April 21, 2009

Are You On The Wrong Side Of Technology?

Are you on the wrong side of technology?

I've been there. Nordstrom, 2004. Higher-end retailers were the first to witness the death of the 1980s catalog business model. Outside lists stopped performing long before the collapse most catalogers are experiencing today. Customers raced online, then stayed online, then stopped using the catalog for shopping inspiration. Mail/Holdout tests proved this ... matchback analytics that were promoted by the vendor community were much less accurate.

At some point, the economics of catalog marketing stop making sense to somebody who is good with numbers, a high-level person in the finance department, for instance. This is a bad day, if your entire career was based on the catalog business model, like, say, my career was.

You're stuck defending a dying business model, while all around you bad ideas circulate, ideas that will make your company less money than the catalog marketing they deride. One executive said that e-mail marketing will replace catalog marketing just fine --- he never looks at catalogs, and would welcome a highly targeted e-mail message. The whole room agrees ... then it's your job to remind the room that e-mail marketing generates $0.18 per e-mail, while catalog marketing generates $4.50 per catalog ...and oh, by the way, half of the customer file hates e-mail marketing and refuses to participate.

Oh.

The room gets quiet for a moment, but then the ideas keep on coming. What if we stopped renting names and let the customer determine how many catalogs to receive? What if we only mailed catalogs to store customers? What if we only put the most most fashionable merchandise in catalogs and stopped focusing on what actually sells?

What if we just killed the catalog altogether?

That becomes the inevitable conclusion, because any other idea is just a poor, sub-optimal compromise.

You're told that you will wind down the catalog program over the next year. You get to eliminate a third of the jobs in your department. You get to watch your favorite co-workers leave for other departments, sticking their tongue out at you as they head out the door. Worse, however, is the fact that most of your favorite catalog employees flee the company, looking for their next challenge.

So you do the hard work. You downsize, you re-structure most of the jobs so that your employees will thrive in a digital future. Nobody thanks you for this job. It took about thirty months to make this transition, and by the time the transition was complete, my job as I knew it was over. A new regime took over, and I didn't have much else left to do. Time to move on.

You feel like a dweeby boy at the High School prom, one who had this wonderful girlfriend, only to have the girlfriend find somebody in a nicer tuxedo. They race off to an after-prom party while you remind everybody that you were responsible for bringing her to the prom in the first place.

In my case, I got a wonderful head-start on my consulting career, because Don Libey was willing to publish two of my books before Nordstrom went in a different direction. I had a one year head-start on my blog before leaving Nordstrom. The combined efforts of the books and blog positioned me for a post-catalog world.

I entered this post-catalog world with a lot of good experience, only to find that almost nobody wanted to listen. The very catalog community that could benefit from my experience largely shunned what I learned, occasionally with a condescending attitude. You walk this fine line between desperately wanting to help your industry and wanting to scold your industry for not "listening".

As we all know, five mega-trends or events ended 1980s-style catalog marketing. Our industry only likes to acknowledge the first two events.
  1. The great postage increase of 2007.
  2. The great implosion of 2008 (i.e. the "financial crisis").
  3. The aging of the baby boomer generation, a cohort being replaced by younger individuals who do not shop the way baby boomers shop.
  4. The power of search to re-direct demand generated by offline efforts to those who play by Google's rules the best.
  5. Do-Not-Call and CAN-SPAM legislation, which gave customers the power to say NO, which ultimately resulted in the amazing declines in customer acquisition productivity catalogers are experiencing.
And it isn't fun to realize you need help. Your business model may still be profitable, while all around you, the sharks swim, blasting your Luddite-style of marketing with 140 sharp teeth called "Twitter". Never mind their business model doesn't work either, they're the new experts, the anointed ones. They praise Dell, a sixty-billion dollar brand, for generating a measly million dollars using their technology --- they mock you without offering a credible transition plan. And they'll be gone in two years when Twitter isn't fashionable, lauding the next shiny new toy. Websites, E-mail, Geocities, MySpace, Blogs, Facebook, Twitter ... it never ends, with each new tool seemingly attracting a smaller audience. If this keeps up, we truly will be executing 1-to-1 marketing.

