The death of traditional media has been discussed ad-nauseum. Sure, Craig's List is putting a hurtin' on classified ad revenues for newspapers, but all the newspapers I get are still filled with advertising and full-color inserts. As the traditional mediums fall out of vogue, I know that smart marketers will find a way to use TV, radio and newspaper to drive traffic to the web. Google has already been working on it for the last year. Guy Kawasaki's best blog entries will be published in Entrepreneur Magazine, again, driving traffic from print to the web.
In 1994, when I was working for Adobe's Image Club Graphics division, the Internet was still in its infancy. We sold clip art, fonts, and photographs through direct mail (DM) catalogs, and at our peak, we mailed over a 1,000,000 catalogs a month. Those of you familiar with DM would not be surprised to hear that a 2% response rate is fantastic (that's about 980,000 catalogs that get ignored!!). Those of you who aren't familiar with DM are appalled at the waste and the harm to the environment. Many people back then had concluded that paper catalogs would become extinct. Some had predicted the death of paper entirely.
When Victoria's Secret mails 400 million catalogs a year in the U.S. - that's 1.33 catalogs for every American citizen - is it because they have money to burn? Hardly. Being an effective direct marketer requires that you have some quants in the back office. They constantly monitor response rates and calculate regressions, because just an extra one-tenth of a percent boost in response rate makes a huge difference to the bottom line. This Business Week article highlights the numbers:
- 2005 percentage of revenues from online/catalog sales: 28%
- 2005 online/catalog revenue growth: 10%
- 2005 in-store revenue growth: 4%
The "secret"? Use catalogs to express your brand and highlight products, but send detail-seekers and orders to the web. Case-in-point: Image Club used to sell over 50 clip-art different volumes collections, some with over 200 individual images in each volume. Because of space restrictions, we could never show more that 20 or 30 images from each individual volume - and those that we showed were tiny. As the web evolved, we simply showed 3 - 5 images, and asked our potential customers to look on the web for the rest of the collection.
The second "secret" is to ensure that the costs and sales from catalog and online are combined. Why? It would be unfair to burden the catalog budget with all the costs, but none of the benefits. You see, when you call an 1-800 number to order something from a catalog, the operator usually asks for a referral code from the back of the catalog. That links your order to a specific group of catalogs (and gives the quants in back office some data to work with). Since online customers rarely enter referral codes, it's impossible to tell exactly how many orders came as a result of the DM campaign. If the budgets are separated, the catalog budget will get cut simply because it appears to be under-performing everything else.
I love how trackable PPC advertising is, and back in the day, loved DM
catalogs for the same reason. Though response from catalogs is less
trackable in today's world, smart marketers will treat their DM budget
as part branding, and part cost-of-sales (like buying 100,000
or 1,000,000 somewhat expensive keyword clicks in one shot).
Several business venture thoughts arise here. First, could an online business hire some DM quants to optimize their marketing strategy? As PPC costs rise, I see huge opportunities in this. Second, would consumers read and respond to a DM catalog full of advertising for online businesses? If so, companies like Yahoo and Google could really expand their reach. So much for the death of paper . . .
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