B-to-B School Supply Sales Make the Grade

Sep 01, 2004 9:30 PM  By

School is back in session, and the business-to-business catalogers that target the education market are now reviewing their report cards as far as sales go. For most marketers contacted, it was a decent year.

At Greenville, WI-based School Specialty, sales for the first fiscal quarter ended July 24 were up 2% from the same period last year, says David Vander Zanden, president/CEO of the $907.5 million cataloger. While that’s not much, he expects sales to trend further upward.

School budgets, Vander Zanden explains, are set after local governments see how much they’ve collected in taxes from businesses and consumers in the prior year. “Businesses pay taxes one year; states spend that money the following year,” he says. So with the economy beginning to recover, he expects there to be more money available for schools to spend next year.

School Specialty, whose titles include Classroom Direct, Childcraft, and Frey Scientific, increased its field sales force 10% this year, to 600 reps nationwide. “With the marketplace improving,” Vander Zanden says, “we need more salespeople in the marketplace. There are 110,000 schools around the country, and in some parts of the business we’ve found that we don’t have enough salespeople to cover all the schools.” Next year the company will probably increase its sales team another 5%-10%.

As Daniel James, vice president of business development for Burlington, NC-based Carolina Biological Supply Co., puts it, school budgets are dependent on state revenue generated from sources such as property taxes, so there is a direct relationship between how well a state’s citizens are doing financially and the amount of money schools have to purchase supplies.

Carolina Biological, which sells supplies for science education, has been benefiting from a trickle-down effect of the reviving economy. Sales this year, James says, have been good, though not superlative.

Moreover, James says, science-education spending had fallen so low since 2000 that it had no option but to increase. “I think science is an area that will get a little more this year after a long dry spell for three years,” he says.

Getting held back

The dry spell suffered by Carolina Biological and other catalogers that specialize in products for “noncore” curricula such as art resulted at least in part from the No Child Left Behind Act of 2001. According to Arlington, VA-based education advocacy organization Council for Exceptional Children, the law requires the annual testing of children in grades three through eight in reading and math, giving states until the 2005-2006 school year to develop and conduct the evaluations. By the 2007-2008 school year, schools will be required to test students in science as well. The law also mandates that a biennial sample of fourth- through eighth-grade students in each state take part in the National Assessment of Educational Progress (NAEP) test, which is intended to measure the effectiveness of state educational standards.

The stringent focus on math and reading means that schools are diverting funds from their arts budgets, says Stevie Mack, president of Tuscon, AZ-based arts and cultural education cataloger Crizmac Art & Cultural Education Materials. “Art and cultural education is not at all valued at this time,” says Mack. “We’re really at a time of back to basics, reading and math, so my subject area is not considered particularly important right now by the people in positions of decision making.”

For the first half of this year, sales at Crizmac were down 16% from the first half of 2003, says Mack, “and 2003 was 22% less than 2002, which was our best year.” In 2003 the company mailed 150,000 catalogs; this year it reduced circulation to 110,000.

Prior to 2003, Mack says she considered a $30,000 order a large one; today a $1,000 order is considered substantial. The same customers are buying from the company, but they have much less to spend. “The number of orders hasn’t decreased,” she stresses. “It’s the amounts, which suggests to me that art programs are losing strong leadership, because strong leadership means stronger buying power.”

Mack says that in addition to art and cultural studies, the market for bilingual educational products, such as bilingual textbooks, has also taken a hit following the enactment of No Child Left Behind. “There is no way teachers can use them, because they are teaching in a different way,” Mack says. “All the standardized testing is forcing teachers to be so rigid in their curriculum that there aren’t minutes in the day to do anything that doesn’t directly relate to those tests.”

Weird science

Even some school catalogers that are seeing strong sales are feeling the effects of No Child Left Behind. For the Scientifics catalog from Tonawanda, NY-based Edmund Scientific, a wholly owned division of Science Kit and Boreal Labs, overall sales are up 20% from last year on a 15% increase in circulation. But its secondary-school division is experiencing weakness due to the current administration’s education mandates, says catalog manager Tim Burns. “In science, the No Child Left Behind legislation has sort of changed things. Schools now have one bucket, focusing on math and reading, to spend from, but the need [for our products] is still there, and we think [sales are] going to bounce back.”

Burns explains that a midsize high school science department that may have had $5,000 a few years ago now has only $3,000 to distribute, with the other $2,000 being allocated to reading or math programs. As such, he says, it is no surprise that the division’s average order size is down 15% from last year.

