September 27, 2009

Dear Catalog CEOs: Six Catalog Trends

Hello there, my catalog friends!

These are interesting times, aren't they?

We are truly caught between two eras. The past 100 years were very good to catalog brands. And in five or ten years, there will be a road map for the catalog brand looking to enter the future.

Between the past and the future, that's where we are stuck. We're stuck in a period where, as one business leader recently told me, "nothing works".

We know that's not true. Plenty of things work. But nothing works at a scale necessary to cause optimism.

So let's discuss six important catalog trends that help the catalog brand bridge the past and the future.

Trend #1 = Micro-Targeting: This has been talked about for decades, but we're getting closer to seeing it happen. There simply isn't a need to send a 96 page catalog that has a lot of the merchandise you love to sell when there is this thing out there called the "internet" that also has a lot of the merchandise you love to sell. We're likely to see a 96 page catalog become three or four different 56 page catalogs, with the customer receiving just one of the 56 page offerings. People are using this strategy to generate 95% of the demand on about 60% of the pages --- mathematically, folks, it works! And instead of sending remails, you can send a different 56 page version to a customer a few weeks later. I cannot predict where micro-targeting is going to take us. I can predict that catalogs will get smaller and smaller and smaller, since the website is the store and we don't need to advertise everything anymore. E-mail will continue to progress down the micro-targeting path, with more an more versions that are sent on a triggered basis. Long-term, we'll see the slow death of the "campaign" ... sure, campaigns will be here twenty years from now, but we're headed down a path that cannot be reversed anymore.

Trend #2 = Filtering: We will see a dramatic change in how a catalog brand views customers. In many of my Multichannel Forensics projects, customers fall into four buckets.

  1. Catalog shoppers who order via the telephone.
  2. Catalog shoppers who order via the internet.
  3. Online shoppers who order because of online marketing.
  4. Brand buyers who like the merchandise.

It will take every ounce of energy possible to not mail catalogs to online shoppers and brand buyers. But this will be essential for the catalog brand to survive the transition that is coming/happening. Honestly, if I had to communicate one thing for a cataloger to do right now, it would be to start filtering, immediately. I've been able to generate a half-million to a million dollars of profit achieved for businesses between $30,000,000 and $100,000,000 in size just by doing a reasonable job of filtering. Quite honestly, filtering may be the difference between profit and loss for many catalogers. And psychologically, it isn't easy for a cataloger to transition the mindset from a customer buying because a catalog was sent to her and a customer buying because she loves the product. This transition has to happen, and filtering is a great place to start --- especially from a profit and loss standpoint.

Trend #3 = Dynamic Landing Pages: Folks are doing this as well (just hit refresh when you visit Amazon.com). Merchants will submit the items they want to feature, while the rules-based system that feeds e-mail campaigns to customers will fill in the holes with customer preferences. Catalogers will not pursue the algorithmic approaches of their online brethren, and that could be acceptable as long as there is a warm story being told to the customer. Again, this isn't a new idea, but it is one that catalogers will embrace, because catalogers will understand that the merchandising of landing pages is very similar to the merchandising of spreads. In fact, any online strategy that can be made to look, from a process standpoint like, old-time cataloging will be embraced by catalogers.

Trend #4 = Co-Op Evolution: We're going to see between one and three companies emerge (could be existing catalog co-ops, could be online co-ops, could be the big data providers, could be one of the web analytics companies), companies that focus on evaluating real-time customer behavior. This is a very different strategy than what we see today. Today's catalog co-ops are very good at massaging past purchase history across brands. Tomorrow's co-op leaders will combine web analytics data with offline data and web surfing behavior. You won't pay $0.06 for one-time access to a name. Instead, you'll pay $0.03, and you'll get to pick the contact you wish to employ --- catalog, e-mail, personalized online landing page, etc., or you'll pay $0.15 to employ a multiple micro-channel campaign (catalog + e-mail + online display ads + search optimization + ads on social media platforms). Of course, catalogers will pay about anything for the multiple micro-channel campaign. This will be transformative, especially among catalog brands targeting lapsed buyers.

Trend #5 = Frenemies And Pods: As catalog productivity continues to decline (not yours, but industry-wide), you'll see new and unusual partnerships. Expect to see contact center and distribution center consolidation --- a company in one industry (automotive parts) and a company in another industry (gifts) will share contact center and distribution center resources, human resources, information technology departments, database marketing teams, circulation teams, all in an effort to conserve back-of-the-office expenses. Customer lists and resources will be freely shared across what I call "pods", a half-dozen or dozen frenemies who leverage what each other are good at. Catalogers already share all of their customer data with each other, and private equity firms already consolidate lists and back-of-the-office operations. It's only a matter of time before frenemies form pods.

Trend #6 = Organizational Transformation: A generation of catalog marketers, age 50 - 65, are getting ready to retire. Quite simply, this generation will not be replaced by individuals who have the same passion for catalog marketing that the generation of catalogers raised in the 1970 - 1995 timeframe had. During the next ten years, we will see a considerable number of business failures, because a generation of individuals used to communicating with customers age 50+ will be replaced by a generation of leaders ready to market to customers in their 30s and 40s. The disconnect (strategies for young customers, marketed to older customers) will drive down productivity, and result in organizational transformation. Leading catalog companies will recognize this well ahead of time, and will cope by developing new brands that are targeted to a younger audience, led by a younger generation of leaders. Think of a business like, say, Cuddledown of Maine, building a new online brand for a younger demographic, training younger employees to manage this business, so that when a generation of leaders and customers move on to retirement there is an infrastructure ready to replace the core business.

Are you a Catalog CEO who has a question for me? E-Mail me your question, and I'll post my answer up in an upcoming article.

3 comments:

  1. Anonymous3:45 AM

    Kevin,

    I think about #5 and #6 all the time, they are definitely connected. The current struggles will probably force them to happen quicker, and the firms that see this will flexibly adapt. Alas, evolution takes time, and many will just collapse and die.
    Cheers
    Adam
    www.easternserenity.com

    ReplyDelete
  2. Thanks for the message, Adam ... your business is here in the Seattle area, correct?

    ReplyDelete
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    ReplyDelete