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Why E-Commerce Companies Are Creating Catalogs

Posted: 09/24/2013 3:26 pm

In the age of digital media, where consumers are plugged in, tuned out and engaging in high-speed comparison-shopping at the click of a mouse, ecommerce and social media is fresh and exciting while traditional print catalogs are un-responsive, costly and old-school, right? So why are ecomms hopping on the catalog bandwagon at a rapid clip?

In the old days (and by that we mean the mid-late 2000's), the best an online retailer could do was max out on paid search, tap lead-generation programs and buy some static display ads (they used to be called banner ads in the ancient 90's, but they bombed so publishers repackaged them) and hope for the best. By 2005, the primary online marketing channels available at the time -house-file email, search and affiliate marketing--had plateaued. But a witches-brew of modern marketing, improving overall data quality and targeting, soon took shape. By tracking users' browsing history through cookies; employing proven statistical modeling techniques; the marrying of online and offline consumer data, behavioral targeting and re-targeting was born.

So now instead of Mary Smith visiting the Good Housekeeping Magazine site and seeing random ads for items she has no use for, she now sees ads targeted to her specific e-footprint from marketers she's most likely to buy from, or from companies whose sites she's recently visited without making a purchase. For many retailers, ecommerce--through search, display, social media advertising (Facebook, Twitter, Pinterest, Tumblr, et al)--is a pot of gold. It's cheap, its fast and it reaches bazillions of potential customers. So why then all the sudden interest in catalogs from ecomms?

Online-only retailers are facing the need to keep their businesses growing, and are turning to experts in the traditional direct-marketing space to provide a terrestrial road map. They're discovering that a high-quality, 4-color print piece is a powerful, and often necessary (especially for smaller, lesser-known brands) initial blow in a 1-2 punch contact strategy. Small, mid-size and premium brands alike are discovering that a high-impact direct-mail piece--from full-size catalogs to postcards--has become an effective means of ushering customers to their sites and has become an excellent path to this offline target audience.

While most online marketers initially focused on email as their primary retention tool, their direct-mail efforts were largely concentrated on new-customer acquisition. Over time, while maxing out their email marketing efforts (increasing to almost daily contacts and focusing on different email-capture initiatives), they're now realizing that direct-mail is a very effective acquisition and retention tool as well.

Over the past several years several pure-plays have launched offline campaigns, while others are working to develop viable direct-mail channels. These brands include Amazon, eBay, Shutterfly, Zappos, Art.com, JustFab, Snapfish, One King's Lane, Modcloth and Minted. The key for these ecomms is to build meaningful direct-mail campaigns that deliver positive ROI and which require a fine balance between who is mailed (the customer/prospect mix), the offer and the overall marketing costs. Each step in the process is equally critical, including campaign strategy, circulation planning, design and production, mail execution and results analysis.

The overall attraction of direct-mail is easy to understand. Catalogs remain the highest-quality, most visually-alluring vehicle to capture an audience, present product, create an aspirational lifestyle and generate solid customer loyalty and brand-awareness. No one can argue the distinct advantage catalogs have through photography, paper and printing quality, size, use of models and share of customer attention. And, catalogs have proven to be the most successful driver of web traffic. There's no better way for a multi-channel marketer to target and acquire customers. It's extremely cost-effective to initially attract the customer through direct-mail while having them make their purchases online.

But entering the direct-mail space isn't as easy as it might seem, even for deep-pocked online marketers. There are a lot of factors for companies to consider, such as the competitive landscape; the scale of the prospective customer universe; the size of their customer database (by traditional recency, frequency monetary metrics); availability of creative assets (i.e lifestyle and product photos); product/merchandising strategy; cost-per-piece and ROI; square-inch goals; and the overall call to action (75% of direct-mail pieces have some sort of promotional offer).

It's also critical to accurately measure the impact direct-mail has in the multi-channel mix, ensuring that demand from stores, websites and catalogs are allocated properly so that decisions on future advertising spend will be made as scientifically as possible based on source and results. The goal should be to generate incremental sales from these direct-mail initiatives and not merely cannibalize ecommerce revenue. One common method is known as "matchback," where marketers analyze all mailed names and addresses and match back transactions across their web, phone, and retail channels for a defined period of time (often 60 days). More sophisticated companies go a step further and apply attribution rules to this matched demand which analyzes interaction with other marketing efforts.

So what does the typical catalog test campaign look like in terms of cost and ROI?:

Total circulation- 400K (50/50 split between customer file and external prospects)
$0.45 cost per piece for a 24 page catalog = $180K in direct mail costs
$0.12 per prospect name = $24K in list rental costs
$3K in mail house fees
$20K in project management fees
Total budget = $226K
Forecasted response rate = 4%
Forecasted orders = 16K
Estimated average order size = $100
Total Sales = $1.6MM
Total Sales per Piece = $4
Ad Cost % = 14%

Put simply, the math works. Especially if this channel is fine-tuned and accutely integrated into the multi-channel equation. Remember the 1-2 punch strategy: find 'em through direct-mail, fulfill orders online. It also can address a major challenge ecomms experience in having large amounts of lapsed customers and one-time-only buyers. In these cases, direct-mail becomes an invaluable reactivation tool in addition to being a visually superior, cost-effective acquisition and retention vehicle. Sometimes old-school is the best school...

Andy Ostroy is Chairman and CEO of Belardi/Ostroy, a New York City-based direct marketing agency providing multi-channel solutions, including customer/donor acquisition and retention, strategic, online marketing, social and full creative services, for catalog, ecommerce, retail, business, non-profit and educational client. Visit at www.belardiostroy.com.

Polly Wong, Managing Partner, Strategic and Creative Services at Belardi/Ostroy.

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