Before Changing Your Business Model, Consult a Direct Marketer
When the management of America’s largest retail jewelry chain, Zale Corp., imperiously decreed a sweeping business model change in the wake of flagging sales in 2004, it bombed big time.
The company president, Mary Forté, was forced to resign and board member Betsy Burton, 55, billed as a “turnaround specialist,” was named interim CEO.
In the aftermath of the disaster, Burton—with an MBA in marketing from the University of Chicago—made a pronouncement of major import: “You should never just roll something out that is not proven.”
Direct Marketing 101
For years direct marketing was considered general advertising’s ugly, little step-sibling.
It was never a business of glitz and glamour. It is no longer (alas!) a business of three-martini lunches.
Rather it is a profession devoted to numbers, to return on investment (ROI) and to a single, overarching premise: “Test Everything.”
If a test works, you increase the numbers and run confirming tests.
Only when the confirming tests have proved themselves successful—and you have a solid control—do you roll out and blitz the marketplace, hopefully leaving your competitors to eat your dust.
The only thing worse than rolling out with an untested marketing campaign is to roll out with a complete change in a core business model without testing.
The Zale Catastrophe
On March 29, 1924, Morris (M.B.) and William Zale opened a jewelry store in Wichita Falls, Texas, with a revolutionary offer to prospective customers: “A penny down and a dollar a week.”
Not only was jewelry—once the purview of the rich—made affordable for every person, the store offered friendly service and liberal credit terms.
Over the years it grew, buying up competing stores and chains and going public in 1957. By the close of its last fiscal year—July 31, 2005—Zale Corp. consisted of Zales Jewelers, Zales the Diamond Store Outlet, Gordon’s Jewelers, Bailey Banks & Biddle Fine Jewelers, Peoples Jewelers, Mappins Jewelers, ZLC Direct and a kiosk jewelry business that sells primarily to teens. It generated $2.4 billion in net revenues and had 16,000+ employees.