Wednesday, February 20, 2019

#43 How a Successful Direct Marketing Business Was Destroyed

Issue #43 - Wednesday, February 20, 2019 

Posted by Denny Hatch

How a Successful Direct Marketing Business Was Destroyed
My first wild success in business, how it was
trashed and why I was fired six months later.
In the mid-1960s I was hired as a (very) junior copywriter by Grolier Enterprises in New York—a division of the publisher of Encyclopedia Americana.
     Grolier Enterprises' main business was a hugely profitable children's club selling hardcover Dr. Seuss books by mail. It's unique business model: reaching out to parents and children through teachers in elementary school classrooms. 
     The company was run by four dynamos. Founder and CEO was Elsworth Howell, whose real love was publishing dog books and  judging Westminster dog shows in Madison Square Garden.

Elsworth Howell (left) awards the blue ribbon to Ch. Carmichael's Fanfare, 1965
The other three members of this high-powered quartet were: Vice President Bob Clarke, who had worked his way up from the Grolier mail room (a fact Howell never let him forget); VP Marketing Ed Bakal, a rough-hewn ex-WWII paratrooper; and Creative VP Lew Smith, the low-key marketing and copy genius who hired me and was my first great mentor.
The Competition
Grolier's main competitor was Scholastic Magazines also selling children's books via teachers in classrooms. Scholastic's offer: inexpensive children's paperback books for 25¢—roughly 1/10th Grolier's price for a hardcover Dr. Seuss book.
Enter an Underfunded Entrepreneur

Using the Scholastic paperback model, a guy named Joe Archy tested the Willie Whale Book Club offering paperbacks to kids via classroom teachers. Grolier's Howell watched Willie Whale grow and liked what he saw. He contacted Archy and said he was interested in buying him out. They signed confidentiality agreements. Stupidly, Archy laid out his entire business plan and results for Howell to study. Howell then told Archy that he had decided not to buy Willie Whale.
     Whereupon Howell launched the Peter Possum Book Club offering children's paperback books.
     Archy sued Howell and Grolier.
     Archy lost.
I was Peter Possum.
Brand new to direct marketing, I was handed the book club to launch from scratch and to run: 
• All titles were to be 64 pages, 5-1/4" x 7-3/4".
• All titles must be in the public domain. These were the books of dead authors and illustrators whose copyright had run out. Howell was not about to pay royalties.
• Cost per book: 35¢.
• This was a higher price than the competition. However...
• All books could be in full color throughout—absolutely stunning, elegant classics compared to the dreary black-and-white Scholastic and Willie Whale editions.
Center Spread, Beauty and the Beast by Walter Crane (1875)

• For every five books ordered, we included a free book for the teacher's classroom library—or to be used as free giveaways to the children of families too poor to afford buying books of their own. Nobody was left out. 
Unique Cover Design
Money was saved by not varnishing the covers. The collateral damage was that ink from the unvarnished cover illustrations would get on readers' fingers, resulting in smudges, not only on the covers but also on the inside pages. The inventive solution: elegant white covers with small a full-color image centered and out of reach of kids' inky little fingers.

I was expected to do everything—find royalty-free books, get them redesigned and into production, write and design the mailing pieces, decide on lists of teachers and work with Grolier's mail production wizard mike Chomko, count orders (if any), tally up money and set up fulfillment procedures.
      A direct mail virgin, I quickly became expert in copyright law and 19th century children's artists. I charged forth, running all over New York buying up vintage out-of-copyright children's books from second-hand bookstores. I was on the lookout especially for the great illustrators of the past: Beatrix Potter, Walter Crane, Edward Lear, L. Leslie Brooke, Gustav Doré, Louis-Maurice Boutet de Monvel, and John Tenniel.
     God, how I loved learning to be an entrepreneur!
     Every time I found myself in over my head—which was often—I would cry out for help. One of the four partners would immediately clear his desk, sit me down, talk me off the edge, through the problem and then send me on my way.
     I can say those three months were the greatest, most fun time I ever had in business. I earned what had to be the equivalent of an MBA in direct mail marketing, book club management, copywriting, book production, product fulfillment and working with a team to oversee a complex business model.
Test mailings went out and I discovered the orgiastic thrill of direct mail success. Every day giant canvas bags of business reply mail from the Post Office—filled with thousands of book orders and mountains of cash—piled into the mailroom.
     Some of the orders contained hand-written raves from deliriously happy teachers.
     Peter Possum was an unequivocal, raging Win! Win! Win!
     The four partners, my editor Roberta Sewell, designer Gil Evans, the production team—indeed everyone in the company—were positively giddy.
     When Peter Possum was offering nine titles, each cover was large and easy for parent and child to evaluate; the descriptive copy was in a readable font.

Management Squashes Denny
Instead of allowing me to start making real money for the company by rolling out nationally with this hugely successful test that offered nine beautiful books, the four partners ganged up on me and radically changed the deal. They told me:
• More is better.
• Find 15 more titles for a total of 24.
• The covers were now to be solid colors and varnished.
     I said, "Yeah, but don't we want to mail the original mailing against the new one?"
     I was shot down. "We've been successfully selling into this market for ten years. We know this business. We know the people. We know what works. The more titles the better. Color covers work better. Do as we say."
     And oh, by the way, I was ordered to start a second book club with another 24 titles for the next higher grade levels.
     I was young and inexperienced. This was my second job after two years in the Army. Next to their decades of experience, I did not know squat.
Yet everything I was ordered to do felt all wrong, looked wrong and didn't make sense!
     I grimly soldiered on, crazed and working 14 hours a day, seven days a week. My then wife left me. What had been beautiful, easy-to-read mailing brochures to teachers, parents and kids were turned into multi-colored hodgepodges of unreadable tiny mousetype, teeny book illustrations with all the charm and warmth of a sheet of World War II ration coupons or S&H Green Stamps.

