Commentary & Recap: Futurist Libey Examines the Present at MeritDirect Event, Part 1 of 2

For the many years I’ve listened to Don Libey, the investor, catalog owner, motivational speaker and wearer of many other hats related to the multichannel marketing business, I’ve often enjoyed his crystal ball-heavy looks into the future of direct marketing. I can’t say I always agreed with them — and certainly some didn’t come true — but they certainly got audiences thinking and implementing the ideas they took away from his presentations.

Because of his business relationship with the White Plains, N.Y.-based MeritDirect, he always graces the B-to-B list firm’s annual Business Mailers Co-Op, which is being held this week about a mile from Merit’s headquarters. But his conference-opening speech this year had a decidedly heavy slant toward the present, and even the past. After all, this is 2009, and to get through this mess, he said, marketers will have to rely on business fundamentals more than anything else.

He emphasized directions that B-to-B and other multichannel marketers must immediately take to reinvent themselves, both during the recession and for whenever economic recovery takes place, the timing of which he didn’t dare predict.

“This is the end of a major cyclical cycle that takes place every 60 years,” he said in true quotable fashion. “It’s going to take a number of years to get back to where we were. But we have to decide: Do we want to grow?”

Noting that a new business model has been put upon us by necessity, Libey reeled off 12 factors marketers need to pay close attention to in order to get through the economic malaise.

By in large, they consist of back-to-basics fundamentals. In fact, Libey faults the multichannel market for perhaps overleveraging itself in the online world over the past decade-plus. “Maybe we’ve gone so far shifting pendulums to online that we’ve become dangerously close to having drunk the Kool-Aid,” he pondered.

Since we prefer not to make our online stories terribly long, here are six of his 12 points. Next week, we’ll offer up the other six.

1. Margin. This is “biblical,” he said. “Nothing happens without margin, which is being eroded by all kinds of things, none of which are under your control.”

He noted that marketers who rely too heavily on China could get burned, because it’s going to become much more expensive. In fact, “anyone who expects to run a business with less than 54 percent gross margin is delusional,” he said. “The question is: Where are you going to get the five points you need? How will you generate gross margin over the next three years? It’s your No. 1 concern as always. Nothing happens without margin.”

Marketers are taking costs out, but margins, he observes, are still dropping. “When recovery begins,” he said, “stand back, because it’ll be roaring inflation. Right now, in a period of deflation, you can’t raise prices.”

2. Leakage. Libey noted how much revenue or profit can leak out of multichannel organizations. “It’s everywhere. It’s a forensic audit. You have to know your marketing and know what works and what doesn’t work, and demand profitability analysis like never before,” he said.

To do so, introduce cost accounting, he advised. Study every bit of every transaction in the company. Get into the real accounting world, he noted. “We’ve always been in the pseudo accounting world,” he said. “Build a foundation of a well-managed business. Our businesses have managed well for direct marketing, but they’ve never been managed well for businesses” in general.

3. Systems. Over time, catalog management systems have been layered with newer systems to accommodate online and other channels. The problem is, many of these systems don’t communicate well with one another, Libey said. Opt for newer systems so you don’t constantly have to pay your vendor to fix bugs.

4. Analytics. Marketing has its number, fulfillment has its number and so forth, Libey said. There are more than 6,000 individual measurements. “Until we get to the point where we’re discussing the same number in the same way every day and have continuity,” he said, “we can’t win the analytic battle, and will leave money on the floor.”

5. Multichannel circulation. Circulation needs to involve the oldest, most experienced person who knows direct marketing, Libey noted. “It’s a profession, and in our quest for all things online, we’ve given circ to young, entry-level people. What do they do? They go to Abacus and say, ‘You do it,’ because it’s easier. So we have two 23-year-olds running the most important thing. Get it back out of the black box and into the hands of professionals.”

6. Customer service. This seems to be the first place to cut staff, Libey said, and that’s a mistake. “They’re the front-line people and can tell you what’s going on with the customer. There are 36 things a dynamic call-center person can do besides taking orders.”

Libey advises hiring the most intelligent call-center people and paying them well. This will make your customer file the very best, totally up-to-date file. This way, “you know who to call and send stuff to,” he said.