Don’t Worry About The 40X Names, Focus On The 1X Names

Think about what you ask the catalog co-op databases to do. You ask them to find you the best names for your mailings.  Those names are usually buyers at your closest competitor’s catalogs. If  I’m the circulation manager at LL Bean, I want the co-ops to give me names of good buyers from Lands’ End, Orvis, Eddie Bauer and Woolrich.

In theory, this is exactly what happens. If I have made purchases at all those other companies, I would look like a great prospect to LL Bean. My name would float to the top of every model LL Bean receives from their co-ops.  But, what if I’m just not willing to become an LL Bean customer?

These consumers that are actively purchasing from other catalogs have nothing against you. They are simply comfortable with the companies from which they purchase now. In the apparel world, they know that what they purchase from these other companies will fit, and fit the way they like. They don’t need to add another apparel catalog to their fashion mix with the risk of dissatisfaction over an order.

The same phenomenon happens in hard goods and gifts. If I’m strong buyer of Virginia peanuts and Pacific salmon by mail, it doesn’t mean that I’m guaranteed to want Wisconsin cheese or Vermont maple syrup, although my name probably floats to the top of models for those other food catalogs as well.

You have prospects like this too. You have a core group of prospects that you mail over and over because they are either good customers with your competitors or with companies close to your product mix.  You either rent these names directly from those companies, or receive them in your co-op models.  But these consumers are never going to buy from you because either they don’t need you, or they choose to stay loyal to the other brand. You just keep mailing them over and over.

But, that may not be a bad thing.

Datamann builds and maintains prospect contact histories for our clients, which is a database that tracks the number of times you mailed a prospect name (individual or household) before you finally received an order from that consumer, as well as tracking those that have never ordered.

The report shows the optimum number of times to mail a prospect to get the maximum response rate, but more importantly, it illustrates the point at which it is no longer profitable to mail that prospect name. You can suppress these “over-promoted” names from future mailings, as well as send them to the co-ops to have them suppressed from the files you order.

Every client for whom we produce these reports uses them differently. Further, every report we produce has vastly different patterns of response. In the sample report above, there were 67,450 prospects mailed for the 12th time in five years (not consecutively). 3,476 of those prospects finally responded to their 12thth mailing, generating a 5.15% response rate for that group of names – not bad. We always see that the response builds over time, but where it reaches the maximum response differs widely. For some mailers it may occur on the 5th mailing. For others the highest response rate may not be achieved until after the 20th mailing.

It is always shocking for some mailers to see that they have prospects which they have mailed 20, 30, and sometimes 40 times, without ever placing an order. Some mailers thought they were always getting “totally fresh names” with each mailing. But think about this – the co-ops are doing what you asked them to do – which is send you the names most likely to respond, which would be those buying from your competitors. The co-ops are not coordinating with each other to say “Oh, I sent that name last time, so you shouldn’t send it this time.” However, this is not necessarily a bad thing.

If you are a longtime reader of this blog, you know I’m not a big fan of the co-ops. It would be great if they could identify those buyers that are extremely loyal to your competitor’s brand, who are unlikely to ever buy from you, and not send them to you.  But in this case, I’m not sure they ever could, or that you want them to. You need to determine how to structure an offer to these names that you have mailed 20 times, or 40 times, to get them to buy from you. What’s it going to take to get them to buy from you?

Look – this is not rocket science.  The co-ops are NOT analyzing 320 million US residents, sifting through tiny bits of data that reveal a fresh new consumer that no one has ever mailed before, who is destined to become your greatest customer ever. No, if the co-ops are doing their job correctly – meaning they understand who your customer is – then they should be sending you these top prospects that are actively buying from your competitors over and over. Those are the names with the highest propensity to convert to being your next new customer. The problem is that this scenario repeats at every other catalog company too. The catalog that raises their game and determines how to appeal to these active prospects/consumers will be the winner.

Here is the bigger issue I see. Look at the top row – the 1X names. Every time we create this report for clients, we see a similar pattern. The 1X names are two to three times greater than the 2X names. Overall, the 1X names are 38% of the total quantity of names this mailer has ever mailed. Doesn’t that seem odd? The co-ops are supposed to be giving you the best names. They “model” what they send you. You are supposed to be getting the best of the best. That would mean you should be getting more of the same names more often.

But, almost 40% of the time, the co-ops sent you a name that they subsequently decided was not worth sending you again. Those are the names you need to focus on. Were those “filler” names that the co-ops gave you to get your quantity up? When you are planning your Fall and Holiday circulation this year, ask the co-ops their strategy on giving you names only once vs. multiple times.

