10 Statements a Catalog President May Not Want to Hear

We’re all guilty of occasionally hearing only what we want to hear. Sometimes we don’t want to face facts. Rather, we want to think what we want to think. We tend to do what’s comfortable and put off dealing with the issues at hand.

In this article, I’ve identified 10 things you, a catalog company president, probably don’t want to hear. (Or if you report to a president, tear out this article and put it on his or her desk.) Listen to these cold, hard facts.

1. Your company won’t grow if you don’t prospect more. Invest in new buyers. You’re not always going to find enough good lists to enable you to prospect at or above the incremental break-even point. To grow, you need to prospect to lists performing below breakeven. That’s not to say they’re bad lists. Rather, the payback will be longer, requiring you to make an initial investment.

How much longer? My rule of thumb: Look for a one-year payback on any investment you make in acquiring a new buyer. This can vary by company depending on margins, tolerance for risk, growth rate expectancy, etc.

Mr. Catalog President, it’s not possible to grow your catalog business by limiting prospecting to only those lists that generate a positive contribution to profit and overhead. It costs money to prospect and to grow a catalog business.

2. You should be renting your list to other qualified companies. I’m still surprised by the number of catalogers who don’t want to rent their housefiles.

According to a leading list management firm, about 10 percent of all consumer catalog companies, and an estimated 25 percent of all business-to-business (b-to-b) catalogers, don’t rent or exchange names with outside companies. If yours is a consumer catalog, there’s no reason not to rent your housefile. For b-to-b catalogers, the decision to rent may be more difficult. It’s tougher to reach b-to-b buyers; therefore your list could be more proprietary than someone else’s. But if the offer is non-competitive, why not rent?

Catalogs that don’t rent their housefiles, in more cases than not, are hurting only themselves. They’re not protecting their customers from mailbox clutter. Rather, they’re missing out on extra income.

Mr. Catalog President, your customers enjoy receiving catalogs. They’re mail-order buyers, and many are active buyers. You can generate extra bottom-line income from the rental of these non-unique buyer names.

3. Joining the cooperative databases is critical to your growth. Consider the impact on your housefile of cooperative databases such as Abacus, I-Behavior, NextAction and others. There’s a strong probability that a high percentage of your customers already are on one or more of these co-ops. In fact, Abacus says it has more than 95 percent of all catalog buyers on its database.

Your customers are being mailed regularly, regardless of whether you rent your file. So you’re not protecting them from receiving catalogs simply by not participating in a co-op.

Mr. Catalog President, excluding the use of co-op databases hurts your growth potential. Chances are good they’re not just “your” customers.

4. If you rent your list to competitors, it should be on a reciprocal basis, so you also can benefit from using their lists. Consider a mail-date restriction if necessary. Don’t let a competitor use the file prior to the mailing of your catalog. Your catalog should be in the mail first.

Also, monitor and control the exchange balance. Once again, if you elect not to rent to competitors, there’s a high probability many of the names will be selected for mailing if the cataloger mails prospect names selected from a co-op database.

Mr. Catalog President, you have just as much (or more) to gain from renting your housefile to a competitor, since it can get these same names through one of the co-ops regardless.

5. A successful catalog depends on three things: merchandise, merchandise and merchandise. Fresh, new merchandise is the key to growth. Keep in mind the one-third rule: one-third of the products are winners, one-third are so-so and one-third aren’t cutting the mustard.

Mr. Catalog President, your merchandise may not be fresh and exciting. You may be picking too many past items. At a minimum, replace the products that are real losers.

6. Growing a catalog business takes adequate funding. The cash flow of your business is determined, to a large degree, by the rate of growth. Postage is paid up-front, inventory is purchased, etc. Serious money is required. However, trying to grow too fast can lead to financial ruin.

Mr. Catalog President, be realistic about growth expectations — base it on what you can afford. You may not have the funding to grow as fast as you’d like. What’s more, there might be a disconnect between your plan for growth and your cash flow.

7. Matchbacks are crucial. Every week when you look at the source code report, do you get the feeling that your traceable catalog demand is declining? For example, the housefile that once did $2.25 per book now is doing just $1.70 per catalog.

Unless you do a matchback, you have no way of knowing how much of the demand that’s going to the Web should be credited back to your housefile (and prospect) mailings. In a recent matchback for one of our clients, about 70 percent of demand going to the Internet was the result of a housefile mailing. Mr. Catalog President, if you’re wondering what’s missing, it’s the Web!

8. Face it, your prospecting universe is limited. Most catalogers want to grow. But they don’t always consider that the universe of mailable names may be limited. The more niche the catalog, the more limited its growth.

Mr. Catalog President, your planning must be based on mailing universe counts from the core prospect lists you’re using. Your desire to throw out growth projections is well intended, but it needs to be supported by marketing and circulation data.

9. Don’t reduce your print quantity because of an increase in Web orders. Here’s a typical scenario. Catalog circulation was increased by 20 percent. Traceable catalog sales are reduced 5 percent, while Internet demand appears to be up 10 to 15 percent.

The conclusion you might draw: Your catalog was ineffective. The catalog is the biggest driver of traffic to the Web. For one of my clients, we recently attributed about $2 million of demand from $3 million of Internet revenue back to a specific catalog source code. Mr. Catalog President, how do you think those buyers got to the Web? It was the catalog that drove them there.

10. You’ve peaked! Now what? Even when there seems to be an endless number of potential customers, it gets narrowed down by the size of your market, the number of catalog shoppers within that market, your competition and other factors. At some point, your business will mature, and it’ll be more difficult to maintain the same growth rates.

Mr. Catalog President, there are a few ways to overcome this: Create promotional offers, using modeling to improve performance, and circulate smarter. But if you’ve peaked, circulation strategies may not be enough. Open and/or expand your market. Create spin-off catalogs. Change your creative for a stronger and/or broader appeal. Or expand your merchandise offer to grow your demographic universe.

Conclusion

Set realistic expectations, and listen to — and solicit — input from others. Hear people out, even when their opinions differ from your own. Be willing to change and try new strategies. By working as a team and listening to others when you really don’t want to, you can have a successful catalog company.

Stephen R. Lett is president of Lett Direct, a catalog consulting firm specializing in circulation planning, forecasting and analysis. He can be reached at (302) 537-0375, or by e-mail via his Web site: www.lettdirect.com.