If You Were Buying A Catalog Today, What Is it Worth?

Back in late June, I wrote that “the big catalog conglomerates (BluStem/Orchard Brands, Potpourri Group, Cornerstone) keep acquiring more catalog titles because it makes their investment in efficiency even more profitable. But, you never see other catalog companies purchase online-only companies because those types of companies would not fit into their efficiency model – there is no synergy, no gains in productivity.” (Note: I wrote that before Camping World, a retailer and cataloger, acquired TheHouse.com, an online-only seller of sporting goods, so there are instances of catalogers buying online companies.)

I received an email a few weeks later from someone connected to the mergers and acquisition (M&A) industry that specializes in buying and selling catalog companies. She commented on the above quote: “That statement is somewhat correct but missing a small point we discovered as we have tried to help our clients acquire web-only businesses over the last year. They can buy a 5-9% EBITDA catalog company with a 4.5-6x earnings multiple. But, it is difficult to find a web-only business with 5-9% EBITDA and, even if you do, they go for 9-12x earnings multiple. I suspect none of the catalog private equity groups which you mentioned can fund that kind of acquisition metrics. Amazon is in an envious position with their stock price, impervious to lack of profits from their retail business.”

I’m not an M&A expert and don’t pretend to be, but let’s look at this from a few perspectives. For those of you not versed in the M&A vocabulary, let me explain a few things being said in the email sent me. A catalog with a 5% to 9% EBITDA, basically means that catalog is generating profits of between 5% to 9% of sales, which would be a very healthy catalog, especially if they had been able to maintain that level of profitability for several years. Once you start getting down below 5%, your catalog is generally not healthy, and is of little interest to being acquired by the private equity companies – unless they can get a really great deal. The buying price is “4.5 – 6X earnings”, means that if a catalog was generating $25 million in sales, and was generating 7.5% of sales as profits ($1,875,000), then the buying/selling price would range between $8,437,000 (4.5 x $1,875,000) to $11,250,000 (6 x $1,875,000).

This 4X to 6X profits multiple to determine the selling price (or value) of a catalog has been around for a while. I even checked with Jim Alexander (my mentor in many catalog related things) who confirmed for me that even in the heyday of cataloging in the 1990s, the multiple was typically 5X to 7X earnings/profits.

The second half of her email is more intriguing. She states that online-only companies have an inverse situation. Apparently not many of them are profitable, because it is difficult to find any with 5% to 9% of sales turning into profits, and when you are able to find such a company, the owners of those companies determined their value by a much higher multiple of 9X to 12X earnings.

Those of us merely on the sidelines can speculate that these online-only companies probably have an inflated view of their potential, each thinking/expecting that their business is the next Apple/Facebook/Google. Heck, they probably play foosball in the office and wear man-buns.

What do you think the reaction is when a cataloger that is in “acquisition mode” encounters one of these not-so-profitable online-only companies that thinks they are worth twice the multiple of the cataloger’s own business? Well, you can pretty much guess the reaction and comments: “Who do these guys think they are? I’ve spent 40 years in this business, building my catalog, going on endless press-approvals, countless buying trips to China, installed three generations of order processing systems, was a charter member of the DMA Catalog Council before they killed it, currently participate in 32 co-mail pools a year, helped start all 3 of the remaining co-ops with my customer file, and these guys have had a website up for four years, they don’t even know their 12-month buyer count, and they think they are more profitable than me? This is crazy!”

But, since I’m a history buff, let’s look at this from a historical perspective. Is it 1903 or 1923?   In 1903 there were 32,000 cars and trucks registered in the US, and 21 million horses. In 1903, most people would have probably thought an investment in a wagon/buggy company was a better idea than investing in a car company (although, that was the year that Henry Ford started the Ford Motor Company). In 1923, the number of cars swelled to 15 million, and the number of horses grew to 25 million.  There were probably still many in 1923 who thought that horses, buggies and wagons would never be displaced by cars. After all, the number of horses grew while the number of cars grew. A rising tide lifts all boats. Plus, all of the horse trade publications of the time featured articles on topics like “Manure Is Not Dead”, and “The Value of the Omnichannel Blacksmith”.

