B2B Catalogs versus “the local dealer/distributor”

I had a conversation with a client a week or so ago about the competition he was facing from “local dealers”.    He was complaining that his locally based competition had gained advantage over the years as they had immediate access for “drop ship tomorrow” delivery to just about any product a customer could want.   He also thought he could not compete with the face to face relationship and the “I’ll be right there” advantage of a local dealer.   (I call that the “bring donuts” advantage.)

After I thought about the conversation a little I realized that the same conversation has been taking place for the last 30 years.    He was essentially telling me about the advantages local dealers have always had.   Yet, as we know, B2B catalogers have grown tremendously over the same period.    So, I think it may be useful for us to remind ourselves what advantages the B2B cataloger has enjoyed against the local dealer.

B2B catalogers “centralize and specialize” and that allows them to do many things better, namely;

  1. Maintain a broader and deeper product offering.
  2. Anticipate rather than just respond to customer needs/wants.
  3. Keep all the offered products in stock for same day shipping, not relying on third party drop ship programs.
  4. Maintain an easily accessible order history, re-order system,
  5. Maintain better customer service (better trained, longer hours, toll free, easy access)
  6. Better handling of questions, returns, repairs and shipping/warranty claims.
  7. Offer high quality, consistent, technical support that only comes with continuous training, employee longevity and quality standard.
  8. Offer and continuously improve a catalog that educates, communicates and provides a reference for telephone sales.
  9. Offer a higher quality, consistent, telephone sales relationship; without the added calories of the donuts!
  10. Reach economies of scale only gained at the national level which in turn results in a more competitive selling price that the local dealer/retailer.
  11. Not charge state sales tax.
  12. Obtain lower shipping rates on their higher shipping volumes.

So, the next time we as catalogers get challenged by all the things local dealers have that we don’t let’s push ourselves to remember the many things that we can do better…and that donuts are just not good for anyone!

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes at b2bdmi.com or (954) 383-5221

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes @ b2bdmi.com or (954) 383-5221

Comments or questions are welcome.

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Is there a Perfect Storm Approaching

I have been doing a lot of strategy work lately for several different companies and have come to believe that there may be a “perfect storm” approaching for B2B catalogers.   Here are three big picture issues that I believe should be on your radar.

  1. Increased online completion.   With the launch earlier this year of www.AmazonSupply.com there has been a significant increase in online competition.   If you have not already done so take a look at their site to see their broad multi-industry product offering that makes them the biggest “one stop shop” by far.   Also note their pricing on your key items, easy 24/7 returns and their fast and inexpensive (free for an estimated 8 million Amazon Prime subscribers) delivery.    I also can’t help but think what the Google, Ebay and other large online players will do in response to Amazon Supply’s entry into B2B distribution.
  2. Postal increases and/or cuts in service.   While the deficit problems at USPS have be “kicked down the road”  for many years I am getting the sense that this issue might actually get addressed after the election.    In all likelihood that means a combination of higher rates, closed post offices/distribution and elimination of Saturday delivery.   Combine this with the irreversible downward trend in first class mail volumes and it is hard to imagine how postage, one of the largest expenses for a B2B cataloger will not increase.   While increases are bad enough it the lack of predictability in frequency and magnitude that is even harder to deal with.    We have lived through double digit increases with less than six months notice before.   We know that’s very difficult to absorb.
  3. Collection of state sales taxes.    It’s not secret that the states are strapped for cash and as online sales have increased over the last ten years so has the size of their opportunity.   Our good friends at the American Catalog Mailers Association (www.catalogmailers.org) are fighting this issue hard on our behalf and allow with other interested parties have formed TRUsT, www.truesimplication.org    to fight this particular issue with gusto!    The Marketplace Equity Act Congress) and the Marketplace Fairness Act (Senate) are both in discussion to “level the playing field” and raise billions of dollars for state coffers.    It is interesting to note that Amazon has recently switched sides on this issue and come out in favor of this pending legislation presumably because they already have a presence in many states.

