Zelnick: Lillian Vernon Is ‘Doing a Lot Better, But Not Well Enough Yet’

NEW YORK — ZelnickMedia founder/CEO Strauss Zelnick fielded a question about how Lillian Vernon is doing during the Q-and-A session following his address at the Direct Marketing Association Catalog Council’s annual dinner Thursday night.

“We’re doing a lot better, but not well enough yet,” he said, adding that “one of the bright spots is we’ve launched a direct-selling business,” which is doing well.

In response to another question about whether ZelnickMedia might buy more catalogers, Zelnick said “yes.” But he noted that prices “have gone way up,” making it harder for companies like his to make acquisitions.

A question about consolidation in the catalog industry brought this response: “There’s not a lot of evidence that people are making money aggregating their companies.” Zelnick cited Hanover and Cornerstone as two aggregated catalog companies that have or are facing difficult financial times. One reason, he explained, is that “meshing together distribution is one of the toughest things direct marketers can do.”

He also discussed the apparent convergence of media and marketing as one factor driving the growth of targeted marketing. Zelnick’s career trajectory illustrates this convergence. Before forming ZelnickMedia in 2001, Zelnick held top-level jobs at BMG Entertainment and 20th Century Fox. Today he leads a company “whose assets are heavily weighted toward one-on-one communication with consumers and specifically towards direct marketing,” he said.

ZelnickMedia, the parent company of Lillian Vernon and Time Life, has annual revenue of about $900 million.

Zelnick pinpointed four agents of change that together are affecting the world of media: digitization, globalization, consolidation and fragmentation.

“Fragmentation is proliferating before our eyes,” he said, referring to Nielsen reporting that young male TV viewership is down. However, this audience’s use of DVDs, instant messaging, cell phones and video games is up.

“What do they have in common? The user is in control,” he said.

As a result, the computer software, consumer electronics as well as the communications and entertainment industries are colliding and competing for the audience’s dollars and attention.

“This is going to create the most exciting, but also the most destructive, period in media that we’ve seen in the last 50 years,” Zelnick said.

He predicted these industries will be forced to cooperate, which is already happening in small tests. Time Warner recently debuted a WB show on the Internet, and Motorola is playing iTunes on its cell phones.

Consumers repeatedly show their preference for tailored niche channels (he wasn’t referring to TV channels) that focus on their specific interests. What they have in common are consumer choice, consumer addressability and consumer interactivity.

“What it really means in a nutshell is targeted marketing is growing and mass audience media is declining,” Zelnick said.

Marketers are being forced to re-evaluate their media strategies and spending. As a result, mass media is quickly becoming interested in direct marketing. This is good news for the Internet, “the first true one-to-one medium,” he said.

Zelnick cited a Forrester Research study indicating digital marketing spending will grow to $63 billion by the end of this year. That growth will be at the expense of mass audience media as well as direct mail, he added.

Chantal Todé covers catalog and retail news and BTB marketing for DM News and DM News.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

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