We'll Match Their Price!!

Price matching works in a world where the potato chips cost $2.39 a bag and somebody down the street has them for $2.29 a bag. You're higher, but it's an issue of being off by 4%.

Last month, my printer died. I called the manufacturer, it's not under warranty, and they won't send a new printer head because it essentially costs the same amount as the printer. So it's time for a new printer.

The printer manufacturer says the printer will cost $212. I visit Costco.com, where the price is $195 (never mind that two weeks later, I found the printer priced at $164 in-store ... #omnichannel!)

The printer manufacturer offers a refurbished model for $188 - they're price matching, heck, they're beating the price. Good! I guess it's good, because it is refurbished. Then a little research suggests that the refurbished model is slightly, and I mean just slightly different. Oh oh.

So I head out to Amazon ... where the slightly different model sells for $117.

#OhBoy.

So I tell the poor guy on the phone about this little issue - he visits Amazon, notices that the unit is $117, and offers to match the price. Of course, he tells me that free ground shipping will take 9 days - which is funny, because I tell him that Amazon will get it here for me in two days for free - at which time he tells me he can get me the item in two days for $40. Ok, I'll go with ground shipping - but only because he's giving me a two year warranty and on Amazon I only get a one year warranty.

Wonderful!

Except that this isn't wonderful.

At all.

I can't tell you how often I'm asked why customers won't "convert" on the web. "Maybe we haven't optimized our site properly?" And all sorts of vendors and consultants and trade journalist will beat the living daylights out of you for not optimizing your site properly. You're stupid - just ask them!

But that's not the issue.

Honest and fair pricing, that's the issue.

The internet, and even more these days with mobile, is pushing pricing into three tiers - but you already know this.

• Tier #1: The lowest possible price with the fastest possible service (Amazon).
• Tier #2: Profit generated from uninformed customers.
• Tier #3: A "branded" experience that the customer is willing to pay a premium for.

That's it - take your pick. The vast majority of customers can't afford anything but the lowest possible price with the fastest possible service (Amazon), and let's be honest, that's a pretty good deal for the customer - not a good deal for the American worker, but that's a topic for another day.

The maker of the printer falls into Tier #2. This printer is #omnichannel - selling on Amazon and generating almost no profit there - selling on their website and over-charging uninformed customers. Of course, this strategy works in the short-term. Once the customer is burned a couple of times, that all changes.

Most of the businesses I work with are trapped in Tier #2.

Tier #3 is our future, mastered by folks like Apple, or Nike, folks who get you to pay more for items - items that you can get similarly but not the same elsewhere.

It's easy to try to be in Tier #1 but almost impossible to win.

It's painful to be in Tier #2. It leads to games like "We'll Match Their Price", which, in reality, means "we'll rip off uninformed customers so we can stay in business".

It's very hard to try to be in Tier #3.

But long-term, it may be the only choice.

Monday Mailbag

As is now our tradition, your questions, real and simulated, are answered every Monday. Email your question to kevinh@minethatdata.com.

Our question comes from Ruth: You are focused on catalogs too much the past two weeks. Why? And honestly, the stuff you are talking about is ten years down the road, we need help now. Why not provide us with free tactics that help us today?

• There are three reasons I'm trying to focus the majority of my audience on what matters.
• First, read this press release from Harte Hanks (click here please). Here's the important quote ... "The decline in revenue was primarily driven by a 13.6% decline in our Retail verticals due to clients making mail format changes."
• Here's the second reason - this article (click here), which outlines that jobs in the print industry have shrunk by one million (yes, one whopping million) in the past seven years. UPDATE - The DMA pulled this article down from their site the morning of 2/10/2014.
• And the third reason - this article (click here) showing that the number of catalogs mailed is down 40% in the past seven years. Yes, 40%.

