The Next Direct Marketing Evolution:
Survival Changes For the Coming Five Year

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The Next Prospecting Frontier

Local prospecting. Mastering local prospecting to zero in on reduced retail activity in your niche will pay off for several reasons:

1. You learn about “local” direct marketing, an extension of the national direct marketing we have all experienced for so many years. Local is different than national and it requires far more sophisticated segmentations and economic profiling of both business-to-business and consumer prospects. And, the list and circulation expertise, uniqueness and experience will be priceless for the future.
2. You develop “local” offers and local relevance for local customers. We have never gone out with prospecting offers that are geared to a small geographic target. By necessity, printers will have to develop local segmentation binding and multiple offer press capabilities that reflect and cost-effectively drive this local marketing focus. Imagine: a marketing campaign replete with lists, offers, printing and mailing targeted to business buyers in specific cities and neighborhoods where major big box office supply stores are closing. Now, imagine the same campaigns in every city and neighborhood where they are closing . . . and read the teaser copy on the catalog cover: “Your OfficeBox at 5th and Oak may be closing, but we’re still here . . . and we’ve got what you want, at better prices, and we can deliver to your door . . . FAST
3. You have all of the internal IT systems , call centers, fulfillment operations necessary to make this work at the local level, and it’s already paid for. You also have highly skilled and experienced marketers who can find those customers if they will only begin to look locally.
4. It is a “No Risk” strategic concept. Right or wrong, true or false, prophesy or shamanism, you benefit from learning how to better service customers on a local basis as well as a macro-national prospecting basis. And, if you really believe you want to have local distribution and local warehouses and local retail stores (as many of you are actually thinking), then you have to master local prospecting anyway. But, my belief is that you can master local prospecting and marketing from a centralized position. Your chief strategic advantage is economic. Don’t obviate that advantage by getting into the retail business!

Price and Survival

The outcome of the Wal-Martization of America is that Americans, whether consumer or business buyers, have become hyper-sensitized to price. As few as ten years ago, price was the least important element in the competitive mix for a catalog company. Today, price may be the determining element in the purchase decision. As price comparison became simple via the Internet, as price bludgeoning became commonplace via the “big box” retail model, as price incentives became the idiotic retail world’s stock-in-trade and self-fulfilling incentive of choice to attract fickle, price-motivated, predatory customers, we as a nation of consumers have finally and irrevocably become price-driven creatures of habit. Of course, the tail of the 55-year boom cycle of the American economy may have a fair amount to do with the sudden, transformational idée fixe about obtaining the lowest possible price on everything that suddenly cloaks our every waking thought about purchasing and our insatiable desire to hob-nob with the nether-world denizens of the local Wal-Mart so splendidly arrayed in Spandex by Tommy Hilfiger.

Bitter as it may be, America has dumbed down when it comes to consumption (quantity, not quality). People who would not have been cremated in clothing from Wal-Mart are now wearing it to work and wine bars because it is cheap chic. If you can save $3 on dish soap, it’s $3 you can spend on a better Old Vines Zinfandel (the red wine in the bottles, not the pink stuff in the boxes).

So, here we are, all cozy in our Wal-Mart cheap chic mode and applying that whole mind-set to capital expenditures, advertising specialties, software, business forms, laptops, and anything else we buy in the normal course of our day. And we still buy from catalogs and, for about 25 percent of us, on-line. So, where are the catalogers?

There they sit. With products like $14,000 stainless steel, backyard gas grills and faux marble flower pots that go for $389.99 each. I don’t know if anybody at the Big & Tall catalog companies have noticed, but $69 for a casual shirt is no longer thought to be an irresistible bargain. And why is it always Big & Tall; why isn’t there a Short & Fat? Anyway, the catalog world got expensive, over-priced and out-of-whack when nobody was really noticing and while everybody had lots of cash. Suddenly, it’s 2003 and the 401 K’s are all being renamed 101 K’s and people are buying their microwave popcorn on sale at Wal-Mart for $1.29 for six bags and the catalog world is irrelevant because of price! Wake up and smell the coffee here! Catalogs are not competitive and the buyers have figured that out. Game, set, match. Thank you for playing. Hey, Wal-Mart did it, not me.

And guess what? Wal-Mart’s pretty smart. Take a look at the stock value appreciation. They know how to source product better than anybody else in the world. When it was time to crank up the Wal-Mart expansion bubble machine years ago, they got real plugged in on the import thing. If a fishing lure sold for $6, they could source it from vendors who were having it made in Taiwan for 8 cents. Then, they beat up the vendors and bought that fishing lure in really big quantities for 7 cents each . . . they could convince their suppliers to sell under cost because of the huge volume Wal-Mart would kind of promise. When the fishing lure guy went under, they owned the market and could source it for 3 cents . . . and put it on special for $3.89, almost half of what the local fishing tackle shop had to sell it for. Ergo: total retail dominance. Coupled with unlimited expansion of locations, one has the perfect vehicle for imprinting the American psyche about price being the only determining element. And, they hired everybody’s grandmother and grandfather to be “Greeters” whatever those are. Ten years later, the average American’s car has developed an instinctive and near-universal homing behavior. It only drives to Wal-Mart.

The Bind

It’s bad enough to be irrelevant on price in America. The only thing that could be worse is to be price irrelevant, charge shipping and handling as a budgeted profit center requirement, and be positioned just under the most expensive seller of your product. Wait a minute! That’s precisely the position we all strived to achieve ten years ago: high threshold pricing; high margin; make money on every UPS shipment; not the high price leader, but just below, hiding in the weeds. Suddenly, that once-attractive positioning is lethal. We’ve got competition from discounters and 8,000 one-product-one-employee wonders selling stuff on the Internet and E-bay at 40 percent below our price. These “net gnats” are nibbling away at us, draining blood from our best products at one or two percent a year while the big box discounters are rapidly taking away our best customers, those with a high RFM profile who are suddenly enamored with low prices and could care less about anything else, like “CRM.”

And, what could be worse? While the discounters of the world were busy sourcing their products by the container-load from China at 70 percent net margins, we sat back and debated the relative merits of multi-variant regression analyses, CRM systems and other inane and banal distractions. We are a whole decade behind in sourcing sophistication. We didn’t believe it when Ross Perot told us about the “giant sucking sound.” As an industry, the catalog world has little competitive experience with overseas sourcing at maximum margins. And when I ask you, “So, where are you going to get an additional 12 points of net margin?” you don’t have an answer. But, you can tell me that 87.96 percent of your 1st decile customers also appear on the Abacus list. So what!

And there’s the bind: Price is elastic and you’ve got no price advantage.

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