Live From the DMI Co-Op: View from the Top is Cloudy

Say one thing about the dismal DM outlook: The misery has hit almost all of sectors, according to panelists at Direct Media’s annual Co-Op.

The title of the session was “View from the Top,” but at times it sounded more like a view from the bottom.

Take the findings presented on the mid-market catalog field.

“Luxury catalogs have come back, and deep discounters like Wal-Mart both performing well,” said Mark Friedman, chief marketing officer for Brylane. In contrast, moderate catalogers must “work harder to keep market share,” he said. “The middle-income individual is also being squeezed.”

That’s not the only problem. “It’s more and more difficult to acquire new customers in the direct channel,” Friedman continued. “That’s our biggest challenge today.”

The good news is that there has been a channel shift, and that the Web, while not a panacea, is useful for both selling and acquisition. And it has resulted in a channel shift. The best customers are those who buy across multiple channels, Friedman said.

Getting new customers is also the biggest issue for Staples Business Delivery, the direct arm of the office-supply giant.

That is due, in part, to competition from local dealers and large contract companies. “A 12-person law firm that five years ago would be happy buying from Quill or Staples is now getting contract coming in with personal Web sites and contract sales,” said Peter Howard, vice president of marketing.

But Staples is pursuing a new brand strategy, emphasizing ease of buying. It is also paying special attention on the SOHO and mid-size markets. And it has merged its field sales force with its contract division so it could focus on direct marketing. A key part of this is its Business Rewards loyalty program.

And the magazine subscription business?

“The view at the moment is pretty cloudy,” said Kitty Carroll Colbert, vice president of consumer marketing for National Geographic Society.

She cited historic trends like the demise of the stampsheet agents. “A mere five years ago, they sold 40 million subscriptions,” she said. “In 2002, they sold seven million.” And this year PCH is expected to hit a “rock bottom 3 million,” she added.

That has been aggravated by a 30% decrease in newsstand sales over 10 years, a phenomenon that seems to be accelerating.

On the other hand, the purported decline in readership is a myth, Colbert said. There were 84 million “heavy” magazine readers in 2003, compared with 79 million in 1999. The problem is that some readers are not paying for the product; they do their reading in waiting rooms.

The Internet, while promising, is a low-volume source at this point. And automatic renewals are fraught with risk.

“They’re doing well for many, but you do it right or you’re going to litigate,” she said. “There are rules up the gazoo.”

One modest antidote to all these problems is negative remit arrangements in which airlines and other companies offer magazine subscriptions for frequent flyer miles or loyalty points.

Then there are combination sales. National Geographic Kids and Child magazine were offered through the Quality School Plan catalog. Response rose by 25%.

Partnerships are another boon. “We sold 36,000 subs with Citibank,” said Colbert. “But with a circulation of 6.6 million, it’s uphill and low volume.”

But Colbert has some advice.

“Model names, go back to basics,” she said. “”If you get a list called Birds in Bloom, say you’ll get a free bird map from National Geographic,” she said. “If it’s Aviation Week, offer an aviation map.”

Meanwhile, nonprofit fundraisers also have problems, according to Chris Cleghorn, executive vice president-direct and interactive marketing for Easter Seals.

“There are 1.3 million charitable organizations, and that has grown by about 50% since 1993,” he said. The $240 million contributed in 2002 was flat with the prior year.

Cleghorn reported that nonprofits now spend $14 billion a year on direct response media, and that this generates $155 billion in donations. But online giving stands only at $1.9 billion, or less than 1% of the total.

Then there are the perception problems, which grew up in the wake of 9/11 and recent corporate scandals. It used to be that people coughed up if they believed in the charity’s mission. Now they want to know whether the money will be properly utilized.

But there is hope. “As more people come to eat up the pie, the answer is going to be effective marketing, smarter marketing,” Cleghorn said.

Are new customers through internet are of lesser, equal or greater lifetime value than donors through direct mail?

Colbert said that online subscribers “renew slightly better than direct mail.”

For charities, “the average gift online is almost always higher, and it’s almost always a credit card transaction,” said Cleghorn. This makes for a better donor because credit cards are preferable to checks.

Staples, meanwhile, is attracting many unsolicited accounts online. “Head to head, the phone channel will get a higher value customer, but if break out by product category and other sizes, they are of equal value,” Howard said.

It’s similar for Brylane. “For folks who are being promoted by catalog and are then shopping online, their lifetime value is as good a someone who would have bought out of catalog via phone,” Friedman said.