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The Kaizen of Catalog Marketing

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The Japanese have a term for it–”kaizen.” It means continuous improvement over time. And you must practice kaizen to market your books successfully through catalogs.

Through my experiences during 25 years in publishing, I’ve learned that the combination of online catalogs with their print counterparts is a truly powerful marketing force. I’ve also discovered that there are some general rules for catalog marketing.

Here are some of the key points that you must master to be successful and to continually improve your revenue and profit performance:

  • Ensure that your product line is suitable for catalog marketing.
  • Acquire customers–don’t just make sales.
  • Develop a catalog marketing infrastructure.
  • Look back to plan ahead.
  • Know your “key indicators.”
  • Use business intelligence to make decisions.
  • Segment and conquer; profile and model.
  • Spend the most $$ promoting to your best customers.
  • Design to sell.

 

Ensure that your product line is suitable for catalog marketing

Before you jump into the catalog marketing business, take a good look at your product line and its suitability for catalog (or Web) marketing. Is your market clearly defined? Who are your customers and how many of them are there? Are they accessible through mailing lists or Web channels? Is your product line unique, or does it have special appeal and uses for your target market? Is the perceived value worth the price? Do you have a sufficient margin to cover marketing and overhead expenses? What is the competition? How do you differentiate your line or marketing program from it? And are you able to make repeat sales?

 

Acquire customers–don’t just make sales

Successful catalog selling is a long-term proposition. In the early stages, you’ll often merely break even on your promotions and possibly even lose money. To succeed, you must have staying power, which means you must have repeat customers over time. It’s more profitable to sell to an existing customer than to acquire a new one. So how do you develop repeat customers? Start with a good product line that delivers value. Develop a catalog marketing infrastructure to support sales (coming next). Create order-taking and fulfillment systems that remember customer transactions and contacts. Invest in staff who will courteously and efficiently interact with customers. Deliver on your promises by describing items in your catalog honestly, shipping and delivering orders promptly, and rectifying problems politely.

 

Develop a catalog marketing infrastructure

Long-term customer relationships require the support of a capable infrastructure. This means an order-taking and fulfillment system that streamlines order entry and processing, plus a database system that integrates customer, marketing, product, and accounting data and turns it into decision-making information and knowledge. If you have several sales channels (catalog, Web, telephone, retail store, etc.), make sure your system identifies current customers regardless of which channel they use. You want only “one version of the truth” about customers no matter which system is pulling reports, taking orders, or providing customer service.

 

Look back to plan ahead

Successful catalog marketing–in fact, all direct marketing–necessitates disciplined tracking and analysis. It’s vitally important to use source codes to track every sale. And you should have an “intelligent” source-code system so you can group orders and report trends. Your system must retain sources and tie them to orders for long-term analysis so you know which lists, offers, formats, packages, timing, and product offers were profitable and successful over time. By looking back and analyzing your promotions, you can track your key indicators (see below), make decisions about what worked and what didn’t, and then plan ahead.

 

Know your “key indicators”

“Key indicators” drive your business. Knowing factors like “cost per thousand” (CPM) in the mail and “response rate” (RR) allows you to calculate “cost per order” (CPO)–an important key indicator. Knowing the “margin” for each order (revenue minus costs of goods) and subtracting the CPO then gives you your contribution to profit and overhead. Knowing this and the number of times a customer purchases from you over time allows you to understand one of the most important indicators for your business–”lifetime value per customer” (LTV). You want information for all segments of your catalog business–new customer orders, repeat customer orders, mail orders, Web orders (ad infinitum and ad nauseam) so you can make decisions about how much to spend to acquire a new customer, and what channels and promotions to continue. This is what is called “business intelligence.”

 

Use business intelligence to make decisions

Gathering data, tracking sales, and analyzing orders is only valuable if you can make decisions as a result. And developing data and information into business intelligence is the first step to making meaningful decisions. Business intelligence helps you know the best times and the best seasons to promote. It allows you to segment and profile customers into patterns and groups. It tells you what products are sold with other products so you can develop profitable product groupings, add-ons, product extensions, and market extensions. Business intelligence also helps you interpret buying signals and indicators, like how many months it takes after someone buys your introductory product for them to be ready to make a buying decision about your intermediate version.

 

Segment and conquer; profile and model

Customers segment into buying groups, and you need to know what those groups are so that you can tailor your promotions to them. The usual segments are by source of sale, by products purchased, by how many times customers have purchased (new buyers, repeat buyers, long-term buyers), by season, and so on. Once you have identified groups with different product preferences and created buying profiles for each one, you can send an inexpensive promotion piece (a postcard, an e-mail, a flyer) to that group only when you publish or acquire a title of interest to it. Customers will buy the new title and then go on to purchase other titles too. With this approach, cost per order (CPO) will be greatly reduced and revenue will come at more frequent intervals–a “double whammy” for profits.

 

Spend the most $$ promoting to your best customers

The well-known principle that 80% of your revenue and profits comes from 20% of your customers holds true in the catalog business. By identifying your best customers, you can develop marketing and retention programs to stay in front of them as often as possible. This may involve more frequent mailings to them, special offers or promotions, or development of a frequent buyer or premier customer program. In order to identify your best customers, you can use a method developed over many years–a “recency, frequency, and monetary” (RFM) analysis. This is a weighted average calculated on a formula that combines recency of purchases, frequencies of purchases, and the monetary value of purchases. When you weigh these factors for your business, your best customers float to the top of the list. The calculations are complicated enough that publishers often prefer to hire a direct-mail expert to do the work, but we plan to cover this in an upcoming issue of the PMA Newsletter.

 

Design to sell

Your catalog should be attractive and appealing, but it is not a work of art. It is a marketing piece. So design it to sell. Pay attention to placement and make profitable and high-volume products prominent. Use the catalog’s “hot spots” wisely. Much like the hot spots for a book, catalog hot spots are the front cover, the back cover, the inside front cover, the opening spread, the inside back cover and spread, and the center spread. The most important non-advertising component is the order form. It needs to collect enough information so you can fill the orders and also retain useful data about your customers. But it also needs to be easy and quick to fill out and to leave customers feeling that they’ve had a pleasant experience. Since filling out the order will be the last contact they have with you until their order comes, you want those last thoughts about you and your company to be positive.

 

Bonus: Do what you know and do it consistently

Since I want my last contact with you to be a positive one, here’s a bonus for getting to the end of this article. We all know more than we realize and we do a lot less than we can. If you implement only 25% of what you know, but practice kaizen by implementing and improving consistently over time, you will be 100% ahead of the game.

 

Gerald Marino is Managing Director of The Marino Group, a marketing and communications agency specializing in publishing, information, and technology-related projects. He can be reached at 619/299-6827 or

gem@marinogroup.com. The company’s Web address is www.marinogroup.com.

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