Do Gucci Catalogs stack up in Direct Marketing? Catalogs, one type of direct mail merchandising, have been increasing in popularity as consumers look for convenience in their shopping. Catalog business has been expanding on the international horizon. Harries Catalog Library has offered 1,250 domestic and international catalogs form which patrons can order. Catalog libraries can be found close to home, in U.S. libraries, and as far away as in Japanese department stores. The Japanese have been especially caring for shopping by catalog because they save up to 30 or 40 percent over local retailers by ordering American products directly from catalogs. Approximately, 12 billion catalogs are produced each year in the United States. The largest catalogers were expected to generate 90 percent of the entire industry’s revenues, which were projected to approach an estimated $152.1 billion in 2015. This projection came from the “Future of Catalogs” reports, which was prepared by W.A. Dean & Associates. According to the study, larger players would sell a wider array of products in the future. This growth won’t be realized through a return to the “big book” catalog it predicted, but through the distribution of specialized titles with narrow product focus. Closer to home, American catalog makers have been striving to increase sales and promote catalogs’ growth on the domestic horizon. The big dilemma facing these marketers is how to accomplish this goal-a difficult task since look-alike catalogs and merchandising is standard in the industry. The problem is only compounded by the fact that the attempts to break out of this trend are unusual for catalog marketers, especially because the industry occupies one most conservative locations on the American marketing landscape. A few marketers have made attempts to break away from the traditional modes of catalog marketing. Gucci is one such company that employed innovative marketing techniques. Gucci’s unusual style emerged in 1985 when the Gucci autumn/winter catalog took a new distribution route in the United States. For the first time, Gucci catalogs were made available in the bookstores. Gucci fell on bad times in the early 1980s, but revitalized itself by the 1990s primarily by the leadership of Maurizio Gucci, the company’s owner and original designer. Despite the killing of Maurizio Gucci by his wife in March 1995, Gucci continued to expand its presence both globally and in the United States. A great deal of their strategy involved creating a unified image of Gucci worldwide and discontinuing products that did not fit that image. Gucci’s CEO, Domenico De Sole, personally travelled the globe to visit Gucci’s stores and closed several that did not present Gucci’s products effectively. Part of the effort to revitalize Gucci’s image has been with a catalog of very high standard. According to company’s spokesperson, “the amount that Gucci spends on catalogs is unheard of in the industry.” 1 Described as a product in itself, the Gucci catalog was predicted to generate interest that went beyond the typical catalog, even offering editorial appeal. Released in the early September 2004, the Gucci catalog had a cover price of $5. Five thousand copies of the catalog were given to Crown Publishers for distribution, and Gucci began courting other bookstores such as Rizzoli, Endicott, Waldenbooks, and B. Dalton. Containing 96 color pages, the book was produced in-house at a very high budget. Apart from bookstores, the Gucci catalog was also available in Gucci stores and was mailed out free of charge to 50,000 of Gucci’s best customers. The merchandise shown in the catalog was made available in the stores, by mail, by telephone, or on the internet (www.gucci.com). Furthermore, this strategy allowed Gucci to determine where customers got their catalog. The order forms in each catalog were coded to indicated whether the catalog was distributed through bookstores, the Gucci stores, or through the mail. While this campaign was not successful as Gucci would have liked, the company did not give up on the idea of developing a new approach to generate growth and sales. In particular, Gucci hoped to gain a competitive advantage by capitalizing on the latest high-technology development for direct marketersautomated voice response. Automated voice response (AVR), also known as audiotex, combines computer intelligence with telephone accessibility, a phenomenon with tremendous marketing applications. This technique has leapt to even greater heights with the introduction of interactive 900 numbers. Unlike 800 numbers, for which the marketer pays the cost, the cost of the 900 number’s call is passed on to the consumer. This is done by billing callers on their monthly phone bills, and the marketer receive any money that is left after the phone company deducts its charge. The marketing department at Gucci thought that it might use AVR technology to build catalog readership. They felt confident that they could do this by working under the assumption that “….the more people spend poring over the pages of a catalog, the more likely they are to find something in there that they can’t live without.” To gain readership, a game that required a touch-tone phone would be employed. On the cover of the catalog, the reader would be informed that there were lucky numbers scattered throughout the catalog. When lucky numbers were found, the person could dial the game button number (which could be an 800 or 900 number) and punch in the lucky numbers along with his personal identification code (PIN). The person was instructed to try finding as many lucky numbers as possible, since the more lucky numbers a person had, the greater the discount on purchase made from the catalog. This game, therefore, not only benefit Gucci by stimulating readership (due to the customer increased scrutiny of the catalog for lucky numbers), but also served as inducement for the customer to make a catalog purchase. 2 Unfortunately, while the marketing department felt that they had a winning strategy, top management was not sure. Before authorizing the implementation of this plan, top management wanted a marketing research to assess if the plan was a viable one. Based on the research report, management would decide whether or not to give marketing a green light. As the company looked to the future, Gucci management realized that reliance on marketing research is essential for continued success. Questions 1. The marketing department at Gucci believes that using AVR technology would not benefit Gucci only by stimulating readership, but also serve as an inducement for customer to make catalog purchase. But before authorizing the implementation of this plan, top management wanted to conduct a marketing research to assess if the plan is a viable on. Define the problem from the perspective of the decision makers at Gucci. (15 points) 2. Define the research problem from the perspective of the researcher(s) and derive from it some specific components in order to fine-tune your answer. (15 points) 3. Formulate three research questions and one hypothesis for each one. (20 points) 4. Can exploratory research be used in this case, and if so, which exploratory research techniques would you recommend and why? (15 points) 5. If a survey is to be conducted, which survey method would you recommend to Gucci for conducting descriptive research? Why? And which interviewing method should be used and why? (15 points) 6- Outline the steps of the research project and explain in detail each one of them by giving examples. (20 points) 3
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