Sadly, for the buggy industry, 1923 was the year when the number of horses, buggies and wagons in the US began to drop, and we know how it ended. Today, there are 263 million cars and trucks on the road in the US alone, and only 3 million horses.

There is none so wise as to foresee the future or foretell how and when catalogs will end. Is 2017 equivalent to 1923? Picture yourself back then – without the knowledge of how cars would take off. You’d like to think that the 1923 version of you had the foresight to look around and say “Yeah, horses are dead. I don’t care how good a deal I can get on investing in a buggy company, cars and trucks are the way to go. And yes, I know that there have been literally hundreds of car companies that have gone out of business since 1900, but a few of these companies like General Motors, Ford, and Studebaker, look like they are going to be around a while.”  (So, you would have been 66% correct).

In my opinion, the question facing the catalog industry is not so much whether the online companies are worth a higher multiple. The question is whether catalog companies are still worth a multiple of 4X to 6X present earnings? You can see the handwriting on the wall. Consumers are migrating online and to mobile, the catalog co-op databases are dying, response rates keep trending down, and fewer and fewer catalogs are generating 5% to 10% earnings. No one can predict how much longer the industry has, but only the naïve would believe that better days are ahead. Would you invest here?

Maybe you would if there was still value in an acquisition which allowed you to roll a new catalog acquisition in with some existing brands and benefit from more efficiency. But, what to pay? The 4X to 6X earnings mantra doesn’t seem like a good ratio anymore if you know there is built in obsolescence to your acquisition.

And that is the problem I see facing the future of cataloging. The people working in those private equity firms looking for catalog companies to buy are not new to the industry. They have been doing this for a while. Like that mythical cataloger I mentioned earlier, they built this industry while building their business. They are not about to admit to obsolescence – they want the thrill of watching the order count grow on Cyber Monday. (They probably still check with the mail room to see how many mail orders came in). They just got a break from the USPS on mailing heavier books – how could that NOT be a great thing? After years of dreaming of moving the 3.4-ounce threshold up to 4 ounces, this is their moment of glory. They are going to mail more pages and not spend a minute on making their websites more effective, or adding any callouts in the catalog to drive consumers to the website. Print (just like manure in 1923) is not dead!

Meanwhile, they all remember what happened to Garden.com, and a host of other online-only companies that crashed and burned over the past 15 years. They know that Amazon had a one-in-a-million chance of surviving when it launched 20 years ago. They hang onto the last comment in the email above from the M&A analyst who wrote “Amazon is in an envious position with their stock price, impervious to lack of profits from their retail business.”  They see the irrational exuberance in the stock market as the so-called FAANG stocks – Facebook, Amazon, Apple, Netflix and Google parent Alphabet – have surged in value, while traditional retailers with real stores and real catalogs, have seen their value pounded in the market. And they think it is not only not fair, but crazy.

But that is the buyer’s perspective. What if you are the seller? You think that 9X to 12X multiple looks pretty good for those online companies. You think maybe you need to stop thinking like a cataloger and beef up your online presence.

Let’s continue this conversation….

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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Do You Want to Be Pure or Rich?

This is part 2 of my revisit to what is to become of the single title catalog.

Around 2004, when I was working at Millard Group, we hosted a client symposium. Catalogers at that point had gone from having a simple website on which – if you were lucky – you could place an order without the site freezing up, to acknowledging that the internet was something that customers wanted.

One of our presenters was Steve August (at that time, the marketing guy for the Brookstone catalogs), who explained how Datamann (a shameless plug!) was doing fractional allocation matchback for Brookstone, showing how orders on the web could be matched to a catalog mailed. There was a stunned look on many of the attendees’ faces. I could tell that many of them were thinking, “I can’t just look at a source code report anymore? I have to do all this extra work?”

