2005: The Year Ahead
by Donald R. Libey

What will 2005 bring? What used to be fairly simple-predicting next year's events-has become very tenuous. So much can happen so fast that the art of futurist thinking is more and more like horse racing.

Any end-of-the-old-year/beginning-of-the-new-year outlook has to carry with it the disclaimer if certain events occur, all bets are off. That is particularly true with the unstable situation in the Middle East and the correspondingly unstable U.S. position relative to that part of the world. That being said, we should try to turn our gaze instead to the significant and shaping events that are occurring in direct marketing.

Online

The Google success story has, I believe, far reaching implications for the direct marketing world. For online access and information, Google is for 2005 what AT&T was for telecommunications in the 1970s and 1980s. Whether you wish to admit it or not, direct marketing is about access and Google and its competitors will increasingly control that access in 2005. Another way of stating the online outlook for 2005 is that search engine marketing will achieve wider recognition of its importance and its strategic exclusivity among smart direct marketers. A few intelligent companies will understand that access will be very expensive in a short time and those intelligent people are taking steps to assure they are members in the exclusive tier of search engine accessed direct marketing beginning to take shape. Let's look at 2005 for a moment and speculate on what might take place.

Here comes a really heretical concept: Buying no longer is a matter of who, what, where or how. Shopping is a matter of word description. In other words, I will no longer associate buying pears with Harry & David. Instead, I will associate buying pears with the words "pears" or "fruit" or "gourmet pears" or any of fifty-eight other related words or word combinations. That is exactly what Google and its ilk are doing: Changing the habits of buying.

Let's look at another example to see if we can get a handle on the future importance of online merchant reputation, service and trust. Ten years ago not one of you would have sent a check for $500 to a merchant known only as squinchymoe@dolls.com. This is a business you don't know, have never bought from, have no experience with and have no basis whatsoever for entrusting with your $500. Add a five-star rating system, a few reviews and you've got . . . that's right: E-bay! Millions of people send money to other people they've never heard of-safely and securely-and have no reason to trust because E-bay has "changed the habits of buying." They are, in effect, controlling access.

How about another example? In 2005, another direct marketing organization will continue to change the habits of buying dramatically: Amazon. Today, Amazon is a "must have" marketing affiliate for many catalog and direct marketing companies. Amazon has the ability to do as much sales in one day as you may have done in two weeks. It's all about access. Amazon has "changed the habits of buying."

In 2005, the momentum for thought-activated word shopping will advance rapidly. Google, E-bay, Amazon and all of the look-alikes will achieve a growing importance in the definition of direct marketing; cataloging will have a closer link to entities like Google's Catalog and Froogle links. Maybe the massive Google catalog archive will be released from beta and be renamed Googalog.

Web and WorldNet

Actually, the World Wide Web is beginning to die. It has evolved from its academic/military beginning and has about reached the limits of its innovation quotient. From here on out, expansion on the web will be simply more of the same. We have reached a point where the concept of the web now must change in order for it to shed its impurities and morph to the next higher level of information structure evolution.

That next higher level of evolution of information structure is being conceived now. It is something likely to be called the WorldNet. It will have, as one component, the Internet, but will also enfold wireless, satellite, On-Star, utility meters for your water, gas, electricity, cell phones, cell phone photos, land-line telephones, I-pods, GameBoys, DVD archives, libraries, financial transactions, markets, consumer history, demographic cells, health history, education delivery, entertainment and every other technological advancement and centralization and access control of information, all rolled into one converged and ubiquitous WorldNet that will be accessible from any of thousands of system access points. If you thought the Internet was all-encompassing, the WorldNet will be the megalith of informational structure and you will be able to burrow into any part of it you require from anywhere using any technological access media you wish to use. Think of it as in-door plumbing for the mind. Turn on the tap and out comes whatever it is you conceived in whatever form you desired. This is the true technological frontier and it is being described, planned and constructed as you read this. And a very few, very smart direct marketers will begin explorations of how they will fit their businesses into this new and powerful technological structure.

