Whose Call Is This – the CEO, Marketing or Merchandise?

Here was the question – “I’m a merchant, battling what our marketers do. In my opinion, catalog marketing optimization has its downsides, namely, blindly going where the response rates lie.  As more money is spent on the catalog, the optimization tactics our marketing department use quickly become our brand face.  Our catalog promotes an outdoor lifestyle, but because of always chasing response, our top sales drivers are more likely to be a turtleneck than a tent.  What can I as the merchant do, because I see this direction as ultimately destroying what originally made our company different?”

This question was from a reader of this blog, which I used in the Q&A portion of our catalog seminar in March. I asked Frank Oliver, our “merchant” at the seminar, to address the question. I had not shared the question with Frank previously.

As a merchant, it would have been easy for him to agree with this question, and put all the blame on marketing, as the reader who posed the question had done. But after a slight pause to consider his response, Frank replied “So, this merchant is complaining that one set of products is selling better than another, and is blaming marketing? This is not a marketing issue. Marketing does not pick what products go in the book. The CEO sets the direction for what products will exemplify the company’s “mission/brand”, and the merchants carry that direction out. Don’t blame marketing for driving response.”

“The optimization tactics our marketing department use quickly become our brand face. I’m a marketer, so I can imagine what tactics the merchant is referring to, namely using the co-ops for prospecting. If marketing instructs the co-ops to provide the most responsive names, and the co-op’s database skews towards an older consumer (let’s say 55+), then this merchant’s logic is that marketing has driven the catalog off its intended course by loading up on customers that don’t belong to the merchant’s vision of the intended customer.

I look at this a little differently. If you didn’t want to go to Chicago, why did you get on the bus bound for Chicago? If you did not want turtlenecks to become the “brand face”, why did you put them in the catalog in the first place? The reader stated that the catalog promotes “an outdoor lifestyle”. If the catalog is doing a decent job of promoting that “lifestyle”, then any product the consumer purchases gives them a connection to that lifestyle. Don’t blame marketing if the products being purchased begin to skew away from an intended or original mission for the company. The products in the catalog or on the website are there because the merchants put them there – and I’ve never met a merchant who did not think that every new product would sell well.

Besides, name a successful catalog or company where the product selection has not evolved over time. Isn’t the purpose of a company to maximize profits for the owners/shareholders? Wouldn’t that dictate that you sell the products that the customer wants, rather the ones which you think they want, or you think they should have? Yes, I know, you are going to point to Apple and quote Steve Jobs who probably said something cool about not selling turtlenecks when you could sell tents. But using this example, if your margins are sound on the turtlenecks, and the customers you acquire on turtlenecks convert to buy other products (like tents) from you, what’s the problem?

Yes, I agree that some marketing tactics can skew the composition of the audience. In the late 1980s when I took over as the marketing guy at Brookstone, I found that our prospecting strategy consisted of always offering a cheap premium (free jackknife or flashlight) with each first-time order. To drive response, the prospecting lists acquired from our rental/exchange partners (this was before the co-ops) were their “sale” buyers. All this strategy did was attract the pond-scum from everyone else’s files that wanted a free jackknife. So, this is not a new concept.

Ten years ago, the concept that the co-ops were skewing the composition of the customer base may not have been as well understood, or as evident, as my Brookstone model. But everyone in cataloging today should understand that the co-ops are skewing the composition of your buyers, certainly toward an older consumer. Can they also be skewed toward a propensity to purchase one type of product over another – certainly.  If a modeler at one of the co-ops knows that by providing you one group of names (turtleneck buyers) over another group (tent byers) that your response rate will be 10% greater, they are going to give you the higher performing names. The result of that might be more turtlenecks sold than tents.

The question becomes not how we got here or who is to blame. The question is whether you can make a course correction now. Ultimately, the companies that carve out a unique position in the market via merchandise will be the ones that survive. That may mean merchants need to prune from the product assortment those products that are commodity in nature and not in keeping with a product strategy that promotes that “uniqueness”. Of course, the CEO, and Board of Directors, must acknowledge that a move like this might mean forgoing short-term gain on the turtlenecks, to ensure long time survival by focusing on tents.

To answer the merchant’s original question as to what he can do, he can make everyone – especially the CEO – aware of the tradeoffs involved with maximizing response versus maintaining a unique identity via merchandise. And if the CEO still wants to take the bus to Chicago, at least you have made everyone aware of the consequences.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com