Finally, the CEO of a New England based catalog company said, “I hate the internet. I wish it would go away. I can’t understand why anyone would want to order off the internet when they can call one of our telephone reps, who can help them pick the right product.” Two-thirds of the room nodded their heads in agreement with his statement, and the other third rolled their eyes and quietly thought “jerk”.

I cite this story because catalogs have moved a little further along the ecommerce spectrum, but many still harbor the belief that they wish the internet and mobile would go away, or at least, were not so powerful. They love their catalog. They know they are doing an adequate job of reaching their baby boomer customer, but they long to get that baby boomer’s 30-year-old children to purchase from them and, ideally, to place that order from a catalog, which these catalogers view as their key to catalog growth and catalog survival.

For most catalog companies, you have done everything you were supposed to with regards to your website. You have added all the mandatory bells and whistles. You have an online staff that runs your PPC, SEO, email and abandoned cart programs. You finally developed a mobile site.

But deep down inside, management still feels that the heart and soul of the company is the catalog. After all, out in the company lobby, there’s a stack of the most recent catalogs – there is not a screen on the wall showing the website’s home page.

Ok – you get the point. You are still catalog-centric. Even companies that think they have turned the corner, and think they are web-centric, admit to me that 100% of their products are in the catalog, and they have no “web-only” products.

When I Feel the Heat, I See the Light

However, this series of postings is about what has changed among catalogers in the past 2 ½ years since I first wrote about the plight of single title catalogs. I have witnessed among many catalogers a change in focus and a realization that the internet is where the future of the company lies. And I’m not just talking about having a good website to compliment that catalog, but a fuller ecommerce orientation that includes using PPC, SEO, Facebook, and Instagram, etc.

To quantify this change, think about this: At our catalog seminar in March, I gave attendees a list of 16 topics to pick from to choose what they would like covered for the seminar in 2018. I asked them to mark two choices. Out of 200 attendees, we had 84 responses (42%, not bad!). The number one requested topic for 2018 – “How do I change from being a catalog company to an ecommerce company?”.   The least popular topic – “Working with the catalog co-ops”.

But here’s the rub – just as you have maxed out the potential circulation from the co-ops, you have now maxed out the affordable ecommerce options like PPC. Yes, you can still keep mailing catalogs, and there are still some things you can do with social media, with better targeted emails, and retargeting, but none of these are going to move the growth needle in a big way.

Look around and you see that even the main stream media is carrying stories about the collapse of retailing. Thousands of stores are closing this year nationwide. Whole malls are being deserted. But who is growing? Amazon.

Now let’s go back to my title question – do you want to be pure, or rich?

Today’s bogeyman for catalogers is not the internet in general. Today it is Amazon and the other marketplaces like eBay and WalMart.com. Some of you are deathly afraid of Amazon. You think it is evil. “Why would I want to sell on Amazon?”

You either experienced or heard of examples of catalog companies which began selling a product years ago on Amazon, and which did well at first because you were the only one selling it there. Then suddenly, there were ten other sellers – including Amazon. And for the past 10 years you’ve been telling anyone who would listen, about how you got shafted by Amazon when they started selling the same cat-shaped tissue holder that you started selling on their site. Amazon saw how well it was doing for you, and they stole the idea from you. So, ever since then, Amazon has been the enemy.

I’m Amazon agnostic. My biggest concern about Amazon has been that while they grew at 25%+ each year, all those transactions were not going into the co-ops, depriving the co-op databases of a huge chunk of transactions. For some reason, this thought never occurred to many of you because the co-ops simply kept telling you “all is well”.

Many of you dislike Amazon with a passion because you see them as the reason your business is declining. The few buyers you have generated from selling on Amazon just DO NOT RESPOND when you try to market to them. These customers don’t recognize that you and your catalog were the ones that shipped that lighted pumpkin figurine – they think it was Amazon. You want to scream “This is what’s killing catalogs and retail!”

