PRESIDENT'S CORNER FEATURE ARTICLE CASE STUDY CIRCULATION TIP CREATIVE TIP MULTICHANNEL TIP CLIENT HIGHLIGHT—GAELSONG EMPLOYEE SPOTLIGHT—ALLISON BAUMHEFNER NEWS BRIEFS
OPPORTUNITIES TO LEARN AND GROW
PRESIDENT'S CORNER Recently, I was interviewed by a firm hired by the USPS to explore the role and future of the catalog in America. This was a tough question since I’ve heard such extreme opinions on the issue. On the one hand, there are those who predict the wholesale demise of cataloging: “Gen X should keep catalogs afloat as an effective media for a while longer but Gen Y, because they only read electronic media, will make catalogs obsolete.” However, others maintain that catalogs continue to play a unique role that will ensure a strong and vibrant industry. While I suspect that either position is somewhat unrealistic, I personally believe that catalogs will remain an important component of multichannel marketing. Catalogs and other forms of direct mail will continue to be the most effective form of “push” marketing because they are targeted and accountable. By push, I mean that it is proactive, intrusive, educates the consumer about products and creates desire. In contrast, retail stores and websites are “pull” marketing and passive. The consumer must travel to the store or log on to the website already knowing what they want to purchase. As an entrepreneur, I operated a multichannel business with retail stores and a catalog. Every time I opened a retail store, the response rate to my catalog dropped by 50% in the store trade area. While it was tempting to simply not mail the catalog in store trade areas—like many other brick and mortar retailers—I viewed the catalog as effective store advertising. If I could get the catalog to break even in the trade area, I deemed it highly successful—it was free advertising that drove traffic to the stores where I made my profit. It reached consumers in the trade area who otherwise would never have gone to the mall and seen The San Francisco Music Box Company. I like to look at e-commerce as just another retail store. It is open 24/7. If you need something, you “go to the store.” If you do not know where the store is, you “go to the yellow pages”—Google. The retailer reaches out to you via email and banner ads not unlike newspaper ads and billboards. Just as I used a catalog to drive traffic to my stores, the catalog is today an effective driver of traffic to websites. The lessons from this analogy are important: First, the catalog should be constructed with the express purpose of driving web traffic—lots of “bells and whistles” to encourage shopping on the web, as well as presentations of new product. Simply pick up a Costco monthly mailer to witness a brand builder and store/web driver! Second, expect lower response rates from your catalog—in effect, they are all mailed into “store” trade areas. Most spontaneous sales from existing customers on your website or those from emails are cannibalized from what would have previously occurred when you mailed a catalog. So attribute a portion of the catalogs’ expense to brand building and general advertising. Many store retailers have cut back on their catalog programs only to find that over time, sales diminished significantly in their stores. So, will catalogs be viable in the future? While much of Generation X and Y may prefer pure electronic media, there is a portion that will respond to a catalog—a highly targeted “push” mailing that has a physical presence with a shelf life. Keep in mind, only 20% of the baby boomer generation drive 80% of catalog sales (the others prefer brick and mortar stores). I suspect that 20% of X and Y will still read something on paper. However, be prepared to appreciate the highly synergistic relationship that will exist between catalogs and internet that defies strict attribution of sales and cost accounting. Also, stop thinking of your company as a “catalog company.” A truer description is that you are an e-commerce company that uses a catalog as an important advertising medium to drive traffic to your “store.” FEATURE ARTICLE Uncertain times like the ones we are in right now cause us to re-examine our marketing strategies, questioning each element. Those of us with catalogs in our marketing mix are constantly confronted with the question of their viability as marketing media—“Is our costly catalog finally dead?” we ask. While asking questions and challenging the status quo are healthy processes, I also see a lack of resolve and a level of indecision on the part of many leaders and entrepreneurs that is alarming. In times of uncertainty, the best approach is to examine fundamentals and ensure that we are addressing the foundation of our business’ competitive position. The drivers of our customer relationships should be at the top of the list. Key to this is not overcomplicating. Truthfully, understanding all of the drivers of consumers is exceedingly complex. But, the fundamentals are limited in number and don’t need to be made complex. That will get us 80% of where we need to get, and we use our intuition for the remainder. THE BASICS The foundation of any business (after ensuring that it has adequate