DMA Explores War Contingency Plans for Catalogers

A brief but intense war and a domestic crisis that may be similar to the anthrax scare are scenarios catalogers may need to plan for, according to a white paper issued yesterday by the Direct Marketing Association.

“Contingency Planning for Catalogers During International or Domestic Crises: Key Issues and Alternative Responses” — by Fred Anderson of AndersonDirect and Peter A. Johnson, senior economist at the DMA — outlined several risks, including:

· Loss of readership as consumers turn to TV news more intensely.

· A drop in direct demand as consumers cancel or postpone purchases of non-essential items, as well as a decrease in indirect demand as spiking oil prices and/or a sagging stock market weaken consumer confidence.

· Possible disruptions to parts of the national infrastructure, including the postal/parcel delivery network or the banking/payments system.

“It's not so much a question of urgency in doing any of the things we advise, but it's the urgency of reviewing the issues for their titles,” Anderson said. “It would be a shame for a cataloger to have gone ahead with plans for the next books in his cycle without having reviewed these issues. In a war scenario, there will be significant falloffs for a short period of time. The biggest issue for our catalogers for this crisis environment is maintaining liquidity.”

Possible upsides in the near- and medium-term include:

· A shift in advertising from general brand advertising to direct channels, “owing to a paucity of TV/radio commercial availability.”

· A greater propensity to shop at home due to fears of public places.

· A drop in oil prices and/or a rebound in the stock market that may trigger a strong upturn in consumer confidence and spending after the war.

“My sense is that sales in the event of one of these crises would be a flat to 1.25 percent drop at the most,” Johnson said. “The total impact would have been mitigated by the fact that catalogers have been facing economic difficulties for two years.”

Regarding circulation, the authors suggest that catalogers consider trading off new prospecting for older house-file reactivation as it might minimize risk and reduce list costs.

They also said an extra drop to the best-performing house file segments should be considered to pick up some of the demand lost by cutting bottom-performing prospect segments. A reminder postcard or e-mail — timed to coincide with the eliminated drop, perhaps containing an incentive — can be considered.

The paper also suggested special one-time benefits for loyalty club members tied to placing orders within a specified time.

“While there might be some cannibalization of future orders here, these are your best customers,” the report said. “Why not count on them to bolster cash flow through a tough period?”

The report also advocated looking closer at historical page productivity figures for repeat items.

“Does your merchandise item sales plan make sense in light of historical productivity and the distressed period outlook?” the report asked. “Add a section of 'favorites' or 'best sellers' — proven items that your buyer file has bought season after season through good times and bad.

“Depending upon the price sensitivity of your buyer file, and the 'price-elasticity' of your merchandise offer, you may want to consider bold price promotions to spike demand.”

They also advised negotiating the shortest possible window between print date and the date for the final merge and cutting of the circ tape so as to include the largest number of hotline buyers.

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