Growth Strategies

Growth is one of the greatest long-term challenges for any catalog company. Whether yours is a small catalog or a behemoth, adding significant growth year after year is, to say the least, a difficult task.

Why? In general, catalogers aren’t adding significant numbers of new catalog buyers to the universe of names available for prospecting. This universe currently is comprised of more than 50 percent of U.S. households, but many of these customers have purchased only from the largest books, such as J.C. Penney, L.L. Bean and Lands’ End. This means we’re all mailing to a fairly fixed audience that’s constantly being pummeled—especially the very best customers—with more and more mailings.

With continued postage increases, any inefficiency while converting consumers into mail-order buyers has become expensive. The Internet will continue to feed some new names, but for now, most growth must come from improving results to prospects and compelling those on your housefile to spend more.

This month I’ll examine ways to add growth to both of these important groups.

Growth from Prospects

There are several ways to grow your business with your prospecting efforts: increase your prospecting quantities (i.e., expand your universe); improve response to your existing prospect lists; and get prospects to spend more.

Knowing your corporate objectives will help you choose appropriate strategies for your business. Some efforts will increase top-line growth at the expense of profits. Some strategies will increase profits at the expense of the top-line or new-buyer counts. And some will optimize both the top-line and profits.

Many of the typical efforts explored by most circulation managers produce incremental improvements, which shouldn’t be overlooked. But to move the needle in a significant way, more should be done. The following ideas can produce breakthrough results in your prospecting work.

• Create a prospect version of your catalog. If your merchandise assortment is broad and your current catalog is more than 48 pages, use your marketing database to determine which items, categories and price points are frequently purchased by your first-time buyers. If the resulting assortment is much different, or is smaller and more focused than your current assortment (and still big enough for a 24- to 32-page book), you may be able to improve results by producing a separate catalog with this edited assortment. You can give more space to the right items and really focus prospects on the items new buyers have shown the highest propensity to purchase.

• Use available co-op databases and tools. If Abacus or Z-24 has worked well for you, participate in all the available co-ops. There’s a new player in this field, as well, a company called i-Behavior. It includes all product-level transactional information from all participants in its database, not just the last transaction. This means you can find buyers who may have been missing from other co-ops.

• Add a new product category to your assortment. A product lineup that’s too narrow can hurt your prospecting efforts by not offering enough assortment for new buyers. Extend your brand to new categories or sub-categories that fit within your overall brand positioning.

• Be as relevant as you can by using your database. Use your marketing database to find ways to speak more relevantly to your prospects. You may find that prospects from certain lists exhibit similar first-time behaviors, such as ordering specific items or in certain price points or categories. If so, speak to them with a customized message on a dot whack. Announce a promotional offer on the appropriate product, or tell them they can choose from 100 items that cost less than $50.

Growth from Customers

It’s easier to grow sales and profits from customers than from prospects. Customers already have indicated a preference for your brand or products and hopefully have had a good experience with you. Look for opportunities to get them to buy more frequently and/or increase their average order sizes. Following are some suggestions:

• Send more mailings to your best customers. This seems rudimentary, but many catalogers mail to their housefiles and prospect lists similarly. Both groups get the same catalog and offers at the same time and with the same frequency. If this is the case, you have an immediate opportunity to grow—mail your best customers more often.

Add more mailings (i.e., re-mail with outer-page changes, cover changes or even just the same book) around the most productive seasons. If your spacing is eight weeks apart, mail your best customers every six weeks or even every four weeks around the holidays.

• Add pages with a new product category to your assortment. Just as with prospects, if your product offering is not very deep, you could be hindering your efforts. Extend your brand to new product categories that fit within your overall brand positioning.

A food catalog company recently added some tabletop and kitchen items to its assortment with eight additional pages. The categories and products selected were a good fit with its brand, and gave customers a new selection of merchandise that didn’t cannibalize the existing offer. In the spring test, customers getting the extra pages with the new product category spent 40-percent more than the control. Interestingly, not all sales lifts came from the new products. The new assortment increased purchasing across all categories!

• Add pages with existing product categories or items. Incremental pages are a good way to get your customers to buy more. If you can’t add new categories, consider carrying over more items or adding new merchandise to your existing categories. These could even come from bundles, kits and gift baskets of your current products, if you don’t want additional inventory risks. The new items could be at higher price points, more giftable, “best of” selections, etc. Do this only if at least 70 percent of your current pages are paying for themselves, and you have at least marginally successful items to offer.

Expect half the percentage in increased pages to come back in increased sales. For example, a 10-percent increase in page count should yield a 5-percent increase in sales. With this assumption, run the numbers to ensure a page increase is economically viable.

Don’t be afraid to test something that seems, at first blush, to be radical if it can be well executed. Small lifts of 2 percent to 5 percent should not be overlooked; however, I also recommend a commitment to finding at least one breakthrough each year in order to deliver exciting results.

Phil Minix is executive vice president and general manager of J. Schmid & Associates. He can be reached at (913) 236-2408 or at philm@jschmid.com.