Sometimes, we need overwhelming evidence before we bother to think about what is happening. What is happening is that you can mail catalogs - you'll be able to do so for decades at ever decreasing levels of circulation. More important, what is happening is that the catalog business model is ending. These are two very, very different concepts, concepts that folks have a very difficult time grasping simultaneously.

Now, I get it. There are a ton of folks out there, about 55 years old. They made it to the Executive level, and they enjoying pulling down $200,000 or $300,000 per year. They're thinking about how to get to age 62, not how to protect a business long-term. If you are in that camp, then yes, by all means, milk your quarterly results for all they are worth, you aren't an audience that thinks strategically, you aren't thinking about protecting the future for the employees you supervise. Go enjoy a healthy dose of omnichannel strategy.

There's another large faction of readership - the vendor community, consultants, and trade journalist. These folks have good intentions, no doubt. But their loyalties lie with their bottom line, not with your bottom line. Pretend you are Harte Hanks - your print-focused business plummeted by more than 13% last quarter. You look at the numbers, you know that the core of your business (print support) is dying. Strategically, you're going to attack your clients on two fronts. First, you're going to convince your clients that "print is in the mix". You'll convince your clients that catalogs are a vibrant part of an "omnichannel" strategy. You say this, of course, to keep the dollars flowing today, so that you can stay in business. Second, and more importantly, behind the scenes, you're looking for a path to the future. You are using client revenue today to fund your quest to find a path to the future. That path to the future, folks, does not include print. Go ask the co-ops who are linking social/mobile data to catalog purchases, go ask your printer who invests in iPad apps that enable catalog shopping at the swipe of a finger. These are not print-based solutions. Your vendor partners are investing the money you give them today (money earned from print-centric solutions) for future solutions that are not print-centric.

This brings me to you.

You care.

You can see the writing on the wall.

You don't believe in omnichannel nonsense (for if omnichannel worked, omnichannel businesses would be growing by 5% or 10% a year, across the board - and print-based businesses would have crushed Amazon, driving Amazon into bankruptcy). You realize that social is 0.8% of your sales total, and it isn't your fault that the percentage isn't higher. You realize that mobile is the future, that mobile will eat e-commerce, and that your customer is likely too old to embrace mobile. You realize the dilly of a pickle your business is in.

You are the person I am writing for. You might be 26 years old, you might be 62 years old, it doesn't matter.

You get it.

I'm asking you to put your business on a long-term path to success.

I'm asking you to focus on the future.

The future is proprietary merchandise that customers love, sold at a fair price with amazing customer service and a compelling story, yielding healthy gross margins that enable enough profit to pay employees well and allow the business to invest in the future.

Notice what I just said. Notice that channels are not part of that. Our focus on channels takes us away from focusing on the paragraph above. I speak with marketers who can't even identify the best selling items. Come on!!

It's going to get harder and harder to listen to your vendor partners. They have to promote an omnichannel message that includes print, because it guarantees their short-term success. You will slowly remove contacts from your strategy, you will slowly cut circulation depth, and you will slowly reduce page counts. All of this goes against the messages you will hear from your vendor partners.

I'm on your side. I'm "pro you".

If I wasn't on your side, I wouldn't sell the very methodology that allows me to make a living for just $29 (click here - Hillstrom's Contact Strategy). I'm literally giving away my way of making a living. Do your vendor partners do that?

If I wasn't on your side, I wouldn't sell the very methodology that allows me to identify why a business is struggling (click here - Hillstrom's Merchandise Forensics). Do your vendors give away all their secrets for $11.95, or do they keep finding ways to force you to mail expensive catalogs?

This is the end of my two-week catalog rant. I hope you give some thought to the future of your business. The catalog business model is coming to an end, even though you'll be able to mail catalogs (at ever-decreasing levels of circulation) for another one or two decades. The sooner we accept our reality, the sooner we get down to the basics of building a sustainable, healthy business for the long term.

