Outlook 2010 : Prognosis: Baby Steps

Industry insiders only see a modest uptick this year over last; further shift from print and store to digital inevitable

In late November, we surveyed the All About ROI editorial board members and other marketing insiders to gauge their views on the year ahead. At press time on the eve of the 2009 holiday homestretch, with their hopes for a better sales outcome than 2008 looking modest at best, few saw an especially bright light shining by December. Instead, many settled in to make the appropriate adjustments for reduced demand.

"Given the circumstances we faced in holiday 2009, I'm not disappointed with our results," says Jean Giesmann, executive creative director for Stony Creek Brands, which goes to market with the Uno Alla Volta and Cooking Enthusiast catalogs and online brands. "Our '09 forecasts were more realistic, and demand was closer to plan than '08. We did our best to reduce costs wherever possible and, as a result, have a stronger bottom line on ?less demand."

As part of their adjustments to the new reality of lower sales volume and print's growing inefficiencies, most retailers, particularly those rooted in catalog or online, are modernizing their sales and marketing efforts this year. The still-challenging economy coupled with the greater expense of nondigital marketing has forced many to rely more heavily on e-commerce to close sales, Giesmann points out.

This strategy spans consumer and B-to-B markets. "We're shifting some of our traditional investment in mailing toward our web and outbound sales efforts; we're trying to maintain contacts with customers and prospects via cheaper methods," says Phil Minnix, president of MCM Electronics, a marketer and distributor of electronic components, 70 percent of whose business is focused on B-to-B. For MCM, he says that means fewer catalog pages, mailing more postcards, sending more emails and focusing on electronic catalog delivery, among other initiatives.

"Our approach will be to better profile and identify new customers and current customers that should receive outbound [telephone] calling efforts to capture more wallet share from our existing customers," Minnix says, noting that 11.5 percent of MCM's 110,000-plus customers drive 80 percent of its sales. "We want to find more of those customers that we can move up the chain by contacting them, understanding their needs better and ensuring that they know our value to them."

Getting More Aggressive
Some marketers with a greater emphasis on the consumer business will look deeper into B-to-B — namely with wholesale businesses — to perk up sales during off periods. Eileen Spitalny, president/co-founder of Fairytale Brownies, whose sales were down 17 percent during holiday 2008, is stepping up the company's three-year-old B-to-B wholesale push this year.

"That's our only channel of growth," she says, "and it'll continue to grow. But people are risk-averse now; nobody wants to make a wrong decision. It's taking [businesses] longer to commit and say, 'Yes, I want to try your brand.'"

This month, Fairytale Brownies will contact corporate customers that bought wholesale products from it last February. "We're trying to get our CSRs more involved with that," Spitalny says. "Usually they handle inbound calls. But we're getting them to work more on sending out emails and even handling outbound calls."

To date, Fairytale Brownies has employed one outbound telemarketer, but intends to have more of its phone reps place outbound sales calls. "We have to be proactive," she says, "as opposed to dropping a certain amount of catalogs and expecting a certain amount ?of response."

Forced Growth
What's more, Fairytale Brownies is forecasting slight growth this year, "out of necessity," according to Spitalny. To obtain such growth, the company is pitching more gift-giving occasions in its catalog than it has in the past, such as graduations and weddings. It's also gunning for greater email segmentation, seeking to retain current customers with emails that are more in sync with the types of gifts they ?usually buy.

Headsets.com, another marketer focused on both B-to-B and consumer, plans to take a slightly bolder approach. "It's too early to be really bold, although don't put it past us to make that switch later in the year if we deem the timing is right," says CEO and President Mike Faith. "Certainly our emphasis continues to be less catalog and more online. The slow and continued demise of the USPS helps to make that a must."

Although Headsets.com's greatest spend will continue to be direct mail, "it'll also be the category that has the biggest drop for us," Faith says. "We're not big technology spenders; we prefer to spend on people, training and development." The company will emphasize its online activities most, continuously improving website usability and content, expanding email marketing efforts, and executing more aggressive search engine marketing.

Even companies approaching this year more conservatively are looking to beef up online activities. "We'll continue to be conservative, but with a hard emphasis on growing our online sales," says Greg Taylor, president of food gifts marketer Liberty Orchards. "We've fallen behind the consumer direct industry in transitioning to the web, so we're in 'catch-up' mode."

'Small Improvements'
Whether approaching it bold and aggressive or conservative, few companies anticipate a sizable rebound this year. Most are taking ?baby steps.

"We believe there will be small improvements," says Doug Hershey, executive vice president of New Pig Corp., a B-to-B seller of industrial safety supplies. "Some of the marketing dollars trimmed in 2009 will be added back incrementally in 2010 as we learn more about the pace of the recovery."

Although the print catalog continues to drive New Pig's sales, the company plans to invest in website enhancements and will focus on learning more about how to make e-commerce work.

Among others contacted for this article, Ron Eike, director, operations for Omaha Steaks, is "optimistic that 2010 will be a solid year," while George Hague, principal at HAGUEdirect, anticipates more mergers and acquisitions "as potential investors see good companies at bargain prices."

Catalog's Not Dead Yet
As for the traditional print catalog, catalog consultants Stephen R. Lett of Lett Direct and Susan J. McIntyre of McIntyre Direct believe the print vehicle will continue to find its place in American retail. "We're starting to see stabilization in the catalog business, even some signs of improvement," Lett says.

That's not to say catalog mailers should jump out of the gate and mail like it's 1999. Lett suggests a conservative approach to planning for this year as well.

Catalog mailers must begin prospecting to outside lists again, he says, since many mailers have dug deeper into their housefiles at the expense of prospecting over the last two years. They've "squeezed revenue from older housefile segments," he says, "but housefiles need to be refreshed with new names."

As McIntyre points out, the greatest focus will be on building and mailing good catalogs, "but with more emphasis on using them to drive sales to the web." What's more, marketers should pay increased attention to fine-tuning email programs via testing.

Modest Spend Shift
As for mailers contacted, MCM's greatest marketing spend — 65 percent — remains with catalogs; the rest is on the web, Minnix says, where it'll continue to invest in traditional SEM, affiliate marketing and comparison shopping search engines. Most of all, however, MCM's online success is coming from search engine optimization.

Mailers are clearly in a transition period. Giesmann points out that "as consumers change their online shopping behavior, the possibility exists that maybe someday we won't have to mail a catalog. We're not at a point where we can stop mailing books, however. The consumer needs some kind of trigger device to stimulate a purchase."

Paul Miller is a marketing and media consultant, and former editor-in-chief of All About ROI and Catalog Success magazines (p914m@aol.com).

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