So, what do you think?   Is there a “Perfect Storm” approaching?   More importantly, how will your B2B catalog business respond to such fundamental changes to the way we do business?   Hmmmmm…..it may be worth thinking about and planning for now…while our waters are still reasonably calm.

 

 

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes @ b2bdmi.com or (954) 383-5221

Comments or questions are welcome.

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Are You Testing New Mail Formats?

I am always surprised at the lack of testing that B2B catalog mailers are doing.   All too often we fall into our ruts and let our testing programs go stale…..or we just get too comfortable with the results of our control mailing package.   Advances in database and printing technologies are constantly giving us new formats to test.  These new formats help up increase personalization or give us a functional feature (like delivering a key fob for example!) that make the mailing more effective.   Most of all they are new to the recipient and, ideally, make them say:  “Hey, this is new, never seen this before, what it?.   Ideally, it draws the reader into the mail piece often with interaction components and drives up response.

 

Here are three mailings that I saw recently that I like and while they all may not be appropriate for your particular offer or target audience you might get some ideas from them.

 

1.   The first one is a mailing from my local hospital.   It’s a postcard that deliver a frig magnet advertising the services of their 24 hour emergency room.  The magnet is enclosed in a cellophane pouch with clear instructions to open.  (Never make the recipient think or work to open your mail package!)  It is personally addressed to me but not personalized in any other way.   I would surmise from this mailing that the marketers at this hospital feel it is important for me to have their contact on my refrigerator when the need for emergency medical care arrives.   Top of mind awareness when the need arises is the goal of many B2B mailers so it seems like a good idea.    One negative I noticed is that the card did tear in the mail and it made me think that a heavy postcard stock than normal might be needed to better support the weight of the attached magnet.

 

2.   The second B2B mailing of interest was a pitch from a company called “Enthusem” which develops printed mailing campaigns using both your online content and their online response mechanism.   As you can see the mailer was in a transparent envelope and use a printed color version of my business home page on the outside back cover of the card that was visible through the mailing envelope.   Very cool and sure got my attention!   More importantly I was curious to open the envelope and read the offer!

Inside I found and invitation to visit a personalized link (PURL) for “the idea that could be an incredible way for your company to drive more sales”.   Visiting the link I get a personalized video explaining their marketing program and a request for a scheduled demo time.  Very slick!

 

3.  The third mailing piece I do not have a photo of but it can be seen at this link: www.weprintplastic.com.   There are a number of vendors who print and mail these plasticized oversized postcards.   Their strength is two fold.   One is their “heft” or feel that comes with a plastic-like card.   It’s different.   Second, is the punch out, wallet sized discount card and/or key fob that the mailing delivers.   Both have higher perceived value than the regular printed-paper postcard with a discount.  They also, by their very format, invite you to punch out the card and put it in your wallet “just in case” you may visit their retail location or online store.   I have heard that several large B2B marketers with retail stores and/or loyalty programs have used this format successfully.

 

These are just three examples of good creative thinking when it comes to testing new mailing formats.   They may not be worthy of a test for your particular B2B product or service or audience.   Regardless, you should be developing and testing similar formats that you believe are right for your target customer and constantly trying to beat your control package.    Too many times I hear B2B catalog mailers complain that their response rates are falling only to find out they have little or no creative or offer testing going on.   It should not be a surprise that the response to the same mail package will deteriorate over a 2-3 year period.   So, take these three ideas and  start looking at your mailbox for more new ideas and put some new life into your testing programs.  Call me if you need some help!

 

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes@b2bdmi.com or (954) 383-5221

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes @ b2bdmi.com or (954) 383-5221

Comments or questions are welcome.

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Are your socks different?

As B2B merchandise marketers we often are faced with trying to differentiate our products and services. I have many conversations with clients about their frustration with ever increasing competition and ever eroding gross margins. My message is always the same. Here it is. As marketers our job is to create new (evolved?) products and differentiation where none existed before. Period. Granted, sometimes this is easier to do than at other times. And it is always easier said than done!

