Pundits want you to let customers take charge of your marketing activities. In this case, you survey your customers, and they tell you they want fifteen e-mail campaigns a year. You test the strategy, and find out it will cost you nearly a half-million dollars of profit.

Let's assume that your CFO demands that you generate profit increases, not decreases. Let's assume you do not have the capabilities to tailor the e-mail strategy to the individual e-mail address.

What do you do? Do you listen to your customer, and convince your CFO that the customer is right, and the shareholders/owners are wrong? Or, do you ignore the feedback of your customers? I'm going to guess that you aim to please your CFO.