Retailers can still score with loyal customers by mailing catalogs. But when it comes to tackling new customer acquisition, online marketing is increasingly the name of the game.
By Mary Wagner
Cookie and cake production soars in homes across the country around the holidays, but when spring rolls around even dedicated baking enthusiasts are less inclined to stay in the kitchen. So to get more out of its marketing spend across the seasonal peaks and valleys of its business, baking gear, ingredient and recipe site KingArthurFlour.com tried something new last year.
King Arthur Flour Co. Inc., which generates about 70% of its sales online, cut in half the number of catalogs it mailed in April 2008, one of 13 catalogs it mails each year, sending that piece only to its best customers. E-commerce director Halley Silver doesn’t say how much the company saved on printing and mailing costs, but says some of that money went into added prospecting catalogs mailed in November, when baking is more top of mind for many consumers.
A green spin
Some of the money also went into an e-mail campaign last year in April—a relatively slow month for the company—that included a free shipping promotion. An added green spin on the April e-mail campaign told customers that, while the company was looking to reduce paper use, it would be happy to send the catalog to customers who requested it
“It worked,” Silver adds. “We didn’t see a huge drop in revenue in April, and in fact we did quite well. So we repeated that same strategy for April again this year.”
The Internet’s rise as a marketing and sales channel has many retailers like King Arthur re-examining their catalog strategy these days. Junonia Ltd., Title Nine and 1-800-Flowers.com Inc. are among those that have cut back on catalog mailings as more of their business moves online.
Online marketing allows retailers to reach customers at a fraction of the price of printing and mailing paper catalogs, making the prospect of reducing catalog distribution, or even suspending it altogether, tempting on a cost basis alone. But to retailers considering doing away with catalogs, catalog consultants and some retailers say, not so fast.
“You will always win on cost with the Internet,” concedes Gina Valentino, president of catalog agency Hemisphere Marketing. “But the mediums work hand in hand. It’s been a drawback for each marketer who has tried to silo this effort. A combination of Internet touches and catalog contact has much more power.”
Declining numbers
While catalogs in highly specialized segments such as baking are thriving, overall, retailers are mailing fewer print catalogs every year. According to Oxbridge Communications, which publishes the annual National Directory of Catalogs for suppliers to the industry, the number of print-only catalogs dropped more than 14% in the past year, from 1,574 in April 2008 to 1,347 in April 2009. That decrease no doubt was accelerated by the sharp downturn in the economy that hit in the fall of 2008, prompting many retailers to seek ways to quickly reduce costs.
Meanwhile, the number of print catalogs with online editions rose, to 8,894 from 8,675 over the same period, while catalogs available in online-only formats climbed to 2,011 from 1,868. The company defines online catalogs as “significant e-commerce sites, PDF files, and digital flip-books.”
Whether in a bid to cut costs, divert marketing dollars elsewhere or go green by reducing paper consumption—a theme emerging across marketing and one that plays well with the growing legions of environmentally conscious consumers—marketers are thinking more strategically about who they send catalogs to, how often they send them and how to best blend them with their online marketing efforts.
George Mollo, president of catalog consultancy GJM Associates Inc., estimates the average per-piece cost to produce and mail a catalog ranges from about 65 cents to 80 cents, including paper, postage and list rental. Given that much of that cost is in fast-escalating paper prices and postage rate increases, that’s up from an average per-unit cost of 25 cents to 50 cents only a few years ago, he says. By contrast, estimates Valentino, the cost of sending a blast e-mail—not including the cost of producing the e-mail’s content—is about three to seven cents per unit depending on volume.
Numbers like that got the attention of Charlie Silver, now a consultant who until last year was vice president of marketing at Bloomingdale’s Direct. Silver says that from 2004 to 2008, prospecting through paid search was about four times as productive as prospecting through its paper catalog.
Silver draws a distinction between productivity and profitability in prospecting, which usually involves renting lists of addresses and sending catalogs to those consumers. “You don’t usually prospect profitably. But you do get customers, who then bring in the sales,” he says. That strategy of prospecting through paid search ads proved so effective that Bloomingdale’s reduced its catalog distribution significantly and funneled a sizeable chunk of those savings into online marketing, he says.
Against the grain
But the growing role of the web in online marketing and sales doesn’t always mean it makes sense to reduce catalog mailings. Ultimately, the value of a paper catalog versus online marketing, whether through e-mail, affiliates or search, is not about cost but the total return on the effort. That’s one reason why Shop.NHL.com, the e-commerce site of the National Hockey League, is actually increasing catalog circulation by about 20% this year, according to Perry Cooper, senior vice president of digital/direct marketing and fan analytics at Shop.NHL.com.
Cooper, who says his cost of getting a catalog in the mail is at the low end of the industry average, says e-mail marketing is a more cost-effective way to acquire customers, but that e-mail simply doesn’t drive the volume of traffic to Shop.NHL.com that its catalogs do. “E-mail is a robust source, but when you get down to open, click-throughs and conversion, it doesn’t have the power of a catalog,” he says.
And with many consumers’ e-mail inboxes crowded with unwanted messages, Shop.NHL.com considers the paper catalog to be essential for breaking through the clutter, Cooper says. How essential? About 60% of sales that occur on its web site within the six to eight weeks after a catalog drop can be attributed to the catalog, Cooper says.
E-mail overload is one of the reasons outdoor gear and apparel retailer Moosejaw Mountaineering plans to increase the number of catalogs it mails this year to nearly 700,000, a 42% increase over the 400,000 it mailed last year, plus the 150,000 it will stuff into packages it sends customers.