Here is another aspect of this report. Let’s assume this mailer is willing to generate a loss of $45 in profit to acquire a new customer. On an incremental basis – looking at each mailing as an event unto itself – this mailer does not reach this threshold until the 34th mailing.  But, what if you looked at this cumulatively? Go back to the 12th row. You did not just mail 67,450 names to get those 3,476 orders.  You mailed 809,395 catalogs (12 x 67,450).  If you include the cost of all those additional catalogs mailed to get those first orders, you actually lost $97 in profit (far right column).  You would attain your allowable profit per new customer (-$45), measured cumulatively, on the 7th mailing.

Should you stop mailing after that 7th mailing? It depends on how you view your “sunk cost” of those cumulative mailings. Most of our clients want to continue mailing prospects as long as it remains incrementally profitable to do so. However, some want to include those “cumulative expenses” in their lifetime value calculations to determine if a customer that required 40 mailings from you to make their first purchase, was really worth it in the long run.

Datamann’s Prospect Contact History is easy to implement, and provides you immediate return because in most cases, there is no testing involved. Your accumulated mailings over the past 5 or 6 years are the actual testing grounds where you mailed all those prospect names. As long as we have your old mail files, we can build a similar database for you. Contact me for details.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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Bill’s 21 Irrefutable Catalog Creative Rules – Last Chapter

We’re almost done – let’s wrap these rules up today.

In case you missed Part One, Two or Three of my rules, click here:

Bill’s 21 Irrefutable Catalog Creative Rules – Part 1 (with rules 1 to 6)

Bill’s 21 Irrefutable Catalog Creative Rules – Part 2 (with rules 7 to 12)

Bill’s 21 Irrefutable Catalog Creative Rules – Part 3 (with rules 13 to 18)

Rule #19 – Do not change for the sake of change

Constant creative tinkering rarely leads to significant gains in response. Unless your customers are calling or emailing and saying “Hey, I can’t order from this catalog/website”, you will see no meaningful increase in response rate from completely changing the format of your design. In fact, you will probably alter the product density and/or the mix of price points, which will hurt response.

Rule #20 – Don’t be afraid to sell

Over and over I see mailers throw a bunch of similar products on a page, with no thought given to helping the customers determine what is best for them. Don’t assume that your customer has the same love for or knowledge about your products that you have – you have to sell them. You have to rekindle that love for your products with every customer, with every new book.  In creative terms, that means going beyond a simple “hero shot” presentation, and going for the “WOW” presentation. Be bold.

Most B2B catalogs are the worst offenders of this rule. They typically make the assumption that the professional to whom this catalog is aimed (regardless of profession) can immediately tell what every product is for, and which of the 17 versions of the same product shown in the catalog, is ideal for their needs. You do no selling – every product is exactly the same, just thrown on the page. There is no effort to be creative, or sell; you are simply SKU barfing page after page.

Rule #21 – You must have a sense of urgency

Our greatest threat is not the online world, or Amazon. It is our own retreat into “catalog narcissism”. We believe it when printers and other industry leaders tell us that catalogs are not dead, and that our industry is fine. We listen to the co-ops when they tell us they are growing, yet we instinctively see all those orders flowing to Amazon and wonder how it could be that the co-ops are growing when they are missing all those orders.

The internet has been challenging catalogs for the past 20 years, and certainly has been pushing the catalog industry hard for the past 10 years. But most catalogs have no sense of urgency in making any changes. You still debate cover strategies, and timing tests. Your merchants maintain the same level of lousy productivity per catalog that they did 10 years ago – largely because no one has held them accountable for increasing productivity.

And because you are focused on the things that matter little, most of you have not had the inclination, the wherewithal, or the luxury of time to really look at your business from a strategic perspective. Neither Datamann nor I have all the answers. Few consultants do. But all consultants have an advantage – we get to walk in the door and view your business without all the day-to-day junk that you have to deal with. We can advise you on where to start making changes. But YOU HAVE TO HAVE THE SENSE OF URGENCY.  Stop fooling yourself that you are unique (there is no such thing as a unique catalog), and stop fooling yourself that your customers have any loyalty to you or that they see you as a lifestyle brand. And stop wasting your day dealing with things that have no impact on the future of the business.

The way to fix this is not to simply say, “well, we’ve got a website, we’ve got an email program, and we’ve got a mobile site, and we’re on Facebook, so we have all the bases covered”. I’ve seen most of your mobile sites and they do not make you a mobile marketer – they make you a catalog from which I can order with my phone.

