Special Report: Catalog Marketing Action Plans for 2007

Just a month into the new year, catalogers have a mixed bag of enthusiasm. On the one hand, the economy appears strong and consumer spending is solid. On the other hand, there’s another postal rate increase going into effect during the first half of the year.

Catalog Success caught up with several mailers and industry observers to give you an idea of which multichannel prospecting strategies may be best for you this year.

Prospect With Caution

No surprise: Feelings differ about how catalogers should prospect in 2007. “I’m feeling particularly bullish this year,” says Tim Kiss, director of enterprise direct marketing for The HoneyBaked Ham Co. Kiss believes he has reason to feel positive given that HoneyBaked’s sales grew about 10 percent in 2006. A historically strong figure for the 50-year-old Atlanta-based marketer of ham and turkey, it came in response to new prospecting efforts on the Web. He anticipates the company will continue last year’s sales growth pace through increased prospecting, both in print and online.

Although HoneyBaked’s 2007 fiscal year ends in September, Kiss notes that his marketing budget for the remainder of this fiscal year is 7 percent to 10 percent greater than in fiscal 2006. HoneyBaked Ham’s prospecting efforts will proceed on two fronts: an increase in paid search marketing, and mailing more catalogs using successful list sources, including list exchanges and internal gift recipient lists.

The increase in paid search comes in response to the fact that nearly 60 percent of HoneyBaked’s 2006 holiday orders were placed on its Web site.

Further, HoneyBaked’s decision to prospect more deeply with the catalog is fueled both by the company’s recent growth and the cost savings it’s seen by doing more catalog co-mailing. “In the past, we’ve really tried to break even on the customer in the first year or so,” Kiss says. “Since we feel that the economy is a little better, we’re increasing that because we can go deeper with our prospecting efforts and still be very profitable.”

But not all catalogers are that optimistic. Astral Direct President Phil Minix says he’s concerned about the postal rate increase’s impact on growing businesses. “We’re going to cut circulation as a result of the rate increase,” he notes. “And that cuts back on names that other companies have access to, making it hard for the industry to grow.”

As for Astral’s plans, Minix says the Ozark, Mo.-based company, whose catalogs include Linda Anderson, The Music Stand and Characters, will cut its circulation and marketing budget by about 50 percent. Part of that action stems from Astral’s recent over-prospecting, and Minix says he’s cutting the budget to increase profits. While not eliminating prospecting entirely, cutting it back will position the company for growth in 2008.

Likewise, Garrett Wade Co. President Gary Chinn also is concerned with the postal rate increase and its effects on profit. Postage makes up about half of the New York-based woodworking tool cataloger’s in-the-mail costs, and Chinn notes that any increase quickly erodes how deeply he can mail to his RFM segments. Even still, he says he’ll continue to prospect using just the co-op databases, as he did in 2006.

Although he doesn’t plan to change his marketing budget in 2007, Chinn will mail less aggressively in the first nine months of the year, and mail more heavily around the holidays. That strategy was effective in 2006, he says, when he increased circulation by 50 percent in the final three months of the year. He’ll do the same this year.

“I suspect, 2007 will be a growth year for many catalogers,” says Susan McIntyre, president of Portland, Ore.-based catalog consultancy McIntyre Direct. “Even taking the postal rate increase into consideration, this is a good year to be moderately aggressive.”

McIntyre says her optimism is motivated by the fact that the catalog industry’s success usually tracks in line with consumer confidence, which, declining real estate prices notwithstanding, should remain relatively high.