Linking The Past To The Future - Catalogs

When is the last time you said to yourself, "geez, I wish I could just link my cell phone to my home phone, so all my calls could come through my land line?".

The past decade has been all about technology. Technology is pulling us in one direction.

History, however, tries to pull us back to the past. There are so many folks who have a vested interest in protecting history. Jobs count on preserving history. In this case, Panasonic has a vested interest in protecting history. Panasonic must find a way to link a 1994-style phone and answering machine to a 2014 smart phone. So they devise a solution to route your smart phone through old-school technology.

We can look at an example like this land line phone, and easily understand that it is not likely to succeed, long-term. Our unbiased perspective allows us to see the future.

But when we look at catalogs, our perspective changes. Now we're biased, and this bias causes us to see things differently.

In catalog marketing, we do the same thing that Panasonic does with a land-line phone. The exact same thing.

I'm sure Panasonic sees that sales of their answering machines are on the decline, just like catalogers know that catalogs mailed are down 40% since 2007 (click here). Panasonic responds by linking the past to the future. Catalogers respond by linking catalogs to the future - calling it "omnichannel".

There are two major trends in catalog marketing:

• Trend #1 = The catalog business model is ending.
• Trend #2 = The catalog as an advertising vehicle within an omnichannel framework.

Too few people understand the distinction, causing a whole bunch of pointless static about how catalogs are either dead or vibrant.

Trend #1: The catalog business model is ending.

• In the catalog business model, paper came first. You assorted your catalog, then, you put the merchandise online when the catalog dropped. You integrated prices, promotions, and creative. You rented your own list out to others, you rented names from your closest competitors. You paid co-ops for an endless supply of just-below-average prospects. You spent 30% of your annual net sales on printing/paper/postage. Everything in the company was organized to support the catalog.
• This business model is ending.
• The productivity (getting worse), gross margins (discounts & promotions erode margin), and costs (USPS) dictate that circulation will shrink in perpetuity - it's already down 40% over the past seven years!
• Because catalogers focused on "core customers", the merchandise assortment did not evolve. Today, the merchandise offered in catalogs is preferred by "older" customers.
• Because the merchandise appeals to "older" customers, when co-ops execute their models, they find "older" customers who like merchandise preferred by "older" customers.
• As a result, catalogers continually acquire new customers who are "older".
• Because younger customers are not part of this loop, younger customers do not have a preference for catalogs, and will not have a preference for catalogs. Worse, when mailed a catalog, they do not respond, driving down catalog productivity.
• Everybody, and I mean EVERYBODY associated with catalogs (including the vendor community) knows this is happening. Nobody will talk about it, because the consequences are frightening.

Trend #2: The catalog as an advertising vehicle within an omnichannel framework.

• If you are a vendor, and your livelihood is based on the heritage of catalog marketing, and you know that the catalog business model is ending, then you are frightened.
• If you are frightened, and do not have a path to the future (see Panasonic above), you must connect the past to today in order to stay relevant.
• The way you connect the past to today is called "omnichannel".
• In retail, omnichannel theory suggests you align all stores around digital strategies, offering customers what they want, where they want it.
• In catalog, omnichannel theory suggests that catalogs (not the catalog business model, but the mailing of a catalog as a piece of advertising) are an integral part of a suite of advertising tools (catalog, email, search, affiliates, banners, retargeting, cart abandonment, mobile, Facebook, Twitter, Instagram, Pinterest, Vine, countless others) that, when evaluated as a sum total, cause customers to buy stuff.
• By promoting the theory that catalogs are part of this mix, vendors are betting that their customers (not real customers, but actual catalogers) will continue to put catalogs in the mail.
• By continuing to put catalogs in the mail, vendors assure their short-term viability, while searching for a path to the future (this is like Panasonic creating a land-line phone that connects to a mobile device, buying Panasonic time to iterate to the future).
• As a result, vendors and consultants and trade journalists, all dependent upon you (the cataloger) for their short-term financial success, find a way (omnichannel) to keep you mailing catalogs, so they can continue to stay in business.
• Omichannel is not real. It is an astroturfed concept used by vendors, consultants, and trade journalists, to keep you executing historical channels in an effort to keep vendors, consultants, and trade journalists financially viable.
• Customers using multiple channels to shop - that's real, and not fundamentally different than ten years ago, when customers used multiple channels to shop but we couldn't track it or measure it easily.

