A Chat With January's Profile, Brendan Edgerton, vice president of direct marketing, Crutchfield Co. (Text & Audio)
Catalog Success: Where are the headquarters of Crutchfield located?
Brendan Edgerton: Crutchfield is in Charlottesville, Va., which is just a little bit outside D.C. Kind of equidistant between D.C. and Richmond. Headquartered and founded here, ever since Bill [Crutchfield] started the company back in ’74.
CS: Were catalogs part of the business right from its founding?
BE: Yes, 1974 represents the founding of the company as well as our initial humble beginnings in catalog mailing. I think we went out the door with 5,000 books. And as Bill will retell, it was the start and almost the failing of the company in one fell swoop. The low response rate to that initial mailing stimulated him then reaching back out to customers and asking them directly: “What worked about this and what didn't?” And based on that feedback and that willingness on his part to go right back out to the market and understand how it worked out, they gave him enough feedback that his second mailing actually worked out. And the business kind of took off from there; but at its core, it's always been a catalog marketing company which has grown into a couple of retail stores here in Virginia, and then obviously a world-class Web experience as well.
CS: How many retail locations does Crutchfield have?
BE: There are two retail stores — one here in downtown Charlottesville and another over in Harrisonburg, Va. In addition to the two retail stores, the Web site came online in 1995.
CS: How do sales breakdown between the three channels?
BE: Catalog-generated sales are a little over 50 percent, and that represents about 45 percent of our order volume. So you can obviously see a higher AOV via that channel. The Web has grown to be the lion's share of inbound orders as an order-taking channel, but the catalog-generated sales are still hanging in there at about 50 percent.
CS: What percentage of sales does retail account for?
BE: Retail's a very nominal piece of the equation now. It's kind of funny because I've been here for about a year-and-a-half, and when you talk to people about Crutchfield locally, they think of us as the two retail stores. As a result, they kind of miss sometimes the fact that we're a national franchise … and have been so for a number of years. At about 6 percent of overall sales, retail's a nominal part of the order and sales volume here.
CS: How many times a year is the catalog mailed?
BE: We're nearly monthly with an issue. We have eight major book events, eight major thematic book events that we go out with that we change due to seasonality, product. Among those there are multiple versions of the catalog, so we're fairly specialized there — going after our car audio folks vs. our home audio and video folks. And then there's different page counts within that, but it crystallizes around eight major mailings, and then remails or supplements between those eight major events.
CS: What's Crutchfield's circulation total for the year?
BE: We tend not to publish that, but it's in the several tens of millions range. It's been a nice, consistent growth pattern for both housefile and prospecting circulation.
CS: Have you finalized circulation plans for 2009? Are you planning on increasing, decreasing or keeping circulation the same?
BE: As I mentioned, our versioning ranges from a large format that's as many as 244 pages, down to smaller formats that are light as 52 pages. Our plan would be to try and optimize the number of contacts and the breadth of audience that we can reach in 2009, probably through some form of scaling back page count as opposed to scaling back circulation. That said, like all of our catalog compatriots out there, we're looking at contingency plans relative to what will happen through the holiday cycle, etc. Our outlook is still good, we still think the catalog's a viable means of generating inbound calls to our call center, inbound traffic to our Web. And we're bullish on it. But just like everybody else, we've got to maintain efficiency levels there.
CS: How many employees do you have at Crutchfield?
BE: We're at a little over 550. That's comprised of headquarters here in Charlottesville, our distribution center's here, a second call center in southwest Virginia and the two retail stores.
CS: Are you able to provide an annual sales figure?
BE: As a private company, we tend not to publish that. I'd say we're healthy, we're growing. What's exciting there is the product mix change that we've experienced over the last several years as we evolve from the basics of being kind of a car audio enthusiast base into more of a player in the home, home theater, hi-def TV arena. That's been a nice product oscillation to watch develop.
CS: What's the primary merchandise offered at Crutchfield? Does this vary by channel?
BE: The most easy break in our product line is the car vs. home distinction. So if you think of car product as car audio, car video, MP3 and iPod accessories, GPS, that's kind of the basis for the business. It still represents the bulk of our order volume. However, the home category, and that's hi-definition TVs, higher-end home theater, home speakers, those types of solutions, even gaming we're offering now, that represents about 60 percent of the sales.