I would ask you to remember examples of where product marketers created differentiation where none existed before. My favorite current example is left and right socks. The folks at Keen (www.keenfootwear.com) came up with left and right socks or at least they were the first people to reach me with the offer! A friend (Thank you Chris!) gave me a pair as a gift telling me they were the “coolest thing”. (Note: Word of mouth referrals are everything!) I fell in love with the fit the moment I put them on and they met my left brain, cerebral needs too as they made perfect sense!! My left and right feet are different so why shouldn’t the socks be different? One of those new products (or evolution of an old one!) where I said to myself “why didn’t I think of that?” Now, if you are old enough to remember the previous evolution of socks (Think “gold toe”) you will realize that socks have been reincarnated more than once. Hence, you will also realize that differentiation is a journey not a destination.

So, here is the point! Stop whining about eroding margins and do your job as a marketer! For every “I’m a victim of lower margins” story you want to tell me I will tell you a counter balancing story of creativity, innovation and ingenuity that lead to almost excessive margins. So, knock your socks off and get busy inventing the next big product idea in your business. If you need help, call me.

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes@b2bdmi.com or (954) 383-5221

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes @ b2bdmi.com or (954) 383-5221

Comments or questions are welcome.

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Weak growth year predicted for b-to-b merchants

2012 is going to be a weak growth year for business-to-business merchants
Various economic forecasts are estimating 2% to 3% GDP growth in 2012, about the same as 2011. But they are also forecasting a 4% to 6% increase in business spending — which is more relevant for most b-to-b direct merchants.
Most of the revenue growth in 2012 will come from getting more from the customers you have and normally acquire. There will not be a surge of new customers in 2012; rather, refinements in your multichannel tactics will allow you to reap more orders and more sales from existing sites.
Unlike 2011, 2012 is an election year, and business optimism should prevail over pessimism and the seemingly endless shocks to the world economies, making 2012 mildly better than 2011.
In 2011, most b-to-b merchants were still working their way back to their peak years of 2007 or 2008 — before the “great recession.” In 2012 I would expect most b-to-b merchants to surpass their previous best year and achieve modest growth.
In spite of all the hoopla about the latest technologies, mail continues to be the dominant driver of sales and new customer acquisition, and that will continue in 2012.
Online marketing will continue to become more meaningful and erode the dominance of mail and phone, but those who overinvest in the latest online fad will be disappointed. While increasing numbers of customers will place their orders online at their convenience, mail and telephone selling relationships will continue to dominate b-to-b when it comes to creating and maintaining customer lifetime value.
B-to-b merchants will continue to take share from the retail channel as they improve the breadth and depth of their product lines and service offerings. At their core, b-to-b merchants are specialty retailers and through centralization can offer more product selection, more personalized and customized offerings, and the all important skills and knowledge needed to use the products sold effectively. The retail channel struggles to compete with its limited product selection, overhead costs and ever-changing, low skilled staff.
Here are the trends worth paying attention to in 2012:

1. Applied technology and product innovation continue to deliver a stream of new product and service offeringsKnowledge of your customer’s business and how you can partner with him or her to achieve desired business results is key. No longer do we think of ourselves as “shippers of boxes,” but partners in solving problems and purveyors of total solutions.
Often, the cost of not having the product or service sold on time and as promised is much greater than the cost of the product or service itself. B-to-b merchants sell solutions, compliance, health and safety, productivity, organization and avoidance of problems as much as they sell what actually ships in the box.
The smart, innovative product merchandiser will deliver more new solutions and more value while reaping commensurate rewards. In short, you are only as good as the products you launch.
2. Your knowledge and content will become increasingly important and will continue to differentiate you from your competitionB-to-b buyers have always bought from knowledgeable people, not just from b-to-b catalogs or websites. In an age where more sellers are selling on price, the value of this knowledge relationship becomes a powerful differentiator.
Telephone sales relationships, online videos, more online information about products and services, warranties, installation, application, best practices, etc., all drive loyalty and the value of the brand. B-to-b merchants are slowly and prudently adopting new technologies to showcase their knowledge and content within their respective buyer communities.
Segmented and targeted social marketing and customer ratings, reviews and continuous feedback will fuel this trend. B-to-b merchants must now manage their online content, including what customers and others may say about them through a multitude of online distribution channels.
3. Superlative, consultative selling will continue to growIt takes a multichannel approach — including mail, customer service, telephone sales, email, web, etc. — to develop, nurture, grow and maintain a customer relationship.
There is no replacement for personal, one-on-one communication, although it’s costly. Balancing all the elements of the communication mix for maximum effectiveness is the key. New multichannel relationship databases being deployed by industry leaders such as MeritDirect are the key to having all customer touches defined and analyzed.
Focus will be on driving customer relationships for higher site penetration and retention. We can no longer afford the customer churn (greater than 50% of contacts) of the boom years. Every customer site must be strategically managed in an integrative fashion, and the direct marketing firepower must be finely tuned like an Exocet missile.
4. Tablet and mobile applications will continue to growThe smart b-to-b merchant will be prudent in testing these new applications to ensure that they actually meet a customer need and deliver value.
We have passed the point where new technologies get adopted for technology’s sake. The ROI of such investments is now vigorously compared to more established, proven marketing expenditures like mail and telephone sales. The multichannel metrics now available give merchants the tools to be rigorous in this regard. While some investment spending and pioneer testing is warranted, the majority of the marketing spend will still take place through proven channels like mail, email and phone.
5. Growth will not come from getting more new customers as much as it will come from getting more from existing customersMost b-to-b merchants know that the recency-frequency-monetary/lifetime-value of customers acquired online is significantly less than that from those acquired via mail or phone prospecting. They also know that the majority of new customers acquired online were driven there mostly by offline activity.
At the same time, the world has changed in that customers have unlimited product and service selection at their finger tips via Google search. The task at hand is how to attract more online buyers from pure organic search, and how to convert those Google searchers to buyers with RFM and LTV comparable to mail order buyers.
An integrated and systematic conversion and upsell program tailored by new customer segment is required, and smart b-to-b merchants have built or are building these systems now.
6. International markets are gaining in importanceAs domestic GDP is weak, many b-to-b merchants have sought out foreign markets for expansion and higher growth. Canada, while small, has grown significantly in the last several years, given the strength of the Canadian dollar and the relative ease of cross-border transactions.
Many b-to-b merchants report that response rates and average order values from Canada are 30% or more than the U.S. The U.K./Euro zone is also an attractive market. Mexico, Asia, the Caribbean and South America are also possibilities, assuming the product offering translates.
Uline, Myron, Seton, Grainger and other b-to-b specialty catalogers — both large and small — have succeeded in foreign markets. The breadth and depth of the product/service offering is often significantly superior to that which can be supported by a much smaller market like Canada or the U.K.

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes @ b2bdmi.com or (954) 383-5221

Comments or questions are welcome.

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B2B multi-channel marketers take note: It’s about the site first!

It is surprising to me how many B2B multi-channel marketers do not yet have complete buyer analysis at the site level.   After all, it is the site where demand is generated.   Let me explain.

For years we (B2B marketers) followed our B2C brethren and focused on analysis at the individual or name level.   We rented names, mailed names, tracked orders and revenue only at the name level.   Most of our operating systems are built to track and report on orders at the name level.   While all that is good stuff what really is required is the same rigorous reporting and analysis at the site level.   B2B marketers know that the people within a company or a site change rapidly….the common assumptions is that name data changes at the rate of 50% each year.   What really counts is what the response rate, number of orders, average order value and revenue is at the site level.   Consider for example any site with say 100 employees.   While the names of those employees may change over time chances are the business continues to operate from that site with relatively the same number of employees and continues to need your products.   Just because a person is no longer buyer (because they quit!) does not mean the site no longer has potential.     So it stands to reason that our first level of reporting and analysis should be at the site level and then broken down to the name or function level.

