March 19, 2008

Profit Week: Prospect Catalogs And Page Counts

Since the great postage increase of 2007, much has been made about prospect catalogs and page counts.

Both concepts are similar ... can one generate the same level of phone and web sales with a 64 page catalog as in a 124 page catalog?

Ultimately, the smaller catalog needs to be merchandised with the best product you have. If this is done, the concept has potential. This is no place for experimentation. Go with the best merchandise you have!

Performance estimates by page count can be determined, in lieu of actual test results, via the magic of the square root rule. When the prospect catalog is merchandised really well, folks observe 90% of the demand on half the pages ... not too shabby at all!

Here's a profit and loss statement for best customers, comparing a 64 page catalog to a 124 page catalog.


124 Pages 64 Pages Increment
Demand $5.00 $3.59 $1.41
Net Sales $4.00 $2.87 $1.13
Gross Margin $2.20 $1.58 $0.62
Less Book Cost $0.80 $0.50 $0.30
Less Pick/Pack/Ship $0.46 $0.33 $0.13
Variable Profit $0.94 $0.75 $0.19

Notice that, for best customers, a 124 page catalog is better than 64 pages.

How about for average customers?


124 Pages 64 Pages Increment
Demand $3.25 $2.33 $0.92
Net Sales $2.60 $1.87 $0.73
Gross Margin $1.43 $1.03 $0.40
Less Book Cost $0.80 $0.50 $0.30
Less Pick/Pack/Ship $0.30 $0.21 $0.08
Variable Profit $0.33 $0.31 $0.02

Here, the larger catalog is only marginally better than the smaller catalog. Let's take a peek at marginal customers, those who shop infrequently or have not ever purchased.


124 Pages 64 Pages Increment
Demand $2.15 $1.54 $0.61
Net Sales $1.72 $1.24 $0.48
Gross Margin $0.95 $0.68 $0.27
Less Book Cost $0.80 $0.50 $0.30
Less Pick/Pack/Ship $0.20 $0.14 $0.06
Variable Profit ($0.05) $0.04 ($0.09)

Ok, now the smaller book works!!

Smaller page counts typically work best among customers who purchase infrequently. For the cataloger feeling the pressure of postage increases and a recessionary environment, the prospect catalog, with fewer pages, offers opportunities to increase total profit.

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