Why aren’t we selling direct marketing?

Each week throughout our industry, catalogers formulate and implement plans designed to grow their businesses and gain that competitive edge. As hallway and meeting room dialogues unfold, each department weighs in with solid, well-conceived ideas designed to enhance the company’s market position. Some examples of typical departmental approaches:

– House file managers and customer acquisition pros debate the merits of new statistical techniques, new response lists, and new selects.

– Creative directors espouse the need to “stand out” in the crowd, always looking for design and copy innovation (and perhaps adding a design award to their resume).

– Marketers seek to position the catalog strategically, with differentiation a key objective.

– Merchants select their soon-to-be best sellers and begin building their rationale for landing the best possible catalog space allocations.

– Fulfillment managers explore new methods of ensuring that merchandise is in stock and customer orders are shipped as quickly and as cost-effectively as possible.

– Customer service managers (I prefer the term “advocates”) rightly remind us that the customer is king and that our world should revolve around his or her needs and expectations.

– CEOs and CFOs scrutinize the budgets and forecasts, always looking for that “new” financial edge.

While each of these discussions is meaningful, we as an industry are overlooking one of the most alarming threats to our long-term growth and prosperity: our inability to convert new households into loyal mail order buyers. Today’s success is being derived from our analytical talents and operational capabilities. (Increased consumer spending isn’t hurting us, either.) Where we are lacking is in our ability and willingness to sell who we are and what we offer to the non-catalog customer.

Too many catalogers forget that our business model was born when Montgomery Ward and other pioneers served rural customers who had few retail alternatives. Then, in the megagrowth 1980s, we learned that metropolitan consumers had discovered the convenience we offered and that the typical two-income household viewed catalog shopping as an alternative to retail.

Into the early 1990s, we began integrating Federal Express into our marketing and fulfillment efforts; FedEx and other overnight shippers became part of the catalog industry’s last-minute retail equalizer and an excellent means of adding days to our holiday selling season.

But in 1999, many of us have become victims of the industry’s sophistication and success, and it is essential that we look not only to catalog leaders, but also to different breeds of direct marketers for new inspiration.

The Sea-Doo story

In the marine manufacturing arena, for instance, Sea-Doo is the world’s leading producer of personal watercraft vehicles (most of us use the term “JetSkis,” even though this is actually Kawasaki’s trademark). Though its industry already acknowledged Sea-Doo as a premier direct marketer and brand builder, the company realized in the mid-1990s that when you hold a 50% market share, it’s difficult to grow simply by improving response rates and becoming more efficient. Sea-Doo then began breaking “traditional” DM rules.

Like its competitors, Sea-Doo already advertised in every vertical boating publication imaginable, much as the catalog industry as a whole mails the same, no-brainer lists until the ZIP model has extracted that last dime of profit. Thinking outside the box, Sea-Doo first took its “Everybody’s dooin’ it!” ad campaign beyond traditional microtargeting boundaries and placed space ads in general boating publications. While this may seem like a minor step, more than one marine manufacturer questioned whether “serious” powerboaters would consider such a product and wondered why Sea-Doo would stray from its core market. Instead, Sea-Doo began establishing its personal watercrafts as “powerboat alternatives.”

The company then decided to create new-to-the-market prospects by selling them on the excitement of water sports. As part of its expansion efforts, it advertised in such general-interest publications as USA Today and Robb Report while also running commercials during televised sporting events. By reaching these households through new media, Sea-Doo ensured that its brand would be well positioned when prospects went shopping for watersports equipment. Moreover, the company also incorporated an 800-number (with automated information-request and dealer-locator capabilities) to capture prospects.

The only negative for Sea-Doo was beyond its control: An industrywide public relations crisis (personal watercraft vehicles are now banned on many waterways) recently reduced the size of its market. Nonetheless, Sea-Doo’s resourcefulness and creativity have enabled the manufacturer/direct marketer to build a brand that has since been extended to larger boats.

E-merchants grow their industry

Closer to our roots, online marketers are putting their marketing budgets to work not only to build their brands, but also to establish their core competency: Shopping is as easy as “point, click, ship.”

Online toys marketer eToys, for instance, recently ran an outstanding print advertisement entitled “A Tale of Two Elmos,” in which it compared buying an Elmo doll in a store to buying it online. The store process consisted of 12 steps, including such gems as “circle parking lot four times for parking space,” “lose one child in the Barbie section,” and “wait in long check-out line.” Better still, the 12th step, after driving home, was “remember you need gift wrap.”

In comparison, the four-step online process consisted of “turn on computer,” “go to www.eToys.com,” and “order Elmo,” before concluding with “Elmo is delivered, gift wrapped, to your doorstep.”

Not surprisingly, a number of catalogers are building solid e-commerce divisions. Look no further than Federated Department Stores’ acquisition of Fingerhut, and the latter’s contract fulfillment deals with Wal-Mart and eToys.

Mail Order 101

Meanwhile, catalogers continue to mail to the same house and rental segments, and even when we test and roll out successfully, we’re taking the short-term approach. Many of us need to enroll in E-Marketing 101, a course that was formerly known as Mail Order 101.

During the first five minutes of class, the instructor will reveal the punch line: An easy, enjoyable, and convenient shopping experience adds value! Then we move from classroom to laboratory, and the testing begins. We advertise in nontraditional media as Sea-Doo has done. We promote our service capabilities as eToys does. We rent compiled lists whose demographics make sense, and we sell those prospects on mail order, as does the automotive accessories mailer that rents lists of new Chevy Truck buyers – regardless of their mail order history – and sends them catalogs featuring their favorite brand.

Or we follow the lead of inflight co-op cataloger SkyMall and build a business by introducing customers to the benefits of shopping from its catalog while in midair. SkyMall promotes the ease of ordering from multiple merchants with one phone call and then offers a free inflight call to place that order, all while a passenger sits trapped in the “comfort” of an airplane.

Consistently, catalog industry growth rates have been double those of traditional store retailers, and virtually every study predicts continued success. The Direct Marketing Association expects catalogers’ share of total retail sales to grow from 3.3% in 1999 to 3.7% in 2004. During the same period, however, e-marketers are expected to expand their share of the pie from 0.4% to 2.5%.

Grouped together, these “convenience” sales will grow from 1999’s estimated year-end mark of 3.7% market share to a more impressive 6.2% share by 2004. With the profit-producing mail order households that have funded our growth so far beginning to grow weary, it is mandatory that we begin “creating” buyers by resurrecting or perhaps discovering the Law of Convenience. Then, by exceeding this group’s expectations, we create today’s ambassadors and tomorrow’s plan-beating “multis!”

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