Also, don’t be sidetracked by analysis at the company or “corporate entity” level.   Most of the major B2B data compilers will tell you there are some 13-20MM “companies”  or “incorporated entities” in the USA but we know that there are only 6-8MM unique business sites with the rest of the entities being shell companies,  tax entities, etc.    A name attached to a shell company is not the same as a name attached to a proven buyer site, obviously.

I also note with interest that our friends at Merit Direct recently launched the first and only B2B prospect database called Pinnacle that is based upon buying sites, not just buying names.   They soon will be able to integrate email, land mail and search activities at the site level.   It is the next generation of co-op prospecting databases.   Think of it as “B2B 3.0” if you will.

So, if your company is still focused on individual or name level reporting and analysis you need to re-assess your practices and re-focus on the site view of your business.     Consider what you would do if you knew the following:

  1. Cost to acquire a new buying site….or lose one!
  2. RFMP by site
  3. AOV, MOV by site or groups of sites.
  4. Promotional history, marketing cost by site
  5. Orders and revenue by channel by site.
  6. Site level segmentation
  7. Site buying history across 50+ B2B catalog companies.

That should get your started!   Need help?   Please call me.

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at (954) 383-5221 or tjukes@b2bdmi.com.

 

 

 

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes @ b2bdmi.com or (954) 383-5221

Comments or questions are welcome.

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Online Video Boosts B2B Catalog Sales

The role of the catalog is changing.   It used to be the only customer communication and sales vehicle but today it is one element (albeit the main course!) in the customer communications mix.

In the B2B world the cost of not having the product….or the information to use the product to achieve the business objective….is often more than the cost of the product itself.   The information (in the web world it’s called “content”) that B2B merchandisers have about problems, solutions, applications, installation, maintenance, repair, warranty, etc. surrounding their products is enormous.   Often customers value the consultation as much as the actual item that ships in the box.   Online videos delivered via You Tube, etc. give the B2B catalog merchant a huge opportunity to communicate a great deal of information in 30, 60 or 90 seconds.

Combine this fact with the following …

1)    Video communicates better than a printed instruction manual.  Don’t you wish you had a video to help you install that new consumer electronics gadget you bought recently?   The same applies to B2B items that require some knowledge before installation and use.

2)     Video production costs have fallen dramatically. Do you have a Smart Phone?  Often real “in the field” videos are much better than a costly professionally produced video. Timely, low quality or “folksy” videos are often not perceived as “advertising” and come across as more “real” and creditable by your customer.

3)    No need to hire video talent. You probably have several knowledge filled,  “wannabe video stars” on your staff so no need to hire models and write scripts.

4)    Videos help internal training.  Videos produced by your merchandising folks also make good product training tools for your sales staff.

5)    Videos encourage sharing on the part of your customer.  They show/educate their co-workers and maybe pass it around to other professionals in their field.  It helps “word of mouth” advertising.   With the advent of specialized social media sites for your specific target audience you will see your videos posted by customers for a broader audience.

6)    Video engages your catalog users and site visitors.Video is a familiar format.  Customers “get it”.  If your catalog item is marked with a video icon indicating a video is available and your website has a “Find a video” search box customers get familiar with where to find and how to use your video content.  Most marketers link video to the item number and keywords allowing intuitive search for video content.  Video may also have an embedded call to action and easy flow to the shopping cart.

7)    Video builds your brand and trust. Your brand personality can come through on a video much easier than a catalog.   Also, the creditability of your spokesperson and in-depth explanation that a video allows removes any hesitancy customers might have about purchasing online. The peace of mind the customer gains from the video positively impacts he way he or she feels about the brand and website overall, building trust and credibility.

