Lillian Vernon: Merchandising Maven

Lillian Vernon began selling personalized belts and handbags with a black and white ad 50 years ago. Now, the company offers more than 6,000 items through nine catalog titles and a growing Web business

What do Katie Couric, Arnold Schwarzenegger and Hillary Clinton all have in common? It’s not their political affiliations. Think porcelain Easter baskets and personalized bean bag chairs. Now you get the picture: These celebrities are among the 23 million people who have shopped the pages of Lillian Vernon’s catalogs.

The namesake business Lillian Vernon launched in 1951 on the kitchen table of her small, Mount Vernon, NY, apartment has grown to a more than $240 million catalog and online retail enterprise. A lot has changed in 50 years, but what hasn’t changed is the focus on merchandise.

It all started with a $495 ad in Seventeen magazine selling belts and handbags that could be personalized for free with the customer’s initials. That ad brought in $32,000 and launched her business.

Today, Lillian Vernon Corp. mails more than 166 million catalogs in 33 editions each year. Its stable of nine titles includes its flagship Lillian Vernon, Sales & Bargains, Favorites, plus five spin-offs—Lilly’s Kids, Lillian Vernon Gardening, Neat Ideas, Christmas Memories, Personalized Gifts—and one acquisition: Rue de France.

Kevin Green, president of Lillian Vernon Corp., has a background in marketing and merchandising—most recently as the executive vice president at Lillian Vernon overseeing those areas—as well as past experience at Doubleday Books and Music and Better Homes & Gardens Book Clubs. He is working to move the company forward in new directions while maintaining focus on the mission of “helping our customers live better for less.”

Accomplishing this feat means first knowing who the company’s customers are and what products they want.

Married with Children

More than 3 million people bought from Lillian Vernon’s catalogs in the past 12 months, according to Green. Take a look at the composition of Lillian Vernon’s mail-order buyer file, and you’ll find a group largely made up of married women with children.

• 90 percent female
• 75 percent married
• 40 percent have children at home
• $62,000 average income
• 47 years median age

source: The Millard Group data card

Lillian Vernon customers may look like a pretty homogeneous group, but Green notes its Web customers are a slightly younger, slightly more male demographic. “It’s not a big difference, but [it] was enough of one for us to note. They’re more in line with our Lilly’s Kids demographic.”

Based on information gleaned from studying its customer base over the past 10-plus years, Lillian Vernon has spun off five niche catalogs. Green explains how housefile analysis was used in its most recent spin-off of Lillian Vernon Gardening two years ago: “It was based on looking at product sales, surveying our customers and examining our database to see if we had any critical mass in certain areas. We saw an opportunity, tested it and found we had another catalog there.”

The Merchandise Makes It Unique

All totaled, the catalogs carry 6,000 product SKUs. Lillian Vernon herself is still the chief merchant for the company. “I travel the world several times a year with a team of our company’s buyers, visiting international trade shows in search of new and unique merchandise,” she says. (see “In Her Own Words,” p. 39).

Green adds, “We have a team of buyers that logs a lot of miles in far-off places like China, Italy and India looking for good products that can be produced at a low cost.” The company also sources products domestically, by going to trade shows and show rooms.

“Our mission is helping our customers live better for less.” And that means, “Finding that unique merchandise that has value,” explains Green. The catalogs’ price points are mostly in the $9.98 to $29.98 range. “We try to keep them under $30, with exceptions of course,” he says.

With a wide array of products, ranging from fashion accessories, toys and home decor products to seasonal items, Lillian Vernon has no direct head-to-head competitor, but competes with everyone from Hold Everything to Pottery Barn to Oriental Trading to Potpourri, notes Green.

“We introduce a lot of new products—3,000 a year,” says Green, explaining that 50 percent of the product line is new each year. In looking for new products to add, Green cites three main criteria:

1. A reason for being mail order. Items that will photograph well in a catalog.
2. Truly unique or hard-to-find. Very different items from what one might see in stores or other catalogs.
3. Items that can be personalized. One of the catalog’s competitive advantages, personalization, is handled in-house at its national distribution center in Virginia Beach, VA, according to Green. Using eight personalization methods—among them laser, etching and embroidery—Lillian Vernon can customize everything from quilts to leather purses to silver-plated goblets with names or initials.

How long a life a product has depends on consumer demand. Seasonal favorites are brought back year after year, such as the children’s dress-up trunk, one of the catalog’s most successful products. Some other recent product winners, according to Green: a Halloween witch colliding with a tree; a wall plaque for changing seasons; and oval-shaped metal tubs meant to hold anything from wine and ice to wood (and they can be personalized!). Of course, even with all of its years of experience, not every product the company chooses is a winner. “There was the martini set that didn’t go over well with our customers,” Green recalls. Other product failures he notes include wood flowers and a smoking pipe stand.

Merchandise-driven Creative

At Lillian Vernon, most of the catalog creative process is handled in-house by a staff from the creative, merchandising, brand and marketing departments—though the company occasionally uses freelance talent during peak periods. Typically, it takes about four months to take a catalog from creative through production and into the mail.