The way to fix this problem is to review the list of factors above that truly have an impact on your catalog’s growth and future, and determine which ones have the biggest impact on your business. (Contact me if you want help). Start there. Then ask yourself these questions to tell if you are thinking like a company that can/wants to grow, as opposed to being simply another catalog caught in a downward spiral:

  • Do you have at least twice the number of products available online for purchase than you do in your catalog?
  • Do you have a program in place to reduce your cost of goods by 20% in order to enable you to increase prospecting to more marginal new customer sources?
  • Do you introduce all new products online first, before they even get included in the catalog?
  • Do you ever keep any of your absolute best products out of the catalog, and make them web-only?
  • Are more than 50% of your incrementally new customers being acquired with no help from a catalog?
  • Have you done a hold-out test to determine the percentage of online demand that comes from existing customer if you stopped mailing them a catalog?
  • Do you spend the same amount of time and attention on updating your website and (separately) your mobile site, as you do on paginating and creating your catalog? (I already know the answer on this one is “No”.)
  • Are you creating separate product specific catalogs/mailers targeted at specific portions of your file?
  • Do you have that sense of urgency?

Repeating what I said at the beginning of this long posting, I’m not a creative person. You would not want me to design your catalog. But, I am convinced that 90% of the catalog creative people in this world could create a really great, innovative, response generating design – if only you would let them. Take the restrictions off – let your creative people spread their wings, and show you what they can do. Let them inspire your customers. As long as they don’t monkey around (too much) with product density, what have you got to lose?

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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Bill’s 21 Irrefutable Catalog Creative Rules – Part 3

In case you missed Part One and Two of my catalog creative rules, click here:

Bill’s 21 Irrefutable Catalog Creative Rules – Part 1 (with rules 1 to 6)

Bill’s 21 Irrefutable Catalog Creative Rules – Part 2 (with rules 7 to 12)

Rule #13 – Branding is what you do to cows

Do not focus on building a catalog brand “creatively”. You build a brand on your merchandise and your customer service. Roy Disney, nephew of Walt Disney, once said that “Branding is what you do when there’s nothing original about your products.”

How many meetings have you sat through at your company where everyone dismissed dismal response rates by saying that at least you are building brand awareness, or that your catalog is becoming a “lifestyle brand” to your customers? That line of thinking is bogus. Customers are not going to buy from your catalog because of your “brand”, especially if that brand is built on a creative house of  cards.

In my opinion, the one thing that motivates your customers to buy is the merchandise. Get that wrong, and it does not matter how well targeted the mailing is, or how many likes you have on your Facebook page, or how strong your perceived brand quality is.   You’ve got to get the product right, and you’ve got to have it priced right – or nothing else matters.

When I hear clients talking about their “brand”, I always think of Roy Disney’s comments, and I ask the client about their products and merchandise. How truly unique is it? What truly sets it apart from others catalogs? What benefit does it truly provide the customer that they can’t get elsewhere? What are the runaway best sellers that are going to drive your business next year which no one else will have?

I rarely get satisfactory answers about the product itself. Instead I hear about their lifestyle branding efforts and their “branded, curated collection”.  There never seems to be any concrete merchandise knowledge and direction. That is what is missing in American retailing and catalogs.  We are focused on how we are selling, not what we are selling, because there is nothing “original about our products”.  Apple’s iPad, iPhone and iPod were all original – that’s what made their company so valuable. That is not because of “brand” alone – it is because of product.

Your catalog merchanside has to be original.  Having a black dress with five buttons instead of the four buttons like everyone else does not make your dress exclusive or original. And you are going to lose in the long run to companies that are bringing products to the market that truly are original and exclusive.

Rule #14 – Let The Product Be the Brand

This is similar to, but different from Rule #13. In my opinion, when you have to use “editorial” content to explain to your customer what you are attempting to do with your catalog, then you’ve already missed the point of what a catalog does. A catalog sells product by making the consumer see the product and say “Wow, I want that.” You should not have to tell them why you think they should want it.

Your creative needs to focus on the product, and make the merchandise sell itself.

I believe that catalog creative needs to be inspired, emotional and aspirational, not just “creative”. The best way to put it is to say “don’t bore us to death”.

Rule #15 – Web drivers

This rule is a big deal to me because I believe that one of the ways catalogs will survive in the future is to learn how to use their catalog to drive customers to their websites. Most of you will have to do this as a matter of survival. But I also believe this will ultimately be a better experience for the customer. Your website can, and should, be better than your catalog. You can show the products in multiple positions/uses, you can have video, you can have multiple ways to find product, and you can even steer customers to products that have the best margins (or even the highest inventory). Most important, you can have more products on the web than you can ever afford to have in the catalog.

You get it – the website just offers more opportunity. And yet, I still hear clients say that if the product is not good enough to go in the catalog, why bother to have it on the website? Or, they simply can’t sell a product unless it is in the catalog. You think that way because you don’t think in terms of the website being better than the catalog.

