February 11, 2015

Small Catalogs Don't Work, Or So I Am Told

This is one of the most common statements that is floated in my direction. I'm told, often, that folks try a smaller page count catalog, and it "generates less sales", so it didn't work.

Well of course it's going to generate fewer sales - it has fewer pages. That's not the issue.

There are things you do, and things you don't do, when creating a smaller page count catalog.

  • Pack the catalog only with best sellers. This raises productivity.
  • Circulate deeply ... for every 10% cut in pages, you can mail 10% deeper if you merchandise the catalog with winning items. Deeper circulation levels allow you to offset the demand you lose by cutting pages.
  • Use existing creative proven to work.
  • Offer fringe merchandise categories that have limited appeal. Back in the day at Eddie Bauer, this meant you didn't stuff the smaller format catalog with Home and Professional Apparel. Those categories, with limited appeal, drove down productivity, causing smaller catalogs to not work. Stop messing around with smaller format catalogs.
  • Use new, untested, risky creative.
  • Over-stuff the catalog with new, risky items.
  • Reduce density in an effort to make a "brand statement".
I have many clients that really dominate the smaller catalog page count format. They find they can generate 85% to 90% of the demand on half the pages. Do you understand what this does to the profit and loss statement? It turns the profit and loss statement upside down, that's what it does.

Say you have a 128 page catalog that generates $4,000,000 on 1,000,000 in circ - costing $0.75 each and, at a 35% profit factor, yields $650,000 profit. Nice.

When you get the merchandising and creative strategy right, you generate 85% of the demand on half the pages. If the cost of 64 pages is $0.50 each instead of $0.75 each, then you run into a very interesting issue ... for all circ lower than 200,000 in depth, the smaller page count format is more profitable than the larger page count format.

In other words, your numbers tell you that you can mail down to 1,000,000 circ on the 128 page count book ... but if you run the numbers up against each other, only 200,000 circ generates more profit at 128 pages ... and you can actually go all the way down to 1,800,000 at 64 pages.
  • Base Case = 128 pages ... 1,000,000 circ ... $4,000,000 demand ... $650,000 profit.
  • Optimal Case = 128 pages to 200,000 circ with 64 pages to 1,600,000 circ ... yielding $4,800,000 demand ... and $820,000 profit.
  • Only 64 Page Catalog = 1,800,000 circ ... $4,562,000 demand ... $787,000 profit.
Mixed circ (big + small) and small-only yield more profit than the current base case. Best of all, you now get to mail 1,800,000 customers instead of the 1,000,000 you currently mail. Wouldn't your co-op, printer, paper rep, and merge/purge house prefer this scenario?

Let me repeat the last sentence ... wouldn't your co-op, printer, paper rep, and merge/purge house prefer this scenario?

Wouldn't you prefer this scenario?

In some cases, the strategy does not work - when the customer loves a broad merchandise assortment and has a low response rate, then the strategy can struggle - the low response rate is the key.

Contact me (kevinh@minethatdata.com) if you would like for me to run scenarios for you. Many catalogers apply this strategy, and make a killing doing it. It's easy, and the health of your business improves. Why would you not at least try the strategy?