Case Study: Tender Heart Treasures
In a comfortable corner of Omaha, NE, designers, woodworkers and seamstresses create more than 600 new home decor and giftware products each year.
Founded by Pamela Watanabe-Gerdes in 1987, Tender Heart Treasures considers its in-house design staff one of the company’s strongest competitive advantages and a major reason for its success.
Today, the company produces two catalogs: Tender Heart Treasures, which offers country-style giftware and home accents, and A Special Place, which features more romantic, European-inspired gifts and home decor items. In addition to its catalogs, the company markets its products to wholesale customers through trade shows and two showrooms.
Started with just 13 employees, Tender Heart Treasures has grown into a $60 million company with about 400 employees. A significant portion of the annual revenues come from the catalogs, says Watanabe-Gerdes. Though she declined to say how much of the company’s business is catalog, she did note the catalogs continue to experience significant growth.
Watanabe-Gerdes attributes much of the success of her business to developing its own unique, affordable giftware and home decor products. “We work hard to determine what the customer wants, then bring it to them at the best price for the greatest value.”
From Concept to Completion
Of the 600 new products Tender Heart Treasures introduces each year, more than 90 percent are created in-house. The company’s product design staff consists of buyers, designers, artists, woodworkers, seamstresses and a staff of assistants. The team, along with Mary DeGraeve, director of merchandising and product development, produces three product lines a year—spring, summer and fall/holiday—for each of the company’s two catalog titles.
More than 30 percent of each season’s product assortment consists of new items. “The focus of each book changes seasonally as we introduce new product lines that reflect the given season,” says Pat Olsen, product design manager.
To come up with such a volume and assortment of new product ideas, product development is an ongoing activity at Tender Heart Treasures. “We usually are working about 18 months out,” says Watanabe-Gerdes. “Right now, we’re designing for the spring of 2004.”
The product development process begins with the design and buying teams working together to determine where the line will develop for the upcoming year. “Our design team works closely with our merchandising team to determine themes/product lines for each season as well as for each section of our catalog,” Olsen explains. Looking at sales results from prior seasons and current seasons helps to determine what to drop or what to expand.
In addition, the team closely monitors market trends when developing new products, lines or classifications, keeping hot colors and mediums in mind.
Home and design trade shows provide sources of inspiration as to the colors and textures for the coming season. Ideas also are generated by reading home decor magazines, attending gift market and trend seminars, and watching the competition.
“We have to stay in line with the decorating trends, because that affects the type of home accessories that consumers will want,” Watanabe-Gerdes notes. And, you can bet that a year or so later those trends will appear in home decorating, not only impacting Tender Heart Treasures’ lines, but those of catalogers such as Pottery Barn and Crate & Barrel. “You’ll even see similarities in apparel trends,” she says.
All of that trend information comes together back in Omaha where the products are planned, designed and specified for manufacturing. First, product concepts are presented to the design and buying teams, usually in the form of sketches. Once a concept is approved, says Olsen, “Prototypes are built, when applicable, and then sent to the manufacturers for production.”
While most of the products are designed in-house, they generally are produced to the company’s specifications in overseas locations, such as China. Tender Heart Treasures is fortunate to have established good relationships and credibility with its manufacturers, says Watanabe-Gerdes. “Due to the competitive nature of the market, we’ve found that being a domestic importer works to our advantage,” she explains. It helps the company keep its costs in check, and consequently, its prices low.
Olsen says, “We try to design with price in mind, knowing our customers appreciate a great value. Our buyers work closely with the design team to keep production costs in line with our merchandise pricing strategy.”
Watanabe-Gerdes believes the catalog has continued to grow steadily and profitably, “due to our ability to design and source our own concepts and offer them at highly affordable prices. Our own unique designs add value to the products.”
DeGraeve adds, “Our customers vote with their dollars each time we produce a new line. It’s fun to watch [this process] and reorder their favorites.”
Two Catalogs for Two Audiences
When Tender Heart Treasures began its second catalog title, A Special Place, five years ago the goal was to fill product needs for an emerging niche of its customer base. “We had touched on different decors in our main book, and the Victorian products seemed to have a strong enough niche to warrant their own catalog,” Watanabe-Gerdes explains.
“This [niche] is where a lot of our growth had been,” Watanabe-Gerdes continues. “We figured the most natural way to capitalize on this would be a spin-off.”
A Special Place represents a softer more romantic side to the company’s home decor business as opposed to what Watanabe-Gerdes refers to as “our more primitive country line of Tender Heart Treasures.”
Between the two catalog titles, the company now mails about 17 million books annually.
The target audience for the Tender Heart Treasures title is comprised mostly of women, split into two distinct groups: younger mothers in their 30s and 40s, and retired or older women in their 50s and 60s. The average household income ranges from $40,000 to $60,000.
The target audience for A Special Place is comprised of women with a median age of 40 (half falling between the ages of 45 to 64) with an average household income of $50,000 to $100,000.
Though the business now is divided between the two catalogs, the company notes significant overlap among the two customer bases. As a result, about half of the total housefile is mailed the two titles. In addition, some migration occurs naturally as the company’s customers mature, says Watanabe-Gerdes. “Our customers have in a way grown up with us. People tend to evolve in their decorating styles as they mature,” she notes. “A lot of people are comfortable with the country style when they first set up their homes. Then as they mature, they may become more traditional and romantic in their tastes, as is a trend with our baby boomer customers.”
Interestingly, she notes, “Sometimes we notice the product preferences shifting back again with our older buyers who may move back into a more country decorating style later in life.”
