Challenges and Choices

Home to Harvard, MIT, Tufts, and numerous other fine educational institutions, the Boston area boasts a considerable brain trust. So what better place than Cambridge, MA, for Catalog Age to host a roundtable discussion on multichannel marketing? We met with seven catalogers in late March to talk about the challenges and opportunities offered by the Internet, e-mail, and other marketing and sales channels.

The roundtable participants

John d’Arbeloff is president/founder of RailRiders Adventure Clothing, a Watertown, MA-based manufacturer/marketer of outdoor apparel.

Dyan Eagles is founder/president of Lexington, MA-based DharmaCrafts, which sells meditation supplies and Eastern-influenced home decor.

Kirk Etten is divisional vice president of Groton, MA-based New England Business Service (NEBS), a multititle marketer of business forms, packaging supplies, and other products for small businesses.

Jake Hall is director of Internet and database for Support Plus, a Medfield, MA-based cataloger of medical footwear and other living aids.

Glen Holt is vice president of marketing for PetEdge, a business-to-business mailer of pet supplies based in Topsfield, MA.

Susan Landay is co-owner of Natick, MA-based Trainer’s Warehouse, a cataloger of training and presentations products.

Warren Sukernek is president of Newton, MA-based Oriac Design, which sells contemporary home and business furniture.

Catalog Age editorial director Sherry Chiger and writer Mark Del Franco moderated the discussion.

Making sense of it all

Catalog Age: Let’s start with each of you giving us a brief “channel history” of your company and explaining what you see as your greatest multichannel marketing challenge.

Susan Landay: Trainer’s Warehouse sells products for people who do training and presentations, so that would be educators and trainers mainly. We started up the catalog about 11 years ago and have had a Website for the past seven or eight years. People have been ordering on the Web for the past five years. Our Web orders are about 35% of the business, and 50% of orders are via phone. The rest are by fax.

We are trying to understand the link between our catalog mailings and people ordering over the Internet — breaking that down and understanding how people are finding us over the Internet and calling and trying to understand all of that data and how the channels interface with each other.

Jake Hall: Support Plus has been in business for 32 years. We started out in the owner’s basement, and we’ve been online with our own dedicated Website for about four years. We started with [online mall] CatalogCity.com in 1998-99 and worked with them for a while. We’ve been lucky with the Internet, because our audience is older women — who tended not to be online as much in the early days. We’ve learned from other people’s mistakes as we’ve gradually gotten into the fold. The Web is about 17% of our business now.

Our biggest challenge is maintaining consistency with the catalog while trying to expand into new areas and provide a much broader reach on the Website.

Dyan Eagles: DharmaCrafts got started about 25 years ago, at a time when maybe 50 people in the U.S. practiced meditation. We used to be listed in the Yellow Pages under “mediation” because nobody understood the word very well! [Laughter]

Our biggest challenge is to understand the data. We know our catalog drives our business on the Website. Fifty percent of our orders come in through the Web, and most of them are related to the key code on the catalog, and we offer a free gift. It’s hard for us to understand with what’s coming in just over the Web.

Kirk Etten: NEBS has made a number of acquisitions and tripled the size of the company. [The roundtable took place prior to NEBS’s acquisition by Deluxe Corp.] Through the acquisitions we’ve acquired many different channels — direct sales, distributor, mail, phone, Internet. We have the challenge of bringing all of that together. How do we coordinate what we are doing and identify the right the type of channel for the right type of customers or prospects? And what’s the right type of product to offer through those channels?

Glen Holt: PetEdge is a 47-year-old business that started as New England Serum, with route salesmen selling product to dairy farmers. That changed in the early ’70s when we got into mail order. Our Website is in the second generation, and we’ve had it for four years now. Our biggest challenge is basically getting the same message across all the channels.

Warren Sukernek: Oriac Design started in fall 2000 as a spin-off of a German company. We started the Website and catalog at the same time. We sell equally to both consumers and business, and as a result we have some challenges in contact strategies and pricing across both channels. And because we sell a lot of big types of furniture pieces and we don’t have stores and showrooms, it’s tough sometimes to convey the impression of what the item is.

John d’Arbeloff: [RailRiders] wanted to use the catalog as a way to reinvent the brand, to tell a story of what interesting things people were doing all over the world. The Website and catalog were pretty seamless in terms of imagery and the stories we tell. The direction down the road, now that we established a base, is to reopen up a third channel and sell back to wholesalers/retailers. [RailRiders started as a wholesaler.]

Our biggest challenge is to mail significantly more books. How do you build that without significant cash behind you and maintaining and growing the house file so that you are not beating the same customers over the head each time you mail a book? We don’t have a very good handle of where customers are coming from. We mail about 1 million books a year. One of the challenges is when the catalog hits, the phone doesn’t ring — but you come in and there are 150 orders on the Internet, and about 10% of them are putting in the code from the catalog. Matching back is very difficult for us.

Catalog Age: Kirk, is channel cannibalization a concern at NEBS?

Etten: What we are looking for is to be able to optimize a relationship with our customers. And whatever the channel the customer chooses, that’s how we want to do business with them. So cannibalization is not exactly a concern for us.

