IndustryEye: The Great NEMOA Debate

Using promotions excessively can be like dealing with the devil. Promote too much, and you not only give customers the impression that you’re an off-price bargain house, but also your profit margins can tumble. One of the livelier sessions held during the New England Mail Order Association (NEMOA) conference in late September was a staged debate in which panelists and audience members argued about the need for catalog promotions. To fuel the fire, response data from a recent Mokrynskidirect catalog client survey was thrown into the mix for each issue tackled.

The debate brought out some issues for all to ponder. Below, are the more noteworthy issues raised, the debaters’ arguments, some audience members’ opinions and the survey results. Having attended the session, I drew my own conclusions and provide you with my own take on each issue. The rest is in your hands to consider as you attempt to empty out your fulfillment center this holiday season.

The debaters were former, longtime Orvis marketing executive Joe Cassidy (now a partner with John Arlotta & Associates) and former Chadwick’s executive Phil McAvoy (founder/principal with PJM Associates). Mokrynskidirect president, Dennis Bissig, and vice president, Steve Tamke, co-moderated the panel. For the record, it’s important to note that after the session ended, the panelists pointed out that they were most interested in carrying out their assigned roles (pro/con) to help stir up the debate — but didn’t always agree with what they were saying.

1. How frequently should catalogers mail special promotions during the year?

Cassidy: “On the low end, every time you mail; on the high end, every day.”

McAvoy: “Never or seldom. Promotions are a drug; you get addicted to them as a crutch.”

One audience member: “You dig yourself into a hole by putting everything on sale all the time. But I compete with the rest of the world, which is doing just that.”

Survey: Twenty-four percent said every mailing; 15 percent said never; 34 percent said four to six times per year.

The editor’s take: The audience member makes the most sense in that promotions are something of a necessary evil. The retail industry as a whole, long ago trained shoppers to wait for sales and promotions. In the catalog/multichannel business, this translates mostly to free shipping promotions. My feeling is the longer you can hold out, the better. But at the 11th hour of your key selling season, when you need to clear out your slow-sellers, it’s time to promote.

2. Are more catalog/Web marketers using promotional techniques?

Cassidy: “Free shipping is everywhere, and has increased dramatically. I suspect the amount of promotions has doubled over the past year or so because it’s working.”

McAvoy: “You’re forced into it, but does [free shipping] fit with your brand? As long as it’s not a knee-jerk reaction to business [conditions], you have to do it.”

One audience member on why his company is running fewer promotions: “When we measured source code for source code, we weren’t making that much money. Your marginal customers and not-very-committed customers get the bargains, and your best customers don’t. So we didn’t want to do that in this particular case.”

Survey: Fifteen percent reported no use of promotions in 2005, up from 4 percent in 2004; but 12 percent of mailers reported using promotions 10 to 12 times per year in 2005, up from 6 percent in 2004.

The editor’s take: In the case of free shipping offers, use them on a spot basis at various times throughout the year — or during a particular selling season. Make sure the offers have tight rules so your customers don’t start taking free shipping for granted.

3. Should the catalog industry increase or decrease promotional techniques?

Cassidy: “Yes, [increase promotional techniques] because it works, and that’s what the marketplace demands; that’s the competitive environment. A lot of us wish the world wasn’t the way it is today, but we have to live it this way, and promotions are part of a growing company.”

McAvoy: “Most people are pretty aggressive in promoting for customer acquisition. Your best customers are very profitable, but only have a 50 percent retention rate. And if you bring in customers with a promotion, you don’t see an increase in lifetime value. So do it carefully, because you’re putting promotions out there, and your best customers will see them.”

Audience member: “The [customer] universe isn’t uniform. So if you promote in a uniform way, you’re under-marketing. But if you target by segment, you’ll be much more successful.”

Survey: Thirty-nine percent of marketers increased their use of promotions in 2005 over 2004; 14 percent decreased their use of promotions; and 6 percent maintained the same levels.

The editor’s take: The audience member makes a good point, because any promotion you put out there as an attempt to bring in new customers is going to be seen by your best customers, to whom you don’t want to have to offer special discounts or free shipping. So, don’t just assume that your best customers will continue to happily pay full price if you’re putting special offers on the table for prospects.

4. Which promotional technique offers the highest response lift for catalogers?

Cassidy: “Free shipping, more so online than in catalogs. But it’s the most powerful offer, because it excites consumers. And shipping is the No. 1 thing people talk about [negatively] with catalog shopping.”

McAvoy: “Twenty percent off offers.”

Survey: Among those reporting response lifts of 10 percent or greater from promotions, 29 percent attributed their gains to free shipping promotions; 17 percent to percentage-off sales; 15 percent to sale pages and specific items sales; and 7 percent to both free gift with purchase and dollars-off promotions.

The editor’s (final) take: I’d go with the flow. As long as it’s used in moderation and clearly marked as a limited time offer, free shipping promotions seem to involve the least contact with the devil. «