A Chat With March’s Profile, Martin Smith, CEO of MindWare

Catalog Success: Where is the company headquartered?
Martin Smith: Minneapolis/St. Paul. Roseville to be more specific — just north of those two cities.

CS: What year was the catalog established?
MS: I believe Jeanne [Voigt, the founder of MindWare] started it in 1990. It’s certainly not earlier than that; it might have been 1991.

CS: What is the primary merchandise offered in your catalog?
MS: Toys and games, all of which have some educational or developmental attributes. This could be physical attributes, physical developmental skills, or it could be mental skills … it could be math, it could be more literary, it could be creative. The common thread that links all the products is that they have a benefit over-and-above enjoyment in the narrow sense.

CS: It really stresses an educational benefit to it?
MS: Yes it does. We wouldn’t carry something which was a straight mass-merchandiser product that was just a game or just a toy that had zero educational content.

CS: How many titles (books) does the company mail?
MS: Just the one title [MindWare].

CS: How mailings per year? Both what you did in 2007 and what the company has planned for 2008?
MS: We had seven major mailings last year and we’re still in the process of really reviewing what happened in the fall holiday season of last year, so things might change. But I would think the seven is likely to hold again for 2008.

CS: What’s the annual circulation of the catalog?
MS: We certainly don’t have a final figure for 2008, but I’d think it would be in the 12 million to 15 million range.

CS: Will this figure be based off of 2007?
MS: That will be upon ’07. In that bracket I’m kind of allowing for the possibility — because our ‘07 figures were generally encouraging — that there might be some modest growth in circulation.

CS: What is the demographic targeted by the catalog?
MS: We’re targeting children overwhelmingly, but of course it’s not usually the children who are actually placing the order and certainly not paying for the order. So we’re targeting parents who have an interest and it fits the parents’ motivation, which is probably the most important thing. Parents, or the grandparents for that matter, that want to give their child something that is (a) enjoyable but (b) beneficial.

CS: Is there a specific demographic that performed better than others based off of last year’s sales?
MS: I’m not sure I could say really very much about one being better than another, but I could say, and no doubt about this, that our kind of center of gravity is very much towards professionals, higher income, high instance of both mother and father having a professional job outside the home, aged in the kind of age ranges that you would expect to have children in our target bracket, which is roughly five to 12. So it’s parents who are in their 30s and 40s, overwhelmingly.

CS: What’s the average SKU count in one of your catalogs? Number of SKUs on the Web site?
MS: It’s generally around 800 SKUs [catalog]. For the Web it’s more than that obviously, but not a lot more than that. I would say slightly in excess of 1,000.

CS: How many employees are there at MindWare?
MS: Well, we’re a highly seasonal business, but our core number of employees is in the high-20s, let’s say 28. We do take on a lot of additional labor in the fourth quarter to help with the peak business.

CS: How did you get your start in the catalog business?
MS: This is going way back in time, I think 1984. I was working at General Electric, nothing to do with the direct business per se, but working in an internal strategy consulting role for General Electric up in Connecticut. At that time, somebody who had been a senior GE executive was the CEO at Avon Products. He was interested in recruiting people with a General Electric strategic-planning background. So one thing led to another and a headhunter contacted me to see if I’d be interested in working at Avon Products. I was interested and a job came up and that job happened to be in the direct response division, as it was called at the time. So I started in Avon’s direct response division in 1984 as a planner.

CS: What were the biggest challenges for you personally and the catalog industry as a whole when you started in the business?
MS: I’m not sure that my memory goes back that far. Well it was a whole new business — I had had virtually no exposure to direct and all the ways of measuring efficiency and productivity, which are specific to the direct business. So there was a personal learning curve getting familiar with the catalog industry. At that time, what were the big issues? Frankly, I think a lot of the issues which have been on the concern ever since then, and probably before then. Issues like cost of mailing catalogs, the high cost of getting a catalog in the customers’ hands. I don’t recall other specific issues from that time.

CS: What will be the biggest challenge be this year for MindWare, as well as the catalog industry as a whole?
MS: I think the great emphasis which we try to pursue, and will continue to try and pursue, is to find and develop product which is true to our mission and position in the market, and appealing to the customer. And presenting it in a way that effectively communicates its benefits. If I can just go back a minute and talk about finding and developing. MindWare presents to customers both MindWare-branded product, which we have developed ourselves, and also, obviously, product which we source from other marketers which we believe would be appealing to our customer base. The emphasis on coming up with a tightly edited offer applies in both those arenas — both those products which have the MindWare-branded product name printed on them, and those which are third party and available to our customers from other vendors potentially.

CS: What factors have made MindWare successful?
MS: I think it’s kind of the truisms of the industry — finding the right product, presenting it attractively and mailing it to the right people. Those are simple principles to state in the abstract, but an awful lot of work goes into actually trying to make those three objectives a reality.

