CATALOG AGE’s Benchmark Report on Marketing 2003

When CATALOG AGE’s previous Benchmark Survey on Marketing was conducted, in fall 2000, the economy was just beginning to show a few cracks. This past November, when the most recent survey was conducted, Americans were waiting for the economic recovery to begin. Yet catalogers as a group haven’t altered their marketing methods as radically as you might have expected. Nor has customer response changed dramatically.

For instance, the participants in the November 2002 survey reported a 9.1% mean response rate from the top fifth of their house file. Among respondents to the 2000 survey, the mean was 9.7%. As for the mean response rate from the bottom fifth of their house file, the mean among the 2002 participants was 1%, compared with 1.1% for respondents from the previous survey. But the mean total house file response rate among the catalogers surveyed in November was 5.9%, up slightly from 5.7% two years prior. And the mean response rate from outside lists among the recent respondents was 1.4%, compared with 1.3% previously.

Market research

In tough economic times, market research is often one of the so-called luxuries that companies cut from their budget. But the percentage of respondents that didn’t conduct market research did not swell appreciably in the two years since the previous survey. Thirty-one percent of the 2002 survey participants said they don’t conduct market research, up just three percentage points from 28% of the respondents to the 2000 survey.

What did change noticeably was the percentage of catalogers who used outside firms or consultants to handle their market research. While 31% of those surveyed in 2000 used outside researchers, only 22% of those surveyed in 2002 did.

As you might expect, the smaller catalogers were much less likely to conduct market research than their larger counterparts. Among respondents with annual sales of less than $1 million, 46% conducted no market research. Thirty-nine percent of respondents with sales of $1 million-$9.9 million also did not conduct research. But among respondents with sales of at least $10 million, that percentage shrank to 21%.

More than two-thirds (69%) of respondents that conducted research did so to determine overall customer satisfaction. The second most popular reason was to rate the company’s service level; 45% of respondents said that was a reason they conducted research. Thirty-eight percent used research to gauge the viability of new product lines, while 34% used it to compare themselves with competitors. Nearly one-third (30%) conducted research to ascertain customer demographics.

Looking ahead to the next 12 months, 31% of respondents planned to increase their level of research activity. Only 3% planned to cut back.

Customer acquisition

November’s survey participants spent 18% less to acquire customers than did respondents two years earlier. Among respondents to the 2000 survey, the mean cost to acquire a customer was $29.53; among respondents to the 2002 survey, it was $24.11. But 18% of respondents had no idea how much it cost them to acquire a customer.

Though catalogers are spending less to acquire customers, their conversion rates seem to be increasing. Among the most recent respondents, the mean conversion rate of leads to buyers for free catalogs was 8.1%; among respondents to the previous survey, it was 5.9%.

Business-to-business catalogers had a slightly higher lead-to-buyer conversion rate: 8.4% compared with 7.6% among the consumer mailers. And the smallest catalogers had the highest conversion rate. Respondents with annual sales of less than $1 million had a mean conversion rate of 11%; catalogers with sales of $1 million-$9.9 million had an 8.2% conversion rate; and those with sales of at least $10 million had a mean conversion rate of 7.2%.

Only 14% of respondents said that they charge for their catalogs. The mean conversion rate of leads to buyers for paid catalogs was 8.2% — almost the same as for the free catalogs.

Customer retention

About one in five respondents offered a preferred- or frequent-buyer program. Lower prices were the most popular perk — 69% of respondents with a buyer program offered members discounts. Sixty-three percent gave members special product offers, while 46% sent members newsletters or the like.

A major difference between consumer and business catalogers was their use of outbound telemarketing to contact customers. Only 6% of the consumer respondents used it, but 49% of the b-to-b respondents did. Among respondents that conducted outbound telemarketing, nearly all (91%) used it to sell products. Sixty-six percent called customers to check on service, and 55% conducted customer surveys.

Analysis

For the most part, mean average response rates didn’t vary widely between consumer and b-to-b respondents. Consumer catalogers reported a mean 9.2% response from the top fifth of their house file and a 1.1% response from the bottom fifth. Among the b-to-b participants, those figures were 9.4% and 1.0%.

But while consumer respondents reported a mean 5.0% response rate from their total house file, the b-to-b catalogers boasted of a 6.9% response. Then again, b-to-bers had a mean 1.2% response rate from outside lists, compared with the consumer catalogers’ 1.7% response.

Just 31% of respondents had calculated the lifetime value (LTV) of their customers. That included 46% of respondents with sales of at least $10 million and only 18% of those with sales of $1 million-$9.9 million. A scant 10% of respondents with annual sales of less than $1 million conducted LTV studies.

So it’s not surprising that more than 12% of respondents didn’t know how many purchases a customer must make before he becomes profitable for the cataloger. (What is surprising is that the percentage of respondents who didn’t know the answer wasn’t higher.) Overall, respondents said that a customer must make a mean 1.8 purchases before the cataloger began making money from him. For 35% of respondents, customers became profitable after just one purchase.

International

Twenty percent of the survey respondents were actively marketing overseas; another 5% were testing the international waters. Thirty-six percent said they received international orders even though they were not actively pursuing them.

Among those catalogers with nascent or established international marketing programs, 59% considered the United Kingdom the most lucrative or attractive foreign market. Canada was close behind, with 57% rating it favorably. Forty-six percent rated Continental Western Europe highly, while Japan was considered an attractive market by only 39% of respondents.

Of the respondents that mail internationally, 40% said they didn’t develop a special version of their catalog for international markets, nor did they plan to do so. Another 11% didn’t modify their U.S. catalog for international markets but were considering doing so.

Methodology

On Nov. 11, 2002, Primedia Business Marketing Research e-mailed invitations to 3,663 CATALOG AGE subscribers selected on an nth-name basis. The invitation contained an embedded URL linking the respondent to the research Website where the survey was located. Respondents were offered a chance to be entered into a drawing for one of four $50 Amazon.com gift certificates. A follow-up e-mail was sent on Nov. 14. Of the 2,553 deliverable surveys, 185 usable surveys were received by Nov. 26, for an effective response rate of 7.2%.

Mean percentage of new buyers who are catalog requesters Consumer catalogers: 10.4% B-to-b catalogers: 11.4% Sales of less than $1 million: 12.3% Sales of $1 million-$9.9 million: 9.7% Sales of at least $10 million: 10.9%

Mean amount spent annually on market research Consumer catalogers: $12,093 B-to-b catalogers: $14,500 Overall: $13,857

Mean percentage of sales from the Internet Consumer catalogers: 20.0% B-to-b catalogers: 8.5% Sales of less than $1 million: 22.3% Sales of $1 million-$9.9 million: 15.7% Sales of at least $10 million: 13.0%

Interested in the complete results from our Benchmark Survey on Marketing? To purchase the full report, visit The Marketer’s Research Store at CatalogAgemag.com.

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