May 15, 2011

Dear Catalog CEOs: 10 Problems

Dear Catalog CEOs:

Let's review ten problems that are slowly burying the catalog industry.  How many of these problems plague your business?

Problem #10 = Brain Drain:  You see it across the board.  The best and brightest are determining the sentiment of a user on Twitter.  Clearly, that's important, but it isn't as important as measuring the appropriate mix of new and existing product.  Smart, young individuals are not choosing to work at catalog brands.  And the exodus of experienced, seasoned Executives is making matters worse.  Finally, Gen-X is too small a generation to provide a veritable plethora of talent.  All in all, it's not a good situation.  Be honest, when is the last time you heard your twenty-two year old dream about getting a merge/purge job at J. Jill?

Problem #9 = Matchbacks and Attribution:  We butchered this one.  We listened to vendors who have a vested interest in making sure we continue to put as much paper in the mail as possible.  Matchbacks are fundamentally flawed.  Execute mail/holdout tests as soon as possible, and learn your organic percentage.  Most of the folks I speak with learn that between 30% and 70% of online demand is organic, and is not driven by catalogs as believed to be via matchback analytics.

Problem #8 = Paper and Printers:  It's happened twice this week to me ... an Executive tells me that they will not be experimenting with page counts because their printer has pinned them into an efficient boundary.  Since when do you let a third party dictate your strategy?  Printers are not going to save the world by forcing you to mail 64 page catalogs without experimentation, coupled with QR-code coupons for 15% off!  We need to tell our vendors what they are going to do.  For too many years, our vendors sold us solutions that benefited the vendor.  Enough.  Be a leader!

Problem #7 = Social Media:  You're probably expecting me to say that you need to get knee-deep in social media, or you're history.  Wrong.  For most catalogers, it is the opposite.  Social media is a drain on resources that threatens to erode profit.  Now, let me be clear here.  I think social media fits perfect in your contact center.  Let the real customer relationship experts, your call center staff, find the right path to social media success.  Every minute that a marketer spends trying to develop deep, emotional relationships with customers is a minute that is taken away from optimizing e-mail campaigns, understanding what motivates a customer to buy merchandise off of a catalog spread, or takes away from calculating the profitability of search marketing activities.  Finally, social media is not a sales generator among customers age 55 and up.  Ironically, catalog customers are, by and large, age 55 and up.  Do not listen to the social media mudheads who want social media to succeed so that they generate page views and followers that validate their perceived popularity.  Do what is right for your business.

Problem #6 = Inflation:  You analyze profit and loss statements, and you see that catalogers survived the past decade by optimizing margins and minimizing variable costs.  Well, margins are about to be gutted, and variable costs are headed north.  Our industry does not have an answer to this problem.  We rely on paper, on fuel, on coal (website), and on cheap outsourcing of resources (China, Indonesia).  The cost of all those things will increase.

Problem #5 = Free Shipping:  We will be forced to offer free shipping, or cheap shipping.  With inflation gutting our profit and loss statement, we'll have no choice but to mail far fewer catalogs in order to fund free shipping.  And once most of us are offering some form of free shipping, we'll see the lift associated with free shipping disappear.  Oh boy.

Problem #4 = Algorithms:  We simply have no control over anything anymore.  Abacus decides which 64 year old rural prospect receives your catalogs.  Obtuse retargeting software determines which 46 year old discount-based shopper buys online.  Heck, I use geeky math to determine the optimal number of catalogs to mail to a customer.  Tell me exactly what it is that you truly control anymore?

Problem #3 = Relevance:  How relevant is a catalog brand in the era of social shopping, group discount websites, Target, Wal-Mart, Home Depot, eBay generating billions via mobile, you name it?  You want to have some fun at lunch?  Go recruit twenty of your brightest analyst and manager level staffers, treat them to sandwiches, then go around the table and ask them where they shop and why they shop there.  At the end of your discussion, count on one hand the number of catalog brands they mention.  Ask your staff how they learn about brands ... I doubt it is through a rented name from Abacus!  Relevance is a big issue ... nobody wants to talk about it because there aren't any easy answers.  I'm to a point now where I advocate creating a separate brand to address the under-40 audience, you're simply not going to woo them with ninety-six pages of home-spun stories delivered seventeen times a year via the USPS.

Problem #2 = Customer Productivity:  Demand that your marketing staff overlay age information on your buyer file.  Then get ready to cringe.  Look at demand per customer by age ... demand per customer usually peaks somewhere in the early 40s.  After age 50, customers spend less and less per year, until the customer hits age 65, where annual spend sinks into oblivion.  In many cases, your productivity isn't declining, but instead, you are dealing with Problem #1 ...

Problem #1 = Age:  Fifteen years ago, you managed a vibrant, 45 year old customer.  Today, you manage a 55-60 year old customer.  In other words, customers are aging about 0.7 years for every year that passes.  This is a huge problem.  First of all, customer productivity declines after a customer passes her early 40s, so your customer base is capable of spending less and less as time goes by.  Secondly, when a customer base ages, it means that your brand lacks relevance among younger customers.  In large part, we caused this ... we listened to the pundits who told us that print was required to drive traffic to a website?  The pundits didn't go a step further ... they should have analyzed the age of the customer who used print to shop online.  Had the pundits done their due diligence, they would have realized that they were inadvertently asking you to target an older, rural audience.  We listened to the pundits.  Now we have a problem.  I do not see any way that catalogers fix this problem ... we will ride the Baby Boomer generation into retirement, struggling to manage expenses and maintain productivity as we ask this generation for yet another incremental dollar of demand.

Time for your thoughts ... what do you believe are the biggest problems that catalog marketers face?