But, how many of you are Amazon PRIME customers? I’m betting that almost all the readers of this blog are, for all the same reasons that millions of other consumers are – it is convenient, and their product assortment is ubiquitous.

Should you be on Amazon? That’s a question each of you needs to answer on your own. I recently read that half the US population either never or rarely uses Amazon – so if you are serving those mostly lower-end shoppers with your catalog, Amazon may not be that productive for you, and Amazon may actually not be a problem for you.

But let’s look at your growth problem from this perspective – you have stalled in your efforts to acquire new customers from your existing sources. You have been unable to develop a marketing strategy that brings in tons of new customers at little or no cost. You are not “creative” in the new online world of marketing, and with new ways of selling. But you do have products, and if you are strong at anything, hopefully it is at being a good merchant.

Amazon is not going to stop growing anytime soon. And after last Friday’s purchase of Whole Foods, you can see that Amazon has its eyes set on many parts retailing. Either be part of it, and follow all the tactics for using Amazon effectively, or stop complaining. Do you want to be pure, or rich? Maybe the more appropriate question is do you want to have a shot at remaining in business or keep crying that you are going to resist Amazon?

I’m not an expert on selling on Amazon – but there are plenty of people who claim to be. I’m sure that one or two actually are experts, and they can help you with the whole strategy of selling on Amazon (as well as sites like eBay and Walmart.com), with regards to pricing, margins, speed, placement, etc.

If you have been a good catalog merchant, and developed proprietary products which would be tough for anyone to copy, then why not sell on Amazon? What’s wrong with generating cash? Your job is to sell product, not mail a catalog.

Let’s be clear, I’m not advocating that selling on Amazon is a cure-all for what ails the catalog industry. It is simply one arrow in the quiver, albeit a very big arrow. As with any company selling products via any channel – whether it be a retail store, a catalog, a website or all three – if you haven’t got unique product, which is priced right, and is in demand, you are in trouble. But if you do have that unique product, especially if it is proprietary to you, don’t be afraid of selling in the marketplaces like Amazon, eBay, and Walmart.

“He is no fool who gives up what he cannot keep to gain what he cannot lose.” – Jim Eliot

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

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What Is To Become Of Single Title Catalogs – Revisited 2017 – Part 1

Based on comments I received at the time, one of the most read and most popular series of blog posts I’ve written were on what is to become of the single title catalog, written in late 2014/early 2015. Click here for  Part 1, Part 2, Part 3,  Part 4.

Because there was such interest in the topic, and because the catalog, retail and ecommerce landscape has changed so much in just the last two years, I decided to revisit the topic, and look at where the catalog industry and single title catalog companies are headed in 2017.

(Note: as was the case in my first series of postings on this subject, I’m focusing on catalogs doing between $5/10 million to $100 million, and they are companies which may have more than one catalog title, but they are not part of a major catalog conglomerate).

In general, I’m a bit more optimistic today than I was in 2014 for some titles. There were single title catalogs doing well two and a half years ago, and even more are taking steps today to ensure their survival – maybe not indefinite survival, but they will live to fight another day. There is a greater awareness today which was not as prevalent in 2014, that catalogs must change or die.

The Catalog Malaise:

However, the majority of single title catalogs – regardless of their best intentions, are not healthy. Here are some of the symptoms I see:

  1. Little to no growth of catalog/web sales on flat circulation;

 

  1. Ever so slowly declining response rates to both house and prospect mailings, creeping down a bit every year, a trend which started after the 2008 recession, but which has not ceased.

 

  1. Prospecting with the four remaining co-ops has plateaued for almost every mailer, due to the continual decline of the co-ops’ performance and shrinking volume of viable co-op names which I’ve written about many times previously. What has changed in 2017 is that I rarely receive any argument from mailers now that this is occurring, and mailers find incredulous the co-ops’ counterargument that the co-ops are actually growing.