financing) is its relationship with its customers. We fill a want or a need in a convenient and rewarding manner, and then enter into and cultivate relationships. These relationships are based on the merchandise we sell, our marketing channels and how we touch our customers, and what our brand represents. Merchandise and The Offer For example, if our products target new truck buyers and new truck sales have collapsed, it is time to shift emphasis. Can we add products or reposition them to appeal to current owners wanting to extend the appeal of their trucks, or to buyers of used trucks? If our assortment is décor meeting the needs of McMansion buyers, should we transition to products that fulfill the desires of homeowners that are downsizing? Can we entice our loyal customers with these, satisfying the desires they had before and their want or need to feel that they are economizing? If we offer high-priced cosmetics or skin care, can we appeal to our buyers’ need to feel they are economizing by creating a lower priced brand that offers some of the benefits and still feeds their need for self-indulgence? Examine your target market and write a short list of how your buyers may have adapted to the current climate. Then identify two approaches you can take with your assortment that either repositions it or adds products that meet the changed wants and needs. Conduct a price point analysis to see how your buyers’ behaviors have changed during this downturn in the economy. Measure the number of items offered by you and the number and dollar volume purchased at various price point brackets ($0-10, $11-25, etc… as appropriate for the range of pricing your goods have). Compare the same season last year to this year. Consider using promotional approaches that preserve the value of your brand and offer. Be cautious about simply reacting with discounts and promotions. If part of your positioning is to be a discounter, then it is appropriate. For others, while this can be an effective short-term strategy, it will change your brand and the kind of buyer you appeal to. Instead, try “Free gift with purchase,” which preserves your price points. “Free Shipping” is a better alternative to 15% off if you have to sustain it for some time—at least it preserves the value of your products. Marketing Channels and Touch Points Customer Life Cycle. Michelle Farabaugh wrote an excellent article on the customer life cycle (LENSER Newsletter, July 2009), discussing the differences between your customers at various stages in their life cycle and how you should adapt your marketing to each stage. We can characterize our customers as:
Examine your marketing strategy and make a list of the efforts you make to address each point in the lifecycle. Here are some ideas: Prospect. Customer acquisition is an important part of you marketing strategy. Without acquisition feeding your buyer file, your business declines. If you are unable to attract new customers for some time, you begin the tragic “death spiral,” where your buyer file, which provides your main source of profitable business, declines at a faster and faster rate. To improve customer acquisition, immediately start implementing search engine optimization best practices. You cannot afford to be in the direct business without effective search engine visibility. The equivalent would be to open a store without signage in a location that is hard to find. Paid search is not the be-all, end-all. It certainly helps, but getting natural search first page positioning is the most important. Prospect with catalogs to your 12-month contribution breakeven. While prospecting using catalogs has gradually become less cost-effective, the value of buyers acquired through catalogs is consistently higher than those acquired through other channels. Evaluate the contribution of buyers during the first 12 months after they are acquired, and prospect to that level. Consider developing a prospecting catalog. Putting a different wrap on a catalog, or creating a smaller. less expensive piece to use for prospecting may work for your market. Try these approaches, but be sure that you test them against a control. Tryer. As you develop your contact strategy, it is critical that you differentiate your approach to tryers, focusing on retention. Conversion of one-time to multi-buyers should be the highest priority you have in managing your housefile. Develop a contact strategy triggered by the initial purchase event. The best time to engage a new-to-file buyer is right after their first purchase. Presumably, you have done a great job of delivering a product that beats their expectations (in both quality/value and delivery!), and the tryer will see you in the best light possible. What a great time to make another sale! Develop a series of contacts triggered by this purchase that include:
Buyer. The most profitable names you have are those who have developed a relationship with you. Catalog mailers know that they can mail active buyers and get good response. The key to generating repeat purchases is to treat those buyers in a manner where they feel special, that you recognize who they are and what they want. Use personalization technology on your website to tailor content to buyers. By using tools that are readily available, you can ensure that your buyers are presented with relevant content and recommendations. Create a special insert for your mailings, and special loyal buyer emails. By showing your buyers they are special, you will strengthen your relationship with them dramatically. This can be done with inserts, emails to buyers only or events (sale previews) that are selectively offered to them. Leverage your database. The great thing about buyers is that you have lots of information about their behavior and preferences. Leverage this by creating offers that target them based on this information. By focusing on their past purchases, you can tailor emails, catalog covers, and even postcard announcements specifically to who they are and what they like to buy. Identify the latency between purchases and use this information to time contacts to accelerate additional purchases. Advocate. This is the level of customer you are rewarded with when you do a great job of developing loyalty. Advocates are not only your best buyers, they are also the best source of referrals of new buyers for you. Recognize advocates. Cabela’s recognizes their best buyers with an annual hardbound catalog. Others recognize them with holiday gifts, a personal letter or an email from the CEO. Loyalty programs often offer premium levels with added benefits. The point is, if you recognize and thank your advocates, they will continue to active. Restarting the cycle—reactivation. At the end of the cycle, if a buyer has become dormant, you need to develop a reactivation strategy. Reactivation is a lot like acquisition, except that you know more about the buyer. So, a similar approach works. Create reactivation offers. Using the information you have, develop offers based on past purchase history that will entice a lost buyer to come back into the fold. Don’t forget what brought you to where you are. It is critical that we don’t lose sight of how we got to where we are. Completely abandoning a strategy is rarely, if ever, the right choice. Your brand is your identity. It is exceptionally important that you continue to support your brand across all channels, not just with creative, but with merchandise choice, pricing strategy, and in the way you treat your customers. If high quality products are what have distinguished you in the marketplace, don’t be too quick to abandon them. After all, do you really want to compete solely on price? With Wal-Mart? If you feel you need to have lower pricing, consider developing products with some of the features of your more expensive products, but retaining high quality for the price, and position them as such. SUMMARY The key to surviving uncertain times is to go back to your fundamentals. Adapt and transition your contact and merchandising strategies; don’t abandon them. Be true to your brand. Play to your competitive strengths. Test when you change. In short, reassess but don’t abandon what you do best. And don’t forget, indecision results in lost opportunities. Keep moving forward with your eye on the ball.CASE STUDY Refer to the graph below, which is real data from a LENSER client. It would be hard for anyone to argue that the catalog mailing has no effect on internet sales, when there is a clear spike in orders directly following the catalog in-home. This helps to prove that many orders that are placed through the internet are in fact catalog orders. By the same token, not all orders placed through the call center can be considered catalog orders, since you can see a small spike in phone orders when the second promotional email is sent out.
This type of reporting can also be useful in identifying additional sources of orders that may not be getting properly allocated. In the example below, it’s clear that the campaign that was meant to be a retail driver in fact drove additional sales through the internet channel, but had no effect on the call center. This also reveals that the catalogs (black vertical lines) are helping to drive affiliate orders as well, since we see a small spike in orders after each catalog gets in-home. This is important, as many internet managers will argue that affiliate orders should not be included in the transactions that are allowed to match during the matchback process. This reporting would prove otherwise.
In another example, I was working with a multichannel company that had several retail stores in addition to the direct business. During the core season, there were a series of catalogs mailed to drive direct sales, but the impact on retail was never taken into account. When providing the order data in this same format, for orders placed at retail only (not matched), it’s obvious that a great deal of the retail performance results from the catalog marketing. After each catalog drop—which was not optimized for retail and didn’t include any known retail customers—there was a significant spike in orders. This was happening unbeknownst to anyone in the company. With this simple tool it became clear that the catalog marketing team needed to take into account the effect of the catalog on the retail channel.
