Where Will Growth Come From?

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For a company to grow, it must increase its average order size or its number of orders. The vast majority of companies -- because of merchandise categories, creative presentation and a variety of other factors -- find it difficult to increase order size after they have been in existence a few years.


True, companies will try to increase the order size through efforts like upselling and bundled offers, but overall order size changes only slightly from year to year. Thus, the only other avenue for growth is more orders. That's simple to say but hard to achieve.


There are a couple of ways a company can try to increase number of orders. It can offer promotional deals, such as free shipping and handling. It can try additional segmentation of its database to find names that will respond. It can try new sources of names to rent. And it can offer new product categories or even create new titles.


All these tactics are worthy and should be pursued if one wishes to grow, but all your competitors are likely doing the same things.


Offering enticements to stimulate orders is a proven technique. But there aren't any new stimulus concepts, and thus the consumer is a bit jaded. You can offer free shipping and handling, discounts on orders or other deals, but the prospective customer has seen them all.


Doing more work on your database, trying to identify who will buy, when and what is worthwhile but most direct marketers' databases contain only their customers' transactional data. Few I have seen include data like birthday of the customer and those of their immediate family or other key dates. And even if they do contain data such as "the customer sent a birthday gift to his mother on X date," they do not promote a year later a reminder to the customer to send another gift. The problem is that all too many catalogers and direct marketers rely on recency, frequency and monetary value in their database segmentation. This has not changed in almost 30 years.


Finally, the third major way used to generate more orders is through prospect mailings. It is a truism of marketing any product that a percentage of all customers are going to be one-time buyers. Even among repeat buyers the number of repeat orders will range from only one to many. Thus, to maintain the status quo it is essential that you replace the fallout with new buyers, which means prospecting. The typical method is to rent more and more names and always just those of proven names. Again, as with database mining and offers, there is little or nothing new in this area.


So what is a cataloger to do? Over the next couple columns we'll discuss a few of our ideas. Today, I want to discuss the problem of new names and where possibly to get them.


List Universe


The statistics on cataloging and consumer shopping show the same information for the past eight to 10 years. The proportion of adults in the United States who buy from a catalog every year hovers around 50 percent. If you flip this, the fact that almost half of all adults do not shop from a catalog is discouraging. Even if you add to this figure for the past few years those consumers who shop electronically, I doubt that remote shoppers total greater than 60 percent of the population.


This means the list universe is expanding no quicker than the population growth of around 2 percent. This did not used to be the case. Until about three to seven years ago there were always new catalogs coming along that generated new names to be fed into the list universe.


Why has the list universe stopped growing? Several reasons abound, and there does not seem to be a ready answer for any of them:


· For the past five to seven years any company that wanted to start selling products remotely or at a distance would have positioned itself as a dot.com. That is where the venture money was. If one had approached financial resources for a single-title paper catalog in the past five to seven years, it would have been laughed out the front door, assuming it ever got in.


· Several big firms, like Foster & Gallagher, have gone under, or firms like L.L. Bean and Macy's have stopped mailing their new titles or almost all their titles. These firms had a history of developing a pool of new customers to catalog shopping, which the rest of cataloging fed off.


· The development of co-operative databases, and I hasten to say that I do not find these databases to be bad nor their existence the problem. But whether we like it or not, because of the success with them many catalogers are now devoting a larger share of the total names mailed to those from these co-op databases. But, with no one adding new names to the pool they become stagnant, and only through further refinement of the selection process are they still as strong a source as they have been in the past.


· The cost of entry today is so high that it is unlikely we will see the numbers of new catalogs that we did in the past. The only new entries will be from large firms who likely will have a very large pool of names and be reluctant to share them.


Other Options


So what are the sources of new names? Existing catalogers have to begin to think and look outside the box. This is easier said than done. The drive to make this quarter or year's numbers scares many into not devoting any of their marketing and merchandising budgets to new ideas.


The reasons given for shunning solo mailings by most catalogers are printing and postage costs. But there are many opportunities, and just not in food gifts, where one could use a solo mailing to both generate sales and new names at a lower cost than a full catalog.


One can use print and broadcast advertising. Too often these are passed over as too expensive. The argument is that you have to be a Lands' End or L.L. Bean to afford this kind of advertising. One needs look no further than Vermont Teddy Bear to see that is not true. You can be a smaller cataloger and make alternative media work very effectively.


There are other options for finding names. But too few catalogers are willing to risk or think about it. That is the question for which there is no easy answer. At present there is no organization or supplier network, such as list brokers, who advocate and can lead one in testing these concepts.


In the next couple columns I will continue to explore this theme and welcome any feedback, argument or discussion that anyone wishes to have on this topic.


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