When times are good, budgets typically grow. Reflecting this, more catalogers appear to have increased their spending in many areas of marketing. Take market research. For the decade-plus that Catalog Age has conducted its benchmark survey on marketing, each year the majority of respondents have said they spend $2,500 or less on research annually. And while this year the largest group of respondents overall (25%) also say they spend no more than $2,500, last year the percentage spending this paltry amount was higher – 29%. Another good sign: The second-largest group of respondents (22%) this year say they spend a respectable $5,001-$10,000 on market research. In comparison, just 15% reported spending this much in last year’s report.
Most respondents that conduct market research (89%) say they use it primarily to determine their customers’ overall satisfaction levels. The other primary reasons respondents say they do research: to rate service levels (77% put this at the top); to rank themselves against competitors (53%); to determine demographics (45%); to determine the viability of new products (43%); to determine the viability of the current catalog concept (40%); to ascertain psychographics (28%); and – no surprise – to determine the viability of an electronic catalog (24%).
Among total respondents, nearly 83% say they use some form of alternative media – such as magazines, newspapers, package inserts, solo mailers, radio, television, and Websites and online services – to generate new names. This is up 6 percentage points from last year’s survey, when 77% reported using alternative media for customer acquisition.
Consumer, b-to-b, and hybrid marketers alike report success in acquiring names through their Websites. Overall, 59% of respondents say they’ve had either “very good” or “good” success with Websites; just 5% say they’ve had poor results. This is up considerably from last year, when 45% said they had “very good” or “good” success, and 12% said results were poor.
As for their catalogs, respondents are willing to spend a few bucks to entice first-time purchases, either in the form of a first-purchase discount coupon, or reduced or free shipping and handling. But overall, spending per prospect is down considerably from last year. The mean expenditure per prospect this year is $6.20; one year earlier, it was more than double this amount – $13.40! Increased use of the Web could be one reason for the decline.
With database marketing technology on the rise, catalogers are becoming more active in doing what it takes to retain their customers. For instance, 40% of this year’s survey respondents (33% of consumer respondents, 54% of b-to-bers, and 25% of hybrids) offer free gifts or premiums with purchases.
Special Website offers are taking on greater prominence, with 49% overall (49% of consumer mailers, 51% of the b-to-bers, and 44% of hybrid respondents) using them regularly.
Not surprisingly, volume discounts are most popular with business-to-business respondents and hybrids, with 85% and 88%, respectively, saying they use them regularly. Only 49% of consumer catalog respondents use volume discounts as an incentive.
In terms of where catalogers get their sales, the mean percentage of sales from the house file names is 67.3%; a mean of 14.4% comes from outside lists; another 14.4% emanates from catalog requesters; and a mean of 6.3% comes from their Websites. (Total exceeds 100% due to rounding.)
Our survey respondents are equally divided in terms of their frequency of contact with best customers: Nearly 22% contact best buyers more than 12 times annually, with 42% of these respondents saying that they contact these people more than 18 times a year. Another 29% contact these customers between seven and 12 times; 25% contact them between four and six times; and 24% contact their best customers only one to three times a year. The mean number of contacts annually is 8.3.
Despite the surging U.S. economy, overall response rates for this year’s survey participants are somewhat lower than for respondents to last year’s survey. The mean response from house file mailings fell from 7.0% last year to 6.2% this year, while the mean response from mailings to outside names dropped from a mean of 2.3% overall last year to 1.2% this year.
Could the fall in catalog response rates be due to a rise in Web orders? Hard to say for sure, but Website orders are picking up steam. Seventy-four percent of this year’s respondents say they’re getting orders online, compared to 68% last year. Looked at by segment, 82% of consumer respondents, 64% of b-to-bers, and 69% of hybrids are taking online orders. In terms of what percentage of total revenue can be attributed to Web catalogs, 55% of those with a Website report that its sales are less than 5% of their total revenue. Slightly more than 14% say Web sales account for 5%-10% of total revenue. But a surprising 30% of respondents claim that their Web catalog actually accounts for 10% or more of total annual revenue.
For the most part, catalogers seem to be content with business at home. Just 22% of respondents overall are marketing overseas, and another 23% say that though they aren’t actively seeking international sales, they do get a number of foreign orders anyway. Meanwhile, just 8% overall are testing foreign markets. Worth noting: When respondents are asked why they don’t pursue international marketing, 50% point to a lack of staff.
Among the relatively small portion of our respondents that market abroad, many are old hands: A total of 48% say they have been selling overseas for more than a decade. But most do not have a special version of their catalog to use for overseas marketing, preferring to make their international customers read their offers in English.
In terms of market preference, a growing number of respondents (41% overall) are finding Australia and New Zealand to be lucrative territory this year, compared to just 25% last year.