Lists Roundtable: Place Your Bets

Who would have thought that mailing to a list of dentists would work well for a cataloger of brownies and other sugar-laden goodies? But it did for Fairytale Brownies — and that surprise success goes to show how unpredictable and challenging lists and circulation can be for catalogers. The six catalog executives who joined Catalog Age for a roundtable discussion in Las Vegas in November had plenty to say about the challenges of maximizing lists, e-mail names, house files, models, and cooperative databases.

The roundtable participants

Mel Concors, director of marketing at Spring Valley, CA-based Chinaberry Books, which mails the Chinaberry catalog of books for children and the Isabella title of books and gifts for women.

Liz Duffy, marketing manager for As We Change, a San Diego-based catalog of products for premenopausal and menopausal women.

Christene Johnson, marketing and sales manager for Chandler, AZ-based food gifts cataloger Fairytale Brownies.

Tim Hoerrner, director of circulation for Road Runner Sports, a San Diego-based marketer of athletic shoes and apparel.

Amit Mitra, vice president, marketing, for Torrance, CA-based office supplies cataloger Viking Office Products.

John Parker, direct marketing manager of Frederick’s of Hollywood, a cataloger/retailer of women’s apparel based in Hollywood, CA.

Catalog Age special projects manager Shayn Ferriolo moderated the discussion.

Circulation, more or less

Catalog Age: Given the state of the economy and of the catalog industry, are you mailing to more or fewer names than in the past?

Amit Mitra: We are mailing to a lot fewer.

Mel Concors: We have two different offers: One is Chinaberry, which is a catalog of children’s books, toys, and games, and what we did last year was try to remain flat circulationwise, just replace attrition. Our other catalog, Isabella, is our female-oriented book, which we are trying to build by 15% this year. It can be described as New Age, inner spirituality.

Christene Johnson: We are actually mailing more. We are continuing to grow, so we are continuing to mail more. Things are looking good. Our sales for the holidays were great. We grew about 24% [in 2002]. Our actual growth was 35%, but 11% of that was [due to] price increases. We are right at our goal.

Liz Duffy: We are also mailing more. In the last couple of years we had been mailing aggressively. [In 2002] we pulled back and were mailing to be more profitable, and we’re seeing more people coming onto the file than we expected. We’ve increased circulation for 2003.

John Parker: I thought I was going to say that we were going against the tide because we are mailing more this year, but everyone seems to be doing the same. In 2001 we cut back a little bit, and we were having problems trying to read response. We’d really ramped up our Website, and we were getting more Internet buyers coming onto our house file. You need to watch that because the Internet seems to bring in bargain shoppers. We straightened out some of those problems but realized that we really need to concentrate on getting the catalog buyers, so we have to mail to more prospects and model a bit more.

Tim Hoerrner: We are mailing more. We are in a growth mode, and we are also introducing a new catalog, a women’s fitness book. We unrolled it in 2002, but we will rename it for 2003. There are parts [of the spin-off] that do better than our main book, but by and large we are trying to figure out what the page count should be and what the product mix should be.

Concors: Are you sending it to your house file?

Hoerrner: It’s about half house file and half prospect. We are trying to leverage the female customer that we have. Road Runner Sports is about 55% male, 45% female, so the female is where we are starting with the house file, but we want to grow it in the future to become as big as the main book.

I have a question for John: You started to talk about the impact of the Internet on [name] acquisition and the value shopper. That is an issue we are facing. What was your experience there?

Parker: First, it has been hard to figure out the channel. You send out a catalog, and people buy online, and you aren’t sure what the motivation is. After a campaign, about three or four months down the road, we’re able to match back and see why certain folks are buying. We started that about two years ago and found 10% migration. The next year it was 20%-30% migration, and now we are up to 50% migration.

Hoerrner: When you say 50% migration, do you mean that 50% of catalog response is coming in over the Internet?

Parker: Right. That is depending on the list.

Concors: Tim, wasn’t your question more in line with average order?

Hoerrner: It wasn’t so much average order as the Internet buyers being price- and offer-focused. And we haven’t found that they are not working for us on the back end, but I want to get in front of that curve. Are they one-time buyers?

Parker: Our ratio of single buyers to multis is going up. Now when I am doing a mailing I am asking, “How many Internet buyers do I want to mail to?” I have it broken out now.

Hoerrner: So you are looking at channel history.

Mitra: We are b-to-b, we sell office supplies, so the concept of lifetime value is extremely important to us. On the one hand, a multichannel buyer is a lot better than a single-channel buyer [for us]. On the other hand, when you get someone from the Internet there is more of a tendency for that person not to have the lifetime value that you historically are used to. What we have found is that once you get a new customer, you need to immediately qualify him in some way. We have tested this and just rolled it out: Every new customer gets a callback from us within three days of receipt of his order.

Hoerrner: How do you qualify them?