“Our creative [process] is merchandising-driven,” says Green. “It starts with the merchants turning over their vision of the products to the creative director and brand manager. Really it’s the enthusiasm of the merchandisers for a particular product, for instance, that can win it the coveted cover spot.”

As Green explains, “Covers and opening spreads often feature new products that we feel have visual appeal and will hopefully be best-sellers.” Other key positions are determined by prior sales results.

Adds Vernon, “Our brand managers ensure that each product is positioned and priced according to our target markets. A uniform brand image is extremely important to retain our loyal customer base.”

The size and formats for the various catalogs remain fairly consistent, with the main catalog staying at 8˝x8˝, while the specialty catalogs are a slightly larger 8˝x10˝ format. One recent creative update: For the 50th anniversary, the company’s catalog logo was changed.

Photography is another important element in the creative process. According to Vernon, “Our merchants, who are in charge of selecting and buying the products for each catalog, work closely with the creative team to determine how each product is styled and photographed.”

To ensure quality shots, a stylist and production coordinator arrange and attend all photography shoots with freelance photographers. Photography is handled in the studios or on location outside. Throughout the production process, the creative department also works very closely with the company’s printers. “We always send a production person on press for print runs,” notes Vernon.

In keeping with recent industry trends, the cataloger has begun to use digital photography for its product shots. Digital images, Green says, make quality control easier. “You have fewer processes getting in between the photograph and the printed product,” he says. “We’re also moving toward more digital photography to cut costs.”

Growth Anticipated for Web

Though 90 percent of its business is still through the catalog channel, Green says, “We are following the industry trend of doing more business on the Web. We’re using it in two ways: First, as an order placing mechanism replacing the phone. And second, we’re seeing incremental sales from new customers online.”

The company started selling its products via the Internet back in 1995 on America Online. In 2000, Lillian Vernon launched a new Web site at www.lillianvernon.com, and the company now has six full-time staff members devoted to the Web. Enhancements to the site are in the works, and a major upgrade and relaunch is planned for September.

“I think there will be certain customers who will shop online exclusively,” predicts Green. “That will save us money on catalog mailings down the road. So we’re investing in the Internet now.”

As such, the company is devoting considerably more space to promoting the Web in its print catalogs, and is building its list of opt-in e-mail names.

As Vernon notes, “Our online customers have the option of receiving brief newsletters by e-mail that offer online specials, feature seasonal products and special promotions. We find this is the best way to communicate with our customers quickly and efficiently and to offer them the best services possible so they’ll return to our site. Our consumer Web site uses instantaneous e-mails to announce new products and special Internet offers. We have an opt-in e-mail marketing initiative that offers special promotions and new products to our online customers.”

The e-mail messages allow the catalog to draw shoppers to specific new items on the site, Green adds.

In addition, when Lillian Vernon customers register online, they are presented with a series of questions including whether they are willing to participate in periodic online surveys, a helpful and efficient way to evaluate shoppers’ needs.

Both Web and direct mail orders share the same fulfillment system handled by its national distribution center. However, Green says, the front end of the Web server is not yet integrated into the back.

Also in the Virginia Beach facility is a large call center that during peak holiday season has more than 1,400 representatives assigned to take catalog orders and answer customer service questions by phone. The department has a special team of representatives who are trained to respond to e-mails sent by online customers. “We are also finding that more and more customers, regardless of whether their order was placed online, by phone, fax or mail, are using e-mail to communicate with customer service,” says Vernon. “In the future, we plan to provide a live customer service option which will enhance our online communications and provide immediate response to the customer.”

Marketing and Media

For Lillian Vernon, regardless of whether you’re talking customers or prospects, the medium of choice is the mail—the catalog itself. “Since we’ve been in business for 50 years, we have a well-tested model of our target customers. We use this model as a basis for evaluating the lists we rent of prospective customers. We acquire rental lists with those same characteristics and then we mail them,” Green explains.

With recent postal hikes, Vernon notes, “We are carefully reviewing our mailing lists to determine the best prospects to receive our catalogs on a regular basis. We don’t mail our catalogs indiscriminately. Our goal is always to mail smarter.”

Statistical models are used to determine which catalog titles to mail to whom. “We use overlay data, for instance, to help us decide, do they need children’s products,” Green notes.

In terms of mailing its customer file, Vernon says, “Our best customers receive the heaviest volume of catalog mailings.” These buyers also tend to get the widest variety of catalogs, as the marketing department will send different specialty catalogs to buyers who seem like a good fit based on database modeling.

Green adds that the company doesn’t have a need to use additional alternate media, such as space advertising or FSIs for prospecting right now.

Housefile segmentation aids the marketing department in developing offers for certain segments of its customers, such as special promotions, free shipping and handling, deferred billing or free gifts.

Another marketing tool the company uses in selling is the telephone. But it doesn’t engage in outbound telemarketing because it is concerned about its customers’ privacy. “We do cross-selling and upselling on incoming calls only. Offers are tailored to the merchandise the customer just ordered. The rep has a few choices in a pop-up window and can offer those to the customer,” Green says, adding that if a customer really seems uninterested, the rep respects that choice.

