Secrets of the Catalog Master
Vol. MMVIII No. 2 January 2008
(Continued--page 2)
The Second Quarter 2008 Economic Outlook
As of early February, the economic outlook continues to slow. The evidence that consumer spending has slowed is significant. With seventy percent of the U.S. economy driven by personal consumption, a meaningful retraction of spending by consumers would have an almost instant negative economic effect. The reporting has included nationwide instances of families deciding to pay cash instead of buying on credit, and only for things that are essential.
Multiple sectors—industrial, services, financial, housing, automobiles, and others—are all slowing to recessionary levels. At this point, it is reasonable to conclude that we are, indeed, in a recession. Receiving the official designation by the economic board is little more than a formality.
Decreased spending will continue to lower demand for goods. Lowered demand will create fewer jobs and additional layoffs. Continued tightening in disposable income will result leading to ever-decreasing demand. At some point, the spiral comes to a halt, and that is when equilibrium is restored and a new economic base is formed, generally signaling the start of another economic cycle upward. It has occurred countless times before and will be repeated in the future. This event is normal. These are the economic periods that justify having cash reserves.
Of continuing and growing concern to the multichannel direct marketing industry, are the previously described issues 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 are beginning to exert noticeable pressure on our micro-economy of direct marketing.
Signs of Regional Stability or Status Quo
None
Flat or Slower
Region One (CT, ME, MA, NH, RI, VT)
Region Two (NY, NJ, CT, PR, VI)
Region Three (PA, NJ, DE)
Region Four (OH, KY, PA, WV)
Region Five (KY, MD, TN, VA, NC, SC)
Region Six (GA, AL, FL, LA, MS, TN)
Region Seven (IL, IN, MI, WI, IA)
Region Eight (MO, IL, IN, KY, TN, LA, AR)
Region Nine (MN, WI, ND, SD, MT, MI)
Region Ten (KS, CO, MO, NE, NM, OK, WY)
Region Eleven (TX, LA, NM)
Region Twelve (CA, UT, AZ, NM, OR, WA)
The Second Quarter 2008
Circulation and Prospecting Recommendations
Synopsis
The short-term economic outlook for the catalog industry in the second quarter of 2008 is moderately positive. The intermediate-term outlook is moderately positive for the first half of 2008 and the long-term outlook for the last half of 2008 is more positive.
While essentially positive, the outlook continues to show weaker growth than that seen over the last three years. I would continue to estimate economic growth at less than 3 percent for 2008, likely down to 1.5 percent. Within the multichannel direct marketing industry, I expect no more than 4 to 5 percent growth overall for 2008, perhaps only 3 percent. Within the channels, I see overall catalog and mailing growth at the 3 percent level and overall online marketing growth at the 7 percent level.
Investment Prospecting
For the normally weak second quarter, we continue to recommend a careful review and study of your investment prospecting plan and an attempt to remain in the market for new customers. The comments from January pertaining to the importance of an active investment prospecting strategy are repeated below.
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.
Nation At A Glance
We have revised our mailing recommendations slightly for the first half of 2008. We caution against decreasing prospecting or customer mailings except for normal hygiene and mailing frequency improvements. Do not fall into the trap of reducing mailings; the end result is always diminished customer acquisition performance. Changes are in bold.
| State |
Mailings |
|
|
| Alabama |
Normal |
| Alaska |
Normal |
| Arizona |
Normal |
| Arkansas |
Normal |
| California |
Normal |
| Colorado |
Normal |
| Connecticut |
Normal |
| Connecticut-Fairfield |
Normal |
| Delaware |
Normal |
| District
of Columbia |
Normal |
| Florida |
Normal |
| Georgia |
Normal |
| Hawaii |
Normal |
| Idaho |
Normal |
| Illinois—North |
Normal |
| Illinois—South |
Normal |
| Indiana—North |
Normal |
| Indiana—South |
Normal |
| Iowa |
Normal |
| Kansas |
Normal |
| Kentucky—East |
Normal |
| Kentucky—West |
Normal |
| Louisiana—North |
Evaluate locally |
| Louisiana—South |
Evaluate locally |
| Maine |
Normal |
| Maryland |
Normal |
| Massachusetts |
Normal |
| Michigan |
Normal |
| Michigan—Up.
Pen. |
Normal |
| Minnesota |
Normal |
| Mississippi—North |
Evaluate locally |
| Mississippi--South |
Evaluate locally |
| Missouri—North |
Normal |
| Missouri—South |
Normal |
| Montana |
Normal |
| Nebraska |
Normal |
| Nevada |
Increase |
| New
Hampshire |
Normal |
| New
Jersey—North |
Normal |
| New
Jersey-South |
Normal |
| New
Mexico—East |
Normal |
| New
Mexico—West |
Normal |
| New
York |
Normal |
| North
Carolina |
Normal |
| North
Dakota |
Normal |
| Ohio |
Normal |
| Oklahoma |
Normal |
| Oregon |
Normal |
| Pennsylvania—East |
Normal |
| Pennsylvania—West |
Normal |
| Puerto
Rico |
Normal |
| Rhode
Island |
Norma |
| South
Carolina |
Normal |
| South
Dakota |
Normal |
| Tennessee—East |
Normal |
| Tennessee—West |
Normal |
| Texas |
Normal |
| Utah |
Normal |
| Vermont |
Normal |
| Virgin
Islands |
Normal |
| Virginia |
Normal |
| Washington |
Normal |
| West
Virginia-East |
Normal |
| West
Virginia-West |
Normal |
| Wisconsin—North |
Normal |
| Wisconsin—South |
Normal |
| Wyoming |
Normal |
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