Branching Out: Successful Spin-off Titles Expand Coldwater Creek’s Brand Territory
With a single phone, an extra-long phone cord and a closet of nature-inspired products, the husband-and-wife team of Dennis and Ann Pence founded the brand known as Coldwater Creek in 1984. Transplants from the East Coast, the Pences fell in love with the slower pace, friendly atmosphere and lush scenery of the Northwest on a trip and later made Sandpoint, Idaho, the location of their home and new business.
According to David Gunter, director of investor relations and corporate communications, the first catalog was an 18-page mailer featuring a hodge-podge of nature-themed merchandise, like bird feeders and binoculars.
To build the house file, Gunter explains, Coldwater Creek followed in the footsteps of other successful catalog businesses: The Pences ran tiny ads in the back of magazines such as Audubon, looking for environmentally-minded customers.
“Some items from the catalog ‘got legs,’ and others were less successful. Northcountry grew out of that,” says Gunter.
Today, the Northcountry title features mostly women’s apparel with a blend of gifts and hard lines, says Georgia Shonk-Simmons, president, retail and catalog.
Northcountry, in particular, is tailored to women who value comfort and natural fibers, and who love the culture of the Northwest.
To continue growing the customer base and the franchise, in the early nineties Coldwater Creek began to look for pockets of opportunity: customer markets that were under-served.
According to Shonk-Simmons, the key to creating successful spin-offs is a combination of looking both externally at trends as well as internally at your customers.
Looking at its database, Coldwater Creek saw an average customer that is female, age 35 to 55, with a household income around $60,000 to $70,000; she’s highly educated, pressed for time and is mostly likely to live along the Eastern seaboard, explains Shonk-Simmons.
These attributes made for a strong, catalog-loving customer base, but a little more digging unearthed other viable market segments.
For example, after six years in the business with Northcountry, management started noticing a strength in sales on the apparel side, Shonk-Simmons explains.
That factor, coupled with the social trend toward a less formal yet tailored mode of work attire, led Coldwater Creek to the realization that there was an untapped market of customers who needed more sophisticated clothing for the workplace, but still hungered for the same appeal of the garments sold in Northcountry.
So in 1993, Coldwater Creek launched a new title called Spirit of the West, filled with more upscale fashions constructed of slightly more expensive fabrics but still tightly focused on the Northwestern theme.
Three years later, Coldwater Creek expanded its offerings again, this time hoping to make deeper inroads within each customer household with Milepost Four, a catalog of men’s fashions.
Opportunity came knocking one more time at the end of 1997, when a resurgence of consumer interest in home life created a flood of new catalogs. Coldwater Creek recognized this trend and began testing for its Bed & Bath spin-off in 1998. “The Bed & Bath book evolved from some analysis of the sales patterns on the soft home merchandise occasionally carried in Northcountry,” Shonk-Simmons explains.
The successful addition of more home furnishings to Northcountry proved this product line could stand on its own. The Bed & Bath spin-off rolled out in August 1998, and almost one year later, management has repositioned the title as Coldwater Creek Home. The first mailing dropped in July. Future campaigns for the Home book will add furniture to the current mix of linens, accent pieces and floor coverings, etc.
Shonk-Simmons believes in looking at popular culture for clues as to what will be the next big trend in merchandising. However, she cautions, you also have to pay careful attention to your brand.
In the case of Milepost Four, which was sold in July to RKC MAIL LLC, Coldwater Creek also proves that it’s smart about staying close to its core customer. It made sense for Milepost Four to be marketed by a company that had more affinity with male customers, Shonk-Simmons says. Coldwater Creek’s customer database is nearly all women.
Acknowledging Your Roots
There’s less cost and risk involved in selling more to consumers who already know and like your company—your core customers—than it is to acquire and convert prospects from the ground up, says Dick Hodgson, president of direct marketing consulting firm Sargeant House, in Westtown, PA.
It makes sense, then, that Coldwater Creek starts with core customers from the Northcountry file to find prospects for Spirit of the West and Coldwater Creek Home. As Northcountry carries a broader product mix that includes both housewares and apparel, data analysis indicates which customers would be most interested in receiving one, or both, of the other titles.
Shonk-Simmons confirms that there is a good deal of customer cross-over between the titles. “You always hope to cross-pollinate.”
In prospecting for its catalogs, Coldwater Creek rents lists that work for all titles, but also finds unique opportunities for each book alone, says Shonk-Simmons.
Coldwater Creek also participates in cooperative databases to find profitable suspects and supplement its knowledge of consumer behavior within its sales categories. Models are another tool the catalog company uses to identify cross-sell, upsell and reactivation opportunities.
Bridging the Brand
At Coldwater Creek, the creative is produced in-house, from product photo shoots to layout. Because the brand is created internally, says Shonk-Simmons, it makes sense for management to keep production in the family for the spin-offs, too. “We have a great creative team that really knows how to bridge the brand,” she states.
One way Coldwater Creek bridges the brand is by keeping the product organization of all three titles consistent. It favors a more eclectic mix of items on spreads, rather than relegating like items to compartmentalized sections. This lively format makes it easier for a company to test a few out-of-category products in the catalog without having to commit to an entire section of merchandise.
Another brand-building technique that is supported by the cross-over between the titles is the ability to occasionally sell the same products in more than one book.
For example, a crocheted raffia hat graces the pages of both Northcountry and its more formal sister, Spirit of the West. In Northcountry, the hat is grouped with numerous products from diverse categories, such as apparel, accessories and housewares/gifts.
The hat receives slightly different treatment in Spirit of the West, where it’s shown with fewer items—all apparel and accessories, in keeping with this catalog’s mission. The copy for the hat is similar in both books, but the Spirit of the West catalog includes more detail and speaks to a more worldly customer. The prices are identical.
The Internet: Everyone’s Spin-off?
In a way, states Hodgson, a catalog company’s Web site can be viewed as a spin-off: It’s yet another vehicle with which to move product.
The Internet has certainly become a more immediate concern that has the attention of top brass at Coldwater Creek. The company has budgeted $1 million to market the new site this fall and moved up the debut of the entire line of merchandise from all three catalogs on the Web site to the end of July—beating the original deadline by a month.
“In the coming millennium, we want to be extremely efficient in the catalog and Internet channels,” says Shonk-Simmons. “The big questions deal with getting the channels right,” she explains. What catalog companies are trying to predict is how many customers are going to prefer shopping on the Internet and how many will stick with the catalog.
Title 12-month Buyers Average Order
Northcountry 1,236,770 $120
Spirit of the West 407,452 $220
Coldwater Creek Home 71,039 $140
Source: Mokrynski & Associates