Special Report: More Web, More Print or Both?

While technology makes many things easier, it also can complicate your job. And as the Internet — and all that goes with it — has evolved over the past dozen years or so, catalogers’ jobs have become a lot more complex. Beyond merely becoming e-commerce and multichannel marketing experts, catalogers must pay closer attention to analytics and constantly reconsider how they allocate their marketing budgets.

Ask any multichannel merchant and you’ll hear the same thing: The rubber stamp has no role in making marketing plans these days. The ongoing changes in e-commerce force catalogers to constantly reinvent the wheel. Add the killer postage increase this past May, and your best-laid plans probably won’t take full shape until close to Jan. 1.

In November, nearly one-third of respondents to a reader poll on the Catalog Success Web site said they planned to spend more money on Web marketing and less on print catalog mailings in 2008, although more than 40 percent said they intended to spend more on both channels.

For this report, Catalog Success canvassed catalogers and other multichannel marketing experts to find out what those best-laid plans ought to be for 2008 and how e-commerce developments might affect them.

“If you can’t transform yourself out of catalog and onto the Internet, you’re going to be out of business,” says Mike Muoio, president/CEO of gifts and home goods cataloger Lillian Vernon. “We as a group and industry have to face that. There will always be catalogs, but if you can’t transform yourself, you’re going to be faced with those cost increases [paper, postage and printing] and you’re simply not going to be economical to the customer.”

Increased Print Circulation
For most, Web marketing is all about creating a unified approach — Web and print working together as one. And despite this year’s postage increase, many catalogers contacted for this special report say they plan to increase the circulation of their printed catalog next year. “From a merchandising standpoint, the catalog is the biggest portion of what we do,” says Dievo Hagen, senior director of merchandising and inventory control at Sundance Catalog Co., a multichannel apparel and gifts cataloger. “And all that we put on the Web is driven by what we put in the catalog.” Less than 7 percent of Sundance’s entire marketing budget is spent on Web-related projects, yet the Web accounts for about half of the company’s revenue, Hagen says.

Stumps Prom & Party, a cataloger of prom and party supplies, also plans to increase catalog circulation in 2008. The 81-year-old company is enjoying its best year ever, and believes increasing catalog circulation will position it for continued prosperity. “We’ll be mailing more catalogs, thereby broadening our customer base,” says Keith Bansemer, director of Internet marketing at Stumps. “It’s time to take a good, winning formula and expand it further.”

Coming off a rough few years, Lillian Vernon is hoping to drive Web sales by circulating more catalogs. Lillian Vernon will circulate 15 percent to 20 percent more catalogs next year, Muoio says.

Some B-to-B catalogers also plan to be aggressive in ’08. New Pig Corp., a marketer of oil leak and spill management products, industrial safety and plant maintenance, intends to keep circulation levels at or above where they are this year, says Executive Vice President Doug Hershey.

Print’s Role as Web-driver
The way catalog printers, such as Quebecor World, see it, the catalog serves primarily to drive consumers to the Web, says Jennifer Lukasiak, Quebecor World’s director of marketing and research. “I can think of numerous instances where a catalog client reduced circulation, only to bring it right back up due to a resulting decline in sales,” she says. “The Internet continues to be a growing preference as a transaction channel, but the catalog is clearly still a very important marketing channel in the multichannel mix.”

While plenty of catalogers plan to increase their foothold in print, Web marketing is hardly taking a backseat. Web-based ordering numbers continue to rise. Consider these examples:
◆ More than 60 percent of all transactions at Lillian Vernon come via the Web;
◆ Nearly half of Sundance’s catalog sales come from Web orders;
◆ Stumps reports it’s seen a 30 percent increase year over year in Web sales in 2007; and
◆ Although he wouldn’t specify the number of Web orders New Pig is receiving, Hershey says more B-to-B customers are buying online as well. “We’re seeing more and more people gravitate to the Web to place their orders,” he says.

With consumers flocking more and more to the Web as a purchasing channel, it’s become increasingly important to analyze who your customers are and how they’re buying your products. Once that is known, you need to market to them. “Stop marketing to your imaginary friend,” advises Senior Vice President of List Brokerage at the Millard Group Bill LaPierre. “I’m amazed when I meet with [multichannel] clients where either the merchants, marketers or upper management in general have a perception of who their customer is based on gut instinct or a marketing analysis done 10 years ago. They’re not truly aware of who their customer is or what their customer wants, whether it’s in print or online.”