Almost everything you read about catalog marketing is a theory that enables the publisher of content to do what Panasonic is doing above - trying to keep you with one foot in the past, so that the vendor / consultant / trade journalist can stay in business today.

All of the noise is around issue #2.

All of our time should be spent focusing on issue #1.

Ask a former employee of Mokrynski or Millard about issue #1.

We will continue to circulate less and less - fewer contacts, fewer pages per contact. We will engineer the catalog down to a postcard over the next decade - economics and customer productivity dictate this to be the case. That will be the 30,000 foot level trend. At the 30 foot level, there will always be a subset of customers who love catalogs - this subset will cause vendors / consultants / trade journalists to use this subset as a case to market to the whole.

Issue #1 should cause us to ask ourselves a series of questions.

• As productivity declines and costs increase, circulation will decrease. How will we maintain sales increases in an environment when the primary marketing vehicle is slowly being eliminated?
• Is the most important element of our brand the merchandise we sell, the service we offer, the price the merchandise is sold at, or the catalog? If the answer is "the catalog", what does it mean to our "brand" when the catalog is de-emphasized over time?
• Who are the business partners who are willing to give us an unbiased and fair evaluation of our business, even if it means that the business partner eventually loses money because of it?
• How do we staff our business if as many as 25% or 30% of our employees are dedicated to producing paper-based content that will not exist in the future at the same rate as today?
• How do we tell our "customer of the future" that we have something new to offer?
• When the current customer (age 55 - 64) retires and stops buying from our business, can we count on a younger customer (currently age 45 - 54) to buy what we sell? In other words, will younger customers move into our product assortment, or are we following a customer cohort into retirement?
• In the future, proprietary merchandise, service, price, and story are going to be critically important, independent of a catalog. How are we going to integrate these key concepts independent of a catalog?

Most assuredly, the answer to our questions is to not replicate what Panasonic did with their land-based phone.

Most likely, vendors / consultants / trade journalists will encourage us to do what Panasonic did.

But My Campaigns Work!!

More than a hundred projects help one achieve clarity.

My projects make one thing really, really clear ... we don't know how to measure campaign performance.

I recently analyzed the purchase trends across dozens of businesses since the year 2000. The analysis showed that customer buying habits have not fundamentally changed in fifteen years.

In other words, the number of campaigns have increased so dramatically (#omnichannel) that we can barely keep track of them. Opportunities to purchase have never been greater. Discounts and promotions are everywhere, at rates nearly inconceivable fifteen years ago.

And yet, customers are still buying at the same rates they purchased at in 2000.

This tells us that we're measuring everything incorrectly.

When you perform frequency testing, measurement errors become highly obvious. Take a look at this table.

Look at what happens to the productivity of email campaigns, as we go from one mailing a week to five mailings per week - and then, when we tack discounts/promotions on top of email campaigns.

What do you observe?

First, the productivity of an individual campaign drops like a rock as you add more campaigns. In-campaign performance drops from $0.20 per customer to $0.14 to $0.11 to $0.09 to $0.08 per campaign, as you go from one to five campaigns per week. In other words, your campaigns are competing against each other ... you're not competing against the competition, you're competing against yourself!!

Look at the "all other demand" line ... the more email campaigns you send, the more demand you cannibalize from other sources (direct load, in most cases).

So, yes, demand increases, and profit even increases ... until you get to the point where you panic and toss in 20% off plus free shipping. That's the last column in the table. Productivity goes back up, but profit falls apart.

