Secrets of the Catalog Master
Vol. MMVII No. 5 September 2007
(Continued--page 2)
The Fourth Quarter 2007 Economic Outlook
As of late August, increased caution continues to be called for due to the emerging economic performance indicators. The subprime mortgage difficulties are probably deeper than first thought and the effects on the international credit markets have been surprising. The very real potential of a burst in the private equity bubble that we mentioned last issue seems to be materializing as numerous deals are being refinanced, postponed or abandoned due to the higher cost of money and a lower tolerance for risk. In the end, it is always all about banks; now, it is banks on a global scale.
The political struggles of the deathless campaigns are, in my estimation, causing the Congress and the administration to ‘spin control’ the economic outlook so we get through the election before the unpleasant reality is released on the unwitting public. The problem is that this is fourteen months away, an economic lifetime. Denial is dangerous.
The energy, war, deficit spending, trade deficit, immigration, aging, health care, crumbling infrastructure, climate change and other purely domestic issues are exerting huge pressures on the American economy and nobody is dealing with the problems. They are not going to go away. The only potential answer is increased and ever-increasing taxes, no matter what the politicians say. The alternative is truly scary.
My view, going soon into the fourth quarter, is that the holiday season will be constrained for consumers. Less money will be spent this year as the “petroleum season” heats up and money is spent on more costly necessities. The housing market is not recovering and debt has, for the first time, moved the nation into a negative savings rate. Simply put, there is less money to be spent.
Businesses are beginning to move to a more cautious outlook, as well. At some point, we all must recognize that the engine of the American economy is consumer spending in all its myriad forms. When that spending slows, the business economy slows as a result. My estimate is that many business-to-business direct companies will see less than 6 percent growth by year end. Actually, 6 percent would be acceptable in the face of an overall economy that may not top 2 percent growth for 2007.
We are also beginning to understand the effect of the 2007 postage increase and the shift in advertising allocation that is underway. I would also suggest that the USPS will seek another rate increase perhaps of the same size as the 2007 sledge hammer. Even with the recent increase, the USPS posted a nearly half-billion dollar loss. It’s a fairly simple formula: either Congress or you will pay for that. Congress won’t raise taxes in an election cycle, so that leaves you. Again, you have to take an active stand and fight for your welfare.
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 Fourth Quarter 2007
Circulation and Prospecting Outlook and Recommendations
Synopsis
The short-term economic outlook for the catalog industry remains positive. The intermediate-term outlook remains positive for the fourth quarter of 2007 and the long-term outlook into 2008 remains positive. While positive, the outlook is also for slower growth.
Prospect as an Investment
For the fourth quarter 2007, even with the signs of slowdown in the economy and in overall business, we recommend maintaining normal strategies for circulation and investment prospecting plans, but likely not more than 10 to 15 percent increases. The economy is going to slow further in the fourth quarter, but there are still no indications or good reasons for reductions in either prospecting or customer circulation, or both, in the last quarter of the year or the early part of 2008. We would remain comfortable with modest increases in prospecting levels, particularly where small pockets of concentrated niche-related prospects can be found.
Nation At A Glance
We will stick to our mailing recommendations for fourth quarter planning in 2007 and first quarter planning for 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 |
Increase |
| Colorado |
Increase |
| Connecticut |
Increase |
| Connecticut-Fairfield |
Increase |
| 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 |
Increase |
| Kansas |
Normal |
| Kentucky—East |
Normal |
| Kentucky—West |
Normal |
| Louisiana—North |
Evaluate locally |
| Louisiana—South |
Evaluate locally |
| Maine |
Normal |
| Maryland |
Increase |
| Massachusetts |
Increase |
| Michigan |
Normal |
| Michigan—Up.
Pen. |
Normal |
| Minnesota |
Increase |
| 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 |
Increase |
| New
Jersey-South |
Increase |
| New
Mexico—East |
Normal |
| New
Mexico—West |
Normal |
| New
York |
Normal |
| North
Carolina |
Increase |
| North
Dakota |
Normal |
| Ohio |
Normal |
| Oklahoma |
Normal |
| Oregon |
Increase |
| 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 |
Increase |
| West
Virginia-East |
Normal |
| West
Virginia-West |
Normal |
| Wisconsin—North |
Increase |
| Wisconsin—South |
Increase |
| Wyoming |
Normal |
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