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CATALOG COMPANIES

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Catalogs led the direct marketing explosion of the 1980s, and their popularity shows no signs of tapering off. In 1991, 13.4 billion catalogs were mailed to U.S. consumers, and more than half the population made catalog purchases, spending almost $35 billion. Of all types of direct mail pieces sent to consumers at home, catalogs are the most accepted. Their popularity stems from a long list of benefits that consumers respond to.

Convenience - Catalogs let consumers shop whenever they want, making them especially useful for all sorts of working people. Jim Kobs of Kobs, Gregory & Passavant calls them "stores that never close."

Product variety - Catalogs bring an appealing and diverse array of products into the home for consideration. And since catalogs are distributed to carefully targeted groups of people, chances are good that the catalogs a consumer receives closely reflect his or her taste, interests, and purchasing power.



Complete product information - In many cases, the product photo and accompanying description tells more about a product's features, benefits, and applications than the average store clerk could convey.

Reliability guarantees - As catalog retailing has grown, so has consumer confidence in the quality of catalog on sold products and the exchange and refund policies that back them up.

Prompt shipment - Thanks to alternative delivery services such as UPS, the four-to-six-week wait is a thing of the past. Most catalog items are on their way to customers within twenty-four hours of receipt of order, and may be delivered in less than a week. During the Christmas season, a number of major catalog companies guarantee that orders placed by December 23rd will be delivered by the 25th.
From a catalog company's point of view, the explosion in the catalog category can be attributed to
  • An increase in the number of women working outside the home.
  • More consumers with more income for discretionary purchases.
  • The proliferation of 800-number calling, which makes placing an order simple and convenient.
  • Advances in computer technology and databases, which have yielded increasingly accurate information on customer preferences and made it easier to analyze results, manage inventory and cash flow, and provide top-notch customer service.
The old "wish books" of Sears Roebuck and Montgomery Ward would look like dinosaurs in today's catalog market, which is dominated by specialty catalogs aimed at precise segments of consumer interests. On an afternoon in the fall, a typical suburban mailbox may be overflowing with these catalogs:
  • The Nature Company: T-shirts, posters, knick-knacks, and tools for naturalists and nature lovers
  • Vermont Country Store: reasonably priced "old-fashioned" clothing, linens, and home tools and accessories with a "country" flavor
  • Wireless: cassettes, books, T-shirts, and gift items marketed to public radio listeners
  • Smith & Hawken: tools and garden accessories for gardeners
  • The Sharper Image: cutting-edge home electronics, computers, and other high-tech goods.
Sears has followed this trend, too. It supplements its "big book" with dozens of specialty catalogs that concentrate on different target markets - casual apparel for fashion-conscious young women, lawn and garden tools for home owners, and bigger outdoor tools for farmers. Sears even publishes Mobile Home: America's Largest Catalog of Products for Mobile and Manufactured Homes.

Each of these catalogs is a shopper's dream and a major employer. True, many of today's major catalog players started out as kitchen-table businesses. And several new catalogs are still in the minor leagues. But according to the 1987 Census of U.S. Service Industries, almost 130,000 people work for catalog houses. Their ranks will only grow, as more and more sales shift to the catalog category.

THE CATALOG PRODUCTION CYCLE

A catalog company's work flow revolves around the production cycle for each catalog. Catalog expert Maxwell Sroge has identified thirty-eight steps in the production cycle in his book, How to Create Successful Catalogs. They are as follows:
  1. Preliminary review of products, old and new.
  2. Special promotion products selected.
  3. New products finalized.
  4. Catalog dummy complete.
  5. Art and copy review meeting.
  6. Photography and art started.
  7. Art and copy review meeting.
  8. Old products finalized.
  9. Product releases sent.
  10. Envelope/order form design started.
  11. Late product closing.
  12. All art and copy reviewed.
  13. Layout finalized.
  14. Cover design/art finished.
  15. All products to photographer.
  16. Cover complete and to printer.
  17. Envelope/order form art to printer.
  18. Product changes, final review.
  19. Copy to typesetter.
  20. Begin paste-ups.
  21. Selling prices reviewed and finalized.
  22. Copy releases accounted for.
  23. All prices and copy changes to typesetter.
  24. Copy reports pulled.
  25. Envelope proof received, returned to printer.
  26. Cover press proof received.
  27. Color printer spreads viewed.
  28. Color spreads to separator.
  29. Paste-ups corrected.
  30. Proofing complete, camera-ready art to the printer.
  31. Envelopes received by printer.
  32. Catalog proof received.
  33. Catalog proof returned to printer.
  34. Catalog on press.
  35. Catalog published.
  36. Transparencies returned.
  37. Files broken down.
  38. Gather bound catalogs.
The four divisions of most catalog companies-merchandising, marketing, advertising, and customer service/fulfillment-each participate in this cycle. How their duties overlap is illustrated in the chart on pages 32-33.

Merchandising is the division that plans, develops, and purchases the items included in the catalog. Because merchandising drives most catalogs, it plays a leading role in catalog development, creating and stocking the "store" every season, and inventing new concepts for start-up catalogs. Its duties fall between steps one and nine in the production cycle.

Marketing professionals influence the creative cycle, too, although their responsibilities are not listed in these thirty eight steps. Marketers oversee plans for expanding a catalog's sales and customer base through analyzing response, calculating the profitability of items and pages in the catalog, examining customer profitability, and planning strategies to increase average orders and acquire new customers.

The marketer's cycle of analysis and planning helps keep future catalogs on target. For example, when marketing identifies profitable best-sellers, those items can be given more space in a future catalog so that they can sell even more. A successful quarter-page item might grow to half a page, and if the results are really spectacular, it might win a high-profile full page or be placed on a "hot spot" like the back cover.

Marketing, then, crunches the numbers that refine, reinforce, or alter merchandising's "hunches."
Advertising is responsible for creating a catalog's look in steps five through eighteen. The creative directors, writers, and artists written, products are photographed, typefaces are selected, and pages are designed and laid out. Production personnel who purchase graphic arts services like color separation, paper, printing, and binding are generally part of the advertising division; their work occurs between steps fourteen and thirty-four.

Customer service fulfillment, not listed in Maxwell Sroge's production cycle, can make or break a catalog. How courteously customers are treated, how promptly orders are shipped, how carefully items are packaged, and how easily problems are resolved all contribute to a catalog's reputation. To do their jobs well, personnel in customer service require sensitivity to customers and, in the most customer-focused companies, an online computer system so that they can pinpoint the location of an order in the fulfillment system.

Fulfillment, also called logistics, is the last but sometimes the most critical step in a catalog's selling cycle. Because all the lush photography and inviting copy in the world can't overcome sloppy logistics, most top-notch catalog organizations assign considerable firepower to this division. As might be expected of a catalog that ships more than 56 million orders a year, Sears Catalog's Logistics Division employs a cadre of personnel to ensure that merchandise is carefully, efficiently, and smoothly taken into its distribution centers and dispatched to its customers.

In some catalog organizations, this "back end" area is an excellent place to launch a career. In other organizations, spending a few weeks here is part of every newcomer's orientation. There's no better way to see sales trends and meet customers first hand, while learning about the snags that can hold up orders and prevent customer satisfaction.

HOW SPIEGEL, INC. IS ORGANIZED

Of Spiegel, Inc.'s 8,000 total employees, about 1,500 professionals work in its gleaming new corporate headquarters which straddles a small pond at the edge of an arboretum in Downers Grove, Illinois.

Founded in 1865 by Joseph Spiegel, Spiegel, Inc. began as a home furnishings business. Today, it publishes a wide variety of catalogs offering apparel and home furnishings, sending out over 200 million copies to 5.6 million active customers in 1991. Spiegel's Eddie Bauer division, based in the state of Washington, operates over 230 specialty retail stores. It mailed an additional 65 million catalogs in 1991. Total revenues for Spiegel, Inc. in 1991 were $1,976 billion.

At one time, Spiegel was one of the biggest mass merchandise catalogs. But in the 1970s, it changed its strategy, cultivating an upscale department store in print and adding to its "big book" catalog selected smaller, highly targeted specialty catalogs.

Today, it is one of the most successful consumer catalog companies in the world.
Spiegel's work force is divided into many departments, which include merchandising, marketing, and advertising. All three groups work together to create and merchandise Spiegel's catalogs.

Merchandising

The merchandising group is comprised of two major areas inventory control and merchandising planning. Inventory control monitors current demand and orders items as needed for circulating catalogs. Merchandising planning is responsible for creating and planning catalogs that will be published in the coming year. It's their responsibility to seek out, select, and develop the merchandise that these catalogs will include.

A team of merchandising planners and inventory control specialists works together on each of Spiegel's lines:
  • Women's "soft-lines" (which has four groups: career, leisure, shoes, and intimate apparel and accessories)
  • Men's and children's "soft-lines"
  • "Hard-lines," including furniture, tabletop accessories, small appliances and home electronics, and outdoor and sports equipment and accessories
On the inventory control side of the team, assistant buyers/inventory control assist inventory control specialists, buyers, and merchandisers by controlling and analyzing current sales trends and demand. Candidates for this entry-level position usually have some experience in retail management, purchasing, or finance.

Inventory control specialists are generally responsible for one or two departments, such as men's suits or women's blouses. They analyze current demand in order to project future demand, and they determine whether a given item should be repeated in a future catalog.

Next on the inventory control ladder is the divisional financial controller, who assumes big-picture responsibility for sales projections as well as management of the workload among subordinates.

All jobs in the inventory control division have the basic responsibility to keep Spiegel "SKUs" or stock-keeping units in stock in just the right quantity. Their goal is to have enough stock on hand to prevent back orders, but not so much that overstock is created.

Merchandising planning personnel have the happy task of searching out new items for a catalog. In some instances, that means developing a product working with Spiegel's manufacturing division to find a pattern, choose a fabric, decide where the product will be manufactured, and select a vendor. In other cases, these planners select something already available.

There are four levels of buyers in merchandising planning: assistant buyer, inventory; assistant buyer, merchandising planning; associate buyer; and buyer. As a buyer moves up the ladder, his or her responsibilities increase.

Assistant buyers help in merchandise selection and planning, pull together product information for the advertising group, and work with advertising as they develop film and layout. Associate buyers, common in large-volume departments, acquire a particular line. A full buyer is creatively and financially responsible for a line of merchandise. He or she selects and develops product, and has more input on how his or her line is displayed in the catalog.

Supervising the buyers are the merchandise managers, who draw up and execute an overall plan for a division like women's career wear. (Buyers handle lines within divisions, such as suits, dresses, and so forth.) The merchandising manager also handles big-picture vendor issues, and oversees planning for the division by projecting sales volume, planning the product mix, and so forth.

Few people in merchandising usually stay there, although occasionally they move into marketing. In the catalog business, merchandising people often move to the top. Spiegel's president/CEO started out as a merchandising manager; several of its vice presidents began at the buyer or assistant buyer level.

Marketing

Spiegel's marketing group has many functions, but one basic responsibility is to figure out how best to market Spiegel's catalogs to new and existing customers.

Marketing planning focuses on new catalogs. When a new catalog is proposed, these professionals help decide what its focus and purpose will be. They define the new catalog's customer, and conduct competitive analyses of potentially competitive catalogs. This customer-definition process also occurs every time a new edition of an existing catalog is planned.

Circulation coordinators and circulation managers in the circulation group devise plans for catalog distribution. They determine who from the master file will get which books, when, and how often.

Personnel in the customer acquisition group devise promotional programs to attract new customers to Spiegel. Using special catalog editions designed for new-customer prospecting, they choose which outside mailing lists to test, and develop circulation plans for them.

Database research personnel manage Spiegel's house file of customer data. They also supervise market research specialists who act as a resource for merchandising staff. For example, market research might write a computer program that would compare a men’s wear buyer's big and tall customers with his regular customers. Or they might analyze purchasing histories of recent customers to tell customer acquisition what effect a premium offer has had on customer retention and purchase history.

Consumer research specialists design surveys and conduct focus groups that help Spiegel find out more about its current customers and prospects. This department includes a staff of part-time interviewers who call consumers during the evening to get feedback on Spiegel products, service, and strategies.

Other groups within the marketing department handle the corporate incentive programs and other special promotional efforts that help spread Spiegel's name among consumers; they also promote the Spiegel credit card to customers.
"Spiegel conducts the majority of its external hiring at the entry level," notes Spiegel human resources specialist Maria Galletta. "Typically, a marketing professional will spend some time in a number of different marketing areas over the first several years of his or her career. Management positions are then filled from within when possible by the most qualified internal candidates."

Advertising

About 100 people work in the advertising division's three groups-copywriting, art direction, and production. In copywriting and art direction, creative personnel work with merchandising staff on teams that manage such lines as women's blouses or children's wear.

Copywriters get product specifications and rough layouts from merchandising, and write copy that entices customers and conveys product information-usually in a small copy block. As creative expert Tom Collins once pointed out, "Writing for a catalog is a rather minor art form, somewhat akin to writing a Japanese haiku." Copy must be brief, but concise; it should deliver all the important selling points in a persuasive way. Another creative expert, Don Kanter, says, "In catalog copy, there is nobody to answer questions. The writer must anticipate literally every question that could arise in the mind of the prospect, and answer that question in the copy."

At Spiegel, copywriters can move up to senior copywriter and copy director. Copy directors work with art directors and merchandising staff to develop the catalog's image and direction, communicating these ideas to the writers, whose copy they oversee and review.

Senior art directors and art directors must be thoroughly familiar with a catalog's merchandise and its market so that they can design a catalog that will catch the consumer's eye. They must know exactly why a particular item was selected, what its major benefits are, and how it can be presented in an appealing layout. Art directors provide detailed sketches of each product shot to photographers, who light and design photos.

Production personnel take the designers' concepts and turn them into finished pages. Desktop publishers set type and compose pages on Spiegel's page-layout systems. Key-liners and layout artists put the final art together.

The graphic arts production manager gets estimates, selects vendors, negotiates prices, determines schedules, and supervises all film work, color separation, printing, and paper to make sure the final catalog's look meets the expectations of Spiegel staff. Production staffs work vigilantly to assure that printing is in register, color is representative of the product, deadlines are met, and problems that might compromise a catalog's appearance, schedule, and profitability are avoided.

Assistant Buyer/Inventory Control

A fashion merchandising and business administration major in college, Sheri Larson worked for two years at Chicago's Apparel Mart and for two years as an assistant buyer for a specialty retail store before joining Spiegel catalog as an assistant buyer in inventory control.

As Spiegel's entry-level merchandising personnel, "ABICs" learn the fundamentals of keeping catalog items in stock. For a typical spring/summer season, Sheri manages between twenty and thirty programs. It's her job to track sales projections and daily back-order reports to find out just how much of each item is available, and whether sales are on target. If sales of an item are running under or over projection, Sheri consults the Spiegel manufacturing division with her needs and coordinates the best way to service the demand or liquidate excess inventory. If a shipment is delayed while demand is strong, she works with manufacturing to try to arrange an air shipment to avoid a back-order situation.

As an assistant to the buyer of the casual active-wear department, Sheri also writes up purchase orders to vendors. Another function of her position includes participating in film review sessions, in which final product shots are evaluated for their sales appeal.

For each item, Sheri keeps a flowchart that tells her when demand for a certain product is likely to peak. That information and actual sales history is used when Sheri and other merchandising staff put their heads together to project sales of an item for a future catalog. "When projecting future demand for an item, information analyzed includes current trends, timing of product, and price."

"In general, we do much more planning and forecasting than I ever did in a retail environment. I really enjoy it. I hope that within a couple of years I'll be promoted to assistant buyer in merchandising, and can continue to learn and grow at Spiegel."

THE QUILL CORPORATION: A BUSINESS-TO-BUSINESS GIANT

The Quill Corporation is the largest independent office and computer supply distributor in the nation, with annual sales in excess of $300 million. About 1,000 employees work for the company, headquartered in Lincolnshire, Illinois.
One hundred percent of Quill's business is conducted through the mail, but it wasn't always that way. When Jack Miller founded the company in 1956, he relied on personal sales calls until he discovered the power of the penny postcard. After a few mail campaigns proved to be vastly more profitable than pounding the pavement, Mr. Miller concentrated entirely on selling through direct mail.

According to Lowell Meyers, Quill's director of marketing and advertising, Quill's advertising organizational chart is fairly similar to Spiegel's. The process of producing a business-to-business catalog isn't much different than the process of producing a consumer book. Many of the tools are identical. For example, both Spiegel and Quill produce pages electronically, although Quill produces its forty-eight annual catalogs with a fraction of the staff available to Spiegel.

"One difference between business-to-business catalogs and consumer catalogs is the amount of demographic and psychographic data that are available. Although much more information is available about the home consumer than the business consumer, we are still able to target our prospects and customers, albeit not as accurately as consumer direct marketers.

"Another difference lies in credit. Because we deal with businesses, about 95 percent of our catalog sales are done on open credit. Very few of our customers use the bank cards, and we don't take American Express. Most customers rely on our thirty-day house credit.

"We also have different goals for the average order size we want to generate. Consumer catalogs can afford to entice a very small average order, but we can't. Acquiring new customers also costs us more. We never break even on our prospecting efforts, while consumer catalog companies claim they do.

"Most of our products are consumables, so we're interested in building an ongoing relationship with our customers. Hence, we consider the cost of prospecting to be an investment."

Few people in the catalog business can easily move between business-to-business and consumer catalog companies. "I think there is a natural path between the consumer and business segments of the catalog industry. Many of my writers and artists, in fact, came from Sears and Ward's," Meyers points out. 'There is potential in both areas, although it's true that there is probably more sex appeal surrounding the "hot" consumer catalogs. But the main difference between a consumer catalog and a business catalog lies in a company's philosophy, not the market. There are very advanced and forward-looking companies in both segments."
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