Mitra: We have a set of questions. Typically, it’s a three-minute call. Based on the 15 questions, we have a set of algorithms that push the customer to different contact plans. Which goes back to the fact that we are cutting catalog contacts. But when we start to look at the multichannel and lifetime value aspect and think of the total number of contacts to a customer via telemarketing and e-mails, we are actually not cutting the number of contacts, even though we are decreasing catalog contacts.

Names and e-names

Catalog Age: That segues into something I wanted to explore today: e-mail marketing and e-lists. How complex is your e-mail marketing program?

Duffy: We break it down into different avenues; we e-mail our customers each and every time there is a catalog drop to let them know when the catalog will be in-home. I section those shoppers out of the mail plan and look at the response rates. I have started doing that a year and a half ago, and there is a great lift in doing that.

Concors: So you do or do not mail those customers?

Duffy: I do mail them. I have tested where I have done an e-mail only vs. a catalog only vs. a catalog with the e-mail announcing the arrival of the catalog, and by far, using both channels does better.

Concors: I know that we are getting 25%-30% of our sales at Chinaberry from the Internet. I don’t know, but I think 10% of it is new business. We find that we have so many misidentified orders.

Duffy: We used to in the beginning, but as we redesigned our Website, we made it user-friendly to get the source code or the promotional offer code, and we are able to capture 85%-90% of the orders with source codes.

Hoerrner: How do you incent the customer to input the source code?

Duffy: We are just really clear and precise about leading them to put that code in. We have a very high multibuyer rate, and customers are used to our catalog and Website and are aware of where to find the code.

One question I had for John is, When you were talking about the Internet, we find that our customers who order off the Internet often do so because of the sensitive nature of the product they are buying. The products that Frederick’s offers, some customers may not be comfortable ordering some of them over the phone. Have you looked at the type of product and where it is being ordered from?

Parker: We have, and the basics do well online, but the bigger-ticket items such as dresses are a little bit more tricky.

Catalog Age: Is anyone renting e-mail lists or offering his own e-mail list for rental?

Duffy: We don’t release our e-mail names, and I will not rent them.

Mitra: Is that pretty universal?

Concors: I think it depends on who you are and what your offer is. It would be interesting to know what the repeat buy for the Internet is.

One of the issues I have right now is that I am not sure I want to release the Internet buyers to our 12-month file, because people who rent our files will get shortchanged if they get those Internet buyers who don’t necessarily represent our traditional mail order buyers.

Mitra: If I asked you specifically for your Internet buyers, would you give them to me?

Concors: No, we will not, because one of the things we do say to our customers is that we won’t give out Internet addresses.

Hoerrner: What about mailing address?

Concors: If you are a buyer, a traditional mail order buyer, you are on our 12-month file, and you can go to either one of our list managers. If you are an Internet-only buyer…it’s a good question. Right now, I don’t know.

Mitra: We are a subsidiary of Office Depot, and we actually have to worry about the legal issues of privacy. On the Internet, we have a different privacy policy, so if you opted in and specifically said that you were willing to share your address, that is fine, but it is very easy to opt out. In the catalog as well. It turns out that most people don’t opt out.

Duffy: We keep our names separate too.

Hoerrner: We don’t share our e-mail names at all. And we find that e-mail is just not a good acquisition tool for us either.

Johnson: We haven’t rented our e-mail list at all. I think our case is different. Our product is a bit different, and we have a lot of repeat buyers who are Web buyers and remain Web buyers. I did do a test where we sent the catalog only and didn’t send an e-mail and vice versa, and I found that it didn’t make difference. Our product is a gift typically, and that is how most people come across us at first. Our number-one acquisition tool is word of mouth, believe it or not. It is really different because once [gift recipients] get the brownies, they don’t have a catalog, so they will go to the Internet, and that is how they become our customers.

Hoerrner: We are getting to the point that we want to leverage our customers and prompt referrals. We have a large number of buyers through various races and running publications, but we are convinced that our best customers have the potential to become our best salespeople. Do you have any programs that you use?

Johnson: We don’t yet, but we are working on a referral program for next year. We haven’t worked out all the details, but we will track referrals in some way.

Concors: [Jokingly] You should refer dentists. [Laughter]

Johnson: Actually, our best customers are dentists. And we just rented our first list, a list of dentists, and it has performed very well.

Acquiring minds want to know

Catalog Age: Are there any other surprise lists or acquisition tools?

Concors: Not anymore. You really have to work hard at prospecting. Chinaberry, selling children’s books, has tough competition. Amazon and Barnes & Noble — how much tougher competition can you get? We can’t prospect well for Chinaberry, and the house file does gangbusters.

We prospect very well for Isabella, and the house file doesn’t perform as well as I think it should. The thing that is working best for us now is modeling. You can spend all the money you want on copy and list testing, but I’m spending it on regression modeling because that is what is helping us for prospecting.

Hoerrner: Where are you sourcing the names? Are you going to the co-op databases?

