Making the Web Work for You
To date, the Web has been less than the utopia that it was billed. Rather than cutting costs by being an inexpensive marketing tool, it has layered on one more expense for most companies.
In 1991, long before interactive marketing, we conducted our first benchmarking study on cataloging (now done with the DMA as the State of the Catalog/Interactive Industry Report). Marketing expenses were 25.3 percent of respondents' sales dollars, and catalogers had an operating income of 2.8 percent. In 2000, marketing expenses had risen to 27.1 percent of sales while profits had fallen to only 2.1 percent of sales.
Adding another marketing expense whose sales do not offset costs is a recipe for disaster. If catalogers want to succeed on the Internet, they must find out how to offset Web expenses with reductions in other marketing costs. It is doubtful there is room for either higher margins or less operating expenses to offset this added cost.
It is necessary that as I discuss how to make the Web work for you, I disclose that I am a board member of Altura International, the parent company of CatalogCity.com.
Unfortunately, as catalogers have found over the past few years, no one else will solve this problem. If catalogers do not set up business on the Web, they'll lose sales. If they are on the Web, revenue has not yet offset the rise in overall marketing expenses. Every company that I have talked with stated that all channels suffer when catalog mailings decrease.
With postal rates continuing to rise, everyone has to find how to generate Web traffic and sales while mailing fewer or smaller catalogs. If catalogers don't do this, then the only survivors will be the big companies that can afford the additional postal expense. So the million-dollar question for catalogers is how to drive Web traffic inexpensively.
The primary Web site traffic methods everyone has used are traditional techniques, such as catalogs, package inserts, print ads, buying space on mega sites like AOL, going for superior placement on search engines like Yahoo or Google and joining shopping portals or malls.
The traditional techniques have proven effective for driving traffic and sales, but they do not reduce expenses. The mega sites drive traffic but are expensive with no company reporting profit from any sales they receive. Further, their structure limits the number of companies in a category. Search engines are the least expensive but depend on the customer doing the search.
Cataloging is push marketing. The catalog is mailed, and the customer responds. Conversely, search engines and much of Web marketing has been pull marketing, with the consumer seeking a resource for a need. This is probably the major reason that the Web has not been as successful a sales channel as many hoped.
The last method used to date has been malls. These have attracted more attention lately with Google and Amazon creating catalog malls on their sites. In addition, there are free standing malls.
In the immediate future, malls seem to have the strongest chance for driving traffic and sales while reducing catalog-mailing expense. They give exposure at no cost unless a sale is consummated and then there is revenue sharing as in most link programs.
However, just as not all catalogs are equal, not all online malls are the same. First are the catalog finders, where a consumer searches for a product category and receives a list of catalogs. The second level shows catalog pages in addition to the catalog cover. The third type of mall shows individual products that the consumer is searching for from all the catalogs on their site.
But all these malls require the consumer to link to another site. If they don't find what they want, they have to return to the original site and start over. Finally, a few sites let the customer shop from multiple catalogs using a single shopping cart and not having to link to anything.
I cannot discuss the link-off malls without expressing my opinion that it is only a matter of time before companies like Google and Amazon charge catalogers for driving traffic. These companies are not in business to offer free services to other companies. If they think they can collect from a cataloger for passing on potential customers, they will. I suspect this will happen by early 2003.
In addition, Amazon offers to post customer reviews. That is great for the cataloger if the shopping experience was good, but it can cause trouble if the customer's experience was bad. The advertising adage of dissatisfied customers telling 10 friends will only be magnified in such a circumstance. Given that not every bad experience is the company's fault or was avoidable, this could be disastrous to a company receiving a bad review.
Catalogers need to develop an integrated Web and catalog marketing strategy.
We have found that too many catalogers have not really developed a strategy for how to make the Web work. This strategy has to be incorporated into the overall company marketing strategy, developed from the top down with input from the bottom.
Once strategy is set, one must develop the tactics. Sometimes the best source for ideas is revisiting old methods such as the friend-get-a-friend promotion in which people recommended others to receive the catalog. This was an important method of acquiring new names in the early days of cataloging.
While most catalogers no longer use FGF promotions in paper, on the Web this can be done easily and with enhancements. The friend getting the catalog can be told via e-mail who recommended they receive the catalog, and even receive first-order inducements. Thus the provider of the name is seen as giving a gift, and the recipient is more likely to study the catalog or visit the Web site.
Another tactic should include mall presence. These attract consumers through their marketing efforts and expenditures. There are other tactics such as alliances and links with compatible catalogs.
Success on the Web will not be easy, but nothing about cataloging is.