 

  1. As circulation flattens, or declines, product margins continue to erode, as mailers lack the ability – or the fortitude – to commit to inventory quantities necessary to get volume discounts.

 

  1. Smaller, ancillary titles that were started 10 to 15 years ago because they seemed like a great brand extension at the time, but which today are simply bleeding losses, are being shut down.

 

  1. CEOs are being fired or let go with greater frequency and after shorter tenures. They are being given a short leash to fix what’s wrong, or are bounced quickly.

 

  1. For even successful catalogs, there are across the board reductions in staff, with the remaining staff often not having any “catalog” experience.

 

  1. With budget allocations moving toward web development, legacy “catalog systems” (be they marketing, merchandise or order processing systems) get left in place, which causes the mailer to fall further behind.

 

  1. Prior to the recession, every time I visited a client, either the CEO or VP of Marketing would pull me aside and say in hushed tones “We are looking to acquire another title. Let us know of anything that is for sale”. Of course, they always thought they were the only ones asking me this. Hardly anyone asks this anymore.

 

All of these symptoms of “catalog malaise” lead to more challenges.  Most mailers know deep down inside that improved merchandise performance, and new products, are the two key ingredients to lift performance. But developing a “sound merchandise strategy” takes time. So, the focus invariably becomes “what can we do immediately?”

The “immediate” fix usually leans towards marketing – and often that means pursuing a series of short-term response tactics/gimmicks:

  • Mailers go down the rabbit hole of offering discounts and offers, and often much earlier than what passed previously as “normal”. A cataloger that previously could hold off until August to have a “Summer Sale” is now offering 30% of the entire catalog in May.
  • Mailers end up working with too many vendors that are “one-trick” ponies, that have one “product/service” that is the “game-changing disruptive technology” du jour. In reality, although these product/services are successful, they only move the response rate by a fraction, or result in acquiring only a handful of new customers. Lots of noise and distractions for little results.
  • Or, the company decides that in order to attract a “younger” customer, they need to update the brand. So, major resources of time and money are spent – wasted in my opinion – on new brand/creative initiatives which typically fail, since they never generate any significant increase in response. The reason for failure is that management acts on their gut instinct, or on the basis of “best practices” fueled on advice from consultants, but neglect to consider the one certain source of information that would be helpful – they never talk with their customers.

As previously mentioned, some catalogers are doing well. They are focused on merchandise productivity. Yet, every catalog/web company exhibits some of these “traits of malaise”. There are few within the industry that see a rosy future for the print catalog going it alone.

Of course, in many companies, there is a line (in some cases, it’s a wall) between what is being done in print and online. Consequently, even if your online team is doing a great job with developing dynamic pricing, adoption to cart programs, and a great mobile site, the catalog is still the dominate force within the company. As one client said to me recently “We are struggling with becoming “Digital first”. The print catalog permeates everything every department does (merchandise schedules, catalog production meetings, operations, finance and even HR).  It’s EXTREMELY difficult to get through even one meeting without saying the word CATALOG.”

What are the options? That’s where we will pick up next time.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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If I Were You

Right after our catalog seminar a few weeks ago, I received a number of emails from attendees thanking me for the event, expressing their enjoyment with the presentations, suggestions for next year, etc. All good stuff and all sincerely appreciated.

(For My UK readers – please see the note at the very end of today’s posting).

One attendee, a vendor, wrote that “I totally get that it is fun to pick on vendors and the bright, shiny objects that we are peddling.  But as a former mailer/digital marketer, I am keenly aware that understanding the advances in technology and what they mean to my business prospects is critical.” He went to say that our seminar in the future could be a “neutral ground” to “educate marketers on what technology makes possible, and teaches (forces?) them to think about how they can leverage the technology advances to grow their businesses”.

A neutral ground? Hmmm…

How would I manage to have a neutral ground if I allowed one vendor to promote their “shiny new objects”, while denying that opportunity to others?  I couldn’t, and I’m not even going to try.