CS: What's the overall SKU count?
BE: We're a little over 8,000. That can flex, depending on time of year. I think we've had as many as 8,900 SKUs recently, but over 8,000 is a good benchmark.
CS: What's the average SKU count in a catalog?
BE: It will range between 300 in those lighter page-count books to as many as 1,200 to 1,400 in those big books, or master books, basically those are the compendium versions of the Crutchfield offering.
CS: What's the page count on one of the big books?
BE: Two hundred and forty-four, and I think our second version step down from that is 196. Those would be the typical large formats for us.
CS: What customer demographics does Crutchfield target?
BE: We're probably about 80 percent male population, mostly affluent, single-family homeowners. There tends to be within the overall Crutchfield customer base a cohort of 18- to 34-year-old folks who are skewing towards that car audio product, MP3, iPods, GPS, etc. And then another cohort of heavily engaged enthusiasts, home audio folks, who would tend towards the higher ends of our JL Audio, PS Audio, Klipsch type of stuff. So kind of two different product segments within there that appeal to two different age ranges. It creates kind of an interesting customer life cycle within the Crutchfield buyer file.
CS: Has this demographic remained steady over the years? Any noticeable shifts?
BE: We're broadly starting to get a larger female demographic to work in that home side of the business. The car business I think tends to stay steady with the do-it-yourselfer, the enthusiast, the person that's willing to put that extra effort into an after-market solution. But the home category kind of moves with the price point of the new products that are available, and as you move into categories like gaming or other peripherals that are designed to work with central storage systems and things like that, you definitely get into a higher and higher end demographic for the home audio and home theater side of the business.
CS: How did you get started in the catalog/multichannel business?
BE: I had probably a nontraditional start, although the more folks I meet in direct it seems like we all share kind of that multifaceted way to get into the business. I started off in Evanston, Ill. with a company called Herbert Krug & Associates, which was a small consulting firm. We were doing everything from circulation planning to list management/list brokerage, helping to acquire companies, helping to sell companies, and I kind of got to learn the business from the inside-out there. I was in Chicago in graduate school heading towards a degree in American Lit., I was teaching at Loyola, had my master's, was all dissertation, and came over to the dark side of catalog marketing as a way to support myself.
And the quantitative side of me started to get attracted to that side of the business; I saw how well direct marketing worked. I got to work with companies there from Crate & Barrel to U.S. Committee for UNICEF, the Art Institute of Chicago, so a varied client base. That was the start. From there I moved over to Crate & Barrel and worked with them directly, went down to Atlanta to work at Benchmark Brands, which was a health care direct marketer, and then did a stint on the B-to-B side of the business out in Colorado with Corporate Express prior to coming over to Crutchfield. So I've always been in direct, but I've been in different verticals, as well as both the B-to-C and B-to-B side.
CS: What month and year did you begin at Crutchfield?
BE: My anniversary will come up in December, so I'm just at that two-year mark here at Crutchfield.
CS: What kind of career path do you think you would've chosen if you hadn't gotten involved in the catalog/multichannel business?
BE: I was looking into editorial/copywriting, something where I could take those nascent skills as an English major and somebody who is interested in literature, and bring that over to an environment that was feasible from a business standpoint. I still have a passion for teaching and enjoy anything where I have an opportunity to work with folks either from an English as a second language standpoint or instruction in other areas. So there might have been something had I stayed in the academy, but I think I would've worked my way over into business one way or the other. It's funny, that first job was offered kind of as an 80 percent creative, 20 percent quantitative thing where I'd be using my skills to help write copy in support of the different catalog clients. And it ended up being heavy quantitative — circ management, metrics. So a little bit of a flip on the ratio that I got into, but it ended up working out just fine.
CS: What do you enjoy most about the catalog/multichannel industry?
BE: There's always an opportunity to learn something new. So even though we have some tried-and-true principles or best practices, the secret is the application of those to different business models. It's important to know when to lean forward and when to conserve in those different areas.
I love the idea that it's an instant gratification game. You don't have to figure out how your efforts are working. I would not be good in a world where I was hanging billboards on highways and trying to figure out the viewing ratio of drive-by or living with store intercept studies. I really enjoy the ability to execute a test, either online or in print immediately, and learn from your results. You need to kind of stay humble, because not everything is going to be a success, but then roll that back into a continuous improvement model. That's what's fun about direct — it's always, I think, moving forward and getting smarter as you go.