In other words, you could send one campaign a week, or you could send five a week each with 20% off plus free shipping, and get the same amount of profit.

This, by the way, is a kind evaluation ... most often, the discounts and promotions happen on the website as well, driving profitability south.

I know, I know, you have email reporting that tells you that everything you are doing is "right", that it "works".

Please try contact frequency testing. It will show you that you're measuring your campaign effectiveness incorrectly.

Hillstrom's Contact Strategy.

• $29 via Print on Amazon.
• $10 via Kindle on Amazon.

Gliebers Dresses - The ESP

Gliebers Dresses is a fictional story about the Executive Team at a New Hampshire based catalog brand. The team struggles to deal with modern business dynamics. If reading a fictional story about email marketing (in this case) is not your thing, then move along, we'll see you tomorrow when I talk about Hillstrom's Contact Strategy - now available on Amazon for $29 (click here). Notice how I got a sales pitch in there?


Setting: The Executive Team gathers for their weekly Executive Meeting.


Glenn Glieber (Chief Executive Officer, Owner): Welcome, everybody! There's nothing more exciting than New Hampshire in February. Who's attending the Great Rotary Ice Fishing Derby? And how about that Super Bowl on Sunday? What a blowout!

Lois Gladstone (Chief Financial Officer): I haven't seen a beating like that since our Holiday catalog missed plan by 30%.

Pepper Morgan Pressley (Chief Marketing Officer): Zing.

Meredith Thompson (Chief Merchandising Officer): The sleeveless ruched sheath sold really well. A portion of the assortment was truly trend right. I am optimistic.

Roger Morgan (Chief Operating Officer): Well, I'm not optimistic.

Pepper Morgan Pressley: Here it comes.

Roger Morgan: In my right hand, I am holding a $795 report from Woodside Research.

Lois Gladstone: We have to sell 28 dresses to cover the cost of the report, Roger.

Roger Morgan: Huh? Anyway, this report, chocked full of best practices and stunning tips, suggests that email marketing is the bridge that connects the baby boomer customer to the mobile savvy shopper we all crave to engage with.

Pepper Morgan Pressley: Careful.

Roger Morgan: I was so impressed with this report that I decided to put the CEO of EngageRight, the esteemed Chet Benson, on the phone.

Pepper Morgan Pressley: EngageRight?

Roger Morgan: The email vendor.

Lois Gladstone: Somebody is listening to our conversation on the phone?

Meredith Thompson: Besides the NSA?

Chet Benson (CEO, EngageRight): Greetings everybody!

Pepper Morgan Pressley: Roger, I am responsible for email marketing. Allow me to introduce myself to those on the phone. I am Pepper Morgan Pressley, the Chief Marketing Officer at Gliebers Dresses.

Roger Morgan: Of course you are. Email marketing is the bridge that connects young and old. I think if our communications were more relevant, we could better engage our customers, gaining mindshare.

Pepper Morgan Pressley: Our communications are relevant.

Roger Morgan: Last week, you featured a sweater dress in the email campaign.

Meredith Thompson: Hey, sweater dresses are making a comeback!

Pepper Morgan Pressley: Roger, last November, you told us that email marketing was dead.

Meredith Thompson: You told us that Woodside Research recommended we switch to all-text communications. All SMS, all the time. Remember?

Pepper Morgan Pressley: In October, you told us to shut down the website and embrace Facebook commerce. You said that Woodside Research identified Facebook commerce as a $14.4 billion dollar opportunity.

Roger Morgan: Trillion. $14.4 trillion dollar opportunity.

Pepper Morgan Pressley: It's a $14 opportunity.

Lois Gladstone: In September, you told us that we needed a community manager, somebody who could relate to the kids and their modern shopping habits. You said that Woodside Research thought, wait, I have the quote here (shuffling papers), they thought that "... in today's highly competitive marketplace, brands that do not embrace community marketing are likely to experience reduced consumer mindshare, and there's nothing worse in a crowded marketplace than reduced consumer mindshare."

