For Jules Silbert, executive vice president of apparel and home goods cataloger Brylane, marketing and merchandising are inseparable: “Although until recently we’ve been selling only apparel to our database of 20 million households, they’re receptive to other offers as well. Fortunately we’re learning how to mine our database to find people who are likely to buy the new offerings. But we’re going to try not to forget the necessity, with each business, of having the right products and of developing [a] unique merchandising character …. A lot of us marketing people forget that merchandising really is the name of the game”
Fred Young, CEO of networking products and services supplier Black Box Co., also made the point that marketing strategies must extend beyond circulation planning: “We spent 7% of our revenue on marketing dollars …. This year we’ll probably spend close to $70 million or $80 million in just pure direct marketing programs, so it’s a really big deal. But don’t underestimate the value of looking at the data that comes out, and I would strongly urge you … to be careful that you don’t let your circulation planning manager be the ultimate decision-maker without coming back to the P&L managers as to what you are getting out of some of these new marketing programs …. You cannot look at ROIs and marketing programs just using a calculator today. That’s our view, anyway, and we strongly encourage you to be objective about it.”
Acquisition Vs. Retention
In addition, Young encouraged catalogers to reconsider the resources they devote to prospecting compared with retention: “When you [look at your marketing data], do you have a preconceived notion that you must prospect, so you must justify prospecting? By definition, then, you’re tainting the data to move in that direction …. It’s very easy to justify prospecting if that’s really what you’re looking for. It’s much more difficult to be objective about the way the data is coming out …. I think probably the best tool that we’re using is a real jaundiced eye [as to whether] prospecting really pays off, and why is it more important to get more revenue out of new accounts vs. getting more revenue out of your existing accounts. These are due to new services, different types of products, or just getting a deeper mind share with that particular customer. And I think that’s probably the best tool we’ve got going for us, and I think that’s what helps us from really overspending on the marketing side and not getting the returns” When it comes to retention, by the way, Young knows of what he speaks: Black Box boasts a 92% customer retention rate.
Keeping acquisition costs down has grown more difficult during the past few years, said Newport News CEO George Ittner—and not only because of escalating postage costs: “Everybody’s going to the top of their file over and over and over, upping the frequency …. So those customers who are productive catalog customers in the industry at large are getting pounded over and over again, and that’s why the cost of acquisition has risen. It’s not only postal costs; it’s oversaturation in the marketplace. … Where we’re finding some success—and it’s obvious it’s a corollary to mailing to people who buy more and more frequently—[is that] we are being much more effective in identifying people who don’t buy, cutting back circulation to nonproductive elements, even within the 12-month file. So if you were in the habit of hitting your most recent buyers, your zero- to six-month buyers, a dozen times in a season, that’s fine. But there should be a large portion of those zero- to six-month buyers that you’re hitting four times or two times or even once. That’s where the money is, and that’s where the dialing down in the economy has come.”
As important as retention is, Silbert said, “We don’t think that we’ll ever be able to stop prospecting, because we have to start bringing new people in to replace some of those who maybe are leaving prematurely …. But it’s a fine balance. Some of our catalogs are mailed 18 times a year. Another brand is mailed 50 times a year. So between those two extremes you’re obviously working with much different financial dynamics, and you’ve got to be very careful how you play this. But both are profitable. It’s a different customer, and it’s also a different market niche. I would agree with what’s been said here, that retention is becoming more and more important. I think it always should have been.”
“We’re going to have to improve customer retention,” admitted Michael Sherman, president of general merchandise mailer Fingerhut Cos. “We’re going to spend a lot of time reactivating customers who’ve walked away from us. How do you get them to come back? It’s so hard to find new customers. If you have a customer and you lost her, how do you find her again? Maybe you can’t find her because she moved on, but what is it that you did that you can fix? It’s all fixable; it’s a great business. People can return more than 20% [of their orders] and still be a loyal customer; that’s a great business. You can fix it. So how do you fix it and get those customers back [is] very important for us.”
The Hows Behind the Whys
As for how Fingerhut plans to retain customers, Sherman said, “We have been very successful at outbound telemarketing to customers who tell us that they want us to call them. … We find in Hispanic markets our customers tell us, ‘Nobody calls us. So call us, mail us.’ But telemarketing is also expensive.”
Nonetheless, Sherman defined the Hispanic market, which accounts for about 17% of Fingerhut’s sales, as ”a very exciting market for us, and we want to continue to grow it. It’s an underserved market. You know, they’re not on [cooperative database] Abacus; it’s harder to find them. How do you find them? So it’s all about finding them and serving them, and they are very, very loyal. And when we call they say, ‘Thanks for calling,’ as opposed to the calls where they’ll say, ‘Don’t bother me.’”
Newport News has been pursuing Hispanic buyers as well, Ittner said. And it has had success with such retention and loyalty tools as house credit cards. ”Also, in terms of new acquisition methodologies, we’re having luck for the first time with FSIs [free-standing inserts]. We’ve tried them over the years; they’ve failed. We are beginning to see some headway there.”