CS: And on the flip side, what do you enjoy least about the catalog/multichannel business?
BE: I think socializing with folks outside of the direct space, the power, the import, the impact of this … there's a lot of what I would call “lazy press,” that will identify that the print channel is no longer viable and they'll use certain metrics to sure up that assumption. Swimming upstream against that sensibility can be a frustration.
Other things that I think are interesting about our business is we tend to tolerate a certain level of mediocrity in our execution, and I mean this across the catalog industry. That often in times of economic downturns can come back and bite us, because that's when everybody runs out and starts focusing on optimizing their models or getting more efficient in the mail or conserving costs. And it's unfortunate that it takes those massive, winnowing out time frames to get people focused on doing this well. As an industry I think we have a lot to learn, there are some people who are doing a very good job with it, and the faster that we learn together the more viable our industry becomes and the more we can maintain consumer interest and a level of performance that we've come to enjoy over the years.
CS: What's the toughest challenge you've faced in your career in the catalog/multichannel business, and what steps did you take to overcome that challenge?
BE: I think the idea of channel integration, recently called channel conflict, is something that whenever you're at a new company, an evolving company or even an established company, you're going to be dealing with that oscillation of customers between your media types. I can think back to my Crate & Barrel days and the debates we would have about, “why have a catalog?” What is the efficacy of the catalog? Gordon Segal, who I think very highly of, would often challenge me about the way a catalog actually would place a constraint on good retailing, because you could source a beautiful product into the East coast, and the same product into the West coast and not worry about the dye-lot or the color change. But when you have a national catalog that you need to support, there needs to be consistency in your product line from coast to coast. So you're limited in what you can present in print to a national audience as you grow from being a niche retailer to a national presence. There was always that challenge there of, “How can we get the freshest, most relevant product into our stores, and then still support it through that behemoth of catalog production and circulation?” So that was a challenge, but kind of a fun challenge there as well because of the three channels.
Probably one of the bigger hurdles there was being able to defend and present a rationale for mailing books into our retail areas. Prior to me, that was a very undeveloped area at Crate & Barrel, and we were able to get people on board and do some creative testing and some very disciplined analytics around the performance of catalogs in retail store markets. It was probably one of the greater challenges, but also one of the greater successes. Because I know since then, while I was there and after, rolled out a very nice retail support program via the catalogs because they're able to understand its effectiveness.
CS: What's the best thing for you about working at Crutchfield?
BE: A company with still a healthy entrepreneurial spirit, good leadership, big enough to be established and credible and have the appropriate credentialing with our vendors, but small enough to be nimble and not reliant on large corporate boards or corporate debt in these tough economic times. Probably one of the things that I think is most unique about Crutchfield is that commitment to service both before the sale, during the sales cycle and after a customer has the product and is using it and enjoying it. I have not seen the commitment to supporting folks as they're making that decision in the consultative presales period to all the way through the use and enjoyment of the product anywhere else that's as evolved as it is here. Certainly a fallout from our core principles that are really focusing on customers’ expectations and delivering a very high level of courtesy, service and information to them.
CS: What's your personal approach to helping Crutchfield separate itself from its competitors?
BE: Strangely, some of it is maintaining a focus on the basics and the things that got us here. As much as it is an exciting time to go out and try new methods of acquiring customers, new methods of executing a sale, there are so many core components of doing good direct marketing, from acquiring the names and addresses appropriately, integrating your customer information across your channels, applying learning from things like Web analytics and other third-party tools that you can bring in to truly bring customer knowledge to the forefront of your marketing activities. I'm not pretending that we have the corner on the market on that at Crutchfield, but I think that reminding yourself that it's a customer game — the knowledge about the customer and the integration of that knowledge across the organization, whether it's your sales floor, your Web site, the catalog presentation, is just key. There are so many people who jump in thinking that, and then move towards either a product focus or a pricing model or some other method of conversion, and they kind of forget about the customer along the way. I try to keep that front and foremost in what we do here.
CS: What's been done at Crutchfield to offset the rising costs associated with mailing catalogs?