Our catalog seminar each March (you can circle March 29, 2018 on next year’s calendar) is almost a year-long undertaking for me, so I’m glad attendees found it worthwhile. I’m delighted when they take the time to write with suggestions.

But I believe the success of our event lies in not promoting “specific” new technologies or new methods of using old technologies. Rather, it lies in helping traditional catalogers see how they must evolve their business in general to stay competitive. Whether it is thinking less like a cataloger, thinking more like an ecommerce or even mobile marketer, or how to confront the reality of Amazon, our seminar will continue to offer more generic solutions that are timeless, rather than the bright, shiny new object that will be obsolete in a year’s time.

If I Were You

I have not been to the Internet Retailer Conference (IRCE) in a few years, but one of the things I always enjoyed about their conference was that it featured speakers talking about the newest/greatest technology. IRCE made little effort to screen speakers and keep them from giving a pitch for their product.  My feeling on this is that the online technology is changing so quickly, you have to have a forum like IRCE where the latest and greatest is presented, even if the presentations tip too much toward being a sales pitch.

Since there is no way Datamann’s seminar (which we host for the VT/NH Marketing Group) could ever offer the breadth of information on new technologies that are offered in the hundreds of presentations at IRCE, why even try?  At IRCE, let the buyer beware, just as catalogers had to pick our way through the maze of vendors and presentations back in the 1980s at the Catalog Conference.

If I were a catalog mailer today, I would attend the IRCE, with my eyes wide open. I’d look for every cool new idea, and zero in on the ones where the presenter/ vendor offered proven examples of how their technology could help me in the next three to six months.

When you are attending a conference with 15,000 other attendees, it is impossible to digest everything at once. But trust your gut instinct on who seems to have a believable story. Years ago, Ben Perez, my former boss at Millard Group, used to say that “some things just smell like 3 day old fish”. You’ll be able tell which vendors are pushing three day old fish, and which aren’t.

Learn to be skeptical. Here’s an example: at the NEMOA conference in March, the Postmaster General was a no show. She sent one of her trusted deputies in her place. He gave an overview of issues the postal services is dealing with, and the new services being offered. Plus, he provided some interesting statistics, one of which is that although since 2012 mail volume is down, “engagement with mail was up, with an additional 25% of households reporting a strong attachment to mail.” So what does that mean? What is a strong attachment to mail? How do you quantify that? How did they determine that “attachment” was up 25% in the past five years? Learn to be skeptical.

In addition, keep a check on your enthusiasm when you get home. As one person wrote to me before our seminar last month “I wanted you to know that although I will not be attending your conference, it’s (IMHO) the best in the business. I am not attending to allow two other staff  to go. Your other reader is absolutely correct, most conferences are a “vendor cesspool” and I welcome the day a newbie (or seasoned marketer for that matter) returns from the typical national conference with more than unbridled enthusiasm for some new start-up that plans to further squeeze our dwindling profit dollars. “

Finally, to my many subscribers in the UK, if I were you, I’d plan on attending the Direct Commerce Association’s Annual Summit (click here) on June 15 at the Hurlingham Club in London. (Awesome looking venue!).  Kevin Hillstrom will be presenting a new and improved version of the business simulation he presented at our seminar last month, and Amy Africa will be presenting her latest take on “The good, the bad & the downright ugly” of websites. Kevin and Amy together, in London – Wow!

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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Marketing Statistics and Alternate Facts

We are all familiar (or you should be) with Captain Renault’s famous line in the movie Casablanca, that he is “shocked, shocked to find that gambling is going on in here”, at which point a croupier hands him a wad of money and says “…Your winnings, sir.”

I’m going to share with you some insight I received via an email recently from a longtime reader of this blog, and longtime friend in the catalog industry. His comments and concerns are a perfect encapsulation of an issue which I hear too few of you discuss, and echo Captain Renault’s famous line.

