Survival Strategies for Small Direct Marketers, Part 1 (1,202)
By Lois Boyle and Steve Trollinger
Are you avoiding these common pitfalls?
What a ride small catalogers have had in the last two years! For those of you still around, you know what we're talking about. Competing with the "big guys" has become tougher than ever. Smaller budgets, limited resources, higher costs to mail and a weak economy all have contributed to a tough, competitive outlook. It's the small catalogers with systems in place that allow them to manage adversities that are riding out the storm.
In this two-part series, we first will outline the pitfalls trapping small direct mail companies, then review the key questions management should be asking of their business practices to survive the storm. Do you recognize any of the following key pitfalls?
1. No obvious roadmap
A plan is not a plan unless it's down on paper. Most catalogers—even the big guys—think they have a long-range plan. In many cases "the plan" is not written down. There's no clear path on how to reach the goal or the only focus is on the short-term. At a minimum, small catalogers who want to grow should look at a three-year plan that starts with an end goal and outlines the following:
- Financial objectives: goals for both the top and bottom line including pro forma profit and loss statements and cash flow requirements for several possible scenarios.
- Name flow plan: an outline of customer acquisition and retention efforts over time.
- Order flow plan: an evaluation of orders based on the name flow plan above that incorporates average order value to determine if your financial objectives can be met.
- Marketing plan: a strategy for contacting and communicating with customers and prospects across a variety of media channels over a period of time.
Having a plan does not preclude you from shifting gears because of surprises in the economy or unique opportunities, but it gives your team a guide from which to build and reach campaign and overall business objectives. Working only one campaign ahead is short-sighted and typically will not allow for sustainable growth.
Producing a long-term growth strategy is one thing, but implementing and staying the course is much harder. A plan should be well communicated, continually referenced and reinforced, and should guide all key decision-making.
2. Lack of systems
Without having the systems and controls in place to facilitate the direct marketing model, new or small direct marketing businesses will never be able to grow intelligently and economically.
The advantage of the direct marketing model, if properly executed, is that it allows savvy businesses to provide customers with the right offer, at the right time, with the right merchandise and the right price presented within a relevant, creative presentation. The model is built with processes and equipment that allow you to track results, accurately read them and integrate that information into your marketing, merchandise and creative plans.
It's much easier said than done, but without these controls you're essentially working on gut feel and subjective judgments—neither of which generally foster long-term sustainable growth.
3. Mighty Mouse syndrome
You really can't do it all on your own. And most of the time you should not try to. The Mighty Mouse syndrome is especially prevalent among single-proprietor or family-owned catalog businesses. Most entrepreneurs are great at one of the following: marketing, operations, production or administration. But few are even satisfactory with at least two.
Building the right team, a core of experts to manage the key functional areas of the business, is critical, and management is often short-sighted when it thinks the company cannot afford a new employee or to hire outside help. Usually, trying to do it all will only stymie growth.
This issue is even more important when it comes to direct marketing. There are a multitude of great marketers, merchandisers and creative talent that excel at what they do—but that doesn't mean they understand the complexities of direct marketing or cataloging in particular. Making wise hiring decisions and fostering an environment that provides for ongoing training and learning allows business owners and leaders to focus on what they do best.
It's important to note that the decision to hire doesn't always mean a full-time employee. Our industry is full of experts that have honed their skills and can provide assistance at many levels of involvement. Choosing the right consultant for the right job should always pay for itself.
4. Database blundering vs. database building
A major pitfall for small direct marketers and catalogers is a failure to capture, covet and cultivate data in a way that allows for consistent growth and intelligent decision making over the long haul. Especially in cases where the systems weren't in place when the business or concept was launched, consistent data capture and usage can be a problem. Remember, your customer list and the transactional data associated with it is one of your company's most valuable—and most perishable—assets. It should be protected, managed and mined for the greatest success.
A relational database as either a stand-alone application or as part of a larger catalog operating system will allow you to understand your customers' needs and wants, where customers are in their overall "lifecycle," how long a lifecycle is and opportunities waiting to be seized.
Every aspect of your business is affected by the data captured in the database—from marketing to merchandising and creative to customer service and operations. The database will tell you what offers to test, what merchandise categories to grow, which creative presentations are most effective and if there are problems with returns or cancelled orders. Most importantly, the database can tell you where the greatest opportunities are for growth.
Again, having the right equipment, the right controls in place to capture and evaluate data, the right systems in place to ensure the data are being incorporated and the right people to use the information to its potential, are critical.
5. Unrealistic identity
Do you really understand the business you're in? Many small, and especially new, direct marketers don't have a strong sense of who they are or what role they fill in the marketplace. Knowing your identity includes understanding:
- What it is you're selling. What market do you serve?
- What your position is in the competitive marketplace—your strengths and weaknesses and the true niche you occupy.
- Whether you're using an effective way to communicate your brand to the audience.
- Your product or niche limitations and opportunities.
- How your customers view your business.
Without understanding who you are, it's difficult to set a stage for growth. If you don't understand who you are, how can you appropriately introduce yourself to prospects? Or, even more importantly, how can you be recognized by existing customers?
While we've only stated five pitfalls, the implications are far-reaching. If you have a plan, put the systems in place, bring in the right people, manage your data and understand the roles you play and needs you fulfill in the marketplace, you will have established a firm foundation for growth.
Stay tuned! Next month we'll take a closer look at the pitfalls and how they relate to the core competencies of operations, marketing, merchandising and creative.
Lois Boyle is president of J. Schmid & Associates, Shawnee Mission, KS. You can reach her by e-mail at firstname.lastname@example.org.
Steve Trollinger is senior vice president of client marketing of J. Schmid & Associates. He can be reached at (913) 236-8988, or email@example.com.