Peter Possum bombed. Big time.
So did Gold Mine Book Club for older kids, with its  24 "brand-new" public domain titles.
     The mentor and advocate who hired me, Lew Smith, left to become Lester Wunderman's creative director and executive vice president.
    The fat little toady who replaced Lew immediately brought in his favorite out-of-work hack copywriter.
     I was fired with two weeks pay.
     Sixty years later I am grateful to these wizards for what they taught me and allowed me to do. At the same time I am still mightily pissed off at how they destroyed Peter Possum and denied generations of children from turning into avid readers by experiencing these glorious books!
Hard-wired into my DNA: These Direct Marketing Rules!
• If you have an idea for a product or service, DO NOT sign a confidentiality agreement with a shyster and then lay bare all your proprietary data hoping the son-of-a-bitch will buy you out. Chances are he won't.
• Let your people own their jobs.
• Never abandon a successful control for something different because you're bored and think you know best.
• The Nutsy Fagan "more-is-better" dictum thrown in my face is akin to the marketing concept: "Hey, if Book-of-the-Month Club is wildly successful, let's scrap it and start a Book-of-the-Week Club!"
• The marketplace will tell you what it wants; you don't tell the marketplace.
• Test away from a successful control s-l-o-w-l-y.
• Always back-test.
• Always set aside at least 15% of your marketing budget for testing.
• Even if you're the new kid on the block, have the cajones to fight like hell for what you know in your gut is right.

Word count: 1,362

At age 15, Denny Hatch—as a lowly apprentice—wrote his first news release for a Connecticut summer theater. To his astonishment it ran verbatim in The Middletown Press. He was instantly hooked on writing. After a two-year stint in the U.S. Army (1958-60), Denny had nine jobs in his first 12 years in business. He was fired from five of them and went on to save two businesses and start three others. One of his businesses—WHO’S MAILING WHAT! newsletter and archive service founded in 1984—revolutionized the science of how to measure the success of competitors’ direct mail. In the past 55 years he has been a book club director, magazine publisher, advertising copywriter/designer, editor, journalist and marketing consultant. He is the author of four published novels and seven books on business and marketing.


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  1. Awesome article, thank you for sharing and for your service. I'm an unemployable, army veteran copywriter with a similar story to this as well. If history repeats itself, hopefully I'll be inspiring the next generation of direct marketing greats too.

    1. Eric, Thank you for taking the time to Comment. And thank you for your kind words. I couldn't wait to get out of the employee rat race and go freelance. Good hunting. Cheers.

  2. Love these stories about the beginnings of direct marketing, Denny!

    1. Thanks for taking the time to comment. I'm old... but NOT THAT OLD! The beginnings of direct marketing happened 800 years ago!

      Do keep in touch!

  3. Eric, Thank you for taking the time to Comment. And thank you for your kind words. I couldn't wait to get out of the employee rat race and go freelance. Good hunting. Cheers.

  4. Thanks for these wonderful stories,Denny. Just about the only things I read beginning to end on then internet -- other the my blog of course.

    1. Doug, Great hearing from you. Thanks for your kind words.
      Yeah, my Grolier gig could have ended badly but for the fact I was given the opportunity to learn a helluva lot about a lotta things. It changed my life!
      Do keep in touch.

  5. What blows me away about this story is now four damn-near-famous professional DMers broke every rule in the book in one swell foop. Drugs? Alcohol? Brain fart? They were looking for a way to fire you?

    Reminds me of a guy who had just hired me. My first day on the job, he brought me into his office and showed me his new test idea. I did not emit the proper level of enthusiasm since I smelled a dog. So, “How many of these packages are you going to test?”, I asked

    He answered, “I am so convinced that this package will beat the control that I ordered 7,000,000 of them.”

    I stopped hyperventilating long enough to wish him luck.

    After the first drop, it was clear that this package would do less than half the response of the terrible control. He ordered the vendor to scrap the whole order and send us a check for the amount of money the vendor got from the recycler. The ink coverage was very, very, very high, so the scrap wasn’t worth much. We got a check for $7.50. It was framed and hanging on his wall the day they fired him.

    Great lesson. My biggest initial test quantity was 25,000. Then back-test the winners using the old 5X rule. They never fired me.

    1. Hey Bob,
      Always great hearing from you.
      Your question:
      >>Drugs? Alcohol? Brain fart? They were looking for a way to fire you?<<

      I would call it a circle jerk of greed.

      Do keep in touch. Cheers.

  6. Great story with useful conclusions. My own lessons learned in direct marketing (not shysterism) have been similar except that I was usually the villain as well as the victim. On Shysterism my advice is to steer clear even if you need the work or think you can profit from a deal!

  7. I enjoyed reading your article. Please make more interesting topics like this on.
    I'll come back for more :)

    From Japs a researcher from AOC, a company whois into ecommerce website design Sydney