His email was one of several I received from readers regarding a posting I wrote a few weeks back on the death of the catalog media, and the independent voice which publications like Catalog Age used to bring to our industry. I will share several of the other comments I received from readers over the next few weeks. They all had a common theme, and surprisingly, it was not a wistful, nostalgic yearning for cataloging’s Golden Days. Rather, they all acknowledged that the industry has lost a great deal of knowledge, and basic common sense.

My friend wrote that he was “shocked, shocked” that there could be such a thing as ‘fake news’. He felt that “the people who value this drivel do so because it either reinforces what they already believe or they don’t have a framework for evaluating the ‘facts’ in the story.”

“Which brings me to marketing statistics. Every email service provider, personalized shopping experience vendor, cloud web service seller, total marketing integration service seller with whom I’ve talked has an easy to install, comprehensive reporting suite that will produce pretty graphs showing how effective their product is. How else can I get email, affiliate and PPC services claiming to produce 121% of my total revenue?”

“Without a business strategy the numbers are hard to evaluate and can be used to tell stories that don’t reflect reality. Our company likes to make a profit so we look at order contribution at a business level. If we are not making money on the orders we take in it doesn’t matter what the “reports” say. We also do an analysis by channel but that is secondary. I often wonder whether people who are looking for ‘good marketing statistics’ have a framework for evaluating fake news. That’s really the issue. Without a framework and context numbers don’t matter.”

Mark Twain used to say there were lies, damn lies and statistics. Today he might say there is fake news, alternate facts, and marketing statistics. They all sort of fit together.

My friend’s email reminded me how much I enjoy his wisdom, and his ability to see and state the obvious to which so many other marketers are blind. He is the Sage of Spokane.

His comments reminded me of a speech that a VP of Sales for one of the co-ops gave at NEMOA a few years ago. She was presenting a talk on new customer acquisition, and she used projections from the DMA to show that direct mail was trending to grow in the next 3 years. I remember thinking to myself – now, who is better qualified to project where catalog volume is going? Who would you put your money on? The co-op, a company that has millions of transactions from thousands of catalogs, and who knows every catalog’s mailing trend for the past 20 years? Or, would you put your money on projections from the DMA, a trade lobbying group which has access to no company mailing information, only self-reported survey data? Hmmm…., why would the co-op use the DMA’s projections, and not their own? Maybe because the DMA’s projections are always overly optimistic, and were a better fit for her narrative that day.

How many others in the room came to that conclusion? How many were “shocked, shocked” that she would cite so shallow a source as the DMA, when her own company was sitting on more data about the catalog industry than any other source available?

The issue is not so much being able to evaluate fake “marketing” news. The issue is the brain drain and experience drain our industry has suffered. There are very few people left in our industry that can even execute a really good direct mail campaign. When was the last time you received a piece of mail at work – not an email, but something that went through a postage meter or that had a stamp? No one does it anymore, because they have been lead to believe it no longer works. In their rush to show that they are not email and social media Luddites, and that they can embrace “Millennial marketing”, catalog marketers have dismissed efforts to make their base books stronger and more appealing. In my opinion, catalog marketers today are not creative, they are lemmings.

Yes, I believe that consumer behavior has changed, and is shifting ever more toward mobile – I see it on an individual level when I watch my wife shop from her iPhone. Yes, I believe that websites need to be stronger than catalogs.

But to ensure catalog survival, we must separate fad from trend, statistical fact from marketing fantasy. To my friend’s specific point about every vendor supplying an easy solution, I encounter this phenomenon frequently with clients that are being told by other vendors how easy it should be to “dial up their marketing”. But, these same vendors never ask the client to provide all costs associated with the marketing – the way I do and the way most list brokers would do – to calculate the marketing program’s profitability (or as the my friend stated, “order contribution at a business level”).

