Three tips for tight times

Jun 01, 2008 9:30 PM  By

You don’t need another article telling you how bad the economy is right now and what that means for your business. We all know that postal and paper prices are up, fuel surcharges are mounting and consumer confidence is the lowest it’s been in 30 years.

What do you need? Solid strategies for weathering tough times. On top of the rising costs of printing and mailing, banks are being more cautious in extending lines of credit — particularly to “fifth-quarter businesses,” those companies that realize a significant portion of their annual sales in the last several weeks of the year.

These major economic pressures are pushing catalogers to the decision to mail less, cut back, and be more conservative. But that might not be best for your business.

The ramifications of cutting quantities, especially when you haven’t projected the future impact of the cuts, can be devastating. If your company is in cut-back mode, put down the shears for just a minute and consider these three strategies.

Strategy 1:
Hone your brand

A tightly defined brand for your multichannel business is essential to your “doing more with less.” More with less means producing similar results with fewer pages, fewer items, and/or lower circulation. But to do more with less, you have to know who your customer is, who you are, and what you stand for in the mind of the consumer or business that you are targeting.

And honing your brand doesn’t mean just a logo refresh, a revised tagline and some new photography. Honing your brand is a process of understanding the customer from his or her demographic, firmographic and psychographic make-up to how and on what he or she spends money. It’s also about knowing your competition — what they own and what they don’t — and where you fit in. Only after your brand is lock-tight should you make significant changes to your business model.

By studying the customer, you’ll come to understand what you provide that no other catalog or multichannel company does — not just in the form of products and price points, but in intangible benefits and experiences. It’s understanding the “why,” not just the “what,” that will enable changes in your marketing strategy and allow you to do more with less.

How will refining your brand position help in tough times? It will make way for two important initiatives: tightening the merchandise assortment in the catalog and enhancing the creative presentation — both of which combine for a more complete and satisfying customer experience.

For instance, many multichannelers are considering alternative printed formats (i.e., slim-jims or smaller trim-size pieces) and/or fewer pages for their upcoming catalog mailings to circumvent rising costs. Hopefully, these companies have considered the impact on sales that such a shift will make.

As a rule, increasing page count results in about 0.5% increase in sales. If the same is true in reverse, for every 2% cut in pages, a 1% decline in sales will come, so dropping from a 64-page book to a 52-page book, for instance, would be expected to produce a loss of 9% to 10% of sales.

Now, assuming you also decrease circulation quantities, the impact will be even more severe. And no, sending out a few more e-mails won’t recoup the lost revenues.

But by honing your brand and understanding the essence of what and why your customers are buying from you, you can apply your merchandise filter to each item in your assortment to understand its place in the mix. Does it bring in the most customers? Is it producing the most profits? Does it stimulate a larger ticket than average? Does it say “you” better than any other item you could select?

Looking at product through the lens of the brand ensures that the items you do choose to feature in the catalog are the absolute best at getting and converting good long-term customers.

What’s more, you can present your creative in a way that gives the customer — your customer — a shopping experience that he or she appreciates. You don’t have to “create relationships” with your customers — some of your customers don’t want a relationship with you. Instead, create a shopping environment that is relevant to your brand and the reasons the customer buys from you.

If your customers are information seekers, tell them about all of the additional information you have online. If your customers are pressed for time and looking for help, give them hints and ideas on which products to buy, and build solution-based navigation into your site and e-mails.

The point is that honing your brand will allow you to ensure that you’re eliminating the right — meaning unproductive — items from your catalog mix and presenting those that you do include in the best possible way to minimize the impact of mailing fewer catalogs with fewer pages, if that’s the way you decide to go.

Strategy 2:
Protect your house

Your house file is your most valuable asset. It’s also among your most perishable assets, meaning that if you don’t mail it, don’t communicate with it, it will dissolve and go away.

As a rule of thumb, about 40% of the average catalog company’s 12-month buyers come back in a given year. But the 40% return rate is a function of communication. You can’t simply mail a single catalog and anticipate a 40% response rate.

You have to communicate with your customers in relevant and timely ways balanced with a need to “cut back” in many cases. Protecting your house means incorporating tactics that will maximize customer retention in the face of cutting back.

  1. SEGMENT TIGHTER

    You have the data to add elements to your existing recency/frequency/monetary segmentation model, so use them. Product level data, purchase channel data, seasonal data, customer mail, gift vs. self-purchase, e-mail promotable, etc. are all variables that will allow you to do more with less. By enhancing RFM or tweaking your models to identify “recession proof” buyers, you ensure that you’re contacting the best customers enough to achieve your target retention rates.

