The Catalog Market - Catalogs That Sell Catalogs

Along with other cataloging techniques, we'll cover the five "Ps" of cataloging:

1. Positioning
2. Presentation
3. Production
4. Personalization
5. Persistence

Understanding these will give you insight into how the industry operates and the unique advantages that catalogers have built for their companies.

A catalog, in retail terms, is a "shelf' that relies on direct marketing techniques. It can encompass education as well as entertainment. This is not just due to the inherent nature of the catalog—the fact that it's a portable picture book. It's also due to the diligence the industry has given to effective presentation including compelling artwork and persuasive copy. Even several business-to-business catalogs have created interesting dynamics in their books and have added significant value over the years. Trade catalogs may include sidebars explaining specific techniques or procedures and are often perceived as reference materials as well as sales vehicles.

Because the catalog industry is so dependent on repeat sales, it has been critical to develop a rapport with customers by mailing frequently and using effective promotional techniques. Due to these techniques, catalogs have gained perceived value that other shelves have not. Customers often keep catalogs even when they are out of date.

The catalog industry is segmented into business-to-business (B-to-B) and home- or consumer- focused mailers. The two often differ in the size, complexity, and frequency of publication. The business-to-business market varies depending on the industry it supports. Frequently, the catalogs are large reference books designed to facilitate both routine purchases as well as those, infrequent, hard-to-find product searches. These catalogs are positioned primarily for the businesses they serve, and within an industry, it is sometimes difficult to tell them apart. They are often supplemented with more frequent catalogs featuring specials and promotions.

Home- and consumer-based catalog firms, however, have learned to segment along vertical markets and have flooded the market with specialty catalogs. Many catalog firms have decided to focus on more narrowly targeted catalogs for two reasons. First, catalogers have become more proficient at targeting consumers effectively. Secondly, catalog firms found they could cut costs and deliver more timely and relevant materials by creating smaller but more frequently mailed catalogs.

Specialty catalogs often feature only one category. There are catalogs specifically for popcorn, chocolate, shoes, hams, rings, and T-shirts. Sports and hobby catalogs specialize in virtually every activity imaginable. These catalogs bring new meaning to the term "armchair shopping."

Whether a business-to-business or a consumer catalog, positioning serves the purpose of differentiating in a crowded market. Historically, catalogs have evolved in the following ways:

1. First, some companies have spawned vertical-market catalogs from their larger, more inclusive catalogs. Based on historical sales, they have identified opportunities to specialize and have positioned smaller catalogs to fulfill specific needs. They have, on occasion, separated low-volume specialty goods into catalogs that are updated less frequently and cut costs by removing these from the more expensive, larger book. JC Penney focused exclusively on its large catalog until the company separated several specialty categories into smaller flyers. Bridal, special-size apparel, and home & leisure are a few of the vertical specialty markets they serve.
2. Next, retailers have given birth to catalog businesses, and, just as frequently these days, catalog firms have developed corresponding retail outlets—sometimes clearance houses for overstocks. The stores have pre-defined the business and are often the result of emergence on the web. Office product superstores created their own specialty catalogs for frequently purchased items, and sales are supplemented by larger contract stationer catalogs for hard-to-find items. Spiegel owned a thriving catalog business before opening retail outlets to sell discounted overstocks. True hybrids—stores with catalogs designed from the outset to compete on both fronts, are somewhat rarer because most establish one or the other first.
3. Last, some vertical catalog businesses have been created to function in the specialty realm with only a website as an adjunct. Companies with special expertise in a market or those that have embarked on significant research to understand market opportunities are most likely to enter these niches.

Each catalog needs its own identity to create competitive distinction. This position must be firmly ingrained in consumers' minds and deliver a package of products, services, and promotions that meet their needs. Vertical catalogs—catalogs designed for narrow markets—may satisfy product needs, but they must also appeal to the specific customer segment for which they are intended. Because the catalogs are so specialized, the cataloger must know quite a bit about that particular product segment and the corresponding lifestyle of the consumer.

The personality of the catalog is apparent through the use of copy, images, the quality of the paper, and the quality of the products. Graphics and visuals are critical to convey messages. Customers usually browse catalogs rather than read them. Pictures and captions may provide the only opportunity for a cataloger to communicate with his audience.

Other, subtle characteristics, such as the selection of models in the apparel industry, give signals to your customers. It's difficult to gain credibility with older consumers, for instance, if 20-year-old models don clothing meant for the senior consumer. Relevance is key to positioning—especially in the catalog industry where one-to-one marketing is the name of the game.

Today's catalogs are so varied that the industry has spawned a new phenomenon—catalogs selling catalogs. These flyers list a variety of unique specialty catalogs, and the reader can order any of them for a small fee. They fulfill two needs—they create awareness for specialty catalogs that otherwise would be unable to gain distribution, and the responses feed into a database qualifying consumers based on interest while updating current demographic information. In addition to receiving revenue from the sale of catalogs, these firms also receive advertising revenue from the feature placements and are able to sell their databases to other catalogers.

Hostage Programs or Loyalty Programs?

The most popular loyalty program among retailers today is the loyalty or affinity card. Consumers are issued a card with the promise of rebates, access to special prices, or promotional merchandise. In exchange, the customer furnishes personal information to the company and allows the monitoring of future purchases.

Since the programs have proliferated, consumers are now inundated with wallets full of plastic or cardboard affinity cards. Each time they make a purchase, they have to search for their "special" cards in order to get discounts that they were able to receive without cards before the programs were enacted.

Few companies have been able to use the data collected effectively. Hallmark has been at the forefront of the movement and is an exception. The card manufacturer created a "Gold Standard" rewards program. Purchases at Hallmark stores are credited to an account developed for each customer. At certain dollar thresholds, consumers are mailed certificates redeemable for merchandise.

Many of these programs, however, have fallen short of their objectives. It's true that companies have been able to collect consumer data. Unfortunately, by the time systems have been designed to utilize these databases, the information is usually too dated. Some firms never even get that far and wind up in a perpetual collection mode, while consumers keep digging for the cards.

In the 1950s and 60s, green and blue stamps were offered with many purchases. The stamps were redeemed for merchandise at special redemption centers. Popular with consumers, the stamps did not differentiate merchants because they were so widely distributed—even gas stations presented them with each purchase. But customers did notice when they were not available. They looked forward to pasting the small stamps into specially provided books so they could ultimately exchange them for luggage, lamps, and dishes. Consumers were disappointed when the stamps were no longer offered. Banks, gas stations, and other industries vying for the same customers supplied them with gifts and cash as substitutes.

If affinity cards disappeared tomorrow, would customers be outraged? Not likely. Some, such as frequent flyer airline programs, enjoy popularity. However, supermarket and drug store cards are often viewed more as an annoyance. The key to profitability is building long-term relationships with customers, and that requires connection and interdependence.

The true measure of loyalty as opposed to a hostage situation is if the customer would continue to purchase or use a service if there were no monetary incentive. With the lure of valuable hotel points and frequent flyer miles, how would a company know that the customer would stick by them if those programs were no longer available? Is the customer loyal to the company or loyal to the program? It could be that a customer is just waiting for something better to come along, and when it does, he will switch.

Measuring loyalty helps you track results over time. An index based on value, intent to recommend, and intent to repurchase is a good indicator of the degree of a customer's loyalty. Current loyalty program offers must be factored in, however, because programs may or may not be ongoing. Comparing the loyalty index during and after a program gives you a more precise loyalty metric.