8)    Video increases customer loyalty Regular video communications like video emails or video newsletters are more likely to attract and keep your customers attention. By some estimates, the open rate for a video newsletter is two to three times higher than for a text-based newsletter. Video communications can also be personalized for each recipient with individualized greetings, references to past purchases, or offers based on site shopping history, geography and other segmentation.

B2B Catalogers with all their content have a valuable story to tell on many fronts.  Inexpensive video is a great way to tell that story in social media and promote word of mouth advertising.  So, get ready for your close up and get those cameras rolling!

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes@b2bdmi.com or (954) 383-5221    

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes @ b2bdmi.com or (954) 383-5221

Comments or questions are welcome.

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B2B Online sales best practice.

Most of my B2B direct selling clients are struggling with the integration of their online selling efforts versus their direct mail and telephone selling efforts.  In our multi-channel world it is difficult to assess what really drives both orders and new customer acquisition.  The channel that takes the order is not always the channel that creates the order.  In addition, customers and orders are being created by a multitude of blended and interdependent online marketing tactics.   My experience is that most companies at this point know enough to confuse themselves and are struggling with what to do.

I tend to start with the basics and advise the following four steps:

1.   First,  quantify the potential of your online opportunity.   “ Size the prize” I call it.  Essentially, here you are looking to quantify and stratify the volume of searches/traffic being generated by the various categories and sources of search terms.   You need to know if your relevant monthly search volume is 10,000 or 500,000.   In addition to volume and quality of searches and traffic you need to know your online competition and current versus potential traffic sources.    Once you know the “size of the prize” you are chasing they you will have some perspective on the opportunity and the investment risk.

2.  The second area that needs focus is your B2B content optimization.   This is usually a two-pronged issue.  First, the structure (site taxonomy, navigation, page titles, meta data, links, site maps, etc.) needs to be structured and presented (and ideally auto updated) to be visible to the search engine spiders.   Second, your product and knowledge content needs to be keyword optimized.  Easier said than done.

3.  The third area of discussion usually involves figuring out what B2B metrics you will use to evaluate your online B2B marketing investments.   At the highest level you are measuring the orders and new customers you acquire online.   As you get more granular here you will soon discover that new customers acquired from non-branded search terms with equivalent average order values and first year values to similar customers acquired through offline marketing is a more accurate goal.   As you might expect there are usually many marketing combinations and permutations here to evaluated and directed.   This is another very complicated task.

4.  Lastly, the more advanced B2B online marketers are reaching the point where they now can integrate all their online activity data (unique visitors, page views, time spent, email, links, traffic sources, etc.) with their offline (mail, phone, store) site level data.  Merit Direct, the largest B2B data management company in the USA today, are leading the charge in this important area.   The importance and impact of this data integration step will be no less than when co-op prospecting databases first became available.  Even the most seasoned B2B direct marketer will be impressed with what is being developed in this area and I would encourage you to explore this step as soon as possible.

As always, please do not hesitate to call if I can be of assistance.

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes @ b2bdmi.com or (954) 383-5221

Comments or questions are welcome.

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The USPS and B2B Catalogs – Will postal rates increase?

 

If you run a B2B catalog company, chances are you have been following the continuing saga of the USPS wondering how future postage increases will affect your business.  The short answer is that the magnitude of postage increases in the near future will have a meaningful impact on your business; just how meaningful remains to be seen.

 

Essentially the future of your business model with your key silent partners, USPS, UPS, and/or any other private carriers you work with, depends upon the federal government and energy costs.   Both impact scenarios are not particularly good.

 

Let’s focus on the USPS.  Here are some background facts to ponder.

