Use E-Mail to Ride the Next Wave
First, let's recount some of the positive developments that have been quietly transforming our industry in the past three years:
· Catalog/Web companies have been proactive in managing every line of their P&L -- everything from paper and printing costs to gross margins, overhead and returns and cancels. This has let many companies stay viable in this time of depressed response rates.
· We have made increased use of targeted promotional techniques to breathe additional life into online and offline promotions to lower customer attrition and keep inventories lean.
· We enthusiastically embraced the opportunities afforded by the new interactive media to keep sales coming in during this period.
By rethinking many of the ways we have done business for more than a generation, our industry has done an outstanding job of surviving this period. Almost unnoticed, however, is that these initiatives have positioned our industry to take advantage of the coming economic rebound to grow even faster and become even more profitable.
As we see the first tentative signs of a true recovery, it's time to take stock of what we've accomplished, investigate opportunities available to us and strategically integrate these initiatives into our ongoing business model.
Chief among these opportunities is the one that e-mail marketing affords us. Improving the integration of this medium can help catalog/Web companies in several ways:
Promotion cost efficiencies. Catalogers have always faced much higher advertising costs than the retail industry. Promotion costs for traditional catalog marketing are often in the range of 35 percent of net sales or even higher, straining the P&L.
But e-mail advertising costs can be as low as 5 percent of net sales. If we can harness the power of e-mail marketing, we may be able to put a dent in our ad costs, which are traditionally the second-biggest drain on the P&L after merchandise costs. If we can replace just 10 percent of our offline customer contacts with e-mail promotions without losing sales, we could add two or three percentage points to our bottom line.
This won't come without work, however. Catalog/Web companies need to embark on an aggressive testing and research program. Among the questions that need to be answered:
· What is the most profitable combination of online and offline contacts with Web-only, catalog-only and combo buyers? How many catalogs should they get? How many e-mails?
· What types of product, price point and promotional offers work best for each medium and each group?
· How can we increase the value of a telephone or Web order using traditional methods and some of the state-of-the-art computer technology?
· How does a catalog mailing affect your company's Web or retail sales? How does an e-mail promotion affect retail and catalog sales?
The opportunity to improve the bottom line is enormous. Our industry has been proactive in recognizing e-mail marketing's ability to drive sales. It's our job now to generate the knowledge to integrate this medium more fully into our marketing plans and use its efficiency to boost the bottom line.
Operating efficiencies. Each order that is migrated from the telephone to the Web can save your company $5 or more in processing costs provided your fulfillment and Web software are integrated. This transition also can lower customer service costs by reducing the number of order inquiry calls and letters.
And once an order is placed over the Web, opportunities exist for follow-up contacts with that customer during the ordering and shipping process. Each of these contacts, which the customer is expecting and so is more likely to open and read, affords a chance to offer another product and thus increase lifetime value.
Catalog/Web companies have done an outstanding job of capitalizing on the Internet to increase sales and move slow-selling product. But little testing has been done of the Web's ability to reduce the number of offline catalogs we mail and replace them with online promotions. This is "the next wave" for our industry. The most successful companies in riding this wave will be those who start now to generate the data to capitalize on it.