Roger Morgan: I'm flattered!

Chet Benson: If I may, I'd like to ...

Lois Gladstone: Roger, is email marketing dead, or is it so relevant that we have no choice but to embrace it?

Roger Morgan: I think it depends upon the Woodside Research report the user purchases.

Pepper Morgan Pressley: You purchase all of them!

Roger Morgan: Woodside Research encourages Executives to broaden their ability to become thought leaders.

Pepper Morgan Pressley: Here's a thought. I'm the leader responsible for email marketing. Me. Pepper Morgan Pressley. The Executive in charge of Marketing.

Meredith Thompson: But without my merchandise, you have nothing to send to the customer. I deserve to have a say in how we execute email marketing.

Lois Gladstone: If we believe you, Meredith, then I control the money and by default, all email marketing. We cannot send email campaigns without paying an ESP.

Meredith Thompson: ESP?

Lois Gladstone: Email Service Provider.

Pepper Morgan Pressley: They work with the ISPs to get the message into the inbox.

Roger Morgan: Can we get back on topic ASAP? I brought Chet in to see if the services he offers can make our email communications more relevant.

Chet Benson: I'd like to begin by ...

Meredith Thompson: I have three merchants that run their own email marketing programs.

Pepper Morgan Pressley: What?

Meredith Thompson: They believe we do such a bad job that they each have their own marketing list. They send their own campaigns.

Pepper Morgan Pressley: Wait ... what?

Meredith Thompson: They just cut and past images from the website for the merchandise they want to feature. They use Outlook, batching and blasting their way to their customers.

Pepper Morgan Pressley: Their customers?

Meredith Thompson: It's their merchandise.

Pepper Morgan Pressley: Does anybody else find this insane?

Lois Gladstone: This whole discussion is insane. We've identified at least four people who think they own email marketing, and I pay the bills. I propose that we restructure, placing email marketing under my purview.

Chet Benson: Our software solution allows multiple stakeholders to ...

Pepper Morgan Pressley: I'd like to put a stake through the heart of this issue. I own email marketing. Me. Pepper Morgan Pressley. I think it might be illegal to create email marketing programs without the consent of the customer.

Meredith Thompson: My subscribers can opt-out at any time. Several have. They send me postcards in the mail.

Pepper Morgan Pressley: Do they opt-out of your programs or my program?

Meredith Thompson: I never really thought about it. I suppose they're opting out of your program.

Pepper Morgan Pressley: Do you see what you started, Roger?

Roger Morgan: Woodside Research started this.

Meredith Thompson: I don't know what you are all so fired up about? If my team sends their own email campaigns to a couple hundred customers, and my customers spread the word that we're bringing back the sweater dress, it ends up being like a whole lot of free marketing for Gliebers Dresses.

Glenn Glieber: I love free marketing!

Chet Benson: Pepper may be right, you have to coordinate all campaigns in an omni-channel environment, or you ...

Pepper Morgan Pressley: I was with you, Chet, until you said the word "omni-channel".

Roger Morgan: I think Chet gets to the heart of the issue, folks. Omni-channel executives have matrixed responsibilities. I say that we give Meredith, Lois and I an opportunity to re-invent the email marketing platform at Gliebers Dresses.

Pepper Morgan Pressley: Gene, help me.

Dr. Gene Feldman (Executive Vice President of Global Brand Direction): In my days at Taco Bell, we had enterprising employees. Some varied the meat-to-spice ratio in our tacos, others managed the percentage of yellow die in the nacho cheese, and a few started their own food truck businesses. One woman, who will remain nameless, thought she was, and I quote, "growing the brand" by selling our product via a food truck to rural communities in the Upper Peninsula of Michigan. She bragged about how she put a dent in "the pasty business" up there. But ultimately, Taco Bell had to shut down her food truck. We had to have one voice. We had to have consistency. We had to offer the same experience, regardless.

