Change 60/30/10 to Include Service
Many companies are reporting drops in prospect response rates of 10 percent to 20 percent even among their best outside names. If this new lower response does not improve, many catalogers will have difficulty growing or even surviving.
However, many firms report their house files are responding better. But one needs to generate new customers for growth and to replace those who stopped shopping with the company. The increased postage rates will only exacerbate the problem.
Historical strategy. Historically, catalogers have operated under the assumption that there were three keys to generating demand: merchandise, marketing and presentation. Because of the importance of these factors a hierarchy has developed over the years expressed as the 60/30/10 rule.
Since the customer is interested in solving a need, the merchandise is the most important element in the buying decision and, therefore, in a catalog's success. Merchandise includes more than just the specific items offered. If a company offers products in a category, how extensive was the offering mix in terms of styles, prices, colors and a host of other factors?
Solving these issues has been the problem for all merchants, and by extension their catalogs. Selecting product categories in which it can be an authority and offering a wide enough selection at appealing prices to the broadest number of potential customers - this is easier said than done, as all too many failed companies have found. Solving how to find new products, what price to offer them at, etc., is not easy or highly quantifiable.
Though some quibble whether historically the importance of the merchandise was 60 percent or 70 percent, no one argues it was and remains the most important element. This is as true for the business-to-business cataloger as those in the consumer field.
The second element worth 20 percent to 30 percent of success is the marketing. To whom and when is the catalog mailed? What offers or promotions are run to entice additional orders or higher order values? This element was and is more quantifiable than others and has benefited the most from analytical tools such as database management. The use of co-op databases, modeling of files and mailings have contributed to marketing being a more important factor than 30 years ago.
Cataloging and all remote shopping would not be where it is today without the advances in modeling, list selection and other marketing tactics. One could even argue that the Web would not be as important a factor if not for the marketing tactics developed by catalogers over the past 30 years that were adapted to the Web. Thus, under the traditional formula, marketing probably contributed 30 percent of success.
The last of the three elements is presentation, which while carrying less weight than the others was still critical for success. There have been successful catalogs whose presentation would not win design awards yet the presentation was perfect for their audience. Thus, even among these books their presentation contributed to success.
Take Dr. Leonard's, on which we assisted Cortec in its successful bid for the company. Most designers would find the catalogs dull and uninspiring. Yet the use of a grid format, clean pages and down-to-earth approach appeals to their target audience that is older and values clarity and simplicity. Thus, the Dr. Leonard's presentation is a winner.
The unfortunate thing in the 60/30/10 formula is that it concentrates almost exclusively on getting an order. This is especially true as most catalogers suffer from having one in two buyers never order again. The retail analogy is to advertise in a national magazine while having only one store. A person may be intrigued by the ad and may shop if he happens to be in the town where the store is located. But the vast majority of the readers of the magazine will never shop in the store. Moreover, if the buyers never travel to the town again they are one-time buyers, just like half of all catalog buyers. Thus, the old saying about half of advertising is wasted is more like 90 percent of it is wasted in this case and for many catalogers.
New times, new rule. As mentioned in the beginning, many catalogers have suffered the past year from a drop in outside response rates with a slight increase from their house file. Many attribute this to a homing instinct after Sept. 11, that consumers wish to shop and deal with companies they are familiar with and not be adventurous.
I find that hard to accept, especially as it is not based on any research I've seen but on instinct or a desire for a simple answer to a complex problem.
The problem stems from several factors. The majority of catalogers fail to offer new and exciting merchandise. Marketing relies on the same selection criteria without any attempt to do modeling beyond what they get from their co-op partner.
In the 10 years of the State of the Catalog/Interactive Industry Report, not once have more 40 percent of respondents reported developing or using advanced modeling. And few presentations break from the company's formula, as catalogers are afraid of not maintaining their brand image. Given that half of first-time customers never order again, and of those that do order more than once fewer than 70 percent order three or more times, the average cataloger's brand is not ingrained for most consumers.
This is not all bad, as I think that most catalogers will see the need for a new formula: 50/25/15/10. Merchandise will still reign and be the most important element. Marketing will remain the second critical element. But the new element will be service, worth at least 15 percent in getting customers to come back and attract new ones through word-of-mouth advertising.
Service is more than answering a question. It starts from the moment customers place an order until they receive it and then, if the cataloger is smart, a follow-up to see whether they are happy with the order.
Moreover, if the catalog has always offered a good quality/value relationship in the merchandise, does a good job of marketing to the right targets at the right time and presents the offers in an appealing fashion, good service is more likely to increase repeat buying than any of the other elements.
Good service means having inventory to ship when the order comes in. For the customer the ordering is easy, informative and answers any questions. Ease of ordering is one area many Web sites still fail. How often do you have to click through five or more pages to fill out the shopping cart? Another part of good service is filling the order promptly, packaging it properly and shipping it by the most efficient method to satisfy the customer. Too many catalogers fail at one or more of these steps.
To keep and get more share of wallet, focus on providing the service that will generate repeat business as well as merchandise, marketing and presentation. If done well, it will generate more new business, as your customers will relate their experiences.
Lands' End is a perfect example where service has helped generate repeat business and new business much higher than the norm among catalogers. When the company made mistakes in merchandise offerings a few years ago, it was able to recover quickly once it corrected the offerings because its customers valued the shopping experience - the service - they received from Lands' End and not only ordered again but told friends to look and try.
Successful catalogers in the future will be those that understand and apply the new 50/25/15/10 rule.