March 23, 2009

Modern Catalog Marketing: Customer Acquisition

The most important topic in catalog marketing these days is the death of catalog customer acquisition.

For so many folks, catalog customer acquisition productivity (after matchback) declined by an average of 5% to 10% a year, every year, since 2003. Couple that with the dire increases in the cost to mail a catalog (back in 2007), and a huge drop in Fall 2008, and you have a recipe for a death spiral.

Catalog customer acquisition has held up when 55+, exurban/rural customers who like shopping via the telephone are targeted. Unfortunately, this audience is in decline, and will not be replaced by younger customers who crave catalog marketing.

Modern catalog marketers will be required to diversify.

The modern catalog customer acquisition department hosts individuals who specialize in different disciplines. These can be folks hired internally, or may represent folks that work in the vendor community.
  • Traditional catalog customer acquisition managers, the folks who work with Millard or Merit Direct or Abacus.
  • Digital customer acquisition managers, the "Web 1.0" staffers who focus on SEO / SEM / Affiliates / Display Ads / Shopping Comparison Sites, all the stuff we've grown to know and love.
  • Offline customer acquisition managers. The most successful catalog businesses I've worked with have offline programs that do not include catalog marketing. These businesses acquire customers via innovative offline programs --- the customers often have marginal long-term value, but the customers do offset the declines in catalog customer acquisition.
  • Social media managers. I would find your most passionate half-dozen or dozen customer service representatives --- usually found in your call center, and I would unleash them on the social media world --- blogs, Twitter, Facebook, you name it --- have them solve problems and interact with customers and prospects.
The catalog companies that have the most robust customer acquisition programs tend to execute two or maybe three of these four areas really well. Average catalogers execute catalog customer acquisition well.

I would create a report or dashboard, whatever you want to call it, that tallies the customers acquired via each of these four key areas --- drawing comparisons vs. last month, ytd vs. ly ytd, rolling twelve month periods, etc.

The important part of this whole process is diversification. We're going to have to accept a world where we willingly acquire ten customers with $5 LTV, as opposed to prior strategies of focusing on acquiring one customer with $50 LTV.

And you folks in the Web Analytics community --- we need your help. The future of customer acquisition requires measurement of a series of activities, all linked together, resulting in an outcome. We'll need to know that a prospect visited the site five times before purchasing --- a process today that is largely measured as a series of failures, but is truly a success.

3 comments:

  1. pragmatist10:28 AM

    Perfectly stated ... you have defined the environment and challenge very well. At the risk of being Debbie Downer ... the scary thing is that alternative prospecting strategies currently are too small to overcome the demise of the catalog prospecting model. Perfectly willing to accept lower LTV on an acquisition (i.e. your $5 instead of $50). We can manage that profit stream on the back-end (i.e. segment well and make sure we do not over mail). But can only afford to spend $5 CPA for the math to work. There simply are not enough names coming in with an acceptable ROI even if we excel at all 4 strategies. We (industry and me) have not found enough good ideas to maintain new customer acquisition levels. Banners, rented e-mails, social networks, behavioral targeting etc … too small or economically not viable. Social marketing … writes well … very strategic …I agree gotta be there … but let’s be real … is there anything there right now?

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  2. "Let's be real" is a relative term.

    As I mentioned in my post, I have clients who have figured this stuff out. 90% of my clients have not figured this stuff out. So the "let's be real" camp is in the 90% who haven't cracked the nut yet, and the 10% who have are not going to publicly share what they have learned with their competition.

    Yes, there is stuff there right now.

    This is why it is so important to be willing to test 200 different micro-channels, and be willing to fail on 198 of the tests. The vast majority of folks are not willing to live with that level of failure. We probably don't have any choice.

    Keep testing, keep trying! There are folks in your/our industry who have figured this out ... they're being really quiet about it.

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  3. pragmatist6:59 AM

    Agree need to keep pushing ... searching for the right idea. Unfortunately not a non-profit marketing research organization so probably need to find 3 winners out of 10 tries.

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