On the flip side, catalogers selling educational tools, such as instructional software, that prepare students for standardized tests are enjoying as much as 30% sales growth, says Mary English, director of sales for Sweet Springs, MO-based business-to-institution list company MCH. “Product manufacturers or dealers that benefited from the No Child Left Behind legislation have seen several strong years of growth, without any softening in the market,” she notes.

Adaptive marketing

Catalogers whose products don’t directly tie into the curriculum and testing requirements of No Child Left Behind are altering their marketing plans. This summer Crizmac changed the text of the ads it runs in professional journals such as Arts & Activities, MultiCultural Review, and School Arts magazines to emphasize the interdisciplinary nature of its products. For example, an ad might describe how a book on early American art could be tied into a teacher’s lessons about the Revolutionary War.

Catalogers are modifying their circulation as well, to take advantage of the Title I portion of No Child Left Behind. According to Bethesda, MD-based education interest group Editorial Projects in Education, which publishes Teacher magazine and Education Week, Title I — also known as Part A, Improving the Academic Achievement of the Disadvantaged Program — is dedicated to helping children from disadvantaged areas or with learning disabilities meet the basic reading and math standards. With $12.3 billion in federal funds allocated for fiscal year 2004, it is the largest education program for elementary and secondary schools.

“Mailers are marketing more to Title I personnel, special-education personnel, and reading coordinators,” says MCH’s English. “Catalogers that have products in basic reading or math skills in particular have been targeting these areas, especially if they have testimony that their product improves test scores and the fundamentals of reading and math.” It also helps that mailing lists of special-education teachers and reading specialists are readily available from list firms.

Even though science is scheduled to reap in a few years the same emphasis as reading and math do now, James of Carolina Biological does not expect to see a bump in sales due to the legislation. “It has schools scared to death,” he says of No Child Left Behind. “Most of it ends up being funded at local levels. It’s a mandate by the federal government, but there is no mandate to pour money into it.”

Eating into school budgets much more, says James, are issues such as the rising gas prices, which result in school districts spending a larger than usual slice of their funds on operating the school buses. “Schools have to pay more to pick up the kids, and it comes out of the funds used to buy supplies with,” he says. “Those types of things affect us more than any president does.”

Old-school merchandising and pricing

Colchester, CT-based multititle mailer S&S Worldwide, which mails the S&S School Supplies catalog selling arts, crafts, and physical education products, found that promoting low prices is “really resonating with customers,” says vice president/general counsel Adam Schwartz. S&S cut the prices of many of its products, in some cases rather dramatically: For example, glue that in previous years sold for $7 is this year selling for $4.65.

Schwartz also credits some of S&S’s strong performance this year — year-to-date sales are up 15% from 2003 on a 1% rise in circulation — to its low-price guarantee in which the company promises customers it will beat the competition on price. “That’s the kind of strategy that’s paying off and gives customers the confidence and ability to shop,” he says.

S&S expanded its product line this year as well to include reward and recognition products, such as colored stickers to give to students for a job well done, and a line of school furniture, such as stackable chairs and teachers’ desks, that it sells mainly through a direct sales team.

And the company altered its Google Adword trigger search words to attract customers with a greater lifetime value. Although he won’t share the specifics of S&S’s search marketing tactics, Schwartz says that many of the cataloger’s newer Google-driven customers are already placing second and third orders. S&S spent more advertising dollars with Google search engine placement last year but received less of a return on investment. “Now we’re being smart about how we buy,” Schwartz says.

Dallas-based sporting equipment cataloger Collegiate Pacific is also seeing double-digit revenue growth. Sales to schools and universities have increased 30% on a 10% increase in circulation, according to the cataloger’s president Adam Blumenfeld. Collegiate Pacific offers 3,200 SKUs of sports and recreational-related equipment and products to school superintendents, athletic directors, and coaches.

Blumenfeld says service and delivery are key factors in Collegiate Pacific’s success. “Customers who are won on price leave on price,” Blumenfeld says. “We win on customer service and reliability.” For example, Collegiate Pacific has what it calls a “quick shipment” guarantee, in which products such as bleachers, backstops, batting tunnels, and basketball goals are delivered within 48 hours.

The Internet has not been a boon to Collegiate Pacific’s business so far. “It’s been more of a customer service tool than a sales engine,” says Blumenfeld. The Web, he hypothesizes, is ideal for instructions on putting together merchandise or requesting a catalog, but he contends that “moving sales to the Internet without reducing the number of catalogs is a futile exercise until you are ready to gamble and pull back on your catalogs.” And that move, he says, will be driven by customer demand, not by company convenience. — with additional reporting by Mark Del Franco and Paul Miller