March 17, 2008

Profit Week: Cross-Marketing Brands And Sister Files

Six weeks ago, I purchased my dog a car seat using the website of a catalog brand.

Today, I received a catalog with an unusual merchandise offering that I have no interest in, and will never be interested in.

I noticed that this catalog had the same style of ink-jet messaging, key codes, and had the same mailing address as the catalog brand that offered me the car seat for my dog. I called the 1-800 number, and learned that both catalog brands were owned by the same parent company. I asked to be removed from the mailing list of the catalog I received today.

What happened here is the concept of "cross-marketing".

Catalog brands (and pay attention e-commerce pureplays, you'll be impacted by this someday as well) occasionally fail to generate profit. From time to time, an umbrella company will purchase the struggling catalog brand.

The umbrella company seeks to capitalize on various efficiencies.
  • Distribution Centers and Call Centers can be merged, allowing multiple catalog titles to leverage the same assets.
  • Information Technology infrastructures can be combined.
  • Customer databases can be merged. This allows each catalog title to market to customers from each "sister file", for free. By doing so, each catalog title can prospect for new customers without dealing with the fee that has to be paid to Abacus or Millard or their competitors.
In this case, I purchased my dog a car seat, allowing the "sister file" to send a catalog to what is called a "hotline customer" (me), a customer who just purchased. Hotline customers are important to brands trying to prospect.

On the surface, these are profitable strategies for catalog brands that are struggling. And in the past decade, there has been a lot of industry consolidation, yielding more of these "synergies". From a customer standpoint, there's a disconnect ... the kind of disconnect that has third parties interested in discontinuing junk mail. In part, this is why customers are getting more and more "untargeted" catalogs.

Profit Week Tip: When cross-marketing to "sister files", conduct an analysis of merchandise synergies. Identify the customers who buy product "x" from one title that are likely to buy product "y" from a sister title. This saves expense, and minimizes customer frustration.

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