Secrets of the Catalog Master
Vol. MMVIII No. 1 January 2008
(Continued--page 2)
The First Quarter 2008 Economic Outlook
As of early January, the economic outlook continues to slip with disappointing holiday sales, a weaker dollar, overburdened debt, a negative Federal current account balance, a record-high Federal debt ceiling, high oil prices and ongoing global instability.
The now assured reasonable conclusion is that the first quarter will, indeed, be a bit sobering. One could almost envision a near-perfect storm gathering on the horizon. It is a daily reality that costs are increasing; equally, it is clear that credit is tightening. Those two influences will cause spending to decrease. Spending at the retail level creates seventy percent of the U.S. economy because we are a nation of consumers. Decreased spending will create lowered demand for goods. Lowered demand will create fewer jobs and, therefore, continued tightening in disposable income, leading to even less demand. And so the spiral begins. It is the long-feared cycle of stagflation that appears with regularity among the repetitive, historical economic cycles.
Of more concern to the multichannel direct marketing industry, however, are the rapidly conjoining problems of Do Not Mail, Do Not Track, Postage Costs, Privacy, Database Proliferation, “Black-Box” Prospect Mailing Selects, Environmental Activism, Carbon Footprints, Supply Chain Economics and Globalization. These problems could, in 2008, create a maelstrom of bad weather. However, regardless of the weather, you have to be in the market to prosper.
Signs of Regional Stability or Status Quo
Region One (CT, ME, MA, NH, RI, VT)
Region Two (NY, NJ, CT, PR, VI)
Region Four (OH, KY, PA, WV)
Region Six (GA, AL, FL, LA, MS, TN)
Region Seven (IL, IN, MI, WI, IA)
Region Nine (MN, WI, ND, SD, MT, MI)
Region Ten (KS, CO, MO, NE, NM, OK, WY)
Region Twelve (CA, UT, AZ, NM, OR, WA)
Slower (Individual states)
Region Three (PA, NJ, DE)
Region Five (KY, MD, TN, VA, NC, SC)
Region Eight (MO, IL, IN, KY, TN, LA, AR)
Region Eleven (TX, LA, NM)
Evaulate individually
Louisiana
Mississippi
The First Quarter 2008
Circulation and Prospecting Outlook and Recommendations
Synopsis
The short-term economic outlook for the catalog industry in the first quarter of 2008 remains relatively positive. The intermediate-term outlook remains positive for the first half of 2008 and the long-term outlook for the last half of 2008 remains positive. While positive, the outlook continues to show slower growth than that seen over the last three years. I will, at the beginning of the year, estimate economic growth at less than 3 percent for 2008, perhaps as slight as 1.5 percent. Within the multichannel direct marketing industry, I see, perhaps, 4 to 5 percent growth overall for 2008. Within the channels, I see overall catalog and mailing growth at the 3-4 percent level and overall online marketing growth at the 6-8 percent level.
Investment Prospecting
As the new year begins, we recommend a far more intensive review and study of your investment prospecting plan for 2008 than normal. Here is our reasoning.
If history is any teacher, many direct marketers will experience economic and credit pressure during 2008. Most will decrease their marketing efforts or shift allocations to less expensive media, particularly online. This will result in a two- to three-year diminishment of the new customer files and a longer-term deterioration on profitability and growth.
Adopt a contrarian approach and find as much investment resources as possible to put into new customer acquisition in 2008. When your competitors are slowing, that is the time to increase market share through two primary strategic initiatives: 1) new product offerings; and 2) increased investment in new customer acquisition (investment prospecting).
Many of you have been my readers since my first newsletter in 1988. Over those 20 years, we have had four periods of economic slowing. In every one of those cycles, I have pleaded with you to expand product offerings and investment prospecting leading to greater new customer acquisition and market share during the downturn and after the coming recovery. Those who have followed that advice have done well; those who pulled back have not had comparable success and growth.
These are the normal cyclical periods of necessary contrary strategy. If you can take the pressure and operate as a forward-looking contrarian, capitalizing on opportunity, you will grow and prosper consistently over the long haul. If you cannot take the pressure, you will first expand during good times, then contract during difficult times; you will go ahead 2 and back 1.5, over and over. Meanwhile, your contrarian competitor who follows my advice will go ahead 2, then 1.5, then 1, then 2 again as the cycles continue to rotate. It is a cyclical economy and you must use a contra-cyclical strategy to maximize growth and market share.
And so, January, February and March are the months for an intense scrutiny of circulation planning, new customer budget allocation, database modeling, and product development research. Call in your Trusted Advisors; obtain opinions and advice; share your position with those who can find ways to optimize your performance. Look at these strategic issues closer and with more intensity than you have done so in the past several years. It is on this effort that a great deal of your 2008-2011 growth, profitability and success will be determined.
