Digital Clues Demystify the Conundrum of Catalogs
By Dan McKone, [email protected]
More than 12.5 billion catalogs are mailed out to U.S. homes each year. But has their effectiveness waned as more customers head online? Are catalogs reliable money-makers or have they just become an inefficient necessity eating away at your bottom line? The answer probably lies somewhere in the middle.
To get to the heart of the matter requires detective work to analyze your customers’ behavior. Traditional catalog distribution algorithms were based on building a book first and then figuring out who in the customer file should get one. This always results in costly over-mailing, and entire organizations are formed to continually analyze and tinker with recency, frequency and spend models to better identify where the money is wasted. Like advertising, it’s really, really hard to predict which part of your budget you don’t need and since the whole exercise appears to be positive ROI, the temptation (rationally) is to overcompensate rather than risk a devastating top-line impact.
But how much higher could that ROI be if you could eliminate the negative marginal contributors? A more cost-effective solution requires a tailored, customer-centric approach, following digital clues to dictate not only who should receive information, but when and how. These clues are grouped and assigned to different categories of customers, each of which have a defined set of characteristics that necessitate a distinctive approach.
Profiling your way to a more effective spend
One of the traits of the most successful retail brands is their ability to narrowly define their core customer archetype and to rigorously understand the detailed behavior of both the core and key secondary customer types. Using a similar form of behavioral segmentation, a retailer can methodically reduce paper spending where it will have the least impact on sales – with its most digitally engaged consumers. The challenge is identifying who this digitally engaged group actually is. The investigation must begin with pulling the clues – what L.E.K. calls digital behavioral signals ™ – that are being tracked to rate a customer’s level of online engagement. These clues will vary for every organization, but sometimes can be found in even commonly watched metrics like email click-through rates, site dwell time or subscription behavior. Signals like these can be correlated with whether the customer received the catalog and their reaction – i.e., did they make a purchase? What type? Clearly, these things must be tracked over time and compared against other indicators. However, even a methodical discovery process can pay excellent dividends to those willing (and with the right know-how) to perform a formal investigation.
Closing the Case
The intention is not to eliminate catalogs; we expect they will remain an effective vehicle for stimulating sales among some customer groups for a long time to come. For example, a poll by the National Retail Federation reported that more than a third of consumers said they would seek ideas from catalogs over the most recent holiday season last year.
However, there is a major opportunity in identifying the right marketing media mix for different categories of customers. A catalog mailer has a different role and level of importance among different customer segments. For some, it may be used as the primary method for sales. For others, catalogs may complement digital sales efforts by driving some type of action to the website. And, as the analysis above points out, there is a growing minority of customers who can, dare I say, be eliminated from a number of traditional mailings without much of an impact at all. The goal is to engage with customers in the most effective way and use a more selective, systematic approach to cost-cutting marketing vehicles. As customer behaviors and preferences continue to evolve, it’s important to establish a system for tracking those changes and testing new ideas to inform more rational decisions about where to make marketing investments.
Dan McKone is a VP in L.E.K. Consulting’s Retail Practice, and head of L.E.K.’s Customer Experience and Loyalty Practice. He can be reached at [email protected].
Jelly Belly updates packaging with nutrition info
FAIRFIELD, CALIF. — Jelly Belly Candy Company plans to implement front-of-package nutrition labeling on its most popular packaged products. The company will begin to roll out labeled packages on shelves this fall.
The new front label will highlight information such as calories and fat content. By providing the information up front, Jelly Belly joins the National Confectioners Association and other manufacturers in support of adopting a method that helps consumers easily access information necessary to make decisions about their diets.
“Front-of-package labeling is the future of our industry and Jelly Belly Candy Company is committed to being an early adopter of this movement,” said Bob Simpson, president and COO of Jelly Belly and chairman of the National Confectioners Association. “Transparency and clear communication on the part of the manufacturer allow consumers to make informed choices when the moment for a sweet treat strikes.”
Jelly Belly beans are four calories per bean, with an average 40g serving size of approximately 140 calories. In addition to their low calorie count, Jelly Belly jelly beans are fat free, peanut free, dairy free, gluten free, vegetarian and OU Kosher certified.
Turkey Hill Daily president Frey retires
CINCINNATI — Kroger has announced the retirement of Quintin Frey, president of Turkey Hill Dairy. Frey began his career with Kroger at Turkey Hill Dairy in 1980 as a management trainee. He served in a variety of leadership roles before being promoted to serve as president in 1991.
"Quintin has been a great ambassador for the Turkey Hill brand and an important part of the Kroger leadership team," said Kroger chairman and CEO David B. Dillon. "The Kroger family extends our thanks and best wishes to Quintin and his family."
During Frey’s 22 years as president, Turkey Hill tripled in size and profitability and now sells products in 49 states, a dozen countries and three continents.
Kroger operates 2,424 supermarkets and multi-department stores in 31 states under two dozen local banner names including Kroger, City Market, Dillons, Jay C, Food 4 Less, Fred Meyer, Fry’s, King Soopers, QFC, Ralphs and Smith’s. The company also operates 786 convenience stores, 328 fine jewelry stores, 1,169 supermarket fuel centers and 37 food processing plants in the U.S.
Located in the rich farming country of Lancaster County, Pa., Turkey Hill Dairy produces the fourth largest-selling premium ice cream brand and one of the leading refrigerated iced tea brands in the nation. The dairy sells its products in a market that extends along the East Coast from Maine to Florida, and as far west as Oregon, Washington and Alaska.