Clients continually ask me which catalogs do a great job of using their catalogs as web drivers – meaning, using their catalog to drive traffic to the website where the customer can have an even larger offering of products than what is in the catalog. By far, the best catalog at accomplishing this is Cabela’s, at least the books which I receive.  Most pages have a call-out to either watch a video online about one of the products, or a call-out to see more of the assortment online. Moreover, it is not done in a rote manner, similar to the way almost every catalog puts their URL on the bottom of the page. The call-outs subtly reinforce, in appropriate places, that Cabela’s has a bigger product assortment on line.

You may not have time this year to add additional products online, and you may not have time (or the resources) to make your website better. But, if you test anything this year, think about the elements you can introduce to drive customers to your website.  That is a worthwhile effort.

Here is a final word of advice – these web driver call-outs are not a creative element of the book. They belong to the Merchandise Department. Someone in merchandise has to be the champion of making certain these call-outs go in the book, and STAY in the book, on an on-going basis. I’ve seen several catalogs which started out strong with web callouts throughout their pages only to see their use fall off after a few months.  When I have inquired of the mailer to determine if they had tested these and determined they did not work, the answer is universally along the lines of “No, the person that was responsible for that left and we keep forgetting to put them back in.”

Rule #16 – Tell a story

This is a new rule, and not one I would have supported years ago. But that was before Amazon, and before this blog.

I receive the most comments from readers when I “tell a story” in this blog, especially when I mention something about my wife and I living in rural New England, such as owning a backhoe. Although I’m sure it bores some of you, most of your fellow readers seem to enjoy when I relate a catalog lesson/parable to a real life situation. That is one of the things that separates this blog from the ones you read that blabber on about “paradigm shifts”.

I like to think I set a high standard with this blog, at least with regard to content. You may not always agree with what I say, sometimes you might think I’m flat out wrong. But you must admit – you know where I’m coming from. I take a stand. That’s what makes it “unique” and difficult for someone else to emulate.

The same is true with your catalog. Most of you are selling “stuff” that at least two or three other competitors are selling. Plus, most of what you sell is also on Amazon. So how do you differentiate yourself? Tell a story, take a stand, and be unique. It will not appeal to everyone – but you can no longer try to appeal to a broad common denominator.

Rule # 17 – Make it Relevant to your customer – Appeal to their hopes, fears and aspirations

As many of you know, I’m partially deaf. I found a really LOUD kitchen timer online which I love. The copy online stressed how loud it was, and that you would never burn anything again in the oven for not hearing the timer. That is a huge BENEFIT to me, so I bought it.  At about the same time, I saw the same timer in a King Arthur Flour catalog. The first line of copy was “The timer you’ve always wanted”. That is a throw-away line that does nothing for sales. They have since changed it to “This timer wants to be heard! Adjustable volume setting on this timer is ideal for noisy households or for those that need a bigger more vocal reminder that the cookies are done.” That is focusing on a benefit, and making it relevant.  Do it with every product that you can.

Rule #18 – Don’t Be Timid

There is a meeting going on right now somewhere – in some catalog or ecommerce company – where “upper management” is discussing adding a new product category.  You’ve probably suffered through one of these meetings.  Someone may have brought some hard data to support going off into this new merchandise direction, but often it is simply someone saying “I believe, I feel, I think” that this new category is what your customer wants and will buy. Everyone else in attendance accepts these assumptions, because “well, we know we need to grow, and we can’t do that unless we expand the product offering, and these products seem like a logical extension of our brand, so let’s go for it.”

So you add these new products – and in my experience, they hardly ever succeed. The reason is because although everyone thought they were a great and logical extension of the merchandise line, no one supported them to the degree they needed to be support in the catalog.

First, and this is a merchandise issue, most new product categories are not supported with enough products to make it clear to the consumer that you are a champion of this category. You make a half-hearted effort with six or seven products. This is not going to help them move the needle and get strong growth.

Second, and this is a creative issue, you don’t give these new products prominence. You gave them a small amount of space, buried in the back portion of the book. We do this all the time. We are afraid to support new items because we are afraid of detracting from existing products.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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Bill’s 21 Irrefutable Catalog Creative Rules – Part 1

One of the pleasant things about this blog is how some readers will remember articles I wrote two or three years ago, and send me an email asking for advice on that subject, which I barely remember writing.

A few weeks ago, a reader asked for my list of “Bill’s 21 Irrefutable Catalog Creative Rules”, which I had made passing reference to in a post last year.  I had written a post last summer on Bill’s 8 Irrefutable Rules For Catalog Covers, but that wasn’t what she needed.

I had to stop and think of when I actually created that original list, and realized it was for a speech I gave in 2005.  I found the PowerPoint slides, and decided that the list needed updating. Which raises the question – if they needed updating, were they “irrefutable” in the first place?  Rules change with time, especially in the online world.