  • USPS is about $15 billion in debt….and sinking.
  • The USPS has more than 31,000 retail locations, more than Wal-Mart, Starbucks and McDonalds combined.
  • Combine that, its enormous workforce (571,566 full time, unionized employees, making it the country’s second largest civilian employer), and its overall revenue, and that means if it were on the Fortune 500 list, it would be No. 29.
  • Federal law currently prohibits closing of post offices solely on economic grounds. Current plans call for the closing of just short of 4,000 locations only. How business orientated is that?
  • The American Postal Workers Union recently signed a 4.5 year contract with seven un-capped cost of living increases and a 3.5% raise over the contract term. Go figure.
  • They don’t have a ten year plan, not even a five year plan. They appear visionless when compared to other leading postal services around the world. TERRY: THEY ACTUALLY DO HAVE A 10-YEAR PLAN THEY UNVEILED ON MARCH 2, 2010. IS IT A GOOD ONE OR A SOUND ONE? OF COURSE NOT, BUT THEY DO HAVE ONE.
  • First class mail volume, which is the USPS’s most profitable service, is evaporating as consumers get and pay their bills online. The glory days of first class mail are gone and not coming back.
  • Even the US Senate Federal Credit Union recently announced a service charge of $5/month for customers who wanted to continue receiving their monthly paper statements by mail.
  • First class mail is three times as profitable as standard mail, aka “junk mail”. (Read: Your Catalog!)
  • Total mail volume dropped 20% from 2006 to 2010.
  • FedEx and UPS have trounced USPS in express and ground shipping. The market share for each is 32, 53 and 15% respectively.
  • Most western Europe postal services are facing the same market dynamics but they are thriving:
    • Germany runs just 2% of its postal locations having outsourced the balance to other retail establishments.
    • The Finnish postal service sells many in-demand digital mail services as does Sweden/Denmark (PostNord).
    • PostNord’s EBITDA rose 43% last year to $490 million.
    • The profit margins of SingPost, Deutsche Post, PostNord and USPS were 26.25%, 4.89%, 3.6% and -13.58% respectively.
    • Needless to say, there are lots of “role models” around the world on how to fix the problem with the USPS.

 

So, given this time of record federal deficits and national debt, how long do you think the federal coffers will continue to support USPS?  Whatever your answer, I doubt it is more than five years, if that long.

 

What will happen? Short answer: Nobody knows.  What is likely to happen?  Here’s my considered opinion along with the potential impact to your B2B catalog business.

 

  1. Postal locations will shut and/or be outsourced.  This is a good economic move and no big deal to B2B marketers.
  2. First class mail will continue to drop.  This puts more economic pressure on USPS to raise postal rates.
  3. USPS will try to get move aggressive with UPS and FedEx. More competition will help keep rate increases in line.
  4. USPS labor costs and retirement costs are excessive by private industry standards.  Again, more pressure on rate increases.
  5. Saturday delivery will be cut.  Again, no big deal for most of the B2B catalogers that I know.
  6. Rate increases will continue to be higher than the normal inflation rate, as USPS seeks beyond-Consumer Price Index “exigency” increases, based on extreme circumstances. The the USPS situation certainly is extreme. Standard Flats rates (your catalog!) will increase faster.  A very big deal!

 

What should you do?

 

  1. If you’re not already a member, the best investment you can make right now is to join American Catalog Mailers Association. Other than yourself, this four-year-old organization is just about the only friend catalogers have in Washington. In a very short time, it’s existing members have achieved a remarkable 22X ROI on their dues investment. So join now, pay your dues, and reap the benefits ACMA (catalogmailers.org) has to offer.
  2. Regardless of the yearly announced rate increase, I would budget on an average of 7-10% postage increase per year for the next five years.  Increases will not be predictable or sane. Some years will be lower, some years will be excruciatingly higher. Remember, postage costs in the US, just like gasoline costs, are a relative bargain when compared to other countries.  But they only have one way to go – UP! And they will go up, but not as high as they could go if ACMA weren’t actively fighting for catalogers’ future.
  3. Continue to “test and invest” in alternative prospecting tactics.
    1. Online prospecting – SEM, PPC, web re-marketing, email , blogging and online video to name a few. Getting your fair share from organic search is one of the biggest opportunities I often see.
    2. Alternative media – inserts, trade ads, sponsorships, etc.
    3. Telephone – if you’re not doing so already, test telephone prospecting to your most responsive prospect mail lists.
    4. Assess the competitor express and ground shipping options between UPS, USPS and FedEx.  Giving all your business to one carrier isn’t your best option.
    5. Know what your contingency plan is for a year where we get another 20% increase in postage costs.  No smart operator should be caught surprised!
    6. Take advantage of prospecting incentives or additional summer sales or QR code or any other discounts the USPS offers; expect that you will not get much lead time on such opportunities.