“E-mail is certainly cheaper than a mailed catalog, but many customers are opting out of promotional e-mails,” says Gary Wohlfeill, creative director. “Additionally, the catalog is a more persistent branding tool than e-mail. Customers can give it to their friends, keep it on their coffee table, or, in the ideal scenario, toss it in the common room at their dorm at college. It’s not uncommon to receive an e-mail from a customer proclaiming that they’ve read every se ntence in the current catalog.”
Some retailers have eliminated long-standing catalogs in the past year, but in some cases those decisions stemmed from factors beyond the growing role of the web. When Bloomingdale’s, for example, dropped its paper catalog last year, Silver says it wasn’t simply due to the greater return on marketing dollars invested online. A decision that the catalog wasn’t reaching the right target for the brand was another key reason it was eliminated, according to Silver.
When the paper catalog Lane Bryant Woman ceased publication last year, it was because the license under which RedCats USA had been operating it as a separate business had expired and reverted back to Charming Shoppes. Charming Shoppes then eliminated Lane Bryant Woman to concentrate on building up the paper catalog associated with Lane Bryant stores, according to Charming Shoppes.
Rather than simply chopping catalogs out of the picture or cutting circulation off the top as web sales and marketing take on greater importance, many retailers are trying to figure out how catalogs and a web presence can complement each other.
Catalogs, for example, excel at creating desire among consumers and drive shoppers to a web site. They also avoid the clutter of the web. A consumer flipping through a glossy paper catalog gives it her full attention, which may be hard to get online where innumerable banner ads, pop-ups and animations provide constant distraction.
At the same time, a catalog can’t be changed the way a web site can. A catalog can sell only what its printed pages show, and it can’t drop from its pages items that go out of stock. Nor can it leverage events or opportunities that occur after the catalog’s been printed and distributed, such as, for example, switching a dress displayed inside the book to its cover.
Web sites can. When first lady Michelle Obama chose to wear a dress from The Talbot’s Inc. in a spring magazine shoot, for example, Talbots was able to get the dress, and in fact the magazine’s cover shot, onto its web site home page.
With both catalogs and online assets having their strengths, many retailers with catalog experience have concluded they serve different purposes.
“Across the industry, people are seeing that sending catalogs to the current customer base still works well because the response rate is high enough to overcome the increased cost of postage and paper,” says retail industry veteran Bill Bass, interim president of Charming Direct, the direct marketing and web retailing arm of Charming Shoppes.
But, given postage and paper cost increases, catalogs don’t hold up as a prospecting vehicle, Bass contends. “The response rates on a prospecting catalog are so low that as costs went up, it didn’t make sense to send them,” he says.
Moosejaw takes the same approach. Its customer acquisition activities are all online, through paid search and affiliate marketing. But it looks to paper catalogs to re-activate and promote re-ordering among customers who have not purchased in some time.
Retailers who mail catalogs are also getting savvier about online marketing techniques. For instance, King Arthur Flour, which used to send an e-mail about every five days, usually to its entire list, is now e-mailing twice a week, but sending each message to a more targeted segment of its customer list.
For example, it segmented out those bakers who use mixes versus those who start from scratch based on their history of buying mixes versus yeast, flour and other ingredients. It offered both groups free shipping, but sent them different content. The e-mail to the ingredient buyers—likely scratch bakers—showed a freshly baked loaf of cheese bread, while those who bought mixes saw scones prepared from a King Arthur mix.
Over several months following that promotion, King Arthur had a 35% lift in revenue per e-mail sent in the scratch baking segment compared to a non-segmented campaign, and an 8% increase in average order value, Silver says.
Spending shift
To the extent retailers are sending fewer catalogs, either to cut costs or as part of a more targeted segmentation strategy, where are they spending the marketing dollars saved? It’s on a mix of traditional and emerging customer touch points, according to Bass of Charming Shoppes.
Some of those dollars are going right back into postage for those catalogs a retailer still wants to send. “If your costs go up 20%, and you reduce your catalog mailing by 20%, you haven’t saved any money,” he points out. “You’re mailing less, but it’s costing you the same.”
While paper catalogs are still an economically viable route for reaching a retailer’s existing customer base, a lot of prospecting activity has shifted to the Internet, and particularly to search engines. Similarly, e-mail, like catalogs, is also more effective with existing customers than as an acquisition tool, Bass believes.
But two other types of online assets may benefit from dollars being shifted from catalogs, Bass says. One is the e-commerce site itself, as marketers look beyond acquiring traffic to upping the conversion rate from the traffic their marketing generates.
“The industry’s average conversion rate is about 3%, maybe higher for catalogers. If you can take that from 3% to 4%, you’ve just increased your sales by one-third. So there is a big push right now to increase sales by increasing conversions on our site,” he says.
Charming Shoppes expects to launch new sites for brands Fashion Bug, Lane Bryant and Catherines late this summer, and those sites will incorporate conversion-boosting features Bass says other retailers also are investing in, such as improved site search and checkout, and enhanced merchandising features that present more personalized site experiences.
And more retailers will also shift marketing dollars saved elsewhere to emerging social media features, Bass predicts. “What you really want to do is get the passion people use when they talk about the cashmere sweater on your site off the site and out across the web,” he says. “It’s the most interesting thing that is happening in online marketing.”
mary@verticalwebmedia.com
