Strategy: Decipher Web vs. Catalog Customers
Catalog companies should know how much total business they’re doing through the Web. They also must know how much comes from the Web and understand the difference so marketing efforts can be targeted properly. The chart below shows the percentage of revenue we typically see coming from catalogs and various Internet marketing programs. Then there are the e-mail campaigns, which are extremely effective and generate 10 percent of total revenue for a typical consumer catalog company — a significant portion of revenue at a very low cost.
The selling expense to sales ratio for a typical catalog company is 25 percent to 30 percent. Some firms experience even higher ratios due to higher costs for postage and paper. Internet marketing selling expenses should also be managed by this critical ratio, as shown in the provided chart.
Just like catalog prospecting universes have their limits, paid search opportunities aren’t unlim-ited. When investing in Internet marketing programs like shopping sites, the selling expense to sales ratio needs to be tracked. In my example, the selling expense to sales ratio for shopping sites is fast approaching the same ratio for the catalog. Paid search is also becoming more and more expensive.
Preferred Mailing Strategies
With paper and postage costs continuing to rise, catalogers feel they can circulate fewer catalogs and use the Web more to maintain the same levels of sales. While this thinking makes it difficult to maintain the same volume of sales, you can improve profits by mailing smarter.
Most catalogers have considered reducing mailings to Web-only buyers as a way to save money. When you look at your source code report, it appears these buyers don’t perform well. Even the results of the zero- to 12-month Internet buyers often don’t look good on the surface. It’s perfectly logical to assume they shouldn’t be mailed a catalog, or at least mailed less frequently than catalog buyers who fall within the same housefile segments. But is this really the case?