CS: At MindWare, how do you locate the prospects to mail to? What’s done to turn these prospects into first-time buyers, into multibuyers, etc.?
MS: I’m not sure that we have any magic secret over-and-above what most direct marketers do in terms of identifying good customers or bringing new customers on the file. I think we do what most other people are doing in terms of continually testing new sources, determining whether there are areas that we haven’t yet taken advantage of, sources that we haven’t yet taken advantage of, in finding productive new customers. I think the trick, and it isn’t a trick, is that the key issues in maintaining the customers are of course the quality of the product and the quality of the service in getting it to the customer. We believe that if we can accomplish those, then I wouldn’t say everything automatically follows, but we have distinctly leveraged our chances of maintaining that customer for the future.

CS: What aspects of the catalog/multichannel industry do you enjoy the most?
MS: I think the challenge and the excitement. The excitement when we get it right is continually seeking ways to try and present the product in an efficient way to the customer, such that we can show our products to the best advantage. And that’s a combination of catalog, e-mails, the Web site itself, what we’re communicating through the Web site, and other less obvious ways such as the way we talk to our customer in phone contacts or customer service contacts.

CS: What steps has MindWare taken to offset the rising costs of goods (e.g., postage, paper) in producing a catalog?
MS: Again, I don’t think we’re doing anything unique in this area, but we did in ’07, because of the postal increase, reduce our trim size (approximately a half-inch slice off the side, so the pages are slightly narrower). Not a dramatic change, but obviously when you hold an ’06 catalog vs. an ’07 side-by-side, then it’s very evident. I don’t actually know to what degree our customers noted that change, but we did make that change for savings purposes. We’ve also been pushing hard on trying to develop co-mailing opportunities in order to get bigger volumes, and therefore better postal discounts.

CS: Was there any reduction to catalog circulation?
MS: Yes there was. We were cautious in our circulation in ’07.

CS: By what percentage was the circulation cut?
MS: It was in the 5 percent to 10 percent range.

CS: What was one of your biggest mistakes in your years in the catalog business? How did you or the company recover from the mistake?
MS: I don’t think I want to get into the specifics of the product category, but we did test a product category in ’05 which we had a lot of hopes for. But the customer didn’t gravitate towards those pages. We chalk it up as a learning experience, but certainly not something we want to repeat unless we can really think of a much better way of going down that particular path. It was a related product area, but not exactly in the MindWare center of gravity.
That was a learning experience. We learned that you can’t just stack on a related product category and necessarily find customer acceptance for it. We did have at the time some overstock issues related to that. We bought too heavily into those product categories, into the items that were in that product category, and it took us some time and some write-downs to clear the inventory as a result of that experiment.

CS: Was this product category within the main book? Was it a whole spin-off book?
MS: It was a section within the main book.

CS: What factors help MindWare set itself apart from its competition?
MS: Education. I think that’s really it. I think we’re true to our mission, and maybe linking into what I said about the test that didn’t work in ’05. I think we’re clearly in toys and games with an educational benefit. That sets us apart. And maybe that’s the area we’ll grow in, rather than becoming a more diverse offer. We’re focused from a business-model point of view. We intend to stay focused.

CS: What do you think would have become of your career if you hadn’t gotten involved in the catalog/multichannel industry?
MS: Having found it [the catalog/multichannel industry], I’ve got to believe that if I hadn’t found it when I did find it I would have found it later, because it’s the only place I can imagine myself having the level of challenge and enjoyment that I get from it.

CS: What kinds of things are done at MindWare to keep the environment fun and light-hearted for your employees?
MS: The products themselves help achieve that objective. We’re dealing with engaging products and we get engaged with those products just as we hope our customers do. We of course see many products come in the door here which don’t, for one reason or another, ultimately get picked up and featured in our catalog or on our Web site. Some of the products that come in are certainly entertaining. We’re a bunch of grown-up kids. I don’t want you to believe that we’re sitting around playing toys 40 hours a week, but they’re a large part of our life and they provide a healthy level of amusement.

CS: And getting to know the product like that (first-hand use) can help you to market it more effectively?
MS: Absolutely.

CS: Have you had any mentors in the business that you’ve leaned on for advice over the years? Have you been a mentor to anyone involved in the industry?
MS: I’m not sure that I’d be happy in answering that question without specifically checking with any names that come to mind to see whether they’d mind being referenced. In general terms, I’ve kept in touch and do keep in touch with former co-workers. Before I came to MindWare I spent close to 20 years at Avon Fashions, which later became Newport News, which is still a major factor in the women’s apparel area. Even though I left Newport News seven years ago now, I still have quite a few friends that I keep in touch with from that company. We talk about work-related topics quite a bit. So I suppose the professional links continue in a way.

CS: What month/year did you join MindWare?
MS: October of ’03.

CS: What are some hobbies you enjoy away from work?
MS: I love traveling, and particularly to interesting and somewhat off-the-beaten-path places. For instance, over Christmas/New Year’s my wife and I went to and traveled around Nicaragua.

CS: What’s something about yourself that’s secretive or would be a surprise to many?
MS: I hate to disappoint you, but I think the people that know me can see what they get. I don’t think they’d be very surprised. I don’t think I have any closet activities which would come as a surprise to them.