The most basic direct and catalog marketing fundamentals (to learn and re-learn)


I recently had a conversation with another catalog consultant about a client proposal we’re jointly working on. The conversation worked its way to a discussion on the basic fundamentals of direct marketing. In essence, what’s the most basic fundamental of direct marketing that we need to present and our clients need to follow?

It came down to this: the 40/40/20 rule.

This rule states that in order to be successful in direct marketing, you must do the following:

  1. Concentrate 40 percent of your efforts on lists. That means list analysis and planning, selection, RFM, and, most importantly for catalogers, circulation.
  2. Concentrate an additional 40 percent on your offer. For catalogers, that means merchandising. That requires expert attention to detail, including but not limited to product selection, pricing, presentation and analysis. By analysis, I’m referring to square-inch analysis, the most powerful tool you can use to manage your catalog merchandising — aka “squinch.” Understanding the wants and needs of your customers is part of this function, as are the offers you make to them to stimulate response.
  3. Tie it all together by spending 20 percent of your efforts on creative execution. Literally, creative execution is only one thing: the bringing together of your list and offer/merchandising efforts in such a way that it speaks “buy now” to your customers.

As a consultant, I almost always see this in reverse.

If I had to quantify what I see in clients as they apply the above core competencies, it would be these three:

  1. 50 percent merchandising, with less emphasis on analysis and more on product development and presentation;
  2. 30 percent on creative. The creative (i.e., the catalog) is the brand’s calling card;
  3. and 20 percent on lists.

In the catalog business, lists and all that circ stuff are just as important (some would even say more) than offer and creative.

It’s easy to see how that could happen. Most catalogers are merchants first. They had a product idea and brought that to market. How they bring it to market is all about building brand image. It’s as simple as that.

I usually get called in when there are some business issues that need addressing. Often I’m told that there’s a problem with their catalogs. To this I say, “The catalog (or direct mail piece) isn’t the problem; you’re trying to solve a marketing problem (translation: circ and merchandising analysis) with a creative (design, look, feel, brand) solution.

At that point, I review the client’s version of the 40/40/20 rule and then the “textbook” version. There’s plenty of evidence for the proper application of the rule in the direct marketing textbooks. Absent this principle, I’ve seen some horribly ugly catalogs that are cash cows, while beautiful catalogs sink like stones.

Jim Gilbert is president of Gilbert Direct Marketing, a full-service catalog and direct marketing agency. His LinkedIn profile can be viewed at www.linkedin.com/in/jimwgilbert or you can post a comment here or e-mail him at jimdirect@aol.com. You can also follow Jim on Twitter at www.twitter.com/gilbertdirect. Read Jim’s personal blog at http://gilbertdirectmarketing.wordpress.com/.

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17 Responses

  1. Jim,

    You’re on the right track, ,but I wuld adjust your ratio to 60:30:10. 60% is the accuracy of the list and the research on it, 30% on the offer, and 10% on the creative. Like you I have seen some really ugly catalogs pull exceptionally well because of the list and offer.

    • Thanks for your comment Phil. 40/40/20 is the textbook example. The truth is the more time you spend on lists, the better the marketing campaign!

    • I was actually thinking it aught to be pulled the other direction … pretty much 1/3rd effort for all 3. In other words, catalog (or direct marketing) is a 3-legged stool. You must have all 3 legs firmly in place for the piece to float. 40-40-20 or 60-30-10 is taking away from this equity. This will result in management dropping the ball on the 20% or the 30 / 10% effort areas.

      And this is coming from a PhD analyst, who lives and breaths list management! For perhaps 10 years I managed everything non-creative about a consumer catalog where management focus was more on the merchandising and creative than on list. But I still say, all 3 must bear equal weight for the mailing to continually succeed.

  2. thanks

    very good

    :)

  3. Jim,

    Great points! I just have one wish for your blog: that there would be a ‘friendly print’ button, that would enable me to print the article without the entire page.

    I frequently pass your remarks around to my team.

  4. I’m in creative and I agree with you! Creative can only do so much.

    If you are selling to the wrong people they will not buy no matter how good the catalog looks. Also, if your list is low quality you will be sending duplicate catalogs to the same household or to prospects who have moved, etc – an incredible waste of money.

    Thanks

  5. I may be taking this off in another direction, but as a broker for 27 years, I was constantly chagrined by the seeming lack of attention my clients paid to list decisions. Now that I am a mailer, it makes more sense to me.

    There is a difference between the importance one puts on an activity and the time one allocates to it regardless of what managerial Guru’s say.

    There is an infinite number of combinations between offers, incentives, timing, paper, etc. Each of these elements in a mailing campaign has its role. And you are right, proper list selection complements the merchandise and the offer, but it does not replace them, nor take precedence over them. And vice versa.

