Catalogers ceding control of business: NEMOA speaker

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CAMBRIDGE, MA - The catalog industry's evolution over the past 20 years has forced marketers to give up much of the control over their businesses because of database marketing and the Internet, said Kevin Hillstrom, president of Mine that Data, in his keynote presentation the New England Mail Order Association's spring conference.

Mr. Hillstrom, who previously worked at Lands' End, Eddie Bauer and Nordstrom before starting his own consultancy, pointed to steps taken at Nordstrom to correct a failing catalog business.

When he started working there several years ago, the first task was to generate a profit from the catalog. The direct team succeeded in doing this by identifying products that worked well in the catalog and running them over and over. But this success didn't last long.

"The more we tried to get the catalog to work, the more the products in the catalog would stray from what was in the store," Mr. Hillstrom said. This caused a disconnect for customers who would see one selection of merchandise in the catalog and something different in the store.

In 2004, the company put together a multichannel task force and stopped putting out a traditional catalog vehicle. The catalog morphed into an advertising vehicle that reflected what was in the stores.

This is an example of how direct marketers are giving away control of their business, Mr. Hillstrom said. Thanks to database marketing, e-commerce and search marketing, marketers are offloading pieces of their business, and customers are taking greater control of how they get to brands.

To help marketers counter this trend, he suggested that direct marketers review different areas of the business by looking at their repurchase rates. Mr. Hillstrom called any category with 60 percent or more of its customers making repurchases on a regular basis as being in "retention mode." If 40 to 60 percent of customers are purchasing every year, the category is said to be in "hybrid mode." If less than 40 percent are purchasing on an annual basis it is in "acquisition mode."

Next, he said it was important to look at a customer's "migration mode," meaning their next likely action once they make a purchase. A category is in "isolation mode" if the buyers are loyal to that product, brand or channel, "equilibrium mode" if they tend to shop different channels and "transfer mode" if the customers are likely to switch to another channel.

At Nordstrom, they found that customers who bought online would most likely go to a store next. "This is a challenge if you're trying to build an online business," Mr. Hillstrom said.

As a result, Nordstrom was able to assign an acquisition and transfer strategy to its online business and a retention and isolation strategy to its stores.

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