A CEO’s Guide To Modern Catalog Circulation, Part 2 of 3

In the second installment of my three-part series on the evolving role of catalog circulation in today’s multichannel environment, I’ll continue my discussion on the types of audiences catalogers must segment by examining online-only customers and lapsed customers (those who haven’t purchased in more than a year). These two audiences comprise my second concept of audiences. Last week, I identified those customers who always order via the phone/mail channel and those who’ve purchased both online and via the phone/mail during the past 12 months.

Here are tips on how to contact these very audiences in 2008 and beyond. (For part 1, see A CEO’s Guide to Modern Catalog Circulation, Part 1 of 3.)

1. The online-only audience is a tough nut to crack. Some order because catalogs were mailed to them. But plenty of others order from online advertising, natural and paid search, e-mail marketing, shopping-comparison marketing, affiliate marketing or blogs, and/or any combination thereof. If a catalog keycode is attached to orders, the segment is likely to perform similar to the multichannel segment. If no catalog keycode is present, this audience may not seem responsive to catalogs at all. Yet, if you mail this type of customer repeatedly, you’ll find that a matchback analysis will always say the catalog is responsible for the order. The difference between mail and holdout test groups determine what’s really happening.

2. Lapsed customers. This audience hasn’t purchased in more than a year. Mail and holdout groups help one decide the appropriate strategy for marketing to this group.

The performance of each audience is likely to be very different, and what motivates each audience to purchase is very different. The phone/mail customer may be an older or rural customer. The online customer may be younger and suburban. These differences in demographics require different marketing strategies, even different catalog merchandising and contact strategies.

Contact Strategy
The DNA of catalog contact strategies changed over the past decade. Ten years ago, the catalog was your store. If you didn’t feature an item in a catalog, the item generated virtually no sales.

Today, the catalog serves two purposes: For phone/mail customers, the catalog is still the store. For multichannel and online-only customers, the catalog is the inspiration that drives them to the Web site to buy something.

This means your contact strategy can evolve. It has become critically important to test different page counts. For instance, is 64 pages just as effective as 128 pages at driving sales to the Web? The CEO should demand the circulation team tests different page combinations to different audiences, closely monitoring the incremental increase in sales in all channels at higher page counts.

Constant Recruitment
In many cases, the online customer has a lower annual repurchase rate than the phone/mail customer, so the online channel must constantly recruit new customers. This can be done by mailing catalogs. However, acquisition activities are best managed with smaller page-count catalogs, those featuring best-selling products and best-creative presentations. These catalogs can be created at peak acquisition periods to maximize customer-acquisition activities.

Lastly, it’s no secret that catalog mailings are becoming very expensive. Remail catalogs previously offered great opportunities to mitigate costs. Today however, catalogers are better served by creating new offerings and avoiding the 30-percent to 40-percent productivity hit that occurs with a remail catalog.

Next week in the third and final installment of this three-part series on catalog circulation, I’ll focus on how obtaining prospect names from co-op databases can affect your merchandising strategy, as well as the CEO’s role in catalog circulation.

Kevin Hillstrom is president of MineThatData, a consultancy company focused on database marketing. He can be reached at kevinh@minethatdata.com .