Note 4/4/2009: This is an April Fools Day Story.I'm so excited to share with you a recent interview I conducted with marketing expert and famous author Seth Godin!
Mr. Godin was kind enough to make a trip to the Global Headquarters of MineThatData and graciously share his thoughts on the changes occurring in what we affectionately call the Multichannel Marketing (aka Catalog) industry.
So today, April 1, 2009 (ahem), I share "the interview" with you!
Kevin: Mr. Godin, thank you so much for making the trip to the MineThatData Global Headquarters.
Seth: Nice to be here, Kevin. I'm a big fan of the work you're doing with Multichannel Forensics. Are these heated leather floors we're standing on?
Kevin: Laminate.
Seth: Oh.
Kevin: Have you ever shopped from a catalog?
Seth: Absolutely. I've always enjoyed the Garrett Wade catalog. The best catalogs are the ones that made it through "The Dip". If you want a German-Made Sodbuster Knife, you know that the Garrett Wade catalog will have it. They understand who their target audience is, and their relevant and timely e-mail messages inform me of needs I didn't even know I had.
Kevin: What do you think of the catalog industry, not the catalog industry of 1989, but the catalog industry of 2009?
Seth: Like many industries, the catalog industry is being transformed by the internet. This is good for customers. Customers have more choice than ever before, and customers have access to the best prices.
Kevin: But this isn't always good for catalogers. The productivity of catalogs, especially those sent to customer acquisition segments, is declining, rapidly.
Seth: I always say that "the new thing is never as good as the old thing". Catalog brands had a spectacular run alongside the baby boomers, and had huge advantages over retailers. The catalog brand "knew" who their customer was, sending timely, targeted, and relevant messages to enthusiastic customers. Catalogers, in many ways, invented Permission Marketing. But the old thing (catalogs) are going away, and what we're replacing catalogs with (e-mail, websites, blogs, social networks, search, tribes) simply aren't as good yet at creating demand.
Kevin: Why do you think that the old thing, the catalog, is going away?
Seth: Catalogs used to be the best vehicle to provide targeted, relevant, personal messages. As a result, the catalog industry built huge systems. An entire list industry grew to support catalogers. Printers, paper reps, the USPS, merge/purge houses, they all evolved to support the delivery of the most targeted, relevant, and personal messages that ever existed. And that worked well, for a period of time. But the system didn't deserve to last forever. The cost structure associated with this huge system is unsustainable. The system is being replaced by three separate but powerful dynamics.
Kevin: And those dynamics are?
Seth: First, a customer can receive a personalized message via e-mail or RSS that costs the cataloger nothing to send. Each catalog costs, what, $0.75 to deliver to a customer, with a whole bunch of intermediaries taking their $0.10 of the pie? The economics are no longer sustainable when a competitor can send a personalized, relevant e-mail campaign that the customer opted-in to receive. The customer has some control over e-mail delivery, and has complete control over content via RSS. Look at your business, Kevin. You have almost 2,000 subscribers, and you spend absolutely nothing acquiring subscribers, do you? And yet, those 2,000 subscribers pay your mortgage for you.
Kevin: But e-mail marketing might generate only $0.15 per e-mail delivered, while a catalog might generate $3.00 or $4.00 per catalog. So the new style of marketing isn't "working", if you will.
Seth: The new thing is never as good as the old thing.
Kevin: What else?
Seth: Second, the customer is now in charge. In 1989, the customer shopped from distance only when she received a catalog. In 2009, the customer determines when and how she wants to shop. The catalog marketer must make the transformation from pushing merchandise at the customer to allowing the customer to pull information when she has a need. This is maybe the hardest thing for a cataloger to do --- to transform from pushing messages to facilitating the pull of information.
Kevin: It's especially hard when the cataloger is going through a customer acquisition death spiral.
Seth: And that brings me to my third point. The cataloger always controlled the start of a relationship, by renting lists from and exchanging lists with competitors. That strategy worked in 1989. But in 2009, the customer demands control over the relationship, and she's not going to tolerate receiving a catalog in her mailbox that she didn't ask to receive. The future demands that the cataloger be a "leader of a tribe", if you will.
