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Libey Incorporated
Economic Outlook
Secrets of the Catalog Master
Vol. MMV No. 2 March 2005
(Continued--page 2)
Markets, Media and Circulation
Lists. Regardless of the size of the multi-channel direct marketing company, the CEO has responsibility for overall list selection strategies. If we accept that lists-of whatever type-response, email, subscriber, co-op, compiled are the heart of direct marketing, then it stands to reason the CEO must be fully informed and fully engaged in the list protocols of the company. Beyond selection, there must be an understanding of the channel contact strategies employed, including frequency, media and mix. Too few CEOs have an intimacy with the lists that are being used in the circulation planning and testing. If we continue to believe that lists are 60 percent of the success of a direct marketing business, then CEOs need to be proportionately engaged in list strategy.
Markets and sub-markets. Under the 'adjacent tree ring' theory of market expansion, any direct marketer that is not expanding their market penetration is contracting. Therefore, market penetration becomes one of the most important leadership areas for CEOs. Where the company is going is determined by who is on the rudder. It can go straight, left or right. Captains give those orders. Because of every element you have read so far and following, the CEO (provided competency exists) is best positioned to determine where the business should go. It is the board of directors who determines whether competency exists and how much latitude or control the CEO should be given.
Circulation planning. Financial performance is directly influenced by circulation, regardless of the channel. Therefore, if financial performance is the primary responsibility of the CEO, then circulation planning and financial modeling requires CEO oversight and approval. This may well be the domain of the CFO, but the CFO models and the CEO approves.
Consider what this means. To be effective, both the CFO and the CEO must have an intimate knowledge of the norms of mailing lists, email lists, newspapers and supplements, inserts, broadcast, organic search, paid search, pay per click, whatever media in whatever channel the contact strategy calls for. This is a formulaic business and the formulas must be enforced and held to a financial standard. That is a CEOs responsibility.
Mix. The contemporary multi-channel direct marketing company, as opposed to the same company two, three or five years ago, is not about circulation; rather, today's strategy is about mix. The formula is media mix per channel and optimal channel mix to produce the most effective and profitable advertising plan.
Testing
Channel testing. It is widely recognized that insufficient testing is taking place in either business-to-business or consumer direct marketing. The mantra is always the same: It essential to test, but testing is too expensive. Testing is still the most cost-effective thing any direct marketer can do.
By using the online channel appropriately; that is, some portion of its utility should be reserved for testing, perhaps as much as twenty-five percent of the capacity, knowledge can be gained rapidly and inexpensively. Given sufficient scale, online tests can return results in days or even hours, clearly far faster than mail testing which can take months to produce valid results.
I would suggest that parts of classic testing have not changed; only the media and the elapsed time to reach conclusions have changed. For example, compiled lists versus response lists are tests that continue to be done with catalogs. Regional mailing tests are catalog mail tests. ZIP code tests are catalog tests. But seasonal tests, price tests, offer tests, product tests, fee tests, shipping tests, incentive tests, coupon tests, premium tests and hundreds of other product-related tests can be accomplished almost at will online. One of the online channel's greatest attributes is inexpensive, immediate testing results. What used to take a year to test and beat a control package can now be done in a month.
There is so much to be learned by online testing (and conventional testing) that any CEO who fails to embrace this responsibility is leaving massive amounts of product, price and customer intelligence on the table. Suddenly, because of channel shifts, testing has become inexpensive and immediate. This is direct marketing Nirvana!
Creative
Creative strategy. Two things impact the strategy and they are both dependent on the CEO for leadership: 1) Position; 2) Concept. Position refers to the market position the company seeks to fill. This can be relative to price, or quality, or speed, or access, or any of a number of factors. Generally, it is first about price; that is, the high-price leader; mid-price me-too; low-price leader. After price, then quality, service and speed may be further defining elements of the overall position. For example, "Our company is the high-price leader in our niche and we provide top quality, exclusive one-of-a-kind products, through multiple channels employing high-knowledge specialist employees who seek to create a one-on-one customer relationship. We ship same-day wherever possible and are available to our customers 24 hours a day, every day." This might be the position of a high-end fly fishing catalog.
From that point-position-the creative strategy can then be shifted to concept. What creative concept best communicates the position? Perhaps action photography blended with close-up product shots, featuring outdoor fishing settings, middle-aged models with a rugged, outdoor patina, lots of explanatory copy, overnight delivery symbols, low product density, high editorial density, and so on. Once the CEO has 'sculpted' the creative concept as well as the desired position, the creative production can be turned over to the creative pros. What the CEO has accomplished is to instill life into an idea and to establish the body ready to be clothed in the creative elements. Creative has been given direction and leadership. Rudder stuff.
Offers. The CEO has the responsibility to assure offers are profitable and in keeping with the position, the market target, and the creative concepts. Additionally, the full, multi-channel creative and merchandising strategy will, by definition, consist of multiple offers and multiple offer tests, all of which the CEO must be intimately involved with. The mix of offers must coexist with the mix of media and the mix of channels to meet the projections that describe the financial performance and the earnings. In this regard, all of the creative and all of the responsibilities above, and following, are in linear order and are inter-dependent.
Copy. Since the offer must be described by copy, the CEO has the responsibility for copy in all of its elements-tenor, tone, color, technical content, age sophistication, etc. If the copy isn't right, the offer isn't right. The CEO doesn't have to write the copy, but the CEO should be able to write it, or at a minimum understand what is good and bad copy.
Layouts. Ditto for layouts. In all channels.
