8 Ways to Protect Your Bottom Line

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The last three to four years have hardly been ones that catalog and Internet sellers can look back on with great relish. Consider the post-9/11 direct selling environment. The negative factors far outweigh the positive ones, and each has had a depressing effect on response rates and revenues.


Catalogers and Internet sellers should consider the following eight short-term recommendations that can help you focus your strategies and help the bottom line.


Creative and promotion costs. Catalogers especially need to be squeaky tight with their creative costs in a challenging year such as this. Can you work with your agency/creative team to reduce fixed creative costs? How about renewed negotiations with your printer in reducing your color separations and in-the-mail catalog costs?


Are there savings in photography - reusing photos or getting greater vendor support in photography with higher co-op allowances or actual vendor-supplied, color-separated photos? How about attaining more efficient mailings by working with your printer and list/database people to reduce the huge postage burden? Will your key vendors give you better terms to help your cash flow?


Upgrade your creative efforts. While some will consider this recommendation at odds with the first one on creative cost, it really isn't. Too often, catalog creative teams go on auto pilot, producing book after book while nearly eliminating any innovation. They defend their efforts as being "our creative formula or model" from which there should never be any deviation.


This is a prescription for big-time customer boredom. Pretty soon, customers tend to say, "We've seen this catalog before. They all look alike." Small things like sharing campaign results with the creative team can make a difference in gaining their buy-in and understanding of the need for innovation.


Another thought is having an outside creative expert, a fresh set of eyes, critique your last several catalogs and give you honest, critical feedback. The upgrading of the creative effort applies to every type of direct marketing - catalog, direct mail, space ads, Web site and e-mail campaigns.


Circulation. Last year's holiday season saw some of the first liberalization of circulation planners by their prospecting or new customer acquisition. The previous two to three years had seen very conservative mail planning, with an emphasis on working the customer list versus prospecting.


Several recommendations for circulation planning include:


· Concentrate on the mailings to your customer list and be extremely prudent in who and when you mail. Let your database drive all your marketing efforts.


· This is a time to maximize results and cash flow from your customer list by using greater segmentation and tighter modeling.


· We have found that traditional RFM (recency, frequency, monetary) segmentation can be expanded to RFMPM. "P" stands for product category and "M" stands for month of purchase or seasonality.


· Expand the use of outside cooperative lists to make marginal and inactive customer list segments more profitable.


· Carefully analyze your last two years of prospecting and concentrate on those list segments that are really paying off. Narrow your new customer acquisition efforts.


· Look at and test some of the non-traditional media to get new customers such as card decks, package inserts and space ads.


Expanding the use of the Internet. By far the largest recent growth in direct selling has come from the Internet. Catalogers would be foolish to ignore the fact that more customers are using the Web to search for product, comparison shop and place orders.


With the change in thinking toward multichannel marketing, more emphasis needs to be placed on e-mail campaigns to supplement mailings. Also, more relevant customer connectivity and customer service is becoming the norm in following up on orders, shipping and tracking of orders, along with presenting e-mail offers that are based on past purchase activity.


What a boon it would be to your marketing if you had 80 percent or 90 percent opt-in e-mail customer names on your database. The marketing possibilities and cost savings that could ensue are endless.


Merchandising. When the economy and consumer confidence are marginal and there are many negative overall business indicators, smart direct sellers start with their merchandise assortments and use every possible historical productivity indicator as a guide to the future.


Consider some short-range merchandise recommendations:


· Keep differentiating product category and price point winners from losers. Be brutally honest in eliminating or downsizing losing merchandise areas.


· Push your vendors to add a point or two to gross margins.


· Re-examine your product price points relative to the competition and see if you can modestly raise your prices to improve margins.


· Consider adding a "Winner's Catalog" or the "Best of Catalog" to your mailing mix. This type of promotion is a proven success story and has been used by catalogers for many years.


· Can you improve your inventory turnover by identifying excess product earlier and exploring alternative ways of disposing of surplus goods?


· Concentrate on adding e-mail campaigns that can be customized to buyers' past purchase activity.


· Make certain that all merchandising is focused on - and enhances - your company's brand and niche.


Focus on the customer. This is a key time to re-examine your basic customer satisfaction quotient. How satisfied are your existing customers? If you don't have a clue about how your customers think, react, buy and what motivates them to action, it's time for self-examination.


When was the last time you did any type of customer research to help you learn this information? Are your customers positive, neutral or negative toward the firm and its customer service policies, merchandise offering, pricing, shipping and handling policies and overall level and quality of fulfillment?


Though research costs money, the basic knowledge of how customers think and act will help every strategic action in merchandising, marketing and customer service.


Overhead. Of all the years in which catalog and Internet marketers must control their general and administrative costs, this one is monumental. If your sales are flat or growing below the level that you would like, and your earnings are being challenged, this is a time to take some hard looks at fixed expenses.


Suggestions that make sense in this area include:


· Defer capital expenditures.


· Postpone new hires until you are certain that your bottom line is not in jeopardy.


· Look at all of your outside services like accounting, legal, phone systems, travel and entertainment, and even consulting, and ascertain if savings are possible.


· How about asking your employees where they can identify additional savings?


· Examine all of your internal systems and determine if they are the most efficient and cost-productive.


Concentrate on your analytical and financial skills. In tougher times, smart direct sellers pay more attention to the benchmarks, metrics and analytical side of their businesses.


Post-promotional campaign analysis is vitally important to point to where success has been achieved and where it hasn't. This is a time to build on one's winners and not perpetuate those list segments, merchandise categories, offers, etc. that are not producing solid results.


Paying careful attention to the monthly profit and loss statement, breakevens, cash flow and variation from an acceptable financial model for your company is fundamentally important. Pay attention to your company's fulfillment benchmarks compared with industry standards.


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