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Custom Catalogs May Appeal to Platinum Customers

A California software company says its system creates personalized catalogs
for high-end customers. The only problem: No one can print them.

By LaShell Stratton

Sid Bursten, CEO of Catalogixx LLC, is an idea man, but more importantly, an optimist. In July 2007, his Laguna, Calif.-based company received a U.S. patent for VariCat, a software and data management system that Bursten says will revolutionize the catalog industry. The sophisticated program produces digitally printed, personalized catalogs the likes of which no retailer has ever seen, Bursten insists. But for now, no one can really use the system. The digital presses available that can produce these catalogs are just too slow.

“We need a printer who is willing to approach this on an industrial scale,” Bursten says. “Right now, the fastest digital press we can use is a Xeikon, which prints 160 pages a minute. But that’s compared to an offset press that could print 20,000 120-page magazines an hour. Clients are used to getting that type of production.”
So Bursten patiently waits for the right time and the right customer—and for technology to evolve and catch up to VariCat.

“We’re in the same position now that Adobe was in 1984,” he says. “We’re in the same position as those who invented the Windows operating system before they invented machines that could run Windows. They knew that eventually there would be faster machines that could run their software. In software development, it is not unusual to develop something years ahead, before there is even equipment to run it.”

Doing Away With Generic
Catalogixx was formed in 2005 as a joint venture of Lexigraph, a digital printing workflow technology group in Harwick, Pa., and VPiColor LLC, a Baltimore-based personalized catalog design company founded by Bursten and partner Ron Agronin. (The firm, Hook Me Up Marketing, Lutherville, Md., has since joined the joint venture.) It was during those years at VPiColor that Bursten says VariCat was developed, but the idea for the system was planted even earlier when Bursten supervised customer relationship management systems as an IT architect at IBM.

“I saw how our clients were spending billions of dollars to get information about customers, but they weren’t using it effectively,” he says. “It wasn’t useable for sales in the hundreds or thousands of dollars. Just big ticket items, like mainframes.”

Bursten, like many others who caught on early to the 1-to-1 marketing trend, says he realized that companies, retailers in particular, needed a way to use the information gathered about their customers and convert it into effective, personalized sales pieces. There was great potential from affluent customers who did not respond well to generic sales catalogs.

“They say 80 percent of sales come from 20 percent of customers,” Bursten says, citing the Pareto principle. And of that group, an even smaller percentage is what Bursten calls “platinum customers. They can spend more than $50,000 in a store annually. When they shop, they get their own personal shopper who shows them around the store,” he says.

To appeal to these platinum customers, VPiColor knew retailers would need something more than the traditional 1-to-1 marketing format. “So far personalization basically means putting in the person’s name,” he says. “Maybe even a picture, but that’s just an attention-grabber. It’s not real personalization.”
More sophisticated 1-to-1 marketing methods try to improve response rates by including demographic information based upon census data from a customer’s ZIP code, but Bursten decided even that wouldn’t be good enough.

Sizing Up the Customer
So Catalogixx created a system that he says will produce personalized catalogs that include the favorite colors and designers of platinum customers based upon their listed preferences and purchasing patterns.

The VariCat system is broken down into parts. “First, there is the CRM system which is basically the database that lists information about the customers, such as what they buy or what sizes they wear,” he says. “The artificial intelligence portion of the software then grabs a list of the right customers based on their spending habits. The second part of the system is the offers.”

From there, VariCat examines the retailer’s inventory system to find roughly 1,000 items that are the right fit for the platinum customer. “It compares each of the offerings to the customer’s preferences. It even sees what sizes are available because it doesn’t want to list a size the customer doesn’t wear. Then the system comes up with photos among the selections available that would appeal to the customer. It chooses the copy, headlines and pricing and inserts them.” VariCat then flows all the information into the catalog, which is formatted into PDFs and sent by XML to the manufacturer who produces a copy of the catalog on its digital press.

Waiting for Demand
Bursten says Catalogixx has not yet sold VariCat but the company is currently in talks with some retail conglomerates that have shown interest. Prospects may be won over by the response rates Bursten says VariCat has produced so far.

“We did this development in conjunction with a mail-order catalog house,” Bursten says. They used a small mailing list and printed a few thousand catalogs on Canon color printers. “When we did that test, they compared it to past response rates,” he says. “The usual response rate for the house was 2 to 3 percent. When they did the catalogs that were completely customized, the response rates rose to 22 percent.”

Bursten says they followed up that test with a feasibility study on a high-speed Xeikon press, but no major retailer has installed VariCat and run a real demo. “The major challenge is that it costs about $150,000 just to set up the test,” he says.

But Bursten believes that eventually the market will sway in his favor. He expects that retailers will eventually force printers to catch up when they start asking for these applications from their printers.

“There are some specialized printers who do substantial volumes of VDP, but none of them have the other capabilities catalog merchants require,” he says. “That’s why I believe that VDP presses will become major profit centers within plants that already do high-volume catalog print runs via offset and rotogravure. Keep in mind that the revenue generated by printers for VDP catalogs is about 100 times what they are used to getting per page for offset and gravure catalogs. Even though only 1 to 5 percent of catalog runs are expected to be diverted to VDP through the Catalogixx VariCat system, the printer’s total revenue—and profits—would rise.”

Bursten says all it will take is one big retailer to believe in the system and force vendors to increase their digital capabilities. “Once someone does it and it’s proven to work, we’ll have a massive flood of people who’ll want it,” he says.

LaShell Stratton is former assistant editor at Print Solutions magazine. Email comments to editors@psda.org.