December 10, 2008

Analog Dollars, Digital Pennies, Micro-Channels, Catalog Marketing

Many folks have talked about the evolution of analog media to digital media. The key topic is the transition from "analog dollars to digital pennies", where the brand slowly gives up big revenue streams for a bunch of tiny online revenue streams.

Nowhere has the transition from analog dollars to digital pennies been resisted more than in catalog marketing.

Our catalogs, which used to generate $5 per mailing, now generate maybe $2 to $4 per mailing, even after factoring in the results of matchback analytics.

But the $3 catalog mailing is still a big deal, when compared with the $0.15 we get when sending an e-mail marketing campaign into the digital marketplace. We need twenty-one e-mail subscribers to equal the sales impact we get when sending just one catalog into the analog marketplace (though the $0.15 e-mail may be more profitable than the $2 catalog mailing).

And a catalog mailing is a big deal, compared with paid search, where you work your tail off spending $500 to get 1,000 folks to click on a keyword, resulting in maybe twenty orders.

You keep telling me that paid search "doesn't scale", that there simply aren't enough people searching for "Ugg Boots" to replace all of the business you're slowly losing in catalog marketing.

We just can't force people to search for "Ugg Boots" in the same way we can force a catalog in the mailbox!

Catalog marketing scales. You can always visit your favorite co-op or list broker and pay $250,000 for one-time mailing access to 5,000,000 names willingly contributed by your most feared competitors if your catalogs are productive enough and you have deep pockets. A few catalog businesses appear to be absolutely thriving as they push themselves toward critical mass, offering desired merchandise and capitalizing on customers nurtured by competitors.

So catalog marketing, like the music industry and the newspaper industry and television and radio, is inevitably evolving, increasingly trading analog dollars for digital pennies.

And this is where we resist change.

We resist the transition to online marketing, just like the music industry resists the $0.99 digital song, and the eventual transition to a subscription-based music service. Just like the newspaper industry, we want the customer to keep using paper. We want to stay focused on a small number of activities that generate large amounts of revenue, activities that scale.

But online, the cataloger who wants to "scale" has to be in a thousand, or ten-thousand different places, all at the same time, without appearing to "force" itself into those places. These places are called "micro-channels", representing all of the ways a cataloger can interact with small communities.

Force is a key part of the analog equation. Catalog marketing via the mailbox/co-op/list-broker/printer defines force. E-mail marketing, after the opt-in opportunity, is largely an issue of force.

Paid search is not about force. The customer decides to click on your keyword. Natural/organic search is not about force (it is, however, about Google controlling your business). Affiliate marketing, shopping comparison sites, social media, they are not about force. In each case, the cataloger puts herself in a position to be successful, but the customer makes the final decision.

Nowhere is this more apparent than on this blog. Vendors hire PR firms, and those PR firms try to force a message upon you, the loyal reader, thinking they are taking advantage of this micro-channel. "Kevin, love your blog (though I review my web stats and observed that they just did a Google search for 'database marketing blog'). We think your readers would love to learn more about our products and services. Could we pay to place an article on your site, or would you be willing to volunteer your time to write about our products and services? Thanks, looking forward to our relationship!!" This is a traditional approach to micro-channels, trying to force a message.

Micro-channels are not about force, they are about influence. What might have happened if the firm I mentioned above had their own blog, and had mentioned my articles a half dozen times? Might I have voluntarily mentioned their business without their firm ever having to ask? In this example, they are using a micro-channel to get my micro-channel to talk about their overall business.

Take Eddie Bauer. Instead of spending $250,000 renting catalog names, why not give the first 5,000 Cute Overload subscribers this Holiday Labrador Ornament for free, no strings attached? And don't do that on the big, popular blogs, but go give this opportunity to the good folks at The Lab Brats Blog, too! Go out and interact with folks, build relationships, give people something, test things, see what works. Or better yet, host your own blog and plant some seeds now.

It is easy to rent 5,000,000 names from a co-op. 5,000 names or 5,000,000 names, the work largely scales, one person asking the co-op for names, one accounting department paying the bill, one postal service delivering the catalogs.

It is hard work managing five thousand micro-channels.

List rental and co-op marketing represent analog dollars. Micro-channels represent digital pennies.

The transition is being made for us, so why not embrace it?

Your thoughts?


  1. Anonymous6:23 AM

    Remember the days of Peppers and Rogers' "The One-to-One Future?" They talked about product managers going away, to be replaced with customer managers. Each manager would get a stable of elite customers who would be sold a variety of products based on knowledge of their intimate needs?

    Of course this was a vision that didn't come into common practice.

    But I was reminded of this when you talked about the fragmentation of channels more passive customers such as affiliate and PPC buyers.

    What is difficult to scale about the management of these transactions is their resistance to a second purchase and easy categorization of need. The only way this can be done efficiently is with better automation.

    I'm wondering: What will the channel management tools of the future look like? The catalog marketer who builds the first really good one will have a huge advantage -- being (seemingly) everywhere, selling everything, without sounding pushy. Amazon does this now on their site, but this tool would extend the catalog to the ad space of every major web site, always recognizing your needs and proffering just what you're looking for.

    Am I off-base here? Let me know your thoughts.

    And thanks for the thought-provoking post!

  2. I don't think the comments are off base.

    I do recall the talk about customer managers. I even remember being in meetings about how we might re-organize around that concept. It was a good idea, in theory.


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