Crisis Drives Innovation for Catalog Mailers

One couldn’t leave the Annual Conference for Catalog & Multichannel Merchants (ACCM) in New Orleans last month without mixed feelings. People wondered, “Where will the catalog industry meet with a show that has a critical mass of attendees from the industry?” Some took this year's disappointing attendance as a sign that the catalog business has truly evolved into a multichannel industry, and that catalogers are harvesting the low-hanging fruit over in Internet-land.

The fall in response rates and the profit pressure from postage and paper increases have been a double whammy on catalogers. Perhaps catalogers’ focus has shifted to the Internet, ignoring this traditional show because success is measured in sales and profit growth — and they just don’t get paid to retrench. So ACCM is in crisis. In fact, the entire catalog industry is in crisis. But crisis forces innovation, and catalogers have lots of new, innovative strategies to survive these troubled times.

* The co-op databases are working hard to produce better models to improve prospecting response. Co-ops are producing more and better models to try and capture market share in catalogers’ shrinking universes of prospecting lists responding above breakeven. All the co-ops at ACCM had new modeling strategies aimed at increasing response.

Specifically, co-ops are focusing on buyer optimization to squeeze the nonresponsive households out of housefiles. The co-ops are recognizing what catalogers have known for years: The housefile is the profit engine for catalogers, and they're vitally interested in keeping theirs in peak health.

* Abacus pushed catalogers to know and understand that gray zone of prospecting slightly below breakeven where the prospecting investment is paid back in six months to a year — what it calls “near-term value.”

Catalogers need to understand that prospecting slightly below breakeven may actually prove more profitable than attempting to only prospect above breakeven. Fixed costs need to be covered; stretching the envelope of prospecting can allow catalogers to keep sales and profits up and avoid deep cuts in their fixed costs.

Abacus recommended digging deep into individual prospecting lists; measuring their profitability over time; and looking at variables such as season of purchase, dollar value of purchase and merchandise categories purchased to find “preselects” that help co-ops find better customers.

* Catalogers were discussing how best to know if the fall in response rates has bottomed out. One quick and clear metric that emerged was comparing monthly sales for this year vs. last year to see how sales are trending. Catalogers are tracking month-by-month sales, comparing this year to last year on a monthly and quarterly basis.

The other side of the coin is looking at how response rates will rebound. Will they rebound to the levels of two years ago? Or will the rebound be a more modest recovery, where response will be a slight improvement over the response rates in the darkest days of the recession?

* Catalogers have seen some cost relief in the decline in paper and printing prices. The first postage “sale” in history is about to begin. Paper prices ratcheted down again, and printing prices also are being selectively cut as printers have to match competitive bids and cut price to keep business.

* Catalogers also reacted positively to news of the USPS' “summer sale.” While not perfect — many smaller-volume-mailing catalogers don't qualify — the sale is a first step in the post office recognizing that lower prices might mean greater volume and actually increased profitability.

* Arandell rolled out a prospecting catalog with page counts aimed at maximizing the cost efficiency of catalogs, letting catalogers prospect at a whole new level. Putting out a high-quality, low-cost prospecting catalog allows mailers to continue to reach out to new customers profitably. Working on minimizing the “in-the-mail” costs of catalogs also recognizes that Web-savvy customers may not need as many pages of merchandise to trigger Web traffic.

* Promotions were a bigger part of every catalog's arsenal. Marketers are concerned about the need to use promotions to achieve short-term sales, and the long-term effect it will have on teaching consumers to just wait for the next promotion. Sure, promotions work, but will people ever go back to buying at full retail?

I left the ACCM encouraged and hopeful that catalogers and the vendors serving them are coming up with a full range of solutions to the problems of trying to sell and survive in such uncertain economic times.

Jim Coogan is president of Catalog Marketing Economics, a Santa Fe, N.M.-based consulting firm focused on catalog circulation planning. You can reach him at (505) 986-9902 or jcoogan@earthlink.net.