How Do You Measure Up?
It aims to ask the questions and provide the answers catalogers and investors need to make informed and intelligent decisions about going forward. This year, to expand its scope and readership, we asked the Direct Marketing Association to partner with us on the project. This led to adding a section on the state of the industry, which will be written by Katie Muldoon of Muldoon & Baer, and another on catalog merger and acquisition activity written by Mike Petsky of Gruppo, Levey & Capell..
In 1993, the survey contained 48 questions, 187 data points and resulted in a 40-page report. By 1997, there were 120 questions with more than 500 data points yielding a 140-page report. The questionnaire for his year's survey -- titled The State of the Catalog Industry -- is the same size as 1997's, and 85 percent of the questions are repeated, making it easier to compare year on year.
However, I still have catalogers asking me what benchmarking will do for their company. It is the only way a company, its management and its investors will really know whether the company's performance is above, at or below standard.
A major strength and advantage of cataloging over all other distribution channels is the breadth and accuracy of its data for decision making. Catalogs are mailed, ads are run, offers are put on the Web, stuffers are inserted -- all carefully source-coded so results can be tracked and credited to the proper medium.
Each product's sale can be traced back to the customer and source. Are there products or price points that will attract first-time buyers better than others? Do some products cause unusually high returns? Are there products that have high sales but bring in new customers who then never order again? What percent of the prospect and customer contacts lead to orders? How long does it take to process an order? Are there better and more efficient methods of getting the orders to the customers?
All these data points -- and many more -- are measurable. Hopefully, all companies measure their own performance in these and all other pertinent areas. However, company data without some standard to measure against will provide only part of the answer needed to make the right decisions.
Is the company's performance above or below standard? Are we mailing too much or too little? Is the mix of the mailings in the right proportion? Are your margins as high as they can be? How much should we spend on new or upgraded systems? Do we need to hire more staff? What is the value of upselling? These are all examples of just a few of the issues facing a company as it tries to grow and prosper.
An industry benchmarking study aids management in reaching those decisions.
Other sources of information that catalogers have had to rely upon for years include suppliers, in particular marketing and merchandising resources; conversations with other catalogers; and seminars or speeches at conferences.
There are serious weaknesses in relying upon anecdotal information to grow your business. The "supplier benchmark" methodology employed in gathering data is too casual. Typically, a supplier in the course of conversation with its accounts will ask about results, performance, etc. Even their study of a company's results will probably be a credit check, which only indicates whether or not the account is profitable.
Some suppliers, list brokers and managers can provide fairly accurate data on response rates and sales per book. However, it is unlikely that they have gone to the trouble to take this data, enter it in a database and then run an analysis to determine the median response rate for say active house customers.
Conversations among catalogers are equally fraught with problems as a source of data. The data supplied is frequently very "sketchy". How much data will a competitor supply to another competitor? It is illogical to assume they will provide very much for fear of losing an edge. If the conversation is with a noncompetitor, then the data must be "translated" for your company. Again it is doubtful that a company will religiously enter this data into a database and run an analysis of it.
At conferences, attendees sit in on a seminar or speech and receive selected data used to make a point. Again there is the problem of lack of completeness and statistical validity.
All these data resources lack any attempt to gather the data statistically and report on it without any bias. This is not to say that the data from these sources is not valuable, just that it has not been gathered and reported using the standards of research and statistics -- something all catalogers should do.
Catalogers must take advantage of the greatest unique feature of this industry: It is data rich and driven like no other distribution channel, and to use this wealth it needs to be statistically measured, analyzed and utilized.
Bill Dean is president of W.A. Dean & Associates, San Francisco, a catalog consulting, publishing and research firm.