Chapter 17: Direct and Online Marketing: The New Marketing Model

Catalog Marketing

Catalog marketing has grown explosively during the past 25 years. Annual catalog sales (both print and electronic) are expected to grow from a current $80 billion to more than $107 billion by 2002.²¹ Some huge general-merchandise retailers—such as JCPenney and Spiegel—sell a full line of merchandise through catalogs. More recently, the giants have been challenged by thousands of specialty catalogs that serve highly specialized market niches. Consumers can buy just about anything from a catalog. Sharper Image sells $2,400 jet-propelled surfboards. The Banana Republic Travel and Safari Clothing Company features everything you would need to go hiking in the Sahara or the rain forest. And each year Lillian Vernon sends out 33 editions of its catalogs with total circulation of 178 million copies to its 20-million person database, selling everything from shoes to decorative lawn birds and monogrammed oven mitts.²²

Specialty department stores, such as Neiman Marcus, Bloomingdale's, and Saks Fifth Avenue, use catalogs to cultivate upper-middle-class markets for high-priced, often exotic, merchandise. Several major corporations have also developed or acquired catalog divisions. For example, Avon now issues 10 women's fashion catalogs along with catalogs for children's and men's clothes. Walt Disney Company mails out over 6 million catalogs each year featuring videos, stuffed animals, and other Disney items.

The Internet has had a tremendous impact on catalog selling. In the face of increasing competition from Internet retailing, one expert even predicts "catalogs are doomed . . . mail-order catalogs as we know them today won't even survive."²³ Thus, even traditional catalogers are adding Wed-based catalogs. In fact, more than three-quarters of all catalog companies now present merchandise and take orders over the Internet. For example, the Lands' End Web site, which debuted in 1995, now gets 180,000 e-mail queries a year, surpassing its print mail response.²⁴ Here's another example that illustrates this dramatic shift in catalog marketing:

When novelty gifts marketer Archie McPhee launched its Web site in September 1995, response was "underwhelming," says Mark Pahlow, president of the catalog company. "But when we added the shopping basket ordering feature in summer 1997, it came alive." You might say it roared to life. According to Pahlow, the site now has 35,000 unique visitors each month, generating 55 percent of the cataloger's total sales. In fact, the Web numbers are so positive that Archie McPhee has slashed circulation of its print catalog from 1 million to less than 300,000, and reduced the frequency from five issues a year to three. Archie McPhee's Web-based catalog makes good sense for many reasons. "We did the math," Pahlow says. The Web site has saved the company more than 50 percent in the costs of producing, printing, and mailing its color catalog, which had been as high as $700,000 annually. Using the Web site, Archie McPhee can also offer interactive features, such as "The Nerd Test" and a fortune-telling ball, as well as much more merchandise. "A 48-page catalog would show fewer than 200 items, whereas the Web site offers more than 500," Pahlow notes. Another benefit of the site is its real-time inventory feature. "The day a new product arrives, it is shown on the site. The moment we run out of an item, we pull it off. We are also able to show items we have small quantities of as Web-only specials."²⁵

Along with the benefits, however, Web-based catalogs also present challenges. Whereas a print catalog is intrusive and creates its own attention, Web catalogs are passive and must be marketed. "Attracting new customers is much more difficult to do with a Web catalog," says an industry consultant. "You have to use advertising, linkage, and other means to drive traffic to it." Thus, even catalogers who are sold on the Web are not likely to abandon their print catalogs completely. For example, Archie McPhee relies on its print catalogs to promote its site. "I think we will always produce at least one catalog a year," Pahlow says.

	Explore further the developing relationship between catalog marketing and the Internet.

Direct-Response Television Marketing

Some successful direct-response ads run for years and become classics. For example, Dial Media's ads for Ginsu knives ran for seven years and sold almost 3 million sets of knives worth more than $40 million in sales; its Armourcote cookware ads generated more than twice that much. The current infomercial champ?

It's three o'clock in the morning. Plagued with insomnia, you grab the remote and flip around until a grinning blonde in an apron catches your attention: "I'm going to show you something you won't believe! Juicy meals in minutes! Something else you won't believe . . . George Foreman!" The studio roars, and boxing's elder statesman, in a red apron, shows off his Lean Mean Fat-Reducing Grilling Machine and highlights the grease caught in the pan below. "Eew!" the audience screams. It can be yours for three easy payments of $19.95 (plus shipping and handling). Don't laugh. [This infomercial has] notched $200 million in sales of Foreman grills in less than four years.²⁶

For years, infomercials have been associated with somewhat questionable pitches for juicers and other kitchen gadgets, get-rich-quick schemes, and nifty ways to stay in shape without working very hard at it. Recently, however, a number of large companies—GTE, Johnson & Johnson, MCA Universal, Sears, Procter & Gamble, Revlon, Apple Computer, Cadillac, Volvo, Anheuser-Busch, even the U.S. Navy—have begun using infomercials to sell their wares over the phone, refer customers to retailers, or send out coupons and product information.²⁷

Beyond infomercials, home shopping channels, and other direct-response television marketing approaches, many experts think that advances in two-way, interactive television and linkages with Internet technology will one day make television shopping one of the major forms of direct marketing.²⁹

	Take a look at one company's contributions to direct-response television marketing.