Advertising plans. Where outside advertising (broadcast, infomercials, inserts, magazines, etc.) are part of the mix, the CEO has the responsibility of factoring the advertising schedule across all channels in order to project staffing, fulfillment peaks, inventory flow, cash flow, and all of the linear responsibilities discussed so far.
Customer Service
Order management. The customer ordering experience, regardless of the channel is the overall responsibility of the CEO. That responsibility encompasses access technology, systems, operating software, people, call center management, benchmarking, and all other elements of an effective order management capability. The knowledge of call center, inbound and outbound telemarketing, cross-sell and up-sell, call abandonment, and the endless aspects of customer service benchmarking are essential for the contemporary CEO. However, perhaps even more important is the understanding of the impact of online ordering and the usability elements of the online ordering experience.
Returns management. The CEO has to provide leadership for managing the returns process beginning with understanding the reasons for returns and ending with the financial metrics and the effects on earnings. Additionally, returns processing, restocking, refurbishing, and disposal of clearance and discontinued products are also covered in this area of responsibility. A reduction of returns of twenty percent has a significant impact on earnings and merits constant attention.
Customer reactivation. Where customers are lost, the CEO has a responsibility for reactivation. Where customers are aging in recency, a CEO has a responsibility for reactivation. Where customers are lost to poor satisfaction, competitive services, competitive prices, competitive channel migration, or any other customer attrition causation, the CEO has a responsibility for authoring and managing the reactivation strategy.
Complaints and praises. Whether the customers wish to praise the CEO or condemn the company, successful CEOs take the phone calls and make sure awards or resolutions are accomplished. In every instance that I have observed where CEOs were aloof from the customers, the companies operated a well below average. In fact, the best evaluation of a company's success can be made in the first two minutes of entering their headquarters. I immediately ask to use the men's room. If it is spotless, the company is spotless and the CEO talks to the customers. If the bathroom is dirty, the company is dirty and the CEO never talks to customers. I have tested this theory time and time again and it is almost never wrong.
Fulfillment
Inventory and warehouse management. In addition to the inventory and logistics chain management elements discussed earlier, the CEO also has to run a world-class distribution center. With the sophistications of systems, bar-code and radio-frequency technologies figure prominently in reduction of labor costs. At the largest multi-channel direct marketers, dark warehouses with totally automated pick systems are emerging. Today's CEO has to master the sophistications of all aspects of supply chain logistics and warehouse systems management for one very compelling reason: Wal-Mart. If the world ultimately comes down to price, costs have been driven out of the fulfillment system by the Wal-Mart and its ilk and that is the only possible direction the direct marketing CEO can go or you run the risk of being non-competitive at some point in the very near, multi-channel future. I would actually go one step further and suggest that direct marketing CEOs of the future will be heavily involved with logistics. I see a day coming when there will be zero owned inventory and the direct marketers of the future will be logistics masters straddling channels and drop-ship manufacturers globally.
Research
New research. If you, as CEO, are not ready for the 'next thing' then you will be left behind. What is the next thing? You will only discover a percentage chance of being ready by doing what I call new research; that is, exploration of markets, products, customer segments, and other elements that are very different from what you are doing now. New research is a bit like a hobby. You keep doing it and getting better and better and finding more and more value in the doing. What you have a responsibility to know is what is going to come along and whack your business upside the head-and you need to know that well in advance of the whacking.
Functional research. As CEO, you are also responsible for the functional research that keeps you on top of your game doing whatever it is that you do now. This area of responsibility includes pre-testing of possible tests for products or markets (sort of like running a mini-experimental lab so you can unleash the two-headed lizards on the unsuspecting staff). Functional research also involves those unpopular responsibilities of actually doing customer research, and actually talking to real customers, and actually evaluating what they tell you. And then there are the qualitative research projects that test product quality and position; quantitative research projects that test for scalability and potential low-hanging fruit orchards out there somewhere.
The Master CEO, however, has an uncanny knack for doing a combination of new research and functional research that somehow takes the company into a new but logical direction and embraces whatever the next new thing seems to be. These people also excel at creative thought.
Strategic Planning
Developing awareness. After the research work, the CEO has the responsibility for doing something with all the insights. In fact, if you have all of the above elements firmly under control, you are ready for the strategic planning process that will carry your company through the next financial knothole of growth or into new worlds. The planning process essentially involves awareness of strengths and weaknesses, analysis of trends and market influences, and formulation of a plan to implement beneficial strategies. This may entail developing business and financial models, creating different planning models, reformatting talent pools, shifting emphases, infrastructure, and any number of major change elements.
Exit strategy. The CEO or owner has one primary responsibility, either to be communicated or held closely: Knowing the exit strategy. You can only take a company somewhere if you know what the exit strategy is. If you are going to sell the company, that is strategic plan A. If you are going to give the company to the idiot son, that is strategic plan B. If you are going to go public, that is strategic plan C. If you are going to merge with a Fortune 100 company, that is strategic plan D. They are all very different plans based on different exit strategies. The primary strategic responsibility of the CEO is to lead the company in the right direction based on the right exit strategy.
Conclusion
I know this has been a very long article this month, but it's a very important topic. Remember, the responsibilities described are only the minimum responsibilities of a fully furnished multi-channel direct marketing CEO. Our industry has a number of CEOs who far exceed these bare minimum talents and skills. We also have a fair number that miss the mark. For those who come next, I would commend to you the necessity of a broad background. It is not enough to be just a CPA; it is not enough to be just a circulation maven; it is not enough to be just an online channel whiz. You have to be really good at all of it.
And then there is the other responsibility of a good CEO: You have to be a genuinely nice person who cares about people.
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