Acquire New Customers... Without Spending $1K/M (1,696 words)

By Denny Hatch

Periodically I get phone calls from fledgling entrepreneurs who have great products and want to get into direct mail.

"What else have you got?" is always my first question.

"Wha ... what do you mean?"

"What other products?"

"This is my only product."

I say, "In the words of consultant Susan McIntyre: 'The key to long-term profitability is to build a large house list of repeat buyers.' That's true for any direct marketing business—catalog or otherwise."

"But don't you want to hear about my product?"

"What does it sell for?"

"Uh, $20, maybe."

"Test it in space," I tell the person. "Take a small space ad in a publication where you find a lot of response ads in direct competition to you and see if your product and pricing fogs the mirror."

"Fogs the mirror?"

"Breathes life." I add, "And stay the heck out of the mail, or you'll go broke!"

Jack Schmid's Dictum

In the 1960s, '70s and early '80s when postage and list-rental costs were more reasonable and the mail stream wasn't so glutted with competing offers, it was economically feasible to look for new customers by renting names and sending your catalog. Today, we're looking at $1,000/M or more to prospect, that is, to send catalogs out to cold lists. If you're lucky enough to get a 2-percent response (20 orders per thousand), each customer will cost you $50, which most catalogers can live with. A lower response means your cost per customer is correspondingly higher.

In 1995, catalog consultant Jack Schmid wrote:

You must have an alternate plan for reaching and attracting new customers. Believe it or not, there is life after list rentals. Successful catalogers realize that renting lists of mail-order buyers is but one of dozens of ways to find and attract new customers. Consider the following alternatives for building your customer list that don't require postage: magazine and newspaper advertising, referrals, package inserts, co-op mailings, television/radio, card decks, trade shows, credit card inserts, doctors' or dentists' offices, or public relations.

(And, in the six years since Schmid posited that rule, a new medium, the Internet, has taken hold.)

Lillian Vernon, John Peterman and The Sharper Image's Richard Thalheimer began their businesses by offering merchandise via small, highly targeted space ads. The C. Crane Co. advertises its radios and other survivalist merchandise on Art Bell's late-night talk show. Curt Strohacker of The Eastwood Co., a cataloger for automobile restorers, drives people to his Web site, fulfills quickly with a catalog and offers wonderful customer service.

A number of catalogers "surround" their markets, running space ads and TV and radio spots. Among them: Bose, Oreck and The Sharper Image.

Visit www.dogpile.com, the search engine of search engines, and type in "travel clothing." You'll find Magellan's and TravelSmith at the top of many lists, along with Birkenstock, Half Moon and Ex-Officio. This isn't a PR coup or favor returned; these search engines were paid for the listings.

Obviously, all of this is far cheaper than the buck a head it would cost to send an actual catalog. And presumably response would be better, since the responders are people who raised their hands to say they were interested in the offer.

Secrets of Off-the-Page Advertising

The beauty of a space ad is that it costs far less than mail, and you know within a few days whether you have a winner or a loser. The reason: Where direct mail dribbles out across the country, a publication with your ad in it hits everywhere at once: newsstands, subscribers' mail boxes, dentists' offices, airliners and libraries. What's more, if you can buy space in a regional edition, you can test for even less money; if it works, next time roll it out nationally.

Catalogers generally run two kinds of ads:

u They'll pick a popular item and then offer it for sale. Example: TravelSmith runs space ads of all sizes in many publications for its signature item, The Indispensable Black Travel Dress.

u They'll offer to send a free catalog, or send it for a nominal charge, say $2, that's refundable against a customer's first purchase.

Where to Start

The first step is to appoint an Alternative Media Czar for your catalog, someone responsible for: looking into all facets of alternative-media marketing, coming up with a testing plan, executing it and reading the results.

In researching space ads or off-the-page advertising, a trip to a major magazine retailer (e.g., Barnes & Noble, Borders, a large airport or train station) is in order.

Consultant Margaret Rose Roberts offers the following tips:

u Look for "editorial-fit" magazines that directly tie in with the nature of your product.

u Go with the medium with demographics most clearly matching your own.

u Look through these magazines for small (or large) response ads from your competitors, and go where your competitors go. Don't touch a magazine that has no response ads. For example, I recently read an issue of Forbes and found not a single ad asking for a response.