Over the five plus years of writing this blog, I have referenced some of these rules, but never pulled them all together into one document. Moreover, since many of the readers of this blog are new in 2017, I thought it would be good to restate them in one place.

Let’s be clear on my perspective about catalog design. I’m not a designer. I’m a marketer. When I critique a catalog, I look at it from the perspective of a marketing professional and a consumer. I want every element of a catalog to drive the consumer to making a purchase. The catalog has to generate a response. I’m not interested in building brand, or developing “engagement”, unless those elements help drive response – and I do not believe that they usually do. Let the other guy blow his print budget doing that. You can’t deposit “engagement” in the bank.

Moreover, as I’ve said many times before, no matter how strong the creative is, your merchandise always rules – it is responsible for 60% to 80% of a catalog’s success. That is why I no longer conduct creative critiques of a client’s catalog without doing a merchandise analysis as well.

Some would argue that the term “creative rules” is an oxymoron.  Of course, to a degree, they are correct. As soon as you begin to follow a “rule” for design or catalog creative, you are not being creative, and are starting down the path of having a stale looking catalog.  But, remember that my rules were developed by a marketer, and have nothing to do with color palettes, or whether the catalog should use models or silhouettes of products. These rules are not for the creative staff per se, but are instead for the marketers, merchants, and management needing help understanding the role of creative in a catalog.  My rules are meant to keep everyone thinking about driving response.

Finally, one very important caveat: not all of these rules apply to every catalog. You have to use your judgment.

Rule #1 – Your catalog is not the most important thing in your customer’s life

Most catalogers still think of their catalogs as the most important thing in their customer’s life. It’s not – get over it. Your customer is not “waiting” for your catalog. Your catalog is competing with hundreds of other marketing messages that your customers and prospects receive every day. You need to up the ante on what your catalog does – especially with regards to driving response.

  • Once a customer picks up your catalog, they’ll spend 1.5 to 2 minutes with it. They are not curling up with it on the couch, planning to read it cover to cover.
  • The percent of pages “read” decreases as the reader progresses through the catalog
  • 40% of consumers read from back to front.

Rule #2 – Your catalog has to stand out

Is it compelling? Does it stand out in the mailbox? Really stand out? I’m not talking about having an odd trim size or being perfect bound. I’m asking if the customer is eager to look at your book because it constantly changes. Or are you too complacent, year-to-year, season-to-season, in what you are creating? In my opinion, the problem with most catalogs today is that they are remarkably dull. If you remember only one rule about catalog creative (or websites), remember this – you want your customer to always pick up your catalog or visit your website and say “Wow, I love this book. I want to see what’s new”. That is the essence of a catalog critique that drives response.

But stop right there. Catalogs have an instinct for order and stability. Most catalogers are content with repeating a perceived winning formula. Yet, when does “safe and predictable” creative cross the bridge to “boring and non-responsive”? For many of you, that is a sad, on-going reality of your catalog. The bigger problem is that you don’t see it – you think you are making HUGE, significant creative changes in your catalog with every edition (“we added extra space on the back cover for a second inkjet message!).

Of course, perceived change and beauty is in the eye of the beholder. Even if catalogs followed all my irrefutable and non-negotiable rules of catalog design, most of them would still be mostly boring. They’d be well executed, but boring.

Why? Because the tide has turned. Even for baby boomers for whom catalogs still resonate, catalogs are no longer our primary method of commerce. It is online or mobile. We can search, we can watch videos, and we can look at products in different colors, from different angles. The catalog is now secondary and even tertiary. When was the last time you had someone call you, email you, or contact you via some form of social media about a “really cool catalog”?  Be honest here folks.

And yet, you could so easily bring your catalog alive. You could become more daring, especially with new products. You know you are getting the cookies knocked out of you by online competitors, so what have you got to lose? Why not double or triple your rate of new product introductions? Allow your creative team to make changes to give creative equal strength to the new products.

Stop playing it safe. Safe is boring. Until you start shaking up the status quo with your products and your creative, you are always going to look like a black and white TV show.

Rule #3 – It must be readable

At best, you will get a 2% response rate. 98% of the recipients of your catalog throw it away. One of the reasons they throw it away is that you made it impossible to read – they could not figure out what you were selling.

  • Skip the knock-out type – no one can read it.
  • Use serif font (I may be the only person in the world that will give you that advice, but older people – like me – find it easier to read).
  • Make the type/font bigger. When you think it is big enough, take it up two more points.