What’s more, LaPierre says, catalogers have to continue to invest in marketing techniques that allow them to target more tightly than they have in the past. For example, catalogers need to scrutinize the lifetime value of customers who find them via search. They need to determine whether there are specific keyword terms that have a higher lifetime value than other terms.

In the end, these techniques can help in two ways, LaPierre says.

1. They help justify your initial investment in specific keyword terms in a pay-per-click environment; and

2. They help you identify those names on the back end that maybe you don’t want to promote quite as actively, frequently or aggressively as some other names you acquire.

Show Me the Money
As the Web continues to grow as the buying channel of choice for many consumers, so too does the Web-based budget for many catalogers. For instance, 75 percent of respondents to a CatalogSuccess.com reader poll earlier this year said they were increasing their budget for paid search.

“But online acquisition channels, such as search, will get more expensive over the next few years as more players get into it,” says Rick Fernandes, CEO and founding partner of online marketing services company Webloyalty. “Catalogers will have to maximize the value of a visit to their site because the cost of getting someone to visit their site is high.”

As far as 2008 print vs. Web budgeting is concerned, the broad view of multichannel merchants’ planning from observers such as LaPierre includes the following:
◆ Some wonder if a fixed percentage of 30 percent here, 30 percent there, etc. will work;
◆ Some say they’ll “do anything as long as it has a positive ROI,” LaPierre says;
◆ Some aren’t looking at it from a budget standpoint; instead, they look to test and eventually roll out if an initiative makes money; and
◆ Some plan to increase both their Web marketing and print catalog budgets.

Then, there were others who at press time in late October were still “struggling with trying to figure out exactly how much money they should put in any one of these resources,” LaPierre says.

Intense Focus on ROI
ROI is very cost-effective in the Web channel, Muoio says. “As that continues to justify itself,” he notes, “we’ll continue to increase spending there.”

New Pig Corp. plans to increase its spending on the Web, with testing and learning being the focus. “It’s more of a learning process for us right now,” Hershey says. “We want to see if we can use e-mail and Web marketing to offset what we invest and spend in print. Just as we test our content, covers, paginations of our print catalog, now we’re testing e-commerce the same way.”

Sundance’s Web marketing budget in 2008 will be weighted heavily toward site redesign, as well as SEO and other Web site improvements, Hagen says. “We need the catalog to push our business in front of new customers; then they’ll come to the Internet to shop. It’s almost like our search engine is really the mailing of a catalog.”

Stumps is investing heavily in rich media to appeal to its primary demographic — teenagers, Bansemer says. “We’re improving our photography and video online, in addition to our social networking,” he points out. “We’ve been setting up specific blogs to make sure we start getting into those Web 2.0-type environments more.”

How much is enough? Con-sidering that the percentage of orders being placed online is in excess of 70 percent for some catalogers, “many still aren’t putting enough emphasis on having a strong enough Web site,” LaPierre says. “They’re not putting enough emphasis on converting customers once they get to the Web.”

5 Pointers From Industry Experts
Rick Fernandes, CEO of Webloyalty; Jennifer Lukasiak, director of marketing and research at Quebecor World; and Bill LaPierre, senior vice president of list brokerage at the Millard Group, offer myriad tips for catalogers to maximize their marketing budgets.

➜ Decrease shopping cart abandonment, increase the price point (values) of every transaction, maximize on post-transaction activities. — Fernandes

➜ Focus more heavily on your data. Track your optimal marketing mix, accurate metrics for comparing ROI across all channels and profitability when acquiring and retaining customers. — Lukasiak

➜Rely on merchandise, not flash. “The catalogers having the most success out there right now are still the ones whose chief focus is always on two things: the product and its relationship to the customer and the customer’s needs.” — LaPierre

➜ Dig deep into your inactive files. Because of the high cost of acquiring new customers, dig deeper into your base of inactive names and figure out ways to activate these files. — Fernandes

➜ Avoid offers and gimmicks. Catalogers rely too heavily on offers, such as free shipping, 10 percent off or trying to become the biggest supplier of a product just so they own all the market share, as opposed to trying to figure out what actual products their customers want. — LaPierre