Circulation

Circulation will increase in 2005. I predict a minimum 5 percent increase and up to 10-12 percent in certain specific niche markets that still have low-hanging fruit and scalability, both for business-to-business and consumer. Those increases, however, will come as a combined channel increase; that is, some portion of the 5 to 12 percent increases will be in catalog, some in e-mail, some in telemarketing, etc. Inserts are suddenly a big deal and insert programs are enjoying expansion. Other media and channels will ratchet overall circulation up in 2005.

But, circulation is a conceptual term. What will it mean in 2005 compared to 2004? Clearly, the online emphasis is growing; the prospecting pendulum is once again swinging to the upside; new customer acquisition-across all channels-is high priority. Circulation is also a geographic term. A few bold companies are establishing early operations in India, a country with 300 million people who meet the U.S. definition of middle class income. Circulation for those companies is a very different concept in 2005. And, let’s be candid: Circulation will have to once again include international as our nation is becoming less important in the global economy that we must all compete in to grow. The early B2B experience with international direct marketing in the 1980s and 1990s will be seen as the first attempt; the second attempt to expand internationally will be the one that creates significant multi-channel, truly multi-national direct marketing companies and at that point circulation is a whole new ball game. And it begins in 2005. It has to begin in 2005.

Prices

Prices in 2005 will go up 5 to 10 percent. Direct marketing companies will be able to take price increases; in fact, will have to take price increases to cover increases in almost every expense category. The wild card here is the effect of the pure play net gnats that have reemerged as strong players after the dot-com collapse. In case you have not noticed, there are a plethora of successful net gnats for almost any individual product you can think of today. Where we once had competitors in office supplies, now we have individual web competitors in just staplers or paper shredders. You can go to www.weddingbands.comand see what these net gnats are doing to the jewelry business. These small, take-one-or-two-percent-share online businesses are proliferating and they are masters of search engine marketing. After all, it’s the only thing they have to spend money on since they have no facilities, catalogs, employees, or other overhead expenses, just a closet and a few computers and servers.

Branding and Multi-Position Marketing

It's on everybody's lips. Branding and private labeling in 2005 will continue to gain momentum among direct marketers seeking to differentiate themselves and add some degree of perceived value. Any catalog company with solid name recognition can potentially benefit from private labeling and a branding initiative. At the very least, it can add to the corporate valuation. But, I think in 2005 we will begin to see branding associated with search engine marketing, perhaps more than catalog name because there are so many more opportunities for a brand-key word link. Suddenly the brand name and all the potential word descriptions of individual products take on new importance.

For some direct marketers who have already mastered multi-channel marketing, the brand will offer the opportunity for establishing two, three or more quality and price positions within the various channels. As an example, a catalog has its name brand products at the top end and uses all channels; it has another separate mid-quality brand for the Internet; and it has a third clearance brand for both a low-end catalog or flyer and a separate Internet site. The concept of capturing and dominating all three market positions is not yet common and in 2005 this will begin. You heard it here first: After multi-channel marketing comes multi-position marketing.

Wholesale Channel

In 2005, many direct marketers will turn to the only remaining channel they can easily enter: Wholesale. I said this in 2004 and a fair number of companies began some tentative wholesale relationships this year and that momentum will grow in 2005. It is logical and it is necessary to increase market share and to grow. The B2B marketers will be the primary movers in wholesale for one powerful reason: Inoculation against the net gnats. If you are going to have to spend huge amounts of money to combat interlopers in your space, why not sell to them and solve the problem? Many catalogers will begin to explore drop shipping for net-affiliate merchants. Here is where your fulfillment expertise starts to influence your channel choices. It might cost you on margin, but you may compensate in fulfillment revenues and overall volume, meaning efficiencies in filling fewer orders but larger orders for a greatly enhanced average order value.

Previous | Next

Page 1 | Page 2

Back to Top