Rule #4 – Think of your website first, then the catalog

This is a tough one, because it is such a hard habit for all of you to break. I had a client recently tell me that they save all their new products for each new catalog edition, because they had been told years ago by the catalog founder, that their customers wanted the catalog to be special, and they wanted to be surprised with new product when they opened it up. If that scenario was ever true, it probably stopped being the case when The Ed Sullivan Show was still on TV. You have to think in terms of making the website better than your catalog. I never hear clients say that they were three weeks late getting print files to their printer. Maybe a day late, but even that is unusual. Yet, I hear them say all the time that the changes to the website are three weeks, or even three months late. You need to make changes to the website as important, and as time sensitive, as the catalog.

Rule #5 – Priority of Placement

Priority of Locations – are you using the hotspots correctly?  This is so basic, some of you are saying “Oh, come on Bill, is this the best you can do?”  But, so many of you still waste the front and back cover, the inside opening and back spread, and a few other hot spots. These places are your best real estate in the catalog; don’t ignore their importance with branding messages, stupid tests, or worse – on ordering information! (I even saw one catalog this last holiday season where page two was blank!!!). This is where you want to be selling your best products.

  • Order of priority for the best spots in the catalog – front cover, back cover, inside front spread, inside back cover spread, center spread.

Rule # 6 – Tell Them More Than Once – Don’t Be Subtle

Most of you believe that your customers love your catalog as much as you do, and therefore remember every little nuance about your book. That leads you to believe you only have to tell them things once. You expect that you can mention free shipping or 20% off just once on the front cover and that the customer will remember this by the time they get to page 48 of your 96 page catalog. To make matters worse, you can’t bring yourself to destroy the “creative integrity” of the front cover, so the callout for free shipping is tiny. Why not remind customers on EVERY SINGLE SPREAD that you have free shipping, or whatever your promotion is? Most of you are competing in some way against Amazon. The consumer knows what they offer. If you are going to have an offer, you have to grab your customer’s attention and clobber them over the head with it. Don’t be subtle.

To be continued – look for Part 2 next week.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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The Most Dangerous Number in Catalogs Is Getting Bigger

So, you got your wish. The US Postal Service is changing the most dangerous number in cataloging – and they are making it bigger.

That number is 3.3, which is now growing to 4.0.

3.3 ounces is the cut-off established by the United States Postal Service many years ago at which standard (bulk / 3rd class) mail can enter the mail at the “piece rate”. So, it doesn’t matter whether you mail a 12 page catalog, or a 64 page catalog, as long as it is under 3.3 ounces, the postage is the same. Go over 3.3 ounces, and you pay the piece rate and a pound rate.

In 2017, the USPS is giving you an incentive to mail more, and that number is moving up to 4.0 ounces, a 21% increase.

I’ve seen several references online that this is a huge opportunity for catalog mailers, as they can now increase the trim size and/or page counts of their catalogs, or print on more expensive, better quality paper, and the postage is FREE. Ah, yes, the siren call of free postage. Think of the possibilities for your catalog circulation.

You can add more pages of products. You can add more branding pages.  You could even leave some pages blank, and it will not cost you anything more in postage.  You’ve been told for years – correctly – that postage is the most expensive part of mailing a catalog, so this is a gift from the postal gods, right?

Well, not so fast. As one of my clients commented to me recently, “Great, I know what you are going to say. Now I can add 12 more pages of incrementally lousy performing merchandise.” (It’s great that clients are starting to pay attention, and know what I’m going to say.)

Here is the problem as I see it:  Most catalogs are run by managers/ directors / owners that have been doing this for a while. It doesn’t matter their age, what matters is when they started in this industry.   Let’s assume that most of them have been working in catalogs since 1992. Back 25 years ago, there was no internet that impacted consumer or B2B catalogs.

But the internet, mobile and social media are not the problems facing catalogs today. The problem is risk and the unknown. Back in 1992, most consumer catalogs had a 92% known source code capture rate. That means that you knew exactly where 92% of your orders and sales originated. You knew which specific mailing, and which specific list caused the order. You could fine tune the mail dates to improve response. You could fine tune the select on a rented list to improve response. When you did those things, you could actually see the impact in your results on the next mailing – but of course, there was a four to six month lag between making those changes, and when you saw the impact.

Everything was measureable. Everything was efficient. Moreover, there was accuracy – there was no guessing, no matchback, and no attribution. You simply knew every facet that was driving your catalog’s success. We long for those days of accuracy. We are averse to moving our businesses into areas where we are taking an unknown risk, and one which we can’t measure with a special metric.

More important, our catalogs revolved around that one number – 3.3, and unfortunately, that number is still with us, and is now growing to 4.0.

Twenty five years ago, 3.3 ounces ruled our lives. We engineered catalogs to maximize the number of pages that we could squeeze in under that threshold. Depending upon your trim size, and paper weight, most catalogers could mail between 56 to 64 pages and manage to be less than 3.3 ounces. We dropped paper weights to add more pages. We worried about the humidity at the printer (really, we did!) the day the book was printed because it might be enough to cause a postal inspector to charge a pound rate penalty.

