By Hallie Mummert
After more than 40 years of perfecting the direct mail sweepstakes, Reader's Digest has closed its prize money vault. In 1998 newly appointed Reader's Digest Association CEO Tom Ryder saw the writing on the wall for the publishing giant, and announced a plan to revitalize the brand—starting with product improvements and a gradual weaning of sweepstakes promotions.
Not surprisingly, this plan came at a time when Congress was pushing for sweepstakes reform, and the state attorneys general were punishing direct marketers they felt were the poster children of sweepstakes. Only a few years after strict legislation regulating sweepstakes promotions was passed at the end of 1998, subscription agencies American Family Enterprises and Publishers Clearinghouse, along with Reader's Digest Association, settled multistate, multi-million dollar lawsuits for the use of what the state attorneys general characterized as unethical sweepstakes promotions.
Now, a few years later, Reader's Digest Association has been able to say good riddance to sweepstakes, in part due to its purchase of Reiman Publications (which has produced 250,000 subscriptions to Reader's Digest) as well its aggressive testing of non-sweeps offers in direct mail, package inserts, telemarketing programs and online campaigns. Forever the company that tests, however, the Association will continue to try the occasional sweeps offer to be sure of its strategy.
Hoping to pull off the same coup as Ryder, Hanover Direct CEO Tom Shull is two and a half years into his plan to right the struggling catalog company. In this month's cover story, Contributing Editor Alicia Orr Suman talks with Shull—who's credited with saving Barney's and Macy's from Chapter 11—and the leaders of his turnaround team to learn what steps they're taking to plot a new course, now that the initial reorganization is over. Like Ryder, Shull has placed his emphasis on brand development, trimming unprofitable circulation and maximizing core efficiencies. An even smarter move: studying catalog companies that are leaders.
It's clear that the road to profitability for Hanover Direct will be bumpy and longer than some shareholders care to wait. But perhaps they can take heart in Ryder's success. If Reader's Digest Association can undo four decades of sweepstakes dependency in one-tenth of that time, Hanover Direct might see blue skies soon enough.