What makes The Talbots Inc.’s newly relaunched Classic Awards loyalty program “very promising”, as president and CEO Trudy F. Sullivan described it during a recent earnings call?
Past history. The program’s previous iteration is credited with boosting spending on the company’s private-label credit card from 28% of total sales during 2000 to 46% in 2008, according to documents filed with the Securities and Exchange Commission.
The current Classic Awards is coupled with a newer, smarter structure. Specifically, the new scheme is geared toward increasing engagement. Rather than offering a flat one-point-per-dollar-spent structure across all customers (with a $25 award being given for every 500 points acquired), the new program is tiered with three levels.
Under the new structure, red-level members (the lowest rank) earn half a point for every dollar spent via a non-Talbots credit card. Platinum members receive one point per dollar spent on a Talbots card. And black level members earn 1.25 points per dollar – provided they spend at least $1,000 per year on their cards.
The high hopes for the program should offset some of the cutbacks in other advertising areas. Talbots had increased its total catalog circulation by 15% during fall 2008. But the company anticipates slashing its catalog circulation during 2009 from 55 million copies to 34 million.
It also eliminated $14.8 million in television and national print advertising spending during 2008, and has no print to resume either this year. During 2009, it will increase its focus on e-mail and Web-based marketing efforts. Additionally, it will allocate part of its capital budget to refining its e-commerce platform.
Overall, Talbots spent $60.2 million on advertising during 2008, down from $64.1 million during 2007.
During 2008, Talbots’ direct marketing activities diminished in importance to its top line. DM pulled in $233.6 million, or 16% of its sales from continuing operations, down from 19%, or $262.7 million, a year ago. And within that, the Internet is playing an increasingly important role, comprising 68% of DM revenue, up from 56% a year ago. This despite Talbots issuing 55 million catalogs across its continuing operations brands in 2008, up from 48 million catalogs in 2007.
In terms of raw numbers, Talbots’ direct marketing sales in 2008 decreased by $29.1 million, or 11.1%, from 2007’s level. According to the company, “[t]he decline in direct marketing sales was primarily due to the effects of the economic environment and a misjudgment in inventory commitments related to our Sale book that dropped in December. The catalog received a positive response and we were unable to fulfill approximately 39% of customer demand from the Sale book.”
“Continuing operations” don’t include its J. Jill line, which the company is attempting to sell. And J. Jill has traditionally been an aggressive mailer, sending out 15 editions of its catalog, with a total circulation of 78 million books, in 2007. The company did not comment on 2008 J. Jill catalog activity.
The company reported a $560.7 million net loss during its 2008 fiscal year, a significant deepening of the $188.8 million loss it took during 2007. The apparel marketer’s sales slipped from $1.71 billion a year ago to just under $1.5 billion. Talbots’ most recent fiscal year ended Jan. 31. For the year, the company recorded an operating loss of $98.4 million, compared with $35.2 million in operating income during fiscal 2007.
The Worrywart’s Take: I wonder whether J. Jill’s new owners – assuming the brand is sold – will be as aggressive in their mailing strategy. Seventy-eight million catalogs is a hefty amount to remove from the mail stream, especially when one considers the paper, list rental and analytics that would also be lost with a significant pullback.
