July 04, 2011

Co-Op Dollars

I seldom talk about this, though maybe I should be talking about it more often.

Let's go back in the time machine, way back to 2005.  Do you remember 2005?  You should.   Your home was worth 70% more than it is now.  You could get a home equity line of credit on your home at an amazingly low interest rate without documentation of income.  Gas cost about $2.70 per gallon.  MySpace dominated Social Media.  Mobile was an oil company, merged with Exxon, not an Android device you held in your hand.  A tablet was something you wrote on with a pen, not a device that allowed you to play Angry Birds in high-definition.

I worked at Nordstrom in 2005.  It was in 2005 that we killed our catalog division, and still generated sales increases in direct-to-consumer and retail channels with a corresponding increase in profitability.

Now, I can hear the blowhards already ... "Yabut, Nordstrom is a retail brand, so you had all of that brand equity that allowed you to kill your catalog, your strategy couldn't possibly work for us."  It's amazing how people who never worked at Nordstrom are always smarter than the folks who did work at Nordstrom, when it comes to catalog marketing (or any kind of marketing).

Regardless, the catalog division was killed.  Instead, a "brand book strategy" was employed.  Some called this a "catalog", but honestly, it wasn't a catalog.  Vendors paid a fee to have their products advertised on each page (a practice called "co-op dollars").  The catalog featured cobbled together images from various brands, low density, high fashion, you get the picture.

Well, the performance of this fashion catalog wasn't "all that and a bag of chips" as some say.

But the revenue associated with this advertising concept is worth pondering.

Let's say that you have a 96 page catalog.  If your product isn't proprietary, why not ask your supplier for a few pennies to help advertise their products (this works for e-mail, and it works for your landing pages ... and if you really want to get your suppliers to hyperventilate, ask them for a few bucks to give them added exposure on your mobile website)?

Or you could remove eight pages of crummy-performing merchandise with ads, sort of like a magazine.  Oh, I know, you don't want to "destroy the brand" ... but that's an opinion ... you already rent your very best customers to your competitors, and somehow that doesn't destroy your brand, so maybe the situation isn't as dire as perceived.

Anyway, I'm not asking you to do this ... I'm asking you to think.  How can you generate revenue from your advertising, revenue that allows you to mail deeper and reactivate more names or allows you to acquire more new customers?