The examples included in this study were from three different companies that are selling in completely different industries, so we shouldn’t worry that this specific behavior would not translate to any company selling direct. By simply graphing out orders by week, by channel and overlaying the marketing communication, it’s easy to quiet the naysayers who claim that the catalog efforts have no effect on internet or retail performance. It also helps to identify other marketing efforts that may be driving unintended orders, such as the case where the email promotion drove phone sales (example 1) and the retail driver drove internet sales (example 2). So the next time someone asks you, “Why are we still mailing a catalog even though we’ve got stores and a website?” back up your answer with some good old-fashioned data. Your sales depend on it. CIRCULATION TIP A few years ago, when catalogs fell from the sky and everything was prosperous, the traditional RFM (Recency-Frequency-Monetary) ideology seemed to work well. We still use the traditional RFM method for our clients’ circulation planning, but increasingly companies need greater insight in order to increase performance and mail with more surgical precision. So what other variables might you use? Some ideas on how to expand your RFM—to “RFM++”—could be to segment your file by gender or type of product category last purchased. More often than not, channel of origination is key to understanding behavior and whether or not a particular name deserves a catalog contact. Building your circulation plans around expanded RFM gives you a better idea of who your top performers are, which will then allow you to mail more effectively. For example, say your buyers last year performed at $1.50 per book. If this year you were to break out your segmentation and mail based on RFM++, you might see your internet-sourced buyers performing at $1.00/book vs. your catalog-sourced buyers who come in at $2.00 per book. Understanding this behavior will allow you to build next year’s circulation plan with the confidence that you can mail deeper into your catalog-sourced buyers than your lower performing internet-originating buyers. Although this may not be possible for every client, we recommend that you check with your e-commerce platform to make sure web transactions are embedded with the proper source information. In addition, appending matchback status (catalog-matched or true internet-sourced) onto your customer file or marketing database will make you more knowledgeable about your customers and allow for better ROI. CREATIVE TIP While this topic—that is, brainless web design—is something one could write an entire book on, I’d like to focus on one of the simplest and most easily remedied problems in the web world: lack of understanding of color and typography. I’m amazed at the number of sites I go to where the type on the site is light gray, orange, pale green and even yellow. So I’ve put a small diagram together here to give you a quick lesson on what makes something easy to read. Before I go further, I should quickly revisit some of my earlier articles on legibility and response. The human eye is enormously sensitive to contrast—it seeks it out. On the other hand, it is over 2000x less sensitive to color changes—and this is where the problem lies. When your prospect or customer can’t easily read what you’ve written, their comprehension goes way, way down. And this is when we lose them. We fail to make our case for why they should buy this from US. And the other site—the one that’s easier to read—is the one they’ll most likely buy from, because that is the message they remember. So…now check out my diagram with color and type. You get into darker colors like red or blue, and put black type on them, and the contrast is much lower. You can read it, but not without some work. The white type on the black background (we call this “reversed out”) gets high points for contrast, but for more than a violator like a dot whack it’s an annoyance that chases customers away quickly, according to all studies done on this topic. The more type you set in white on black or another color, the worse it gets. The red block with the green type is the one that makes your eyes seem to ‘wiggle’—that’s because the green and the red are both the same value of dark to light. This is intriguing in a painting if done with some limits, but amazingly annoying to people trying to read. I know it’s too late for most of you who did your catalog covers using green type on a red background, but, knowing this, at least you can fix your website before the bulk of your holiday customers come to visit. Just seeing that and staring at it for a few seconds gives you the idea of how bad it feels to read it. Those who use cool and subtle treatments like pink on light blue, or white on a pastel…well, you can see how successful that is. And I can’t tell you how many white on pastel headlines I’ve seen this year. In a world where others are making their sites and their emails easy to read, this is a complete loser. Your designer may be in sheer bliss over how tender and lovely it is, but your customer is not moved, because it’s too hard to read. And then, consider your older market, who may have lost some degree of their color vision. It’s even harder for them to read what you’re looking at now. And let’s not forget, this is an audience with time to shop and money to spend. Do you really want to alienate them? We humans are smart enough to pare away the things in our lives that are too difficult, unless we really want to do those things. And reading copy and headlines on a website is very, very low on that list for all but a few of our most loyal customers. So if you’re trying to figure out how to improve your bottom line, it’s time to take a good, hard look at your emails and websites, find what’s hard to read and fix it now. Making your site and emails easier to read truly is one of the least costly and most effective ways of increasing your sales.MULTICHANNEL TIP
