March 25, 2009

Modern Catalog Marketing; Catalog Merchandising

The modern catalog marketer takes a different approach to merchandising a catalog.

During the "catalog era" (1880 - 1995), the catalog WAS the store. If you didn't put an item in the catalog, you didn't sell the item.

During the "multichannel era" (1996 - 2008), the catalog was one component of numerous channels that all had the same look and feel, the same message, the same merchandise. Blah blah blah blah blah blah. We failed to capitalize on the strengths of each marketing channel, instead watering down the presentation in every channel. Bad idea. This might not have happened, of course, had the online pioneers of the late 1990s done everything "their way", in a non-integrated, silo-based manner, giving the store away for the sake of monetized eyeballs.

The modern catalog marketer realizes that catalog marketing is now a niche channel, tailored to the 55+ exurban/rural customer who prefers to order via the telephone but will shop on the internet.

This gives the modern catalog marketer the freedom and flexibility to merchandise the catalog in any way that benefits the customer.

If the customer is truly the 55+ exurban/rural customer who prefers to order via the telephone, you merchandise the catalog in a traditional manner. You know that the first twenty pages are critical, you have to have "order starters" in the front of the catalog. You know that you don't bury your best sellers on pages 72-73. You execute the craft you love.

If your customer is the vaunted "multichannel customer", you have a whole different set of challenges. In these cases, 70% of the customers who will purchase because a catalog was mailed to the customer purchase online. This means that catalog marketing is a "two-step" process.

And this two-step process creates problems. For the merchant or inventory manager, it looks like an item must be advertised in the catalog in order for it to sell online. But when looking at the customer, as we did at Nordstrom back in the day, we saw that as much as 40% of the merchandise that sold online (because of a catalog mailing) were items not featured in the catalog. It was hard to see from a merchandising standpoint, because the 40% of demand spread out over hundreds or thousands of items. For instance, we knew that we sold just as much Mens merchandise (incrementally, measured via mail-holdout tests) whether we advertised Mens in the catalog or not. So it looked like the catalog didn't drive anything to non-catalog-featured items. But it did, when viewed at a customer level!

If your catalog is merchandised to the vaunted multichannel customer, then you know that traditional square inch analyses are largely meaningless. You merchandise the catalog not based on the best selling items, but rather, the items that drive the customer to the website.

Ultimately, the catalog is measured on the basis of the profit it generates. But just as important, you measure the percentage of customers who receive a catalog and VISIT the website. This percentage is often a big one --- you'll often observe that 35% of customers who receive a catalog VISIT the website within three weeks of receiving the catalog. Does that make the catalog a failure? No, quite the opposite. The catalog can be a success ... the website may be the weak link, failing to convert the customer. When do we talk about that?

So if your customer is a multichannel customer, you merchandise the catalog in an entirely different way, seeking to identify items that create interest, items that drive the customer to the website.

The modern catalog marketer thoroughly understands the role of the catalog --- niche channel to a niche audience vs. website/store driver. The merchandising strategies are entirely different, based on the customer you're talking to. We're better off talking to separate customers than mass-advertising to all customers.

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