We used to focus a lot on the [catalog] code. We still do, and it’s an important part of what we do, but at one point we would make a decision based solely on what the mail was doing, and we’ve had to broaden that a bit. Say we sent a piece of mail and contacted the customer with an outbound phone call and sent an e-mail. We need to bring in [and look at] all of these contact methods. The challenge is coordinating the different methods across the business. And looking at it from the customer’s perspective and not from the company’s perspective.

Catalog Age: And how do you coordinate that?

Etten: We work with some pretty talented people within the analytic part of our company. We work pretty closely with them to coordinate and bring the databases together.

Catalog Age: Dyan, you mentioned that you were getting about 50% of your sales from the Web.

Eagles: We know that only 13% are actually coming from somewhere in the Web, and the rest are driven by our catalog and key codes that people fill in.

Catalog Age: How do you get them to do that?

Eagles: We offer them a free gift, which we don’t really advertise.

Considering the source

D’Arbeloff: We just started playing with Google adwords. And I don’t know enough about it to speak intelligently about it. It seems like it’s getting a lot of views, but I can’t correlate that to orders.

Hall: It’s difficult. We do a decent amount through pay-per-click. The management of it is probably the biggest hurdle for us to making pay-per-click work — there are so many iterations of it and placements beyond Google and Overture that it’s just a huge headache to find the right positioning and words that are going to pay out for you in the end.

It moves so quickly. It’s easy to buy a lot of traffic and it’s easy to buy a little traffic that’s highly qualified but figuring out that balance is a real headache.

Landay: We’ve been using HitBox [a Web traffic and reporting software from WebSideStory]. It analyzes whether Google and Overture were successful.

Hall: We put key codes on our links that come through and for management purposes we ended up bundling a set of keywords into a code. Our reporting software will tell us what’s going on there, but we have not found a way to independently look at which key words specifically are driving what sales at the end of the day.

Landay: How customers decide to order adds another level of complexity. Part of it is what ads are they responding too — are they responding though a link, from a catalog coming in the mail, through a search — but how they decide to place their order is a separate question. We get people who find us on the Web but want to order through a catalog; we also get people who get the catalog and want to order from the Web. It’s so intertwined. Right now we are looking at those numbers separately, and I don’t know how to think about integrating them.

Sukernek: The most popular action people do on our Website is request a catalog, even though we have more products on the Web and better prices.

Hall: Is anybody doing regular match-back reporting? That’s been helpful to us for allocating where our sales come. We don’t do it on a continuous basis. We go back every six months or so and do a match-back of all our order volume vs. who was mailed catalogs. It gives us some good benchmarks to apply across the board.

Holt: We match back as well, but we don’t care which channel they come from. We have not necessarily made an effort to break out Web-only customers. We’ve done some testing in that area, and we know they don’t respond quite as well. The response rates and average order size are dramatically less.

Sukernek: Someone who gets the catalog, even if it’s just a prospect, you sort of have a relationship with them — or at least a confidence factor. Someone who gets to your site via the Web, through searching or pay per click, they don’t have that relationship or confidence. As a result, they are less willing to try it out, so they will buy a cheaper item or maybe they are more drawn toward sales merchandise — but then the next order gets higher.

Hall: Our [average order value] is significantly higher online, and we’ve assumed it was a socio-economic thing: People who have the money for computers can afford to buy more. And our phone orders are significantly higher than orders that come in through the mail. So there’s a progression there.

We see a lot of traffic coming through corporate networks — people ordering at lunchtime — and we know that our major business is largely from retirees, so we can infer a lot from that…that children are buying a lot for their parents.

D’Arbeloff: Do you mail catalogs to retired-living communities?

Hall: Somewhat. We’ve had difficulty any time we get a little too broad in our mailing list. We have to keep it pretty well refined. Age alone doesn’t quite do it. There really has to be a mail order component to the customer, which is where the cooperative databases really come in handy because they can take the two and mesh them together for us.

Landay: Most of our marketing dollars are spent on the catalog, and the Web for us is a faction of that, partly because the catalog does drive Web sales. I guess we see the Web more as a way to purchase [than as a medium]. It’s less costly than paper and postage.

Catalog Age: Those of you who employ salespeople, do they feel that the Internet is receiving credit for “their” sales?

Etten: We will give credit for the sale to whoever is taking the order. We will also work with the groups — for instance, we’ll allow our outbound group to get credit for [online] sales that come in within a certain period of time if they worked with that account. It is an ongoing challenge to keep all the channels aware of what’s happening with the outbound group, the Internet group, the mail group, that affect the customers they are working with.

Holt: We have an outbound group. We don’t really care where the sales come from. Their compensation is really based on their ability to drive incremental sales. Our employees have quotas in terms of incremental sales and how much volume they have to generate each month.

New…but improved?

Catalog Age: How have search engine marketing and affiliate marketing changed your overall prospecting strategy?

Holt: We have a dynamic site and didn’t have any rankings on Google at all until we installed a product that would [adapt] our dynamic pages for a search engine, and at that point we started receiving a lot of Web-only traffic.