If you see ads from other catalogers, it means they've tested this publication, and it apparently works for them and may well work for you, too.

u Buy copies of all likely alternate-media candidates, and request media kits.

Roberts writes: "The price you pay often determines your long-term success or failure in space, so be prepared to bargain!" With most media, it's critical that you be prepared to bargain or have an agency that will do it for you. Your margin of profitability is determined largely by how much you pay for what you get.

See if the publication offers:

u A mail-order discount (up to 25

percent is common).

u A special test rate for new advertisers.

u Standby ad space (tests at the media's convenience can save you up to 50 percent).

u Last-minute remnant space.

Iris Shokoff's Rules

One of America's premier media consultants is New York-based Iris Shokoff. In my book "2,239 Tested Secrets for Direct Marketing Success," which I co-wrote with Don Jackson, we quoted Shokoff as noting: "Never buy retail: Only if you absolutely must have page 3 or page 5 of a major magazine should you pay full price. The reason: Virtually all magazine publishers and reps negotiate and will sell space at up to 60-percent off."

One technique: Hang back until the closing, and call at the last minute. Most magazines will take a space reservation up to 10 days after closing. Have the ad ready and the money set aside in your budget so you can move quickly and take advantage of a deal.

For budgeting purposes, start with a projected response of one order per 1,000 circulation, and work down or up from there based on experience.

Two Possibilities

The New Yorker, with a rate base of 800,000, frequently takes small ads from catalogers. For example, Hitchcock Wide Shoes for Men runs a 1-inch, black-and-white ad that costs $2,015 per issue (see page 32). If they run it 48 times, the price comes down to $1,632 per issue.

Another venue is the monthly "Catalog & Online Shopping" section of The Wall Street Journal that features 20 to 30 advertisers. Among them are niche merchants such as Masters Collection, Camping World, Pacific Aircraft, Seacraft Classic and Cedar Works.

I recently had dinner with a catalog owner. "The Wall Street Journal was very good for us," he said. "It more than paid for itself. Almost all the people we sent catalogs to became customers."

Ads in this section generally run 2.5 inches square representing 35 agate lines at $65.91 or $2,306.85 to reach 4.1 million readers.

Remember, unlike direct mail to magazine lists—which not only is expensive, but reaches only subscribers—a space ad also will be seen by newsstand buyers and people in waiting rooms and on planes. My advice: See what your competitors are doing and steal smart.

It Can Pay to Fulfill Quickly

One other point deserves mentioning. With feet size 8EEE, I used to order shoes from Hitchcock Wide Shoes for Men. But in the early 1990s we dropped off of each other's radar screens. When I moved to Philadelphia, I needed dress shoes quickly. I spotted a Hitchcock ad and called for a catalog. I was ready to buy on the spot. The phone rep took my name and address. I asked if she wanted my prior address since I had been a very good customer, and Hitchcock might want to know that. She said "no."

I waited and waited for my catalog. At a direct marketing show, I mentioned my dilemma to Boardroom's Brian Kurtz who said he, too, had wide feet and swore by cataloger/retailer Johnson & Murphy. I found a Johnson & Murphy store a few blocks from my house and have been buying shoes there ever since. (P.S.: My Hitchcock catalog did not arrive for six weeks.)

Tip: If you get a catalog request from any source, fulfill it quickly; the prospect may be eager to spend money with you. Fulfillment can be done economically through companies such as QuikPak, Indianapolis, a mailing house that will store your catalogs. Send them your requests electronically, and your catalog will be in the mail to prospects that day, or at most, the next business day. QuikPak employs co-mingling technology and flies catalogs to every U.S. Postal Service sectional center facility in the country every business day. So your book will be in prospects' hands in five to seven days of QuikPak receiving the order—at a cost of about 25 percent less than First Class Mail.

One more important point: Key the label by source, and track results by conversion all the way through to lifetime value.

For more information:

n Iris Shokoff, (212) 295-9191, x23;

n Margaret Roberts, (870) 431-7729;

n The Wall Street Journal Catalog and Online Shopping, claudia.nelson@dowjones.com;

n QuikPak, (800) 447-7791

Denny Hatch, consultant and freelance copywriter, founder of Who's Mailing What! (now Inside Direct Mail) and former editor of Target Marketing, is the author of "Method Marketing" and "2,239 Tested Secrets for Direct Marketing Success." He can be reached via www.methodmarketing.com or by e-mail: dennyhatch@aol.com.