Silkies Runs With New Plan for CustomersPat Corpora, president/CEO of the nation's largest continuity marketer of hosiery products, is working hard to pull the Silkies pantyhose brand out of a tight spot.
Consider his external challenges: casual dress codes, pants and bare legs acceptable in offices, Lycra technology that increases fiber strength and reduced retail shelf space because of depressed sales.
Worse, the U.S. hosiery market declined 39 percent in sales from $2.67 billion in 1997 to $1.61 billion in 2002, the last year measured by Mintel Group. Couple that with the demise of continuity programs like Time-Life Books and Rodale Books and the downward spiral at International Masters Publishers and Bookspan. Coffee brand Gevalia is one continuity marketer bucking the trend.
"What's happening is continuity programs are going out of business," Corpora said. "Basically what we're doing is turning Silkies into a service, not a burden. To me, that's the big challenge of the continuity business. You can't operate it the way you had done it 10 years ago."
HCI Direct Inc., Silkies' owner and Corpora's employer in the Philadelphia suburb of Bensalem, PA, had its own brush with mortality. The company posted $200 million in 1999 revenue with increased mailings, but then spread itself thin geographically and with millions of Silkies.com customers who never returned. A 2000 diversification into Little Silkies and socks didn't work, sales plummeted, the marketing budget was slashed and staff downsized.
In 2002, the company was rescued from bankruptcy. Its creditors -- bondholders like private equity group Kelso, Credit Suisse and Black Rock -- became the equity owners. The next year they poached Corpora and his trusted team from AOL's marketing department.
"The first 12 months were spent changing the culture and getting people used to the [new] organization," Corpora said.
Phase 1 of his plan had several elements: begin new acquisition efforts, particularly hotline mailings; change retention strategy; outsource HCI's list and insert business to list manager Direct Media; improve collection efforts; increase the in-package catalog business; and negotiate a new credit facility with its bank, PNC.
The company last year got a new vision and values. New acquisition and retention efforts were tested. Customer service was revamped and the call center brought home from India, with new three-week rep training for cross-sells and upsells. An incentive program also was developed for key managers.
Those initiatives dealt with maximizing the core business. Expansion plans include growing the $5 million Silkies Boutique in-package catalog for bras, tops, lingerie and figure-flattering pantyhose. Also, www.silkies.com was relaunched.
Corpora's team, including vice president of marketing and customer service Karen L. Arbegast, created two new direct mail packages for this year. A sampler collection was implemented for the customer's second shipment. A standalone catalog for a new product line launches later this year.
The Silkies Made-to-Order hosiery service has new options. Customization is possible by style, quantity and monthly frequency of delivery.
"People were canceling because they had too much pantyhose delivered," Corpora said. "People didn't feel they were in control."
Such measures garnered HCI $135 million in revenue last year.
It helps that the hosiery market is stabilizing. Total hosiery sales slid only 1.9 percent for 2003 over 2002 versus 5 percent for the prior year. Niche products -- footless hose, shapers, socks and knee-hi's as well as stylish compression hose -- are affecting sales. And specialty stores and direct-to-consumer have become popular shopping channels.
Corpora said HCI's direct and database marketing expertise, particularly in recognizing trends, will help win share from retailers.
"Thirty-seven percent of our women customers are plus-size," he said. "They can't find their sizes in retail stores. They have to buy through direct marketers. That's why we have high loyalty rates."
The Silkies customer's median age is 51. She is very Middle America.
"We're more highly penetrated in the South than in the West," Arbegast said. "It's a more highly traditional woman. It's the woman who goes to church and socials, whereas in the West they're underdressed."
Attention is paid to a younger demographic with appropriate models, imagery and shapely wear for a slightly more youthful customer.
"Most women that we talk to see themselves as aspirational," Arbegast said. "Most women don't perceive themselves as chronologically old. They always think of themselves as 10 years younger."
Silkies is the No. 1 hosiery brand sold through direct response, outlasting overall market leader Sara Lee Corp.'s now-defunct DM operation. The Silkies brand has an overall 10 percent market share. Its customers average six shipments yearly. At any given time it has 2 million active customers.
The company changed from monster mailings two to three times a year to a regular frequency year-round. This reduced risk and yielded access to fresh names and higher response rates. The number of names mailed rose, and the production cycle was smoothed.
Mail will continue to underpin HCI's efforts. The marketer yearly drops 40 million mail pieces: 25 million to 30 million to outside names and the rest to its house file. Lists of other continuity marketers in the books and publishing space, like Bookspan, Reiman Publications and Guideposts, work well because their customers are trained in that art of buying.
"I want to be able to mail deeper into our house file," Corpora said. "I'd like to get to 50:50 on new names and the house file. It's more efficient to get customers through the mail. It's difficult to explain on the phone."
HCI is targeting parts of the house file that have a lower cost per order and stronger continuation.
All company mail is created in-house with the help of freelancers. But mail is not the only acquisition medium. Package insert, take-one, co-op, online and print ad programs account for 10 percent to 15 percent of the source mix. There also are stronger win-back promotions combining mail and telemarketing. More customer service reps have been hired, and about 3,000 e-mails are sent weekly versus none only a few years ago.
The retention effort focuses on returning control to the customer.
A recent Made-to-Order customization test yielded significant results: 22 percent to 28 percent more customers continued to shipments four and five versus the control offer. In the second shipment, 25 percent changed frequency versus 5 percent in the control. Customers who changed frequency at the third shipment continued at 65 percent to 75 percent while those who didn't change frequency continued at less than 25 percent.
Prior to Corpora's arrival, the two most common complaints from HCI customers canceling the program were "the pantyhose come too frequently" and "I have too much pantyhose."
"The goal is never to get them to this point," he said. "My goal is to be out of the win-back business."
Mickey Alam Khan covers Internet marketing campaigns and e-commerce, agency news as well as circulation for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters