In My Mailbox This Week

Here are the direct mail pieces I received this week in my mailbox, both as a customer and a prospect, along with anything interesting to note:

• Garnet Hill- (Mailed as a customer) Entire opening spread dedicated to one product, supported by lifestyle photography, detail shots, and a brand message
• Sundance- (Mailed as a customer) Opens with home product, featuring three pitchers and a dining table; most notable is the 8-page spread in the back featuring swimwear plus the continued move towards fashion-forward styling
• Bevmo- (Very appropriate for those of you who know me well) Folded direct mail piece featuring their 5 cent sale- buy one wine, get the second for 5 cents!
• Huggies- 10 page mailer with coupons (I read somewhere that you change nine thousand diapers in the first year with twins)
• Boden- 172 page catalog in a small format size, featuring 15% plus free shipping and returns on a cover dot whack plus opening spread fold-out (no product on cover)
• Grandinroad- Emphasis on “Get the Look” with more editorial content and price call-outs; free shipping on wall décor
• Ballard Designs- Received two “Early Spring 2010” catalogs with different covers; one as a prospect and a second in an envelope with a thank you message (received as a hotline new buyer)
• Champion- Received this catalog as a prospect, featuring sports bra sale (new catalog for me); high product density and promotional creative (featured men’s and women’s product); I suspect I received this catalog because I made a recent purchase with Athleta
• Hanes.com- Received this catalog as a prospect; “Best bra sale ever”
• Justice- Postcard featuring 40% entire store for 5 days only; I suspect I received this postcard because I bought a gift card for my niece

The Cost of Shipping

It really does boil down to shipping. After all the hours and dollars spent building and optimizing the business, don't forget to consider your shipping tables.

I receive multiple catalogs from home decor and furnishings retailers, and I enjoy looking through them. I recently purchased a new desk for my home office and thought I would share with you my amazing experience with shipping and handling.

I went online to order the desk I'd picked out, and when I went to check out the cart said that shipping was $322. I found that hard to believe, so I then called the 800-number and this was in fact the correct charge. This seemed ridiculously high, so I then went to purchase another desk online via another catalog. This time shipping was $39. The desk was the same size and very similar- with the same expected time frame for shipping (2-4 weeks).

Have you reviewed your competitor's shipping tables lately?

Popular Initiatives for 2010

I am a terrific example of how not to use social media- i.e. sporadically. Fortunately, the reason for this is that we have been exceptionally busy with budgeting and planning for 2010- what looks to be a promising year by both economic measures and early feedback from dozens of clients. Here are the big items that seem to be on everyone's mind as we rally to build business back up:

• Acquiring new customers- increasing marketing spend back to 12-month payback period
• Ramping up their 12 month active file (including new, retained, and reactivated)
• Returning to growth mode - many private companies are striving for double digit growth
• Building a plan to stand out - from offering a unique experience to overhauling merchandise strategies and creative
• Finding the right balance of online marketing and direct mail
• Understanding the right social media strategy for their brand/target customer

Within the online space, several additional topics continue to get a lot of attention: paid search (still tackling incrementality), re-targeting programs, customer reviews, and email prospecting. We are constantly looking for new opportunities and will be sure to share the outcome of our innovation workshop in early March in San Francisco.

Fall Catalogs That Stand Out

Here is a list of some of the great call-outs from the early fall books.

Innovative Merchandising Partnerships to Note:
Grandinroad and Martha Stewart
Pottery Barn Kids and Barbie

Impressive Brand Endorsement to Note:
House Beautiful and Ballard Designs

New Creative to Note:
Restoration Hardware’s Worldly Design
Anthropologie’s fall look and feel

Entirely New Merchandise and Creative!
Check out the latest Sundance catalog

On a side note, I have received a whole stack of catalogs this week- the week leading into Labor Day weekend. We'll see how this mail date strategy works!

On to More Interesting Things

Over the past few months, we have all heard the same story again and again about the economy. We are going to assume we are on the upswing, given all of the positive economic indicators, and stop talking about something we have all talked about ad nauseum!

So, on to more interesting things! Over the last few months, hot topics seems to include customer retention programs, 12 month file sizes, page count and contact strategies, 2009 holiday promotions, email list rental, and social marketing.

A few thoughts to get us started!

A few of you have asked about the timing of your sale books this holiday/winter season. We polled some mailers and the consensus is to go in-home with the earlier date for both house and prospects. If you mail prospects later you run into sell out situations which do not make for a good first impression. Industry reports are also indicating that more people will be home for the holidays and that holiday travel the week between Christmas and New Years will be down.

We are also interested in some of the latest customer reactivation strategies that include following up a catalog mailing with a postcard or letter the same week with a special reactivation offer. With the additional cost of the second contact and the cost of the promotion, the big question is whether this is still more effective than your marginal prospecting efforts.

Lastly, how is early fall trending for everyone?

In our next blog, we will post the most popular promotions from last September.

Light at the end of the tunnel

This morning my newborn twins slept until 4 am for the first time, and I woke up thinking, Great! There is light at the end of the tunnel.

This is much of what we see and hear from clients too. Small signs that business is rebounding: customer counts stabilizing, achieving Plan (even though Plan is down to LY), customers actually buying full price, prospects starting to respond again, new ecommerce programs showing strength, retail comps climbing back from the deep end. Economically, we see the Dow rebounding and hear that home sales have picked back up a little, along with consumer confidence.

For me, one of the biggest surprises is hearing that high price point brands and/or brands selling nice-to-haves vs. must-haves are seeing a pick up too. To manage expectations, we are not talking about leaps over LY here- just a slow pick up against results that were down to LY in the double digits.

Last night, when I searched for coupons for two websites I was shopping on, nothing came up. I still made the transactions though, and as a marketer, I wondered if I was throwing off someone's incremental testing for the impact of promotions... If we can finally pull away from the constant promotions, we are left to really think about how to MARKET to our customers. How exciting!

Holiday 2008 Buyers- How do they compare?

Chances are, you had fewer customers who spent less and relied more on promotions during Holiday 2008 than in any other season in the past. As we find ourselves quickly immersed in 2009, here are a few key metrics to keep track of. Be sure to break out new and existing customers by segment/source for each of these metrics and compare to last year:

Standard metrics
> Repeat purchase rate
> Subsequent orders per buyer
> Subsequent revenue per customer
> Subsequent profit per customer- fully loaded (not just marketing costs)

Additional key metrics
> Subsequent orders and demand by source (email, search, catalog)
> % Incremental for results tied back to the catalog (by building sustainable mail/no mail groups and including path to purchase data)
> Total subsequent marketing costs (the cost of all marketing touches, from catalog to email and affiliates)
> % Of demand that is full price vs. sale/clearance vs. with discount/free shipping
> Customer migration across merchandise categories (what are they buying next?)
> Corporate results, if you are a multi-title company (% conversion to other titles and the sales and profit to the other titles)

The key questions are
1)How will customers from the 2008 holiday season compare to buyers from holidays past?
2)How should you change your contact strategy based on these metrics?

Join me this Thursday - January Webinar

Happy New Year!

2009 is here, and there's no time like the present to focus on improving your share of wallet with existing customers. New customer acquisition is more expensive than ever and in a tough economy, healthy response rates are hard to come by. Your existing housefile is still your most valuable asset.

Please join me on Thursday for a great discussion surrounding how to increase your share of wallet with existing customers, both online and offline. Our webinar this month is co-hosted by the great team at My Buys and we have two outstanding panelists- Francis Juliano (CMO/CIO at Wine Enthusiast) and Erik Martinez (Director of Ecommerce at Peruvian Connection).

Webinar details:
Thursday, January 8th
11 am PST (2 pm EST)
Please click here to register:
https://www2.gotomeeting.com/register/850172820

We look forward to hearing your questions and comments on Thursday!

A New Mindset for 2009

A friend of mine recently said something along the lines of, "I'd rather have more job security than a $5 shirt at the Gap."

We all have friends in our industry who have been laid off and we continue to see job cuts. Retailers continue to erode their margins in a need to push through high inventory levels and create demand. As shoppers, we might enjoy the deep discounts and promotions but it is going to be a tough reality come January 1st. It is time to change our approach.

In a declining economy, the landscape changes and new opportunities arise. Consumer behavior has changed for the long haul. Even the wealthiest consumers are more value-conscious. How are you changing your marketing and merchandising strategies based on a new consumer mindset?

A few questions to ask yourself:
> What are our customers willing to pay now for our core items vs. what they used to pay?
> Is there real value in what we offer and if there is, are we communicating it effectively?
> Where are our customers shopping now vs. two years ago?
> What are our competitors - from low ticket to high ticket- charging for the same product?
> Why should our customers continue to shop with us?
> Do our marketing programs effectively reach those consumers who are actually shopping with us?
> What new marketing and merchandising opportunities should we be considering, assuming it will take a long time for consumer confidence and spending to recover to previous highs?

Mid Season Holiday Sales Pulse- Tuesday Webinar

Please join me next Tuesday for our Holiday Tune-Up webinar. We are speeding towards the close of the holiday season- a season fraught with tough economic news and weak retail results. Many of you often ask me how other retailers are performing. We will talk through results by category, promotional strategies, what is working, and then look ahead to 2009. Please click on the below link to register for our webinar.

http://www.brighttalk.com/webcasts/1785/attend

(copy and paste link if the url is not connecting)

We have partnered with NCR Ecommerce to co-host this webinar with us- they have terrific insight into other channels of business and we always learn something new in our conversations with them.

We look forward to connecting with you on Tuesday.

Happy Holidays!

Polly's Blog Today: 28 Promotions and Counting

I received a seemingly large volume of emails today, and as I was deleting them, I thought it might be helpful to list them out. The promotions are piling up this holiday season, from Eddie Bauer to Neiman Marcus, with more discounts than free shipping (so far).

In no particular order...

Eddie Bauer- Last Days: 30% Off Outerwear + Up to 60% Off 250 Styles!

Teleflora- Save 10% - Teleflora's Fall bouquets starting at $29.99!

Borders- 40% Off Holiday Music & More -- 2 Days Only

Coldwater Creek- $30 off + Favorite holiday looks (at fabulous prices!)

Frontgate- 20% Off Continues: Enjoy the Best of Outdoor Living

Sundance- Take 20% Off All Jewelry...But Hurry!

Ballard Designs- Shop our Estate Sale and save up to 65%

Teleflora- Introducing Teleflora's Colonial Williamsburg Sweepstakes! (yes, 2 emails in the same morning)

Shoebuy.com- Stay Warm & Save $15 on all Boots and Slippers of $40 or more!

Amazon- Free Super Saver Shipping to Kick-Start Your Holidays

Tiffany & Co - Complimentary Shipping Ends Today

Bluefly - One-Day SHOE SALE - Now up to 60% off

Ann Taylor - Final Day: 30% OFF Your Purchase

Overstock - LAST DAY 10% OFF

Neiman Marcus - NEW ARRIVALS: First Call SALE + Free online shipping AT ANY PRICE

Design Within Reach - Save up to 70% at the DWR Warehouse Sale

Restoration Hardware Baby & Child - Save 20% During our Friends and Family Event

Babies R Us - ONE DAY ONLY! Terrific Tuesday Savings, Veterans Day, Nov 11th

Lillian Vernon - Free Shipping on Christmas Gifts, Decor and More in the new catalog

All Posters.com - 25% off entire stie & up to 75% off VINTAGE clearance

Personalization Mall - Countdown to Christmas 25% off

Omaha Steaks - Save up to 64% and Get Your Free Ham (first 1,000 orders only)

Discovery Store - Final Email Secret Sale - 20% Off Site-wide

Nordstrom - Free Holiday Shipping (Details Inside) Half-Yearly Sale: Save 40% or more

Eastern Mountain Sports - Up To 50% OFF* Your Holiday Shopping! Act Now!

Exposures - Exposures the more you buy the more you save

Circuit City - Veteran's Day Savings on HDTV's, laptops, cameras and more

Snapfish - Get 20% off our Holiday Catalog


The vast array of promotions this holiday season only tells us what we already know... there is no easy way out of this recession.

How Much Change?

It’s November and our holiday season is officially here. The market is up and today’s election could make history. We are all planning for 09, and the number of revisions to our forecasts has hit double digits.

We are busy with cost-cutting measures, new initiatives, and plans to optimize our existing business (from page counts to merchandising). We can not use the economy as our excuse for weak sales and sit back and wait. Or can we?

Unfortunately, it is very difficult to understand, when you are down in sales 20% to LY, how much of that is the economy and how much of it is our own business decisions.

I was a Pottery Barn customer before I worked for Williams-Sonoma Inc., and I am still a Pottery Barn customer. This brand is struggling along with the rest of the home décor and furnishings market, but to my consumer eye, the catalog and the retail stores have never looked better. Perhaps expensive leather was not the right fall statement in a weak economy, but overall, the brand still looks great.

How do you preserve the brand you have created, while making changes to combat declining sales in a temporary economic climate?

In really tough times, we have to be smarter marketers. We have to find ways to do more with less. This means that creating valid, insightful tests is more important than ever. Here are some of the questions that require testing to answer:

*How will our rolling 12-month revenue per customer with an opt-in email be impacted by a reduction in catalog contacts?
*What is the incremental value of mailing catalogs to customers who only shop via web or at retail?
*Should we be emailing our lapsed customers with an opt-in email address every week (multiple times each week), or can we save on email costs by reducing the number of email contacts to this group?
*What is the incremental profit per customer with and without different types of promotions?
*What is the long term impact of the promotions we offer today?

All of these questions can be answered by setting up the right tests. Here are a few key rules:

1. Understand your expected response when you are selecting your segment sizes- you need enough orders to be statistically valid.
2. Only compare like groups. We all know this goes without saying. The segments in the test must be equal representations of the customer group in question (a random nth).
3. Only compare like segment sizes. Your segments must be the same size- comparing the results of a 25K test cell against a 200K control cell is not valid.
4. Don’t try to test too many variables at once. For example, using the same segments to measure the incremental value of mailing catalogs to web only customers AND creating a test to optimize your catalog/email contact strategy is hard to accomplish in one mailing unless you have large segment sizes.
5. Focus on creating a few, meaningful tests. For example, if you know you will always mail catalogs to your 0-12 month customers even if they have an email on file, then only test limiting catalogs to your lapsed customers or low dollar customers. If you know you would not give up mailing catalogs to your older customers unless they have an opt-in email address on file, then make sure you are only testing a segment with opt-in email addresses.
6. When testing promotions, consider the open use of the coupon code on the web and how you will account for those sales. When you look at the subsequent value of customers acquired with a promotion, be sure to include the initial costs of the offer.
7. Create sustainable control groups that last over a season (at least) and understand the prior contact history of customers in these control groups when you are evaluating results.


These are basic rules for tests that we are all aware of, but as we position ourselves to learn more and optimize our businesses in this economy, it is good to remember!

"Major in the Majors"

Clearly, it’s been a tough week. How our world has changed over the last few weeks and months:

-- We went from file growth planning to helping you determine the impact of closing stores. How much of the customer’s demand will shift to DTC and how much of it will be lost? What promotional contact strategies are necessary to continue to engage these store customers in other channels?

-- The focus on true contact strategies has kicked into gear, as you look to cut circulation and page counts in 2009 without impacting demand to the same degree.

-- The previous shift away from promotions to focus on the bottom line is swinging back to coupons as sales fall to plan and inventory backs up. Understanding the LTV of these discount customers is now more important than ever.

-- Communicating with investors is now part of our daily responsibilities as M&A activity continues in the world of direct marketing.

Yes, these are tough times. But for those who remain proactive and focused on those efforts that can truly move the needle, this is a time to fine-tune and evolve our marketing practices and come out on top. My mentor used to tell us to “major in the majors.” Now it couldn’t be truer.

How Important is Promotional History?

It seems like common sense. If you mail Mary Jane your catalog, as a customer (because she spent $500 three years ago) or a prospect (because she shops from your core lists) for two years and she never responds, perhaps she is likely to never respond and you should stop mailing her the catalog.