    A quick word on customer mail preference: Many multichannel marketers today maintain customer preferences for their online buyers. These profiles include the customer’s preferences to receive e-newsletters, e-mail promotions about specific products, lines or events, birthday dates, etc. Some marketers are turning the tables and using online profiles to manage customers’ offline preferences as well.

    By asking the customer when and how many mailed catalogs he or she would like to receive, you accomplish two tasks: You put the customer in control of the relationship, and you increase the likelihood that you’ll mail out fewer “wasted” catalogs. Extend the concept to ask about postcards, retail notices, direct mail fliers, etc., and you’ve given yourself marketing information that saves you money and gives the customer a better overall experience.

  2. AGGRESSIVELY INCORPORATE E-MARKETING STRATEGIES

    If you’re still e-mailing your entire house file with every campaign and not tying the results back to a master contact strategy that includes mailed and e-mailed marketing, you aren’t helping yourself. You need to build a master contact strategy that incorporates all of your customer communication vehicles and looks at composite metrics.

You should be testing the viability of replacing catalog mailings with e-mail campaigns. The truth is — and you’ll see it in your own data — your better customers will deliver a fraction of the overall response to an e-mail campaign as they will to a catalog mailing. The catalog will pull orders for weeks; the e-mail will pull orders only for days.

Test the appropriate sequence and frequency of e-mail campaigns to replace mailings and watch results across a variety of segments, not just rolled up. And use the segmentation you plan to use in the mail. Only then will you get the information necessary to build an integrated master contact strategy for your house file.

And work on your site navigation to make sure that you’re offering the best navigation, the most appropriate search features, the most relevant content possible. Search-term specific landing pages and dynamic content, for example, create more robust shopping experiences, greater conversion and more profitability.

Strategy 3:
Prospect to win

If 40% of the 12-month file returns in a given year, the other 60% of the file must be replaced either through reactivation or through new customer acquisition. If your plan is to drive new-customer acquisition via pay-per-click advertising and you think lists are relics, don’t stop reading just yet. It turns out you’re not the only one who thinks that — and the marketplace for keywords is becoming more and more competitive (read: expensive).

Selling gift baskets today? “Gift baskets” is commanding between $2.10 and $3.16 per click as of the writing of this column — and only early summer. Come fall, the price per click for “good” terms will be much, much higher.

So lists are still a viable and significant source of new customer acquisition. But selecting them or, rather, adding selects to them, is increasingly important to garnering the response you want and need to protect your business in tough times. Here are a couple of tactics to consider.

  • Raise the bar

    Test into “raising the bar” on your selects. Targeting higher-dollar spenders, for example, may aid in protecting against a deteriorating average order value. Consider testing from catalogs that have higher average units of sale, suggesting that the buyers are perhaps more buffered from economic downturns.

    Adding product selects, gender selects and date selects can all improve response to prospect files and should be considered. If the added selects increase response and pay for themselves, you’ll be refilling your customer pool and keeping pace even in tighter times.

  • Mail your multis

    Multibuyer prospects, those prospects that show up on multiple files, are gold mines of response. You should be getting multis from the merge/purge. Use them. Build them into your contact strategy and mail them, late in the season if possible. They generally perform well and are known mail order buyers from multiple files in your target market.

And if you’re using co-op databases to get your prospect names, assume high overlap between top model segments. In fact, if you’re using co-ops exclusively, the multibuyer prospects should play a major role in your efforts.

But don’t stop there. Look for overlap between your outside lists and your older house segments. Matches between these lists are generally referred to as “superdupes” and can be looked at in one of two ways: problem or opportunity.

If you’re in the problem camp (and you might be if you’re looking for ways to minimize circulation), you would suppress these records from your prospect mailing under the assumption that you’ve mailed these folks a number of times over the past several years and they haven’t responded.

If you’re in the opportunity camp, you’ll see these hits as a chance to mail names you already own, and who already know your product and offering, with a higher likelihood for response. Depending on your financial position and your corporate goals, either would be a viable stance to take.

A final word on your projections for the season: Be close and build a range, since you don’t know what’s going to happen. Promising your bank a specific return is a fast way to disappoint in this type of economic environment. If the economy picks up, the tax rebate stimulus plan works and gas prices settle down, your season may end up strong. Then again, things could get worse.

While many financial experts are predicting a much stronger third and fourth quarter, looking at three scenarios — conservative, most likely and optimistic — will build a realistic range of projections that you can live with and that set an expectation for performance. Even in tight times, a solid brand, a lock-tight marketing plan and a commitment to prospecting will keep you afloat for a brighter future.


Steve Trollinger is executive vice president of J. Schmid & Associates, a catalog consultancy based in Mission, KS.