Principles of Catalog Shopping for Retailers, Part 1 of 2

Many retailers are finding catalogs to be an important adjunct to their retail businesses. They realize that once they’ve obtained customers, the catalog mailing is an effective way to bind those customers to their brands and expand awareness of their products.

In the first of a two-part series targeted at multichannel merchants who have significant retail businesses, below are five of the 10 key principles to augment your retail/multichannel program with catalogs and the Web.

1. Exploit the phenomenon of multichannel lift. Mailing a catalog delivers sales in its own right while increasing the value of customers who originate in the store or on your Web site.

After first buying from the store or online, customers with catalog-driven purchases show about twice the subsequent lifetime value of those with single-channel buying histories. This is for buyers with otherwise identical purchase histories, where the only difference is whether more than one channel was used.

2. Be channel agnostic — unsilo your company. The key to effective catalog marketing for multichannel retailers is to make sure the catalog program is structured to serve customers’ interests.

All customer communication should encourage them to communicate with, and purchase from, the company in whatever manner best suits that customer at that particular time.

To achieve that end, the following are vital:
• Web site addresses and store locations should be prominently shown in the catalog;
• the retail store should be able to place online orders for customers while they’re at the cash register if items are unavailable; and
• a “live person” order number should be visible on every Web page.

Too many companies set up reporting and control structures that artificially divide their operations into different divisions or silos — usually store, Internet and catalog. Such a structure is often tied to management assessments or bonus programs. But this never works out and inevitably leads to bad marketing decisions.

The only way around this common roadblock is if top management is knowledgeable in all channels available and committed to providing buying opportunities in the manner that best suits customers. This single issue is the largest stumbling block to retailers successfully optimizing their multichannel opportunities.

3. Start with the data and a unified database. For most retailers, the point of sale (POS) system is where customer names and addresses are collected and transactions are credited to individuals’ sales histories. The best way to assure proper data collection is to have an easy-to-use customer loyalty program that automatically tracks points and gives small but meaningful discounts when customers meet sales thresholds. Check out the West Advantage program at West Marine to see a well-structured program. (Go to www.westmarine.com, then click on “West Advantage Program.”) The goal should be to track about 80 percent of store sales data.

Another method of aggregating sales history is to use an address append program after the sale. But it’s still best to attribute the information at the time of sale using the POS system. Whatever method of collection you use, Internet, store and overall sales data should all flow into a common customer database. Access to such aggregated data is essential for selecting which customers to send catalogs.

4. Consider the value of different media in a contact plan. Of the media opportunities available to retailers, catalogs usually garner the highest response, but also the highest cost per contact. Because they’re so effective, catalogs comprise the principal store advertising expenditure for many of the country’s most successful multichannel sellers.

Williams-Sonoma, Victoria’s Secret, Cabela’s and Brookstone are examples of companies with effective store-driving catalog programs. They also gain significant catalog sales through their phone and online order-taking systems. Perhaps it’s no coincidence that The Sharper Image failed when it reduced store-area catalog mailings.

Less effective but very important retail store drivers that also result in significant direct sales are e-mails, newspaper inserts, print media, Web-sponsored links, online comparison shopping channels, infomercials and Internet banners. But while limited to the very best customers, the catalog is usually the most effective medium for creating high sales volume across all channels.

5. Assess the effectiveness of catalog contacts by using matchbacks. Understanding the difference between the channel of origin and the channel of order is a key to success. Even large and sophisticated retailers who mail catalogs get this wrong. There are several points of confusion among many.

• They believe sales coming via the phone are driven by the catalog;
• they think store traffic is a result of general marketing media; and
• they believe Internet sales come from Internet marketing efforts such as keyword buys and banner ads.

While it’s simple to allocate expenses in this straightforward manner, doing so can lead to serious marketing inefficiencies. Know how traffic in each order channel is related to specific media used. One question that must be answered is, “What percentage of catalog-generated business is coming in through the store and Web site?”

Misconceptions about what’s really driving sales have led to serious misallocations of marketing expenses — even to unnecessary company failures and bankruptcies in recent years. Use a properly structured matchback reporting system to attribute sales from all channels back to the marketing activities actually driving those sales.

The other five principles will appear in part 2 of this series in an upcoming issue of Catalog Success.

Bill Nicolai is a senior partner at LENSER, a catalog marketing agency based in San Rafael, Calif. You can reach him at (415) 446-2500 or bill.nicolai@lenser.com.