July 22, 2012

Dear Catalog CEOs: Four Levels of Catalog Marketing

Dear Catalog CEOs:

You probably already know this, but I get asked all sorts of interesting questions about catalog marketing.  Let's answer one of the common questions.

  • "We're thinking of starting a catalog.  Can I get a quick list of best practices so that we can master this thing when we launch in six months?"
Oh, I know, you're rolling your eyes.  But let's think for a moment about how catalog marketing has four levels.  Each level requires a different discipline, a different set of skills.

Level 1 = Best Customer Mailings:  When marketers think of catalogs, this is what they think about.  You slap together a 64 pager with almost no thought about merchandising or creative.  You just want to "make a statement about the brand".  Well, you'll accomplish that!!  These catalogs are generally sent to twelve-month buyers, they generally cost $0.60 each, and you generally earn $2.00 per book.  When you run a p&l, you're not particularly inspired.  When you analyze the results, you find that "best customers" were "engaged", as they spent $3.00 per book, while everybody else spent $1.00.  This causes the marketer to think about "squeezing more juice out of the lemon", to proudly proclaim the magic of the 80/20 rule (80% of the sales are generated by 20% of the customers).  This level of catalog marketing is what marketers think about.  This level of catalog marketing requires little thought, little analysis, and very little of it is continued as a revolving door of Chief Marketing Officers enter/exit the building.

Level 2 = Housefile Catalogs:  This is a fundamental shift in mindset.  Somebody with an interest in merchandise figured out that in a 64 page catalog there are a whole bunch of "correctable problems".  Somebody realized that spreads with twelve items outperformed spreads with six items.  Somebody realized that 70% of the products, while "brand appropriate", don't stimulate customer response, causing the business to lose a ton of money.  Somebody realized that 80% of the orders in the catalog happen online or in stores, causing a shift in measurement of customer performance.  The focus, of course, is still on mailing catalogs to housefile buyers, but this level of catalog marketing results in a significant improvement in productivity.

Level 3 = Lapsed Customer Catalogs:  The Level 2 marketer figures out how to ramp-up productivity, and that opens up the universe of names to customers who haven't purchased in two, three, four, or five years.  Interestingly, these customers have different preferences.  All of a sudden, you're busy analyzing order starters, figuring out how to get these customers to be inspired in the first twenty pages.  You experiment with 48 pages, or 64 pages, or 80 pages, or 180 pages.  You remail catalogs, you create new catalogs, you test offers on the cover, you spend hours agonizing over what goes on the back cover.  When you're tempting a thirty-six month buyer to purchase, you have to have a discipline that few could match.  In fact, your online marketing team will find your level of discipline completely stifling.  If they find your level of discipline stifling, ask them why they spend so much time analyzing the conversion rates of 50,000 non-branded terms.

Level 4 = New Customer Catalogs:  The most sophisticated catalogers have prospect catalogs.  Any cataloger that tells you that "prospect catalogs don't work" simply hasn't found the solution, and are consequently stuck at Level 3.  The Level 4 catalog marketer figures out that new customer acquisition is the secret to growth ... in fact, the Level 4 catalog marketer is frequently mocked by just about everybody.  You see, the hoi polloi love customer loyalty, but they never actually analyze customer behavior, never understanding that true growth happens when customer acquisition activities are profitably optimized.  The Level 4 cataloger realizes that a 48 page catalog with only best product to new customers outperforms the 80 page monthly catalog on a demand per thousand pages circulated level, allowing the Level 4 cataloger to double new customer acquisition circulation, allowing the Level 4 cataloger to double profit in two years, allowing the Level 4 cataloger to pay huge bonuses to all employees.  This level of catalog marketing requires merchandising and creative analytics that few companies can compete with.  Level 4 catalog marketers pretty much do the opposite of everything that can be learned these days on Twitter.  Level 4 catalog marketers seldom speak at conferences.  Level 4 catalog marketers have seasoned and happy employees, boasting considerable industry experience.  Level 4 catalog marketers could work at Fab.com, but are more interested in posting 10% EBIT in the teeth of a marketing environment that tells them their craft is dead.

Your turn:  What level is your organization at?

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