Secrets of the Catalog Master
Vol. MMVII No. 7 November 2007
(Continued--page 2)
The First Quarter 2008 Economic Outlook
As of late October, the economic outlook slips another small notch with a weak dollar, overburdened debt, a negative Federal current account balance, a record- high Federal debt ceiling, record oil prices and ongoing global instability.
The reasonable conclusion is that the first quarter will be a bit sobering. With fourth quarter results, post-holidays, likely to be flat to barely increased, the proof will dawn on the markets in January, and it is likely the national mood will dip further. It is clear that a majority of Americans has lost all confidence in the government and is becoming increasingly pessimistic. Yet, the economy continues to grow, although at a slow but steady rate.
The bright spot continues to be direct marketing’s performance in an otherwise slow growth economy. Our catalog and multichannel businesses tend to have seen about a 6 percent gain for the year; not bad for a difficult 2007. Fewer companies are posting the 15-25 percent gains of past years, but 6 percent is better than 1 percent. To be sure, there are catalog companies (well-run companies) that are showing over 20 percent growth, but they are rare. Indeed, for every one of these excellent companies, there are several poorly run businesses that have negative growth for 2007. So, if you have 5 or 6 percent growth, you have done fairly well; keeping it going, however, is going to be a bit more difficult in 2008, I believe.
My view for the fourth quarter has, again, not changed much from the last issue. The holiday season will be constrained for consumers. Less money will be spent this year as the petroleum prices increase seasonally. And don’t deny the fact that $100 a barrel oil is going to be a problem—a big problem. The housing market sinks deeper and recovery moves further off. The difference this coming quarter is that consumer spending is probably going to slow, perhaps abruptly. Never lose sight of the fact that consumer spending is some 70 percent of the nation’s economic momentum.
The balance of 2007 remains slow. I will adjust with my call for a 2% to 3% growth in the economy, when all is done, downward to 1.5 percent or a bit less. I would not pull back on mailings or prospecting in the first quarter of 2008. Income maintenance is going to be a concern; decreasing mailings will create a spiral; lowering costs is essential, but it must be achieved in areas outside of circulation.
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.
Investment Prospecting
For planning purposes, turn your attention to the second half 2008 circulation planning. 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 we remain with our recommendation of not more than 10 to 15 percent increases. The economy is likely to slow further in the first quarter as sobering economic news emerges and into the first half of 2008, but there are, as yet, no valid reasons for reductions in either prospecting or customer circulation, or both, in the first half of 2008.
Forewarning: Begin now to solidify your paper and production contracts, as the market is likely to become tight in 2008. Paper supply could become critical; it already has in the U.K. and Europe, and capacity is being reduced. This could be extremely serious in 2008. Stay on top of it and plan well in advance. Some are segmenting their customer lists on an RFM basis and mailing the lower performing deciles catalogs printed on less expensive paper.
Nation At A Glance
We will stick to our mailing recommendations 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 |
Increase |
| 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 |
Increase |
| 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 |
Increase |
| 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 |
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 |
Increase |
| Wisconsin—South |
Increase |
| Wyoming |
Normal |
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