Retailers shift their ad spending from TV, radio and print ads to digital ads.
Retailers can still score with loyal customers by mailing catalogs. But online marketing is the name of the game when it comes to new customer acquisition.
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.”
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.