Can Catalogs Be Replaced With Only Internet Marketing?

By Jim Coogan

The question is as old as the internet itself: Can’t internet marketing simply replace the expense of printed catalogs? The answer remains an emphatic no.

Here are some reasons why internet markting can’t replace the expense of printed catalogs:

Overall catalog circulation is expected to increase very slightly in 2016 compared to 2015, with a trend toward smaller page counts. The catalog printing data coming from RISI, which monitors paper consumption across industries, shows that catalog volumes remain steady year-over-year and would actually increase more except for the potential for slightly higher postage costs.
Catalogers need to test the difference in sales between mailing a catalog and not mailing a catalog to their housefile. Savvy catalogers will quickly learn from this type of test that catalogs produce a very defined incremental layer of sales that are simply not realized when the same RFM segments do not receive a catalog. Testing shows precisely how much sales are generated as a result of the catalog vs. the sales that are realized without the catalog.
The internet doesn’t cost effectively supply the lifeblood of direct response businesses, which are a steady flow of new buyers. Catalogs provide new buyers through prospecting to rental lists. The catalog business model is to bring in new buyers at or above breakeven, and then make the lion’s share of profits from mailing the buyer file. The internet simply hasn’t been able to deliver enough profitable new buyers. Catalogers need to track the number of new buyers that are coming purely from the web. This is easy to do by looking at those new buyers that aren’t coming from the mail files that received a catalog.
A major problem many catalogers are experiencing is that customers who are coming from the web simply don’t convert into profitable house buyers. Why not? Many catalogers’ flows of new buyers are from affiliate relationships, and those customers are either loyal to Amazon.com, eBay or they’re simply buying based on price and aren’t loyal to any brand. Catalogers are segmenting their web buyers and tracking their profitability, and so far have seen greatly diminished response rates to follow-up catalogs.
Direct response marketing via paid search, Facebook and Google is simply too expensive for most catalogers, and therefore is both unprofitable and not scalable.
Emails have proven profitable at harvesting demand because consumers are increasingly demanding the best and most recent promo offer. However, keep in mind that emails don’t create demand; they’re simply evolving into the best way for you to keep promotions in front of your customers.
Catalogers who have tested holding out catalogs to their buyers and relying on emails only for sales see that top-line sales revenue quickly falls off the cliff. It’s easy to test the difference in response with and without a catalog. Run mail vs. no-mail tests before you consider dropping your catalogs and hoping that top-line sales and bottom-line profitability will be maintained.
Catalogs still have all the tangible elements of photography, headlines, copy and a lasting presence around the house that create demand.

Must-Have Metrics
Here are key questions catalogers need to ask themselves before they trim circulation or eliminate mailing catalogs altogether:

What’s the difference in sales to their house buyer file when housefile segments are mailed and not mailed a catalog?
What’s the proportion of new buyers that are coming from the catalog vs. noncatalog channels?
What are the profitability metrics on the various types of internet marketing channels (e.g., email, affiliate, social, paid search), and what are the unrealized profitable marketing opportunities on the internet side of the business? What’s the potential for scaling up the proven profitable internet marketing channels? Can those online campaigns replace catalog sales and profitability, or are you going to be covering your fixed costs with significantly smaller sales volume?

Jim Coogan is the founder and president of Catalog Marketing Economics, a consulting firm focused on catalog circulation planning.