November 13, 2011

Dear Catalog CEOs: Growth

Dear Catalog CEOs:


We all crave it.  

I used to work for a CEO who frequented the "GROW OR DIE" phrase, at elevated decibel levels, in meetings.

I once worked in a division that was growing, but was unprofitable.  I authored a plan that reduced sales by 4%, but generated considerable profit.  This wasn't a popular plan, of course, but when the year ended and we generated record profit, it became a very popular plan, until, of course, the plan for the next year didn't feature growth.

We lust for growth.

We'd rather generate $10,000,000 at break-even than generate an additional $1,000,000 in profit without increasing annual net sales.  Even though profit pays the bills, growth pays for our ego.

We're competitive.  We believe that if we generate an additional $10,000,000 in sales, that we hurt a competitor in the process.

Here's a little secret that you probably already know ... it is really, really hard to grow.  Especially when you run a business with a heritage in a channel (catalog) that is now in decline.

Oh, I know, the paper industry and the vendor community and the pundit community will tell you that catalogs are an essential component of the "mix" ... they have to tell you that, or they are out of business.  You're smart, you know the reality of the situation.  Your team produced demographic reports indicating that your catalog-attributed customer file is getting really, really old.

Businesses that grow have a customer base that holds a constant age, over time.  These businesses market to a demographic profile, not to a cohort.

Catalogers, by and large, market to a cohort.  In the 1980s, catalogers exploded on to the scene, in large part because the Baby Boomer generation began to enter prime earning years.  

In the 1990s, catalogers achieved pop culture success (see Seinfeld episodes about the J. Peterman Catalog), utilizing database marketing techniques to target smaller catalogs to niche audiences.

In the 2000s, technology transformed the customer experience.  Instead of searching the mailbox for products, we searched the internet for products.  Instead of finding out about products via a physical mailbox, we could quickly scan content via an electronic mailbox.  Instead of dialing a phone to chat with a friend about merchandise, we could leverage social media via a smartphone to understand how other people perceived the merchandise we wanted to purchase.

The pundits will say that this "changes everything".  They will tell us we have to expand into all of these channels, and we have to be expert in all channels, if we want to grow.  They'll tell us that the best way to acquire a Facebook Fan is to offer a discount.  They'll tell us that the mobile-savvy customer is standing in our stores with a tablet in her hand, ready to switch from an in-store purchase to an e-commerce purchase at the swipe of a finger (ask yourself, by the way, how many times you've been in a store while a customer holds a tablet device and actively performs a comparison-shopping exercise in front of a sales associate? Yes, I realize this happens, but does it happen 2 times out of 100, or 72 times out of 100 like the punditocracy tells us?).

What follows is only my opinion.

I believe we cause growth to happen by selling merchandise.  We must have something that the customer craves, and we must be absolutely enthusiastic about selling it.

When our products are craved by the customer, and when we are enthusiastic about selling our products, then customers do the work for us (my opinion).  The customer leverages social media and mobile to share passion for our products.  Their passion spreads, "goes viral" as the pundits say, and this causes our business to grow.  We don't create a video with the hopes of it "going viral" ... we create a video that illustrates our passion for what we are doing, that passion becomes infectious, causing customers and prospects to join us in our passion for the merchandise.

In other words, by having merchandise that customers crave, and by being enthusiastic about sharing our message, we enable customers to be excited about our product ... instead of renting names/addresses from a database, we create our own prospect list using tools and techniques that are essentially free.  This low-cost method of customer acquisition fuels our future growth.  Of course, this only works if we have something the customer wants to buy, and if we have a message the customer wants to spread on our behalf.  Without this, newer channels don't work so well, pushing us back into rented names/addresses of 58 year old customers who respond to catalogs for growth.

We spent the past decade trying to grow by marketing to the same cohort we always marketed to, using tactics and channels to grow.  By and large, as an industry, we didn't grow.  Worse, our customer base aged significantly.

In the 2010s, we're going to have to try something different if we, as an industry, want to grow.  Might a zeal for our own merchandise represents a starting point?

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