How to interpret the mailing
trends presented in the 2016
Home Shopping Trends Report
by Michele Masnaghetti
During the DCA (Direct Commerce Association) Annual Summit
at the Hurlington Club on the 2nd June 2016, I presented some
insights on the health of the home shopping market with Epsilon Abacus’
Sales Director, Dylan Jenkins. These insights were largely based on the findings of Epsilon Abacus’
2016 Home Shopping Trends Report, which investigates revenue and direct mail circulation trends
amongst the 500+ members of the Abacus Alliance.
During the presentation, Mark Wilby, Operations Director at Nauticalia, asked the following question:
“We sometimes see mailing volumes in the category drop substantially while revenue holds steady
or even grows. Does this mean that multi-channel retailers can reduce circulation and expect no
impact on the revenue side?”
We can find an example of this in the Gardening category (pp. 28-29 of the report, see Figure 1
below), where April and May 2015 saw a substantial reduction in circulation compared to 2014
(-45.5% and -35.7% respectively) while sales in the category were up 13.2% YOY in April and 27.5%
in May.
Figure 1 – Revenue and mailing volumes in the Gardening category, 2014-15
1
If you don’t have our 2016 Home Shopping Trends, you can download it here: http://www.epsilonabacus.com/annual trends-report
Although I attempted a quick answer to the question, the matter is quite complex and I
wanted to explain in more detail why it is not possible to infer that retailers can reduce
circulation without impacting revenue based on the figures presented in the report. Also,
I wanted to explain why I think that reading the relationship between mailing volumes and
revenue in the industry or a category in the same way we read results for a single brand or
a single campaign can be misleading.
Why we can’t really use a year-on-year comparison to evaluate whether the
effect of a marketing channel is growing or declining
 
There is Latin phrase often used in scientific literature that expresses this concept very well:
ceteris paribus. It means “all other things being equal”, and it is one of the few instances
where the Latin version is a bit “punchier” than the anglo-saxon equivalent. Trying to obtain
the ceteris paribus condition is the reason why when we are testing multiple data sources
for a prospect mailing we should do that within the same campaign: we want all other
things (mainly the economy, the weather, the creative, the offer and the other marketing
activities associated with the brand) to be the same so that we can measure the net impact
of mailing names from different data sources on the results of our recruitments efforts.
We wouldn’t mail Source A in January and Source B in March. In the same way, we wouldn’t
mail Source A in January 2014 and Source B in January 2015 and then compare the results
because many external factors might be different in the two months.
Similarly, we can’t compare the ratio between circulation in the category and sales in two
different years and conclude that the effectiveness of this channel as changed (either
declined or increased) because many external factors might have changed over 12 months.
Going back to the Gardening category example and looking at the analysis that Capital
Economics and Consumer Indicators have contributed for the Home Shopping Trends
report, we can see that the economic environment was more positive in 2015 than
2014 (unemployment down from 5.7% to 5.1%, annual GPD growth of 2.2%, consumer
confidence on the rise, etc.). Also, in his presentation at our Insights Event in March, Tim
Morris from Planalytics highlighted how we had substantially less rain in Spring 2015 than
we did the previous year (14 out of the first 21 weeks of the year had less rain than in
2014, see Figure 2).
Figure 2. Precipitation in the first half of the year, 2015 v 2014
It’s likely that these factors had a positive impact on demand for gardening products in
Spring 2015 and therefore this renders any comparison of the effectives of Direct Mail
(DM) in the two years potentially misleading. Please note that this is valid also when the
effectives seems to have improved (an example of this can also be found in the Gardening
category where in January and February 2015 we saw both circulation and revenue
growing - up 4.1% and 13.2% respectively).
2
You can see a recording of Tim’s presentation here: https://www.youtube.com/watch?v=5G5QTbu15tc
Why we can’t look at circulation in the category in the same way we look at
circulation for a single brand
While in both cases we are measuring the number of DM pieces posted, when we look at
campaign results for a single brands the number of DM pieces generally equates to the
number of households that receive a catalogue. This is because most mailers dedupe their
campaigns at the household level to reduce wastage and achieve maximum impact.
However, when we sum circulation across multiple brands to obtain circulation figures for a
specific category, the figures stop being unique at the household level as different brands in
the category might be targeting the same household. This difference has a profound impact
on the relationship between circulation and sales.
Let’s imagine a household – the Smiths - that in 2014 received gardening catalogues from
two competing brands: Brand A and Brand B. The Smiths decided to place a £20 order
with Brand A in response to the catalogue. The following year, Brand A decided to cut
circulation and not mail the household. The Smiths still needed to purchase bulbs for their
garden and therefore decided to place a £20 order with Brand B instead.
What we would see if this was the only household in the category is a 50% reduction in
circulation with no change whatsoever in category sales. However, what Brand A and
Brand B would see a £20 reduction in sales and a £20 increase in sales respectively.
What the catalogue does in this case is helping to determine which brand gets the sale
rather than the overall demand in the category, rather than generating demand for the
overall category. This phenomenon is accentuated when one brand in the category stops
trading: the circulation for that brand is reduced to zero but the demand doesn’t disappear,
it just gets redistributed in large part across the brands that remain active in the category.
You might then ask: if we can’t do this type of comparison what use is looking at
circulation trends in the category to marketers? In the next section I’ll provide a couple of
examples of instances where analysing circulation trends brings value to multi-channel
retailers.
Which insights can be drawn by looking at circulation trends in the industry?
Mailing trends in the category are a good proxy for how busy consumers mailboxes are
and comparing them to sales trends in the category can help us identify when is best to
mail to achieve our objective.
For example: If mailing volumes in a certain month are very high it is likely that household
will be receiving catalogues from multiple brands that month, and therefore the “share of
mailbox” (also referred to as “share of voice”) of each of those brand in that month will be
lower than the share of mailbox in a month with lower circulation. If you are launching a
new brand or a new product line a month with high circulation might not be the best time
to do so, as consumers are more likely to concentrate on brands they are already familiar
with. A month with lower circulation might be a better option.
Also, consumer behaviour changes over time (as illustrated for example by the “arrival” of
Black Friday & Cyber Monday) and there are months in which the ratio between circulation
and sales is quite low: this could represent an opportunity to introduce further marketing
activity when not many competitors are actively promoting, helping brands to recruit new
customer and gain market share.
Although I certainly haven’t covered all factors at play, I hope I have managed to show why
we can’t look at the circulation in the category in the same way we look at the circulation
for a single brand, and to clarify why despite this fact the trends we reported can still be
useful to marketers when creating mailing plans for the year ahead.
About the author:
Michele is responsible for the Epsilon Abacus Strategic Services Team
and oversees the Abacus 360 suite of products (Data Tagging, Licensed
Score, Campaign 360 and bespoke reporting & insight). He specialises
in helping multi-channel retailers to use the Abacus Alliance data to
learn more about their customers and improve their retention, crosssell and reactivation activities. Michele joined Epsilon in 2006 and spent
two years providing analytic support to Fortune 500 companies in the
banking, insurance and pharmaceutical sectors before focusing on
home-shopping retail. Michele holds a MS in Marketing Analytics from
Bentley University.
[email protected] or 020 8943 8036
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www.epsilonabacus.com, call 020 8943 8000 or email
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