Supplementing the natural buying migration between the catalogs, the two titles are actively cross-promoted. On the order forms within each book are offers to receive the other catalog. And on the company’s Web site, both catalogs are featured, although at this time, the Web is purely for catalog requests.
Plans are to cross-promote the titles online—once the Web commerce is up and running. Tender Heart Treasures’ Web plans have been on hold as it undertakes a complete overhaul of the company’s core information systems. The new information-processing system will integrate all of the business functions, from the call center through picking tickets and shipping, from customer relationship management to marketing. This will include an Internet module, as well.
“We’re building our e-commerce sites in conjunction with the other new systems,” says Lisa Kuehl, advertising manager. “We’re incorporating functionality that will allow the customer to cross-navigate between the two sites, ordering items from both in one shopping trip.”
Company executives anticipate launching full-service Web sites for both its Tender Heart Treasures and A Special Place catalogs early next year. At that time, Kuehl says, the company also will develop and implement e-mail promotions and campaigns to support both sites.
Product Is Prominent in Catalog Creative
The creative staff also is intimately involved with the company’s products. To keep the catalogs’ focus on their unique products, Tender Heart Treasures’ creative team works closely with merchandising and marketing. All of the company’s creative and production is handled by its own in-house agency, which helps to foster the close working relationship.
From product photography and page-layout design to copywriting, public relations and production coordination, a team of 12 creates and produces all of the company’s advertising material, including catalogs, space ads, direct mail packages and visual merchandising displays. Annually, they generate more than 700 fresh catalog pages and more than 2,000 new shots between the two titles.
There are some specific creative decisions in which merchandisers and creative staff collaborate. For instance, in paginating the catalogs, they discuss which products are expected to be key sellers and which should get prominent positioning. Cover decisions, too, are a joint effort between advertising, merchandising and marketing.
“Our merchants recommend key selling products, and advertising carries out the presentation,” says Watanabe-Gerdes. “Marketing evaluates the strength of each cover based on its mailing strategy.”
Bottom Line: Is the Customer Happy?
When all is said and done, the company’s goal is a satisfied customer. As such, it sees customer service as a competitive strategy —starting at the beginning with product quality.
“We set high quality-assurance and quality-check standards for ourselves, both internally and with our vendors. Because of this, our return rates are extremely low compared to industry standards, averaging well under 3 percent each year,” says Watanabe-Gerdes. “Even one return is one too many.”
To maintain quality control beyond the product, Tender Heart Treasures keeps most of its operations in-house, from fulfillment to call center operations. Most internal staff is shared between the two books, with the exception of separate merchandise buying teams.
The quality philosophy extends to the call center, as well. “We handle our own telemarketing efforts between approximately 100 call center and customer service associates,” Watanabe-Gerdes explains.
Training the front line on the company’s products is very important, says Watanabe-Gerdes. “We’re always filling the training room with products, making sure to bring in any new ones.”
The call center staff is so immersed in the products that they flock to the regular Employee Garage Sales held by the company, where they can buy products at a discount. “Our employees love the products they sell, and it shows,” she says.
For the future, Watanabe-Gerdes’ plans are to continue to focus on the products that are unique to the company while ensuring the same high quality standards and affordable pricing customers have come to expect.
“In this business, we know we may not get a second chance to make a good first impression, so we work hard to get it right the first time.”
Addition: A Lesson in Branding Leads to Clearer Focus
Tender Heart Treasures redefined its company brand image about four years ago.
“We did some self analysis, and found that, visually, when we looked at our catalogs, we couldn’t identify who we were,” recalls Pamela Watanabe-Gerdes, president.
The first step was to create a positioning statement. “We needed to define who we are and what we do,” says Lisa Kuehl, advertising manager. “We encapsulated the spirit of the statement into our current tagline: “warming hearts and homes.”
The next step: a hard look at the catalog itself. “We realized our strengths were our in-house [product] design team and in-house production. And our catalogs just weren’t doing our products justice,” Kuehl continues.
Before moving forward with any catalog creative changes, officials at Tender Heart Treasures spent time listening to customers to get their input. “We wanted to make sure our copy and voice were consistent throughout the company,” Kuehl says.
From there, the company updated the catalog’s logo and cleaned up page layouts, adding structure to the previously scattered look. “We added sales copy (touting benefits) to our bare-bones, feature-driven product copy, along with headlines and customer testimonials,” Kuehl notes.
Imagery was changed from straight product shots to dynamic shots incorporating warmer, more natural lighting along with a sense of lifestyle. In addition, full-page shots were added to kick-off a section such as “Kitchen,” “Garden” or “Country Comforts.” These full-page openers helped to pace the book and showcase key products within each collection, Kuehl says. “We supported our brand through key positioning elements such as our guarantee and signature design platform. Our covers have continued to evolve over the years, once packed with an average of 13 items, nowadays, sometimes featuring only one.”
The results? “An easier-to-shop book that supports our brand identity while maximizing our sales opportunities,” she says.
Company officials plan to do a similar brand focus review for its A Special Place catalog within the year.
About This Company:
Headquarters: Omaha, NE
Founded: Tender Heart Treasures catalog, 1987; A Special Place, 1997
Number of employees: 400
Annual sales: About $60 million
Type of products sold: gifts, home decor
Number of SKUs: 2,500
Catalog printers: R.R. Donnelley, Quad Graphics
Average order size: $45
Housefiles: Tender Heart Treasures, 300,00012-month buyers; A Special Place, 88,000 buyers. Both lists managed by List Services Corp., (203) 743-2600