We pitied mailers that only had enough merchandise to justify 32 pages. We could not envision a reason why anyone would purposely mail a catalog that did not maximize the number of pages you could squeeze in less than 3.3 ounces, because “the postage is free”.   Response rates were so good, and paper relatively cheap, that we never looked at the incremental paper costs. We just saw free postage.

Now, that mentality is going to take on a whole new dimension, as merchants and creative directors are going to think they can add more pages for free. They will now think in terms of maximizing that 4.0 ounce limit, even though we know we could and should trim pages, and plow some of the paper savings into expanded circulation or even just do more on the web. We won’t do that because we hear FREE postage, and we come running. (Try and find one printer that doesn’t think this is a great idea!)

But what about the other expenses? What about the creative expense (and time) in generating 12 more pages? What about the extra paper expense?  Your cost per catalog is still going to increase, and you will try to cover that extra cost with more marginal product, or worse, “branding” pages which are not selling at all. If you already had 12 page additional pages of truly outstanding products, would you have let the “old” pricing format of piece and pound rate for anything over 3.3 ounces have stopped you from mailing them before?  Probably not. You’re being enticed into adding extra pages of products that are marginal at best, simply because of “free” postage. What does the USPS have to lose? They are coming to your mail box each day anyway. So what if the tray is a little heavier if it encourages catalogers to keep mailing?

My biggest fear is the marketing director or member of upper management that is going to demand that the catalog now print on heavier stock. “No more of that 38lb stuff. Let’s go to 60 lb., with a varnished cover. And a gatefold! The sky’s the limit because the postage is free, and you know, postage is the most expense part mailing a catalog.”

We know we should make our catalogs more of a “web driver” but we won’t. That type of catalog is not appropriate for our customers. Your customers may respond to web drivers in your catalog, but not my customers – they still shop my catalog, page by page.

We love the idea of getting those extra 7/10ths of an ounce of free postage because it can be measured. There is no risk here – we can see that our cost per catalog is going from 52¢ to 55¢ each, because even though the postage is FREE, we have those pesky other costs. But no matter, because we know the old rule of thumb that we heard at a DMA Catalog Conference in 2003 that “if we add 20% more pages, sales will go up 40%. Or maybe it was that they will go up 10%? Oh, it’s been so long since I heard that rule, which way does it go? Sales go up by double the percent of space, or half the amount of space? Who cares, the postage is free.”

This leads to another flaw in our thinking, tied to page counts and postage expenses, which is a mentality that our products have to be in the catalog in order to sell. Consequently, we build merchandise assortments around a mythical number of products that could conveniently fit into a 64 page catalog. We don’t think in terms of having more products on our website, and using the catalog as a vehicle to drive people there to do their shopping. We don’t do this because we never think of our websites as better than our catalogs. Our catalogs are what people want to shop.

As a result, our efforts to sell more products on the website – that are not in the catalog –fail, because we don’t support them adequately online.

4.0 ounces will soon become the most dangerous number in the catalog industry. It causes us to think small, and to be restrictive with our product assortment and consequently, with our ability to acquire new customers. You need to think beyond the benefits of free postage associated with 4.0. Just like the other postage gimmicks that the USPS is offering such as a 2% discount for using QR codes, or a discount for using scented paper, this is not “found” money.  There is a real cost (hard cash) and an opportunity cost associated with making changes to your catalog to pursue a postage savings that comes with other expenses, which you would not otherwise have ordinarily pursued.

If you want help determining how your catalog can survive on a smaller page count, and to use the savings to expand circulation and acquire new customers, contact me.  Don’t automatically submit to the siren songs of the printer mermaids. You have a lot riding on how this plays out.   You still have time to adjust your catalog growth strategies and catalog circulation planning for 2017.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

 

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Getting to The Core Of Catalog Marketing Advice

I received an email recently from the CEO of a company that, like Datamann, is a supplier to the catalog industry.  He was commenting on one of my recent blog postings, and offered an observation about a problem that he saw within the industry.

He mentioned that many online media outlets are reporting on companies that use Artificial Intelligence (A.I.) in their quest to find new customers and correctly target existing ones. He stated that in most of these articles the term A.I. is misused. The companies profiled are instead using “just predictive models (typically neural networks) and not true generalized ‘artificial intelligence’ at all. But claiming the use of AI is all the rage among Marketing Tech vendors (and the online media reporting on their activities) and causing massive confusion among the marketers I speak with.”

I knew exactly what he was meant. At a company I was previously associated with, every new service or product that was introduced – no matter how mundane – was promoted as having “advanced analytics”.   So we’ve progressed from advanced analytics to artificial intelligence, and both turn out to be an exaggeration.