Other marketing efforts have included the mailing of oversize postcards to their best customers announcing special catalog promotions. The company tested a loyalty program in the past, but it didn’t meet profit expectations. “It ends up becoming a discount,” says Green.

Lillian Vernon’s brand also extends to 14 outlet stores, which regularly advertise special sales and store promotions in newspapers in the markets where they are located.

The Future

Like many catalogers, Lillian Vernon has tightened its belt in recent months due to the uncertain economy and reduced consumer confidence (it cut its workforce by 12 percent in March, including the closure of its Las Vegas call center). Yet the company remains optimistic in its outlook and continues to forge ahead with plans for the future. “When business is down, you simply need fewer people,” explains David Hochberg, vice president of public affairs at the Rye, NY-based company. But, he adds, the planned Web site relaunch and the company’s acquisition of the French country furnishings catalog Rue de France and its Web site present possibilities to further grow the business in new directions.

“The integration of our recent Rue de France catalog acquisition into our business should present other opportunities for growth,” explains Green. “Its customer base is much more upscale, with $150,000 average income and a $180 average order.”

Merchandising for Lillian Vernon and Rue de France varies widely, too. While there is some cross-over in terms of the product categories each carries (such as kitchen items, linens and garden decorations), there are major price point differences: In Lillian Vernon, a set of decorative earthenware kitchen canisters runs $39.98 for four pieces. In Rue de France, hand-painted kitchen canisters are priced at $85 to $115 a piece.

Another goal for the future, according to Vernon, is to “advance our stake in the Internet so we can attract a new generation of Lillian Vernon customers who will remain loyal over a lifetime. From a practical standpoint, we would like to persuade more customers to order online to reduce the inevitable increase of postage and printing costs.”

Finally, licensing is another promising opportunity that is being pursued since the Lillian Vernon brand is so well known. Explains Green, “The Lillian Vernon name is a powerful brand that we’re looking to leverage with partnerships, such as a line of jewelry or hosiery. We also have added product extensions that make sense, such as our own bulbs and horticulture line in our Gardening catalog.”

Of course, look for the continued growth of the company’s product line as thousands more unique items grace the pages of Lillian Vernon’s catalogs in the years to come.

In Her Own Words: An Interview with Lillian Vernon

As the mail order business founded by Lillian Vernon celebrates its 50th anniversary this year, we asked the legendary catalog entrepreneur to share some thoughts on where her company has been, where it is today, and where it’s headed.

Q. How was Lillian Vernon Corp. founded?
A. “I founded Lillian Vernon in 1951 when I was a young housewife expecting my first child, because I wanted to help supplement my husband’s income. Ignoring the belief that women should not work outside the home, I developed an idea to sell personalized handbags and belts by mail. I placed a $495 ad in Seventeen magazine using $2,000 of my wedding gift money, knowing that it would appeal to young women like myself. A year later, the ad brought in [a total of] $32,000 in orders and my company was launched.”

Q. What have been the most successful and least successful products you’ve sold?
A. “A monogrammed bookmark that we have sold for 45 years holds a special place in my heart because I was expecting my second son David when I first introduced the bookmark through an advertisement in Redbook magazine. When the ad first appeared, a phenomenal 20,000 pieces were sold, so I consider this a very successful product as well as one of my favorites. Several Christmas ornaments, especially our hand-embroidered, white cotton lace angels and hand-crocheted snowflakes are still top sellers. We sell 6,000 products so naturally not every one is a top seller...

“If a product sells well it will remain in our catalogs indefinitely. Some of our standard favorites like personalized pencils and a children’s dress-up trunk were introduced decades ago and are still strong sellers today. If a product does not do well, we take it out of the catalogs as quickly as possible.”

Q. Why do you offer so many personalized items and how is your personalization handled?
A. “Our company trademark is free personalization. When I began my business in 1951, I offered a personalized handbag and belt. Today, Lillian Vernon has one of the largest in-house personalization departments in the direct marketing industry. Our customers have come to rely on us for a wide variety of personalized products.”

Q. What is your biggest creative challenge?
A. “Our greatest creative challenge is producing visually compelling and exciting catalogs that stand out in our customers’ overcrowded mailboxes. With 10,000 catalog titles competing for consumer dollars, not only does each edition feature unique and interesting products, it must compel the customer artistically so they’ll open the catalog and order.”

Q. What plans are ahead for the company?
A. “As we celebrate our 50th Anniversary this year, our company is proud of its reputation as a multi-channel retailer that markets its products via catalogs, outlet stores, business-to-business and on the Internet. ... We plan to continue investing in new technology that will enhance our consumer Web site so we can accelerate the growth of our Internet business.

“We will have a business-to-business section on the new Web site this year. Though we’ve never had a separate b-to-b catalog, Lillian Vernon has been wholesaling to business customers for years and marketing at events like the premium and incentive trade shows.”