    Unfortunately, circulation and list segmentation are not very amenable to much “tweaking”. Your housefile -where most mailers make their profits – is pretty stable and has, for the most part, a fairly stable set of datapoints to work from. You can always test some new segmentation scheme or enhancement, but there is limited variability here from one campaign to another. You can look at past results, but evaluating past performance is an exercise in straight mathematics. Anyone who has been looking at results for any length of time should be able to figure pretty quickly how deep you can afford to go into your housefile. And if you didn’t test any new phillip in segmentation last time, there is no real way to incorporate it into your circ plan for this campaign. You can’t manufacture data. And it doesn’t take that much time to set up a new test unless you are trying something radical or comprehensive.

    Similarly, there is only so much you can research about a prospect list. Datacard information is limited, and sometimes misleading or is outright false. Two lists with virtually identical profiles work entirely differently in the mail. Since list performance is basically unknowable until you mail the names, some mailers simply go by bromides – we can only select $100+ buyers, we can’t afford more than X $/M, we can only mail a 3-MO hotline, etc., etc. And as long as we get list tests that work despite having no logical explanation for their success, list will remain the wild card of the equation.

    While many mailers surely recognize the importance of list selection, the C-level mailer’s ability to actually effect campaign performance is much more finely nuanced by paying attention to the flawless execution of offer, product and presentation. After all, looking at last years results or reviewing datacards an extra hour or two, will probably not yield any incremental actionable insights for most upper-level managers. If you make the wrong list test call, no one can call you on it – the path not taken and all. But printing your correct phone number and web address on the order sheet or making sure you print the correct number of covers is controllable and visible to everyone when its not done correctly.

    You must spend your most time on the things that are important, but only if they are manageable.

  6. This is a very succinct explanation for the decline of a once-successful company I worked for for many years. The further we got from this formula, the worse business was. An entire revamp of the creative (which happened more and more frequently over the years) never paid off the way a good offer (and a good offering of product) mailed to the correct people did. As a member of the creative department, I found this difficult to believe, but I must confess that this makes complete sense.

  7. Circulation planning + response analysis = bread + butter. Essentials skills for direct marketers, and they transfer from catalog to solo mail to broadcast and electronic media.

  8. Hi – unless I missed something, I don’t see any mention of LIfetime Value Analysis. Particularly with the advent of pay-per-click (which I do consider a form of direct marketing), this seems to be even more important. As I tell my graduate students, LTV analysis can show you how you can lose the campaign battle but still win the LTV war.

    • No Bruce, you didn’t miss anything. You are right on both counts. I’m actually working on part 2 of the series, and it is about lifetime value!

      Jim

  9. Hi Gilbert,
    I think you are getting there, but beleive you are missing something and that is the client experience upon purchase or inquiry. For this reason I would go with a 40/10/10/40 ratio.
    40% on list development, accuracy, mailability, etc.
    10% on the offer
    10% on mail/execution
    40% on customer interaction experience planning, execution, follow up, data collection
    The reason I place so much importance on this is that even if all of the steps preceeding the sale are executed to perfection, but the customer ordering or inquiry interaction is bad —- the deal is off.
    In my consulting business, one of the things we specialize in is improving sales and in most cases, we do this by improving the customer’s purchasing experience!
    So as you are mulling over the list, line by line, name by name, also plan how each one of those people will be greeted, communicated with, thanked and followed up on as they bite on your offer!

    • Mary, I love the way you think! I always see this as from the promotional side, not from the response side.

      I have written on this topic for Catalog Success Magazine many times, but never thought to include it in the percentages.

      I’ve said it before and I’ll say it again… Great direct marketing will make the phone ring… but the people in your call center make the cash register sing!

      Thanks!
      Jim

  10. Hi Jim,
    Does this 40/40/20 rule also apply to e-commerce websites that send out email marketing campaigns instead of a physical catalog? We’re working with a small start up that doesn’t exactly have a list to manage yet.

    Thanks,
    Angie

    • Yes Angie. Absolutely! Start with your list. Make sure it is healthy, and who you target on that list has the right affinity to your offer/merchandise.

      Let me know if I can be any more assistance!

      Jim

  11. Thanks!

  12. Jim, great stuff and some really great comments. I like the 40/40/20 rule and I remember a time when the catalog business was almost 80/10/10 – Lists/merchandising/creative.

    BUT, these are old rules for a different economy. In this digital age, your audience controls everything. Why aren’t catalogers leveraging the tools of social networking more frequently and with more confidence.

    Think of the basics of catalogs: Lists and refererrals (Facebook), Photography (Flickr), Sales and Deals (Twitter).

    I’d like to see catalogers leading the conversation and the development of new applications that make it easier for consumers to CARE about the merchandising and the creativity. Think beyond email. The rules of lists and mailing aren’t dead, they are just a part of the total integrated strategy for facilitating the consumer conversation.

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