Glenn Glieber: Feldman, what the heck are you talking about?

Roger Morgan: I think he's advocating an omni-channel approach.

Chet Benson: Are you going to accept my RFP and switch to my platform?

Pepper, Lois, and Meredith, at the same time: No!

Chet Benson: Then thank you for your time. Good luck. You're going to need it.

Meredith Thompson: He doesn't get it, does he?

Pepper Morgan Pressley: Roger? No, he doesn't get it. At all.

Meredith Thompson: The dude on the phone. He doesn't get it.

Lois Gladstone: In an omni-channel business model, all stakeholders get to have a say. Roger taught us that.

Meredith Thompson: We iterate, and we iterate, and eventually, we land on a solution.

Dr. Gene Feldman: And the solution is?

Meredith Thompson: We're going to stay the course, that's the solution.

Pepper Morgan Pressley: That's not a solution. I own email. I'm in charge of marketing.

Lois Gladstone: In an omni-channel world, we all own marketing.

Pepper Morgan Pressley: Roger, this is your fault.

Roger Morgan: No, Pepper, Woodside Research united us. They unite everybody around their message.

Glenn Glieber: Pepper, won't you join us in our journey?

Lois Gladstone: An omni-channel journey.

Roger Morgan: Fueled by email.

Meredith Thompson: A marketing tool that we all share.

Pepper Morgan Pressley: Good gravy.

A Discussion About The Future Of Catalog Marketing - Don Libey

Don Libey, whom numerous readers have a relationship with, attempted to leave a comment about yesterday's mailbag (click here), an article that ties in to this article about change (click here). 

As many of you know, I now require a login for comments, as a response to hourly comment spam. But instead of publishing Mr. Libey's essay as a comment, I asked permission to publish the essay as an independent blog post. His thoughts are unedited, below, for your consideration.

If you have a unique perspective (pro or con) regarding the future of catalog marketing, I will be happy to consider publishing your point of view this week, as a way to stimulate a conversation about the future. Email me your thoughts (kevinh@minethatdata.com). With nearly 3,000 blog subscribers and more than 5,000 Twitter followers, your thoughts will reach a receptive and open-minded audience. I rarely grant opportunities for published thoughts from others, so please take advantage of the opportunity in front of you.

Mr. Libey's thoughts:

Kevin

As a very long time observer and operator of catalogs, I have an almost 45 year perspective I would offer in addition to your observations which are flawless, brilliant and absolutely correct:

The Catalog Age is over: 1) It will become increasingly irrelevant as a medium of commerce due to individual preference; 2) it has become too expensive relative to the utility of response; 3) it has been technologically replaced by online and other alternatives; 4) it has a core of practitioners who mastered its techniques, but who abdicated the direct marketing mastery to massive co-ops, inexperienced managers, and techno-mavens chasing shiny buttons and New Things instead of customer and merchandise mavens focused on what really matters; 5) if you think about it, why would we ever buy paper, print on paper, affix costly postage, send it through an archaic, ever-costly system called "mail" and expect to survive when 95% of what we do is thrown away and most people no longer care about mail?

What we can expect as a replacement of our former high-growth, high-profit catalog universe is a slow-growth, lower-profit, bland amalgam of this mythical and totally nonsensical "multi-channel/omni-channel" world being sold by "Black Box Data Vendors" that depends entirely on price driven by the buyers and the competitive medium itself (Amazon).

When the catalog entity, as we knew it, morphed in the late 1990s, it eliminated the one thing that was responsible for the tremendous success enjoyed from 1970-1998: Margin. We had it, and it is now gone. When margin disappears due to price discounting and commoditization, what is left is a dry husk. There is no business (and no medium) without margin.

