Evidence from a large-scale field experiment with a luxury e-commerce retailer
To test the effectiveness of catalogs, we partnered with a U.S. based specialty luxury watches and jewelry e-commerce retailer with a global clientele and without physical store presence. The company generates annual revenue of $60 million and operating profit of $12 million, with a database of approximately 28,000 customers.
The company acquires new customers through online search and other online platforms, so all customers are comfortable with e-commerce and digital communication. More than 75% of the company’s revenue comes from repeat purchases, and so and relationship development efforts are critical. When a customer’s first order ships, the company obtains permissions for future marketing contacts, then uses weekly email marketing campaigns to promote repeat purchases.
Acting on our advice, the company launched a new bi-monthly catalog campaign featuring professional and artistically rendered product photography with high-quality printing. The company conducted the field experiment using a random 30% of its U.S.-based customers. Of those customers, 5% of them received neither email nor catalogs for six months, 55% of them received a weekly marketing email, and 40% of them received the new bi-monthly catalogs in addition to the weekly email marketing. To control for effects of content, over 90% of the products were the same between emails and catalogs. The same set of photos and descriptions were also used in both media. We then tracked purchases and product inquiries across all three groups.
Results showed that “Email + catalog” group experienced a 15% lift in sales and a 27% lift in inquiries, compared to “Email-only” group.
Compared to the Control group, “Email + catalog” group experienced 49% lift in sales and 125% lift in inquiries. In comparison, “Email-only” group only had 28% increase in sales and 77 % lift in inquiries over the control group. The sales and inquiry lifts from catalogs almost doubled those from email marketing. Furthermore, of those customers that received the catalogs and also made product inquiries, surveys by the company’s staff found that over 90% of the customers have browsed through the catalogs and kept them for an average of seven days. The open rate was much higher than that of the email campaign which was around 26%. During the six-month experimental period, customers in the email only group purchased an average of 0.3 additional products.
A quick ROI calculation indicates that a 15% increase in sales on an average order size of $6,700 due to the catalog campaign, at approximately 30% gross margin, translates to an additional $90 profit (or $180 additional annual profit) per customer. The average cost of the mailing with front-end design cost factored in is $5, yielding a direct ROI of 600%, not to mention the additional customer engagement from increased inquiries. If this campaign is instituted across the entire customer base similar response rates would result in an incremental annual profit of over $5 million, a boost of 40% from its current profit level.