Sadly, I still encounter mailers for whom the concept of calculating profitability on a mailing is a new concept. The thought of assigning profitability to other, less tangible marketing is out of the question. (Errors committed by the new generation of catalog mailers will be the topic of a future posting).

The irony of all this is the second part of that famous scene from Casablanca. Renault is shocked, but then he turns around and accepts the cash from the croupier. In the catalog world, many of us know how to detect when data is wrong/ missing/ misleading/ fake, but we smile, accept the report and say “thank you very much”. We don’t push back enough and say “Your data is crap, and your assumptions are misleading.” Although, I have no doubt that some of you tell your internal analysts that, and especially tell it to your vendors, not enough of you do, because you lack the insight to know what is real and what is fake.

Wisdom is an asset that often comes only with time and maturity. Don’t overlook it, and don’t under value it. As Lord Tennyson wrote “Knowledge comes, but wisdom lingers.”

PS: In case you are interested, Casablanca’s Captain Renault has a connection to New Hampshire, where I live. Claude Rains, the actor that played Captain Renault, is buried in Moultonborough, NH. Bet you didn’t know that.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

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Press On – Why Coolidge Matters to Catalogs (Really!)

Most of the catalogers that are readers of this blog reported that they had soft sales this past holiday season.   There are many reasons, some of which I have previously reported.

I think Amazon took a far bigger chunk of business from each of you than you probably are willing to acknowledge. Few of you had “remarkable” catalogs – you just keep boring your customers with the same old look.  The catalog co-op databases, your major source of prospect names, are dying.

But what really bothers me, and where I see the biggest problem, is that most of you have given up on new products. You are making no effort to develop, source, find or promote new products. I’m talking truly new products – not just a new color or a new version of an old product.

I don’t get it. You know that introduction of new product is the number one thing that will drive sales from both existing and new customers. But you are not taking an aggressive stance to get new products, especially products exclusive to you.  It’s almost like you have given up.

This brings us to Calvin Coolidge (30th President of the United Sates, 1923 to 1929), who was born and raised about 20 miles away from Datamann’s offices here in Vermont. He was even inaugurated President by his father, in his childhood home, by the light of a kerosene lamp, in 1923 when President Harding died.

As a history buff, a presidential inauguration like the one later this week – regardless of incoming party – is like ten Super Bowls to me. So I’m going to tie a catalog lesson to one of Vermont’s native sons – Calvin Coolidge

I’m going to bet that 99% of you know nothing about Coolidge, other than he was quiet, and not a very remarkable president. Much to the relief of many of you, I’m not going to take the time to provide you with an education on his contributions to history – minimal as they were.

Coolidge was a conservative, taciturn Yankee, who prized hard work and independence. One of his few lasting contributions to American history and culture was something he wrote just after he left the White House. When asked what was the most important character trait for success, Coolidge replied:

Nothing in the world can take the place of Persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and Determination alone are omnipotent. The slogan ‘Press On’ has solved and will always solve the problems of the human race.”

Persistence and Determination.  Do you have those two qualities? In my opinion, they alone are the two qualities you need to survive. Short cuts are not going to get you there. Cataloging is no longer for the faint of heart – it can’t be. Going forward, the key to having a successful catalog will be the persistent application of aggressive tactics for basic survival. It has no other direction to go. You have to be willing to gird your loins and ‘Press On’. The place this most applies to catalogs is the development and testing of new products – you must get aggressive at introducing new products. And when they fail, “press on” and bring in more new ones.

Some of you will think my comments are overly dramatic. You have not yet been tested the way many other catalogs have been, especially this past year. But that time is coming for all of you. Maybe not 2017. But it is coming sooner than you think.

Here is the important thing to remember – your fight must be to find new product and new customers. Your fight is not just with Amazon, the post office, the printers, the co-ops, or even me. Don’t waste your bullets on imaginary foes. Your fight is against yourself, and your ability to shake off your old habits and try some new things.

There are no short cuts.

press-on-coolidge-quote-cro

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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