But, the overwhelming change was self-imposed. The catalog as an advertising medium was never wholly supported by the catalog companies who benefitted from its early successes. The owners were unable to ever come together and protect it from the margin erosion that steadily invaded from other media. As one of the founders of the American Catalog Mailer's Association, I was always amazed by the unwillingness of a successful and profitable catalog owner to pony up a few dollars to help maintain the margin and the marketing dominance of their chosen marketing approach. Sensing change in the wind, the successful catalog owners sold their businesses to much larger corporations who had no catalog experience or appreciation and were simply buying market share; it was a pure short-term financial transaction with a few dollars to be made. The "small close-knit industry" we had known was suddenly comprised of Big Corporations and the agenda shifted almost overnight (Sears and Lands' End, as an example; Target, Grainger, Home Depot Supply and Amazon, as others).

So, the transfer of profits and assets has taken place, the catalog has eroded over time, and much of the demise is due to Big Corporate greed, apathy, a lack of common support, and the inevitable progress of change and preference. The catalog industry has been "milked" and there is little cream left to squeeze out.

I've owned or run probably 15 catalog companies in my time, small and big, domestic and international. I've been a trusted advisor or director to literally hundreds of catalogs.  All of this was self-evident and talked about as far back as 1992, but nobody seems to have cared. The secret still is actually very simple:

Good products, preferably proprietary, sold at good margin, and backed by extraordinary customer service. Forget about the medium (channel) and focus on the products, the customer experience and the numbers. Result: Profit and relevance.

Best wishes

Don Libey

Managing Director

Libey LLC

Advisors and Intermediaries to the Catalog Industry since 1970

Monday Mailbag

Email me your questions (kevinh@minethatdata.com).

We have one question this week - it comes from Alan:  "What is going on with catalogs, Kevin? The information is all over the board. Lois Brayfield says catalogs work (click here). You have a very different point of view. Who is right?"

• Alan, in 2014, everybody is right. Everybody. Lois is most certainly right. So am I.
• On the one hand, if you are aligned with an organization like "Catalog University" (click here), you have no choice but to support a thesis that advocates a healthy catalog industry. Be honest - how could the good folks who support that organization do anything but recommend that catalog marketing is alive and well? And if you ask the folks at Catalog University, they'll produce dozens of case studies of success - and they are right. They are right.
• On the other hand, you have two facts that cannot be denied. First, the mailing industry has lost 1,000,000 jobs in seven years. This cannot be the fault of the economy - e-commerce grew 10% per year (or more) in each year of that time frame. The second fact is that the raw number of catalogs mailed is down 40% from seven years ago. 40%! The decision to cut that much circulation out of the mail stream was not done carelessly, it was done because all that paper was highly unprofitable.

Take a Chasing Fireflies - born nine years ago, sold to HSN for tens of millions of dollars. That business was built by catalogs, plain and simple. Catalogs work.

I consult with numerous catalog businesses that cater to Judy (61 year old customer). Many of these businesses are healthy. Catalogs work, when targeted to Judy.

And yet, the 30,000 foot trend is undeniable, and cannot be avoided. At a 30,000 foot level, we all know where catalog marketing will eventually land.

For whatever the reason, we are unable to hold two inconsistent factors in our head at the same time? Why is that? In 2014, there are businesses that use catalogs in a highly successful manner. And in 2014, we can see that customers age 45 or younger are never going to embrace catalogs - why would they, when they rent every piece of information ever created, on a mobile device, for $80 a month? I don't need a catalog when I can visit Forever 21 on my phone at any time, at any place.

In 2014, catalogs are highly successful marketing tools for customers age 55+. And in 2014, it is obvious that the long-term future of catalogs couldn't be bleaker.

We can hold two opposite thoughts in our head at the same time. This isn't an either/or proposition.

We should also consider the three problems that are creating great pain in catalog marketing.

1. Amazon.
2. Retail Discounting.
3. Demographics.

Thoughts?