We use paid key words, although on a relatively small scale, and that’s been driving additional business. We’re trying to get a handle on where these new customers are coming from so that we can identify them as a separate group and identify trends.

Hall: We deliberately shifted our prospecting online. We are trying to balance by looking at acquisition costs and meeting our goals regardless of the channel. The toughest part of that is knowing the lifetime value of the customer. We are finding significant differences among those who were acquired through organic search engine listing vs. a paid search engine listing vs. the catalog. Trying to understand that is the biggest component of deciding how to allocate our marketing budget.

When it comes down to deciding what lists to rent we are looking at acquisition costs and going as deep as we can before crossing [the profitability] threshold. But we won’t deliberately say we are going to cut it off here and shift to the rest of the Web.

Landay: We just started experimenting with affiliate marketing. We are doing more and more links. It’s interesting to look at the value of the customers who come in through a link, which means they are probably interested in our company as a whole, compared to someone who is doing a specific search for a specific product or a solution to one specific need or a specific solution.

For a long time we didn’t want to do links. We thought that once visitors were on our site we wanted to keep them there. But affiliates are kind of like a “value add” for the same reason you would want to have tips on your Website — it’s a service.

Hall: We’ve established a relationship with a company that offers caregiver consulting services — if you’ve got a parent or someone who is starting to have problems maintaining a home or needs a hospice, they compiled a huge database of rankings and can provide a consultant and a negotiating role.

We’ve set up a link on our Website to their site, and they’ve set up a link on their site that sets us up as a “wellness store.” I think has a lot of more value than some of the random, scattered affiliate programs out there.

Catalog Age: Do you offer online-only promotions?

Holt: We have a clearance section that’s one of our most popular landing pages. So we try to put the products out there earlier and incent the traffic to the Website.

Catalog Age: Warren, I was thinking that maybe furniture would lend itself to some of the online tools, such as alternate view and that sort of thing.

Sukernek: We have zooms and alternate views. But no matter how technical the audience, no matter what the dimensions and different criteria that we track and put online, we’re always getting questions. But you could certainly put more information in that regard on the Web.

Hall: We try to expand on [our product presentation online], but one of the challenges of being online and offline for us is managing the product in the two channels. You want to get the sneak preview out before the book mails, but the book is driving the whole process, and oftentimes the book comes as an afterthought.

Landay: Is it a resources issue for you?

Hall: It is. The Web business has grown pretty rapidly, whereas it had been just an adjunct of the catalog channel for a long time. It’s an area of great potential.

Landay: But if the catalogs aren’t in the mail by a certain date, you know your sales are going to fall. Whereas if those products aren’t on the Web, you can make do.

D’Arbeloff: One of the other things that you can do is test product on the Web before you have to commit it to paper [in the print catalog].

Catalog Age: Has e-commerce proven to be much of an operational issue for you?

Hall: Not much. Our Web orders come through and are processed the same as every other order in the warehouse. When it comes down to being in the warehouse and picking from the list of order tickets, there’s no difference.

Our pickers are aware of the difference between an Internet order and a catalog order because we try to vary the message. When we are really busy sometimes we’ll give priority to the Web customers because they have a higher expectations. When someone orders from the Web they want it tomorrow, but when someone is putting an envelope in the mail with a check they are not expecting to see the product tomorrow. When it comes to that there’s some operational impact.

But the major operational impact resides in the call center and handling the amount of e-mail that comes through. I’ve looked at some huge expensive e-mail management packages out there, and there’s no way we could handle that. Instead we have a terminal with [Microsoft] Outlook installed, and we’ve trained a couple of agents on that. They’re a little bit more Web savvy than the others, and they’ll go in and handle the e-mails.

Etten: For us a lot of the impact of the multichannels has been what the customer’s expected experience is. Our customers are expecting the same level of service whether they are talking to us on the Internet or the telephone.

On the Internet they want to see where their order is, the same as if they talked to us on the phone They want to know what they’ve ordered from us across all channels. It really focuses us on providing the same level of customer service across all of the channels.

Hooray for eBay

Sukernek: When we tried selling on some other online channels such as Overstock.com and eBay, the fulfillment challenges were much greater. On eBay the customers have expectations that are totally unrealistic. They want to pay nothing for it, get free shipping, and have it yesterday.

Catalog Age: Some people have said that eBay would be the next great thing for getting rid of overstocks.

Hall: It’s very labor-intensive to handle an eBay order. We have tried a couple of items, and with any SKU-intensive item it does not work. When you have a shoe that has 120 combinations of size and width, and you’ve got one person out there who’s searching for that one shoe that’s going to be in their size, the chances of that person finding the right shoe are remote.

But a friend of mine who’s also in the catalog industry says that although they lose money on their eBay orders and listings fees, the traffic advertising value of having their name on eBay has proven to be worth it in the long run.

Sukernek: That’s where cannibalization comes in. Why would I go to a cataloger’s site when I can just go to eBay and wait for the item to go up for bid?

Holt: Speaking of eBay, I heard an interesting statistic last week. It said that 26% of the people who shop on the Internet have been to eBay; the next most popular Website is Amazon.com at 1%. That might be some of the reason for the eBay name recognition — there’s phenomenal traffic.

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