August 21, 2022

Catalog Modeling: Optimal Annual Contacts

I'm working on three (3) catalog modeling projects over the next six weeks. These projects have become a lot more important than in the past few years for three reasons.

  • Response is down due to the end of the COVID-bump.
  • Catalog costs are up and paper availability is sketchy.
  • Cost of goods sold are up.
Those three factors reduce the optimal number of catalogs to mail. Here's an example. Two years ago this company averaged $0.70 per catalog mailed and 45% of sales flowed-through to profit. An optimal catalog mailing table might look like this, for a customer with a 50% organic rate.


The optimal strategy isn't the twelve catalogs currently being mailed, but is instead 5 catalogs, though anywhere between 3 catalogs and 10 catalogs is close to optimal.

Now, what happens when the average cost of a catalog increases to $0.75 and the profit factor decreases to 40% due to a higher cost of goods sold?



Oh oh. The optimal answer now happens at 4 catalogs, though anywhere between 2 catalogs and 7 catalogs is close to optimal.

So, here's what we know from this example.
  • The company mails 12 times per year, yielding in this case $11.00 profit under current circumstances (the prior answer, two years ago, was $14.10 profit).
  • Two years ago, an optimal answer was between 3 and 10 catalogs.
  • Today, with different cost constraints, an optimal answer is between 2 and 7 catalogs.
You probably want to know this stuff, right?

So join the companies that are getting way ahead of the curve on this topic ... I have a slot that opens up October 1 ... be the first to obtain that slot.






No comments:

Post a Comment

Note: Only a member of this blog may post a comment.

You Were Warned Back In Early Spring / Summer

I told you earlier this year that what is coming in 2023 isn't going to be pretty. I sure hope I am wrong. I maybe have a 35% chance of ...