Libey Rebuts DMA's Position on War Contingency Plans

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Catalogers should not become paralyzed during a war, longtime consultant Donald R. Libey suggested yesterday as he released a response to a white paper put together by the Direct Marketing Association.

"In order not to jeopardize the remainder of the decade or the core valuation of your business, continue operating your business and maintaining your budget to invest in and assure growth," Libey wrote in his report "The Market and War: Attitudes." "Make needed hires, increase spending on viable prospecting in order to capture new market share and invest in needed capital expenditures to assure appropriate positioning for future opportunistic and organic growth and expansion."

Libey, president of Libey Concordia Investment Bankers, said catalogers have been hurt by much worse than the possible effects of war with Iraq: the combined postal increases of the past 15 years, privacy constraints, do-not-call legislation on the state and national level.

"The erosion of the fundamentals of direct marketing are far more dangerous than the minimal costs of a short-term dip in demand [because of] conflict," he wrote. "No catalog company has ever succeeded by stopping and no catalog company will ever grow by shrinking."

The DMA's white paper suggested that catalogers consider trading off new prospecting for older house-file reactivation as it might minimize risk and reduce list costs. They also said an extra drop to the best-performing house file segments should be considered to pick up some of the demand lost by cutting bottom-performing prospect segments. A reminder postcard or e-mail -- timed to coincide with the eliminated drop, perhaps containing an incentive offer -- can also be considered.

Libey, however, said "most pull-backs in prospecting and increasing in house file mailings will result in a further dilution of house file performance and a longer term loss of momentum in new customer acquisition and share shifting in the cataloger's core markets. … The Mom-and-Pop local grocery that opts to cut back on circulars, newspaper advertisements or reduce any of its minimal promotional budget will drop farther and farther behind the power of the major competition, and it will lose core customers."


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