Concors: Well yes, but also I have commissioned a fellow to build a model for us. He takes our information, and he goes and does his magic and grinds the data. For instance, the Highlights for Children [magazine] file, we can’t make it work, but we exchange with them, and they are using our file. So I continue to rent to them or even exchange, but I need to model their file. I’ll even rent their expires, which are just collecting dust. I say to them, Give me 100,000 and I’ll guarantee you rental on 35% of that, and then I’ll pay your running charges against the difference of some reduced running charge rate, so I can make the numbers work. And if I can find 35,000 names that will give me a $1-plus per catalog when I prospect, all of a sudden, I am a happy direct mailer.

Hoerrner: It sounds like you need to do that with someone you want to establish a relationship with.

Concors: Exactly. The age range of the children we are trying to target is 0-9 years old. So we have a short window for the Chinaberry title. For Isabella, it’s a broader audience, and it’s women buying for themselves. I can still get $2 per catalog when I prospect with that catalog.

Hoerrner: Is anyone else doing statistical modeling?

Mitra: We do, but then we have a different problem: We rent such a volume of names. We bring in anywhere from 18 million to 20 million names a year, so there is not much out there that we don’t bring in. Therefore, we need to find a way to intelligently market and mail to them. We use statistical modeling to peel through layer after layer and find the universe that we are after.

Concors: You can probably afford to spend more to get a customer than we can. We spend about $30 per customer, and you probably spend 10 times that amount.

Mitra: We are in office supplies, so we have very good repeat rates. So we are able to spend a lot of money on a customer up front, knowing that I am going to get a lot of orders. So the economics work, but it is still an expensive proposition to overlay and do all of the statistics.

Concors: That’s the reason for building the model and then making the name deal and processing the names through the model. You have to be very careful how you negotiate. But the way things are today, there isn’t a broker that is going to turn down a list order. I mean, it’s bad.

Mitra: Well, we have a prospect database. What the major list companies have taught us over the years is that if you want to be part of the database, it’s net-net or no deal. And so essentially, we pay as we go. As for co-op databases, I’m a bit old-fashioned. There are many co-op databases out there, and a lot of people participate in them. I am very suspicious, not because I think there is any bad intent out there, but because I know that one mistake by someone and all of my names go to my competitors, and I could not afford that.

Catalog Age: Are the rest of you involved in co-ops?

Parker: I have had limited success. We are doing more modeling and creating our own models, and we worked on reactivations for the house file, which is working well. We are using zip [code] models.

Mitra: Do zip models work for you?

Parker: They used to work well, then they stopped working, but then we brought them back in the past few years.

Mitra: I used to use them, but I could never get the pop I was looking for, because the darn zip codes keep changing. Also, you take a place like Chicago, where within the same zip code you have someone who makes $200,000 and someone who makes $20,000, and you do the average and it comes out to look like a customer who makes $80,000 but does not exist.

Parker: The zip model that we are building right now is based on the new census data.

Mitra: If you use census tracks it is much more accurate, I find. It is a much more accurate read of a demographic.

Hoerrner: We sell running shoes. Everyone wears running shoes, but we sell to marathoners and serious runners who put in 30 miles per week. And we know that there is a bigger universe of buyers than we are hitting. And we are always looking for ways to find that. I think that is why we’re leaning toward a referral program.

As for co-op databases, I think that they are going in a good direction, to the product level instead of a catalog title. And some of them are even going beyond that. I think it is good development.

Concors: Your customers will obviously be buying more than shoes, so these databases try to pinpoint those products and find those names for you.

Catalog Age: Are any of you using magazines or any other different acquisition tools?

Johnson: Ours is really PR. About a year and a half ago, a cooking magazine called Taste of Home had a blurb about our business and brought us so many new customers. It still does. People keep this magazine because of the recipes, so we are constantly in front of readers.

Parker: I’m a big believer in space ads. Some of the lists that were kind of marginal, I would take that as an indication of whether I should be in a magazine [for that market]. Latina magazine was one of them, and most of the bridal magazines. If it needs a little push, we will go with space ads. But I find that you have to be in the publication at least three times to make it work and get the reader recognition.

Making contact

Concors: How often do you contact your best customers?

Johnson: On average, five times per season. That’s fall and holiday, though we contact them once in the summer to prompt early holiday sales, and that seems to be working well.

Hoerrner: It seems that as an industry we have just been hitting customers more often. I would wager that the dollar-per-book response rates were much higher, say, 10 years ago.

Johnson: Over the past two years, we have added four drops. That’s to our house file.

Mitra: And postage has gone up over the last few years. If you are looking at that kind of increase, your response rates would have to increase by the same rate as the postage.

Concors: You need to differentiate between the response and the value the catalog brings in based on circulation. In other words, if I can increase the dollar per catalog that I get, I don’t necessarily care about the response rate. So if my charter is to generate $5 in revenue for every $1 in marketing, I have to be smarter about how I spend that $1 and be concerned about my return on that dollar.

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