New Look, Better Numbers

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When Gordon Cooke took over as president and CEO at DM Management two-and-a-half years ago, he faced a couple of big decisions. The Hingham, Massachusetts-based catalog company had four overlapping women's apparel catalogs: Nicole Summers and The Very Thing!, targeting 50-plus women, Carroll Reed, a preppy-clothing catalog acquired in 1995 that had a lower price point than the others, and J. Jill, a smaller and less-focused apparel collection.

Cooke had to decide what to do about some unprofitable lines and duplicate mailings that plagued certain customers. His main tool turned out to be database marketing, a key ingredient in revamping the 11-year-old company.

Database marketing was critical, because Cooke's executives needed a full statistical analysis of who their customer was and what products would appeal to her in the competitive world of women's apparel catalogs, including such mainstays as Talbots and Spiegel. They had to differentiate their catalogs by creating an easily identifiable personality and offering distinct merchandise that was modern, hip and still appealing to a mostly 50-plus customer.

The company's biggest discovery was made through demographic overlays. After a series of focus groups, research surveys, and meetings between Cooke and DMM's merchandising executives, the team concluded that J. Jill could appeal to a younger customer base than the Nicole Summers line. What followed was the discontinuation of one catalog, Carroll Reed; the consolidation of The Very Thing! into Nicole Summers; and the unveiling of two distinct, upscale catalogs: J. Jill, with a more casual look for women in their 30s to 50s, and Nicole Summers, for a woman in her 40s to 60s looking for more corporate apparel.

"The mantra around here has been to differentiate," says John Hayes, executive vice president of marketing, who, like Cooke, is an alum of the Bloomingdale's by Mail catalog. "Nicole Summers is for an older woman who may not have had as many options for suits in the past. J. Jill is growing so fast because of the casual clothing trend for working women. We knew that market was growing."

And that gut instinct was correct. The company has grown from $85 million in sales in 1996 to $135 million last year. Its sales volume is expected to reach $190 million this year, a gain of nearly 41 percent. "As we differentiated J. Jill from a merchandising point of view, it opened up huge opportunities for acquiring new customers at a very acceptable investment level," says Hayes. "That's been the number-one fueler of growth."

Gathering the data While DM Management has always managed an in-house database, including names, addresses and purchase records, Hayes says the team had to go many steps beyond that. Hayes hired Chris Fawcett as director of marketing analysis from Comtrad Industries, a direct marketer of high-tech gadgetry, to manipulate the data, shore up internal information and work with such cooperative databases as Abacus, which enables a cataloger to know more about its own customers as well as the purchasing patterns of a broader list of mail-order buyers. The most aggressive push was to find new customers and, in 1997, DMM bought 2 million names and sent half of its J. Jill copies to prospective customers, a trend that continued this year.

The company's customer database contained roughly 2.2 million individual customer names as of last June, including approximately 724,000 individuals who made a purchase within the previous 24 months. DMM stores detailed information on each of its customers, including demographic data and purchase history, and updates the database weekly. "We know that in January 1997, J. Jill had 175,000 active customers or those who purchased within the last 12 months," says Hayes. "Today it's 660,000. We've added 500,000 names in a year and a half."

To determine which customers will receive a particular catalog mailing, the company uses Centrobe, an off-site service bureau, to analyze an individual's stats using sophisticated modeling techniques. In addition, DMM acquires lists of prospects by rental or exchange, and also from Abacus, the database cooperative that pools customer names and transactions information from more than 1,000 catalogers. "Abacus can take your names and identify those who are active mail-order buyers," says Fawcett. "If I want to find the best 5,000 names and don't have a lot of information on them because they don't buy from me, Abacus can find the 5,000 out of 10,000 who are the most mail-order active."

To build its list of prospective mailings, the company analyzes available information about such prospects with the same statistical modeling techniques used to target mailings to its own customers. "We're trying to develop applications of our internal database that will work in a client/ server environment," adds Fawcett. "We're developing ways to enable the in-house marketing staff to tap into the database using their PCs. Right now, everyone is e-mailed with weekly or daily data updates of purchase transactions."

As a growth strategy, Cooke and his team try to balance prospecting for new customers and efficiently generating revenue from existing ones. In planning its circulation strategy, the team analyzes existing and prospective customer databases and develops targeted marketing programs. Part of that plan is to significantly increase prospecting, especially to potential J. Jill customers. "When we came up with a new assortment of J. Jill inventory, we realized we could measure the response of every list we use, and only use those that perform at acceptable levels," says Hayes.

That means knowing the upside of keeping the mailings under control. "Cooke knows the benefit of not diluting a name, and he knows better than to milk it for every dime he can," says Cody S. McGarraugh, a consumer analyst at Scott & Stringfellow, a regional investment banking firm in Richmond, Virginia. "A lot of times catalogers forget they're in a statistical game. If you let a catalog be overwhelmingly driven by merchandise, you'll take your eye off the ball of the statistical side of the business. Gordon Cooke is good at not doing that."

Branding and beyond As he developed J. Jill, Cooke realized that its target market not only craved relaxed clothing for work and time off, but probably wanted to see that lifestyle reflected in the catalog. He made editorial adjustments, filling J. Jill's pages with lifestyle photography and stressing the need for exclusive, private-label merchandise, a broad assortment of sizes, and "total look" wardrobing-blending clothes, accessories, shoes and gifts all on a single page.

DM Management plans to expand internationally, launch a home furnishings catalog and, perhaps, develop retail stores for the J. Jill franchise in the next three years. "DM Management is more interested in building J. Jill into a brand than Nicole Summers," says analyst McGarraugh. "It has a broader appeal and has more of a retail appeal. They have a fresh offering in the market so they can drive response rates successfully compared to a Talbots that's been in place for 50 years. J. Jill is new and different and that's why it's been such a growth area for the company."

Of course, another strength area has been the company's emphasis on statistical regression modeling, says Fawcett. "A lot of companies go in and find people who have purchased within the last six months, spent more than $100 and bought two or more times since their first purchase. What's different here is that our statistical models take those variables, break them down further into product purchasing behavior as well as some demographic data. That's made all the difference for us."

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