 

If you have other suggestions, comments, ideas, questions or just need help, I’d be happy to talk with you!

 

Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes @ b2bdmi.com or (954) 383-5221

Comments or questions are welcome.

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Measuring ROI on B2B Marketing Activity in a Multi-Channel Environment.

Measuring ROI on B2B marketing activity in a multi-channel environment.

 Most B2B marketers today struggle to measure and allocate expense and return to various marketing efforts.   The interrelationships between sales and marketing activity like direct mail, email and telephone sales, for example, are complex and confusing.   It’s tough to know true cause and effect when dealing with multiple communications activities to both customers and prospects.

Here are a few “best practice” suggestions.

  1. Where possible, make sure all the activity you undertake has a built in tracking mechanism or “source code” so that you can directly track as much as possible.  This may be accomplished by using unique 800 numbers, pre-coded fax order forms, unique URLs or landing pages.   Most B2B marketers can directly track 30-60% of their orders these days but the trend is downward.
  2. Conduct  “match back” data processing of sites/individuals and orders/sales to marketing activities such as mailings, email campaigns or telephone contacts.   Merit Direct (www.meritdirect.com) has the best B2B match back logic and software, check them out.  You will have to establish allocation rules that will reflect  your assumptions about which activity had the most impact on delivering the customer/order.  For example, if you mailed a catalog within the last month and sent an email within the last week and the customer ordered something from the catalog and from the email you may wish to give the catalog 75% of the credit (for promoting the item ordered) but the email 25% credit for, theoretically, reminding the customer they needed to order.   Yes, these rules are somewhat arbitrary but hopefully intuitively better than no allocation rules at all or giving 100% credit to the last activity regardless.
  3. Make sure you examine your online order to see which ones came from proprietary or branded search terms and which came from non-branded terms.   If the customer did a Google search on your brand name you can hardly give your web team (and investment) credit for the full value of that order.   Most B2B merchants take the majority (i.e. > 50%) of their orders online today but their offline marketing activity still “makes”, instigates or creates the demand in the majority of cases.
  4. Make sure you are looking at recency, frequency and monetary at both the site (discrete geographical address) and the name/individual level and comparing changes to your marketing programs.  In B2B the site creates the need/demand and the individual is usually just the order processor.   Individuals also come and go but site need/demand remains and you should measure your ability to maintain and grow that revenue year over year.
  5. Provide your customers an explanation of why the source code you are asking for is important and what’s in it for them.  Also, test giving them incentives like special pricing, advance sale notice and added services.   Properly train, incentivize and monitor your customer service reps also to collect the tracking information and monitor them for success.
  6. While you do you best to track and allocate at the order level never forget to monitor the “big picture” first.   Track total mailings, e-mailings, and phone calls monthly and quarterly and compare that to overall trends in revenue and new site and name acquisition.  It helps to have the big picture relationships in your mind before you go granular with tracking of specific programs and codes.
Terence Jukes is president of B2B Direct Marketing Intelligence LLC, a strategic B2B direct marketing consultancy based in Fort Lauderdale, Fla., that services B2B catalog company clients in the U.S., Canada, France, the U.K. and Germany. You can reach him at tjukes @ b2bdmi.com or (954) 383-5221

Comments or questions are welcome.

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Posted in Catalog Marketing, E-commerce systems, Online Marketing | Tagged , | Leave a comment