Co-Op Funded Catalog Pages

Catalogers that sell branded merchandise (merchandise that they did not design and source themselves, merchandise they purchase from another branded vendor) have challenging decisions to make.

• Do you offer merchandise you know will sell very well, and pay for the cost of mailing the pages out of your budget?

• Or, do you accept funding from the branded vendor, allowing them to feature their merchandise on your spread, incurring no paper/postage/printing costs?

Unless you are selling iPods or HP computers, it is common for co-op funded merchandise to perform worse (often much worse) than the merchandise you would choose to feature in a catalog.

Here's an example of what I'm talking about:

Catalog Mailing: Spread Analysis, Circulation = 1,000,000
	Regular Merch	Co-Op Funded
Demand	$80,000	$40,000
Final Fulfillment	$68,000	$34,000
Net Sales	$54,400	$27,200
Gross Margin	$27,200	$13,600
Less Marketing Costs	$16,000	$0
Less Fulfillment Costs	$6,528	$3,264
Variable Operating Profit	$4,672	$10,336
Demand / 000 Pages Circ'd	$40.00	$20.00
Customers Purchasing	1,159	580

Which spread would you rather feature in your catalog?

• The spread that causes 1,159 customers to purchase, generating $80,000 demand and $4,672 profit?

• The spread that is paid for by vendors, causing 580 customers to purchase, generating $40,000 demand and $10,336 profit?

(Hint: You have to determine the long-term impact of generating less sales and more profit on your customer file. How would you do that?).