These days, the collapse of the newspaper industry is all around us. You can't help but feel bad for the journalist who loves her job, only to have a business model implode. How will she make a living?

The music industry isn't much different --- with the imminent death of the compact disk causing a complete restructuring of the way music is made and sold. What do you do if you worked in an independent record store for the past fifteen years, how will you make a living?

The catalog industry is different, in that e-commerce forms a bridge between the catalog marketing of the 1980s and the hologram marketing that is coming. Still, the traditional business model of buying and selling lists, of planning a merchandise assortment 124 pages at a time, fifteen times a year, nine months before the catalog drops, is going away. And as it goes away, an entire generation of marketers, highly passionate about what we've always done, are on the wrong side of technology.

What will we do?

For us, the future is really quite bright!

See, we have to make a decision. Do we love putting catalogs together, or do we love selling merchandise? We have to choose.

If we love putting catalogs together, we can still do that. There will be many companies that, for the next fifteen years, will cater to the rural baby boomer audience. For the traditional catalog marketer, this will be a nice capstone on a wonderful career.

If we love selling merchandise, there's never been a better time to sell merchandise! There are a nearly infinite number of micro-channels that allow the merchant to have a relationship with the customer. What a wonderful time to be a merchant, to learn!

Me? I've already made the hard transition. It took five year to go from spending every ounce of energy trying to defend a dying business model to downsizing a department to saying goodbye to my friends to the end of my job at Nordstrom to starting a consulting practice and being laughed at by some in my industry to finally having a thriving consulting practice. Multichannel Forensics is channel agnostic --- the methodology will explain whatever comes to us in the future.

My goal is to never be on the wrong side of technology again. Of course, I already am on the wrong side of technology, being one of the few remaning long-form bloggers in a world dominated by 140 character tweets about people spitting on pizzas at Dominos. But the goal remains ... to keep up with technology.

Your thoughts?

8 comments:

  1. Hey Kevin, I couldn't agree more. I'm a technology evangelist but honestly believe people have to stop the 'shotgun' approach and use the data we have to maximize the results. Great read, thanks.

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  2. As for one of your last points: Take solace. Long-form blogging such as yours is not on the wrong side of technology, but is instead a narrow-cast successor (or at least helpful side-kick) to journalism / publishing as we know it.

    I agree that it's painful and thankless to shutter a dying business model. Does anyone really care about the person boarding up the windows of a ghost town ... even if this poor sap was once the mayor?

    However, our perspective and experience is invaluable to business, as long as we're willing to retool, and exercise some charity for the young turks who may ignore our advice when we say "It's been done. It won't work" to their bold plans. Remember, we made our share of mistakes too!

    I recommend Jeff Jarvis' book, "What Would Google Do," to think more about the changes we're experiencing and how to thrive with them.

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  3. This is a great inspirational post Kevin. You're on the right side of technology and you use it appropriately. I'm a little behind you in the tech. curve, but nevertheless have made a leap from sales/mrktg. in traditional print and direct mail. I look forward to reading more of your great posts/tweets and learning a great deal from your experiences.

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  4. Thanks for the comments, folks.

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  5. Ron Shevlin5:36 AM

    On the wrong side of technology because you're "one of the few remaning long-form bloggers in a world dominated by 140 character tweets about people spitting on pizzas at Dominos" ?

    No way (and you know it).

    For someone who understands targeting and segmentation like you do, you know darn well that what you're writing appeals to a certain segment of people out there.

    And I don't believe for a minute that you'd even want to have the people who tweet about what they had for breakfast this morning to be reading this blog in the first place.

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  6. Ron, my audience isn't tweeting about having oatmeal for breakfast?

    Thanks for the feedback!

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  7. I had oatmeal for breakfast.

    Just sayin.'

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  8. MineThatData Nation loves oatmeal!

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