Kevin: Describe what you mean by being a "leader of a tribe"?
Seth: Instead of renting names and addresses, the cataloger will transition to the role of a tribal leader. The Garrett Wade marketing role will evolve, speaking to an individual who lives a lifestyle that demands a Japanese Pattern Crosscutting Timbersaw. Garrett Wade identifies a group of individuals who have common interests, providing the tools needed for tribe members to achieve their potential. The tribe partners in the marketing role with Garrett Wade, they invite individuals to join, individuals who share common interests.
Kevin: But that sounds like a lot of work.
Seth: It is a lot of work!
Kevin: So here's the problem. The catalog brand has numbers that they need to hit, now, in order to keep people employed. What you're talking about sounds futuristic, esoteric, theoretical, almost unachievable.
Seth: I always say that "The best time to change your business model is while you still have momentum". Catalogers still have momentum. And it isn't easy to give up the idea of sending catalogs to a mass audience that doesn't have choice. Get over it! While you think about a different business model, folks like Zappos successfully apply a different business model. It might be the only option if the catalog industry wants to stay in business, long-term.
Kevin: Our time is almost up. Do you have anything else you wish to share with the catalog industry?
Seth: I'd tell the catalog industry to make things happen. Take initiative! You practiced permission marketing before permission marketing was popular. You have a virtually endless number of channels to practice permission marketing in today, and you have loyal customers who are waiting for you to lead them into the future. So lead them there!
Kevin: Mr. Godin, thank you so much for taking the time to speak with the MineThatData "tribe".
Seth: My pleasure, Kevin!
>> But e-mail marketing might generate only $0.15 per e-mail delivered, while a catalog might generate $3.00 or $4.00 per catalog. So the new style of marketing isn't "working", if you will.
ReplyDelete>> Kevin: But that sounds like a lot of work.
Kevin,
a couple of weeks back you asked the MTD 'Nation' why we hadn't come up with alternatives to the death spiral, why we appeared paralyzed. Well I think the two quotes above sum up the cause of the paralysis for me.
The good old days are over and moving to a multichannel future will be a lot of extra work for a lot less return per customer.
I look at the Zappos or Zazzle website and wonder "How on earth do we change our business model to something like this?" Maybe we could start by renaming our business to something that starts with a 'Z'? We've been thinking about a website forum for nearly 2 years and still shudder at the thought of resourcing the moderators. We do an admirable job of publishing several titles per year but where do we find the resources to fund people to Twitter or LinkedIn?
"Are these heated leather floors we're standing on?" - that made me chuckle. How about sharing some holographs of Galactic HQ?
Cheers
I will say this ... if the target customer is a 55+ exurban/rural customer, and if customer acquisition activities can be targeted to that audience, then catalog marketing has a bright future.
ReplyDeleteSo in many ways, it depends upon who the target customer is. If the target customer is a 38 year old Mom, well, the word recently became a lot more complicated.
I personally believe that the folks who staff your call center are the perfect folks to tackle moderation and to tackle micro-channels like Twitter. If these folks work eight hours a day, you have them spend a half-hour focusing on these tasks.
Great interview, Kevin.
ReplyDeleteSeth nails it - the customer is in control and you need to figure out how they want to hear about your products. They have numerous channels to choose from and multiple "homes" - physical and virtual.
More and more people that I know first go to their computer to check for their mail when they get home rather than sift through the mail that drops through the slot. More and more people have a home on the internet at google (iGoogle) or Facebook. What if your brand was on my iGoogle page or my Facebook page or even my Desktop? What if you delivered a digital catalog with video and click-through to my electronic mailbox instead of my physical mailbox.
Merchants have gotten over the fear of opt-out requests from our service and are now working with us to provide Contact Preference services and digital merchandising tools. We can help companies put the "Z" in their business without a major transformation.
Looking forward to meeting you in NO @ ACCM.
Chuck
http://catalogchoice.org
The key with the April 1 Day articles is to write them in a way that teaches. I wanted to reflect what Mr. Godin might actually say, while presenting a different viewpoint.
ReplyDelete