Chapter 12

1.	Catalogs are succeeding today for all but which of the following reasons? Personalized catalogs Lightning-fast fulfillment Universal credit cards Sophisticated telesales No-hassle returns
2.	Why don’t many catalogers today do database marketing? It provides no sales lift. They have never heard of it. The economics of catalog production. All of the above. None of the above.
3.	Give three reasons why catalogers have profitable Web sites today.
4.	What did Office Depot find was the valuable feature of customers who shopped both at the retail stores and on the Web?
5.	When GUS adopted collaborative filtering, what marketing method did it change and by how much? Catalog distribution was down 8 percent. Cross sales were up 100 percent. Web visits were up 15 percent. Call abandonment was down 10 percent. None of the above.
6.	List four things that catalogers need to add to their Web sites if they are going to succeed on the Web.
7.	What did Macy’s do when it found that customers were leaving its site when they didn’t find what they wanted?
8.	What is the advantage to Lands’ End of having a personal shopper? Conversion rates were up: 10 percent 20 percent 30 percent 40 percent None of the above
9.	As the Sharper Image email campaign grew in size, what happened to its catalog distribution? It went down 5 percent It went down 10 percent It went down 20 percent It went down 25 percent None of the above
10.	What is the advantage of a Virtual Model to Lands’ End? Conversion rates were up by 16 percent 26 percent 36 percent 46 percent 56 percent

Answers

1.

(a) Personalized catalogs

2.

(a) It provides no sales lift.

3.

To reach high end customers; to reduce ordering costs; to open up another channel

4.

They spent 33 percent more than regular customers.

5.

Cross sales were up 100 percent.

6.

They need to add:

a. Customer profiles capturing emails and customer preferences and demographics. This reaches 20 percent on the first round and an additional 20 percent on each additional round.

b. One-click ordering for all customers completing their profile, plus personalized emails and Web site opening pages.

	Year 1	Year 2	Year 3
Customers	200,000	98,000	57,820
Retention rate	49%	59%	69%
Basket size	$64	$69	$74
Visits per year	2.50	2.90	3.20
Revenue	$32,000,000	$19,609,800	$13,691,776
Cost rate	65%	62%	60%
Costs	$20,800,000	$12,158,076	$8,215,066
Acquisition cost ($46)	$9,200,000
Retention cost ($8)	$1,600,000	$784,000	$462,560
Total costs	$31,600,000	$12,942,076	$8,677,626
Profit	$400,000	$6,667,724	$5,014,150
Discount rate	1	1.25	1.4
NPV of profit	$400,000	$5,334,179	$3,581,536
Cumulative NPV of profit	$400,000	$5,734,179	$9,315,715
Lifetime value	$2.00	$28.67	$46.58

c. Email thank you for all orders, emails when the order is shipped, email asking people if the order was satisfactory.

d. Personalized emails announcing the arrival of each catalog, with click here for items that it is assumed the customer is interested in.

e. Collaborative filtering to make suggestions on next best product, leading to a cross-sale rate of 40 percent.

f. Advanced search feature that permits customers to find products faster.

g. Live shopper support for people who want to have a text chat with a customer service rep while they are on the site, or who want to call on another line to talk to a live agent.

7.

It provided a window showing the address, phone number, and directions to the nearest Macy’s store.

8.

(e) None of the above; they were 80 percent higher.

9.

(e) None of the above; catalog distribution increased by 20 percent per year.

10.

(b) 26 percent