We find that:
1) Promotional history is very rarely used in developing contact strategies for customers, and
2) For those who have done the analysis, promotional history is not as predictable as it seems it should be. Mary Jane repeatedly appears on your core prospect lists, so you keep mailing her even though she doesn’t buy, AND studies show that you should keep mailing her because a recent hit on a core list is more likely to predict a response to purchase.

The reason I bring this up is that I have been receiving the same home décor and furnishings catalogs for years without buying anything. I suspect I get them because I am a gift buyer from catalogs like Sundance and Acacia, and these catalogs are core files for many home brands.

Here’s the thing- even though I have not bought from these home décor and furnishings catalogs in a long time, I really enjoy looking through them. Now, I am buying a home and suddenly these old catalogs are coming off the shelves and my wallet is coming out.

How important is promotional history?

6 Ways to Segment Customers (Other than RFM)

1) Email Activity- (Last Opened Email)

Understand how recently a customer has opened an opt-in email from you. For example, Mary Jane is a lapsed customer that you are not planning to mail until you see that she just opened an email last month and she is engaged again with the brand.

2) Promotional History Flags - (Mailed Last 30, 60, or 90 days)

It can be difficult to execute contact strategies because customers are migrating in and out of segments. As a brand, you may make a decision that you want to contact even your most lapsed customers once a quarter. If you add flags to your backend or promotional history, you can just select those names from an older segment that have not been mailed in the last 60 or 90 days.

3) Source of Acquisition- (This is something you hear from me a lot!)

Defining customers as web only does not tell us a whole lot, especially how responsive they are likely to be to the catalog. Understanding that a customer is a catalog-driven web customer or a pure web only drive from a program like non-branded paid search or affiliates is critical to optimizing contacts and costs. It also requires storing matchback data on your database.

4) Product Category- (Might seem obvious to some of you but it is still rarely used)

We most often see product categories included in the segmentation for apparel companies where differentiating shoe or accessories buyers is important, but it also has implications for general merchandise, children’s, gift, and home décor and furnishings.

5) Sale/Discount/Free Shipping Buyers- (These are large segments of customers for most retailers now)

Try testing different segments based on their type of purchase- full price, free shipping, discount, sale, etc. You may find that certain segments of buyers are more responsive to different contact frequencies/messages.

6) Presence of Opt in Email (Critical for optimizing catalog/email contacts)

Similar to the promotional history flags, adding a flag to your backend for presence of opt in email can also help you decide who to mail and who not to mail when you are cutting back circulation, especially to marginal segments. If customers will hear from you anyways, there is less risk in reducing catalog contacts (though it should be tested first!).

Opportunities to Consider for 2009

(In no particular order...)

1. Integrate cross-channel databases, linking web behavior with promotional history
2. Improve buyer definitions on house segmentation and list rental files- identifying pure web onlys vs. catalog-driven web onlys
3. Revisit testing across the board- more cost-effective creative versions, prospect sources outside of core files, contact strategies for lapsed customers and requestors, etc.
4. Launch at least three forms of auto-triggered email marketing, such as shopping cart abandonment
5. Consider replacing some of your core catalogs with smaller, less-expensive brochure-like pieces intended to bring the brand top of mind and drive the customer to your web and retail channels of business
6. Concentrate on lapsed customers with multi purchases (vs. dollar spent) who have purchased at least 1x in each of the prior 2 yrs but who have not purchased in the last 12 months; test sending them a special mailing, ie: we miss you with an offer
7. Offer customers contact preferences for method and frequency- perhaps some customers only want the first catalog of each season
8. Find one way to leverage social media for your business- it comes in many forms!
9. Revisit non-traditional advertising opportunities like space advertising and package inserts
10. Talk about how to reach the growing, affluent youth market- the traditional catalog customer base is aging
11. Consider brand/product spin-offs to increase share of wallet with your existing customers- still cheaper than cold prospecting
12. Consider mobile marketing and a dedicated mobile website, especially if you have a younger audience and/or a large retail presence
13. Offer additional payment methods: BillMeLater, Google Checkout, PayPal, etc. According to a recent article, sales increased an average 14% for retailers offering 3 or more payment methods (Website Magazine, August 2008)

$3.00 for One Click?