This vendor went on to describe many of the innovative services and products that his company provides their clients.   Some of them sounded pretty cool – even cutting edge. But he wasn’t trying to impress me or sell me anything. Instead he wanted to make a point that so many of us have to contend with. Some of his products are really meant to make a mailer’s job more efficient and easier. But what is the client’s typical response? “Cool – but now what should I do? Can’t the system just act on these insights for me?”

He bemoaned the death of fundamental marketing skills among most catalog mailers, stating that “the Staples ‘Easy Button’ for marketing has become fully realized and it’s doing far more harm than good at many companies today.”

We all see it. When I polled mailers and marketers for what they wanted to learn at our seminar next week (yes, it is now less than two weeks away), the marketers I contacted almost universally asked for “the five most important metrics I need to run my business.”  When I explain to mailers that those metrics are different for everyone, they lose patience. They don’t want to hear that – they want me to skip to the “best” metrics and reports that everyone else uses.

I can’t blame mailers for not having the patience to understand that their business – as is everyone else’s – is unique. I’ve mentioned before (perhaps ad nauseam) that there has been a talent drain in the catalog industry. Maybe a more accurate statement is to say there just aren’t many staff left at many catalogs. It’s not that the individuals left lack talent – it is simply a fact that in just about every catalog company, the jobs of five people eight years ago are now being done by one or two people. The reasons that this has happened are endless.

It Is Always A Step Backwards

When staff is downsized, it is almost always a step backwards. What happens when someone is downsized or leaves and you are left to do your job and the other guy’s job? You cheat, and take short cuts to get your job done. Maybe cheating is not the right word, because it implies that what you did was ethically improper. That’s not the case. But you need to find a way to get more done, so you look for the easiest route. One of those routes is to outsource your marketing and circulation planning.

There are plenty of consultants in the industry that will do circulation planning and/or modeling for clients. The vast majority of these folks are ex-mailers. They know their stuff, and generally they are all good at what they do.  I perform the circulation planning for a handful of Datamann clients. My methods are no better or worse than those of other consultants. We each have our little quirks that make how we do it different from the other guy – but no one has a secret sauce, beyond experience.

But here is what bothers me. I view circulation planning as being a core function of the catalog. That’s because that was the role I filled as a cataloger. Of course I want to think of my job being “core” to the success of the company. I have always felt it was a mistake for catalog companies to “farm out” their circulation planning. To me it is a relatively easy exercise. But when you have someone else do it, you become that much further removed from the business. Once you start letting someone else plan the circulation, after a few seasons you start to skip looking at the reports that consultants like me provide that show how the last mailing performed, and how the next one is planned. You start to lose touch with how your customer is performing.

This phenomenon of losing contact with your customer is even more pronounced when you have someone doing your circulation planning via modeling. At least with RFM, if you wanted to, you could see how each customer segment is performing. But modeling requires a huge leap of faith. You are often mailing huge swaths of your customer file in very large segments, simply defined as Segment 1, Segment 2, etc. Yes, you can see a difference in response between the segments, but can you tell which portions of your customers are not responding?  Do you even take the time to ask the modelers, or do you simply assume that they are doing the best job that can be done?

It’s one thing to hire a consultant like Kevin Hillstrom or Frank Oliver to come in and provide you with an assessment of what you are doing. Maybe even have them build you a model. But, consultants like Kevin, Frank and me are always willing to teach you, the mailer, how to do what we just did for you, so you can replicate it and carry on the process when we are finished with our assignment. Rarely do mailers want to do that. They want that “Easy Button”.

I’m not knocking companies that do hire outside modelers. There are many of you that are big enough to justify modeling, but not big enough to hire your own in-house statistician to do it.  The problem is that it is not that much of stretch to go from the “easy button” of modeling to being confused by discussions of artificial intelligence to think that your model should be able to “learn by itself” what to do next.

I don’t see this as an issue with every mailer. People that have been “around for a while” know what is, and what is not, possible. It’s the younger professional, mostly from the ecommerce side of the business that suddenly find themselves also responsible for the catalog that think there should be an algorithm for everything. “Facebook can determine what kinds of people are most desirable to view my ad, why can’t your model just figure out the 2% of the people that are going to respond, and mail to them”.   They of course understand that Facebook’s response is not going to be 100%, but can’t understand why the postal model should not be attaining 100% response.

In my opinion, there is no “easy button” to catalog marketing. You have to be involved. You can hire others for their expertise, but don’t become too reliant on them. If you put too much of your business on “autopilot”, you will lose touch you’re your customer, and what they are doing. Your company will become an example of the old joke about the guy that jumped from a 10 story building, and people kept hearing him say as he passed each floor “Okay so far”.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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