Uncovering these “unknowns” will help you improve your overall forecast, both in accuracy and attainability. CLIENT HIGHLIGHT—GAELSONG While trekking around Ireland in 1986, Colleen stumbled upon some beautiful, well-made, and incredibly cheap Celtic knot earrings in a store. Though at the time she had no clue what she’d do once she found him, she began a mad search across the Irish countryside and through tiny hamlets looking for the jeweler. When she finally located him, she bought out his entire stock with a cash advance from her credit card! Back in Berkeley, California, she set up a table at a local flea market and sold each pair of earrings for $2, but quickly realized when that batch sold out that she’d been undercharging. Needless to say, she raised her prices, and continued to sell out of the unique items she’d brought back from Ireland. “Starting with that first experience and continuing through my years of selling products at Renaissance Faires and Irish and Scottish festivals, I learned by doing. Definitely it was trial by fire!” Colleen says. After moving to Seattle and starting the GaelSong catalog in 1993, the business continued to slowly grow into something bigger and more multichannel. Colleen had been attending the Annual Catalog Conference for years, encountering little that was applicable to her very small catalog business, when she happened to catch the tail end of one of John Lenser’s sessions at ACCM 2006…and was captivated. “He gave us a formula for determining how many catalogs to put in the mail,” enthuses Colleen. “I was amazed! Before that, I’d decided how many books to mail based on what kind of capital I had available, but this really struck me as the more sensible approach.” She approached John after the session and shortly thereafter decided to work with LENSER toward greater growth. LENSER Partner Geoff Wolf, who works closely with GaelSong on their plans for growth and profitability, had this to say about Colleen and the business: “Colleen is an example of a truly passionate entrepreneur who has built a very successful business through years of extremely hard work and good ol' common sense. We are thrilled to be able to partner in taking GaelSong to the next level." Be sure and visit www.gaelsong.com to check out GaelSong’s collection of unique, Celtic-inspired gifts, clothing, jewelry, accessories, home décor items, books, and CDs, and to request a catalog.EMPLOYEE SPOTLIGHT—ALLISON BAUMHEFNER Allison had been on LENSER’s radar for a few years, but until 2008, the timing had never been right. However, after taking a year off to travel and bicycle through North America with her partner, Mike, Allison was on the market again and we wasted no time in reaching out to her. In her tenure at LENSER so far, Allison has tackled new business initiatives by overseeing and managing the LENSER marketing database program. “Due to Allison’s background in developing and implementing databases,” says Vice President Michelle Houston, “she has a natural ability—as well as the intellectual acumen—to smartly bridge the left and right to find the best solution for each client.” For many years, while living in Southern California, Allison could be found up in the air, hang gliding. But when she moved back up north, she soon found that she could leave her house and be out on the mountain and on her bike in minutes, having just as much fun without the hassle. Allison recently completed an intense three-day, 150-mile mountain bike race in the mountains of central Oregon. In her words, “Huge vistas, hardest three days of riding in my career, and big fun!” As you can tell, Allison is not your typical “ride through the park” kind of gal! To learn more about Allison, please visit her bio.NEWS BRIEFS
OPPORTUNITIES TO LEARN AND GROW
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Since you’re reading this in a digital format you’ll have a chance to see this demonstration in the environment in which the biggest transgressors are practicing their trade—online. The digital nature of a monitor, and the resolution thereof, takes what we know to be already bad practice with regard to reading and understanding website content—and makes it even more dramatically detrimental to the cause.
When we heard the story of how Colleen Connell founded GaelSong over twenty years ago, we couldn’t help smiling. It’s always fascinating to hear how our clients began their businesses, and Colleen’s tale was no different.
For Allison, the big benefit of the marketing database project is helping LENSER clients market smarter. “It's really the way all direct marketing should be done because it is so much simpler and more useful, and I am excited about making it work.” She adds, “Simple business questions are all easily answerable in a marketing database environment, but complex without it. This allows users to align all the marketing channels so marketers can know what combinations of marketing efforts actually do—instead of guessing. It's also great to slice and dice data to come up with improved segmentations and analysis for all business audiences, including merchants. Most of the time it’s impossible to link customer behavior to product purchase and really get useful reporting out of it. Marketing databases allow you to do that.”