Back in my days in Ecommerce at Eddie Bauer and RedEnvelope, success was so easy!! Clicks for major keywords cost, at most, $0.75; all of our reporting was purely cookie-based, without any understanding of how many of our web buyers were influenced by offline marketing. Our ad cost was 15% (or so we thought). It was fun- we were all rock stars.

Online marketers are just now feeling the pinch that direct mail marketers have been feeling for the last few years. As catalogers have battled rising costs across the board, online retailers are now faced with incredibly high costs, driven up by competition:

Cost per click for the keyword “gift baskets” - $3.00 (on a good day)
Cost per click for the keyword “food gifts” - $1.80
Affiliate revenue share for the shoe category- 25%
Cost to send an 80-page catalog- $0.65

We also know that, depending on the retailer, 30% to 60% of the buyers from paid search and affiliates were first mailed a catalog.

Two scenarios:

$100,000 Spent on Non-Branded Paid Search
$2 Cost per Click
50,000 Clicks
3% Conversion Rate
$100 AOV
$150,000 in Sales
67% Ad Cost, not including the cost of any catalogs mailed to these buyers

$100,000 Spent on Catalogs to Targeted Lapsed Customers (Reactivation)
$0.65 Cost per catalog
154K in Circulation
2% Response Rate
$100 AOV
$308,000 in Sales
32% Ad Cost

Acquisition, in all forms (paid search, affiliates, catalog prospecting), is more expensive than ever in this economy. Two recommendations for your 09 planning:
1) Housefile Reactivation, via email and direct mail
2) Website initiatives to improve conversion rates- these efforts will improve the ROI of all marketing programs

The Future of Catalog Acquisition?

Much has been written about the future of catalog acquisition, with the growth of ecommerce, the bankruptcy of so many major mailers in the last year, and now, the green movement and consumer opt-out programs.

But I wonder how many truly targeted acquisition opportunities exist today where we can proactively drive new consumer demand. As marketers, we can’t control how many consumers each month will search for “wood daybed” or “turquoise necklace” on Google. And Mary Jane doesn’t just wake up one morning, unaided, and decide to type in your brand name.

Viva La Terra and Acacia are two of my favorite catalogs I just discovered in the last year. I received each of these catalogs a few times as a prospect before a need (in one case, Mother’s day) drove me to the web to make my purchase.

Now, I am by no means a traditional direct shopper. I could probably count on my hands the number of phone orders I have placed in my life. And I prefer the immediate gratification of in store retail shopping more than anything, but I find more and more that the merchandise in retail stores is the same, same, same.

Did mailers potentially mail too deep as response rates declined? Or did response rates decline because we pushed too deep?

Web merchandising has a long way to go before it can deliver the advertising impact of a well-executed catalog. It’s time we shifted our thinking to the catalog as a targeted advertising vehicle, rather than an order channel. The question we should be asking is whether we can make the same advertising impact with 40 pages instead of 80???

Product is King

It’s not all doom and gloom. I talked with a handful of clients in the past week who are pleased with results this summer. (Of course, it depends on how you define success- sales growth vs. LY, improvements in operating profit, achieving Plan.)

As Kevin Hillstrom pointed out in a recent blog, it is frustrating to read headlines such as Five Easy Tips to Boost Business- as if anything is easy right now! But it got me thinking about the similarities in recent strategy for the brands reporting success. It also reminds me of something we used to say at Eddie Bauer…

Product is King.

Some marketers have a tough time admitting this, but even the most brilliant marketing strategy can only sell so much mediocre product.

Some of the companies achieving strong results this summer include brands in the following categories- home furnishings, children’s merchandise, and specialty gift. The one common element they all share is an intense focus on the “freshness” of their merchandise strategy: introducing new product, spinning existing product in a fresh way, providing content and solutions, establishing authority, and putting a new look on the catalog creative.

These brands prove that it’s possible to succeed even with all the challenges we face!