BE: If you'd asked me six to eight months ago, I was of the ilk, and I would share with our vendors, “We plan to mail through this. We're not going to make aggressive changes; there's not going to be a major tug on the wheel to the left or right of the road here.” We've been through these things before; we've been through four economic downturns. Fortunately with the strength of consumer electronics, the strength of our customer base, we've been able to rise from each of those downturns a stronger business on the back side.
Now, I think there are some components to the new economics of direct marketing that make it unfeasible for certain segments of your file or certain activities that had been able to endure lower costs. We're taking a good hard look at lots of different things. In addition to paper and postage, I think privacy is kind of that third “p” out there that's rearing its head right now, and something we all have to be focused on as mailers — those three constraints on the business. Obviously you get more efficient through things like co-mail. Hopefully more and more folks are taking advantage of those. You give up things that you might have embraced earlier, such as a unique trim size or certain basis weight. We do all those routine things to maximize efficiency. But I think order allocation becomes very important, too. While you're focusing on making the most economic vehicle work out the door, make sure your back-end systems are in place to measure all the value of that effort, because if you underestimate there, you'll make some bad decisions on the front end.
CS: With your outlook shifting in the last six to eight months, does this signify an increased reliance on online tools such as search engine marketing and e-mail marketing?
BE: In my area we balance the whole portfolio of SEM, SEO, our affiliate space, the work we do with price-comparison sites, reports up through me, so I kind of try to manage it as a portfolio. So if cost per new buyer is getting out of alignment in one area, we'll ratchet down spend there. I wouldn't say it's a movement right now of chips on the board where we're saying, “OK, X amount of spend is not going to catalog and it's coming over here to the Web.” I'd say it's more a matter of making sure the catalog works as hard as it can — whether that's through product density, controlling who we're mailing to, controlling the frequency of our mailings. Again, the focus will be on breadth but perhaps less on depth. There are new techniques I think to developing a print strategy that is synergistic with Web, whether it's unique 800 numbers, tracking codes that convert online, that type of stuff. I think the focal point for us will be on making sure we are allocating and measuring the performance of these vehicles correctly.
CS: Professionally, where do you see yourself in five years?
BE: One thing I'm enjoying know is some leadership in the community at-large from a catalog standpoint. So getting involved with the strategic advisory board with the DMA, helping to shore us up as an industry. I like that component of both advocacy, training, development across different companies of some core ways to cut back on costs, improve efficiency, get smarter about mailings … reaching out to the vendor community to do some of the same. So our printers, list providers, merge/purge shops. A theory I have right now is that if we allow direct to become a smaller piece let's say, or cataloging become a smaller piece of a customer's consideration, then we all lose together because customers are less trained or a catalog is less top of mind as a vehicle to get them either to a store, to a Web site or to a phone to engage somebody. It's kind of like a muscle that needs to be flexed fairly routinely. If less people are using that means, or less people become comfortable or familiar with that means to make their purchases, it atrophies over time. Certainly, has the role of print changed, has it evolved, will it continue to change? Absolutely. But I'm enjoying that part of the next evolution, and that is helping to shore up the industry as a whole and make sure that we are as efficient and as healthy as we can be on a go-forward basis.
Internally, I enjoy my role in employee development. I've always enjoyed that role of being a teacher. Because so much of direct is kind of an apprenticeship, there are courses you can take, there are schools that you can go to get an integrated marketing degree, but I think there's nothing like on-the-job to bring you forward in this industry.
CS: Is there anything you'd like to add?
BE: I guess I'd make one pitch to the folks who are going to read or listen to some of these comments online, and that is: While I do see a lot of people applying some very creative ways to continue to move their businesses forward, there seems to be a lot of alarm and apathy about what's ahead for both Q1 and Q2. Of course 2009 is going to be rocky from an economic standpoint, and we hope that consumers come with us. But I think the viability of the direct channel, if you look at the comparison of retail store sales and the amount that their traffic and volume is off right now compared to what's happening online, it bodes well. It shows us that when things are tough, people are going to go out and make decisions and do research and get involved with the Web site, get involved with the catalog. So, to the extent that folks can maintain the course and continue to move this line of business forward, obviously seeking out efficiencies and advocating where they can to help this business continue to be a choice for customers out there.
