Bind-In Order Forms-What's the Best Strategy? (2,000 words)
By Stephen Lett
Alsto's. The Company Store. Garnet Hill. Martha By Mail. Williamsburg. Pottery Barn. Frontgate. Good Catalog. The Land of Nod. Linen & Lace. Restoration Hardware. Ross-Simons. Sundance. What do these catalogs have in common? They have all eliminated the use of a separate bind-in order form with envelope typically found in the center of a catalog.
These catalog companies employ a lot of smart people, so why would they make the decision to discontinue using a bind-in order form with envelope? What was their thought process? What should you do? This month, we will review the order form in detail and we will consider several points of view on this subject.
While preparing to write this article, we reviewed a total of 150 different catalogs at random. In our survey, which included both business-to-business and consumer catalogs, we found that 43 percent printed the order form on a page (or two) in the catalog instead of using a separate bind-in order form with envelope. Knowing that it is more common to find business-to-business catalogs not using bind-in order forms, we then eliminated these catalogs from our analysis. In so doing, we found that 33 percent, or one out of three, consumer catalogs are now printing the order form on a page in the catalog rather than using a separate bind-in order form. This high of a percentage was a bit of a surprise to us.
The decision to eliminate the use of a separate bind-in order form with envelope should not be taken lightly. Nor should the decision be based solely on saving money. In most cases, that analysis does not go far enough. While it is true today that catalogers receive fewer and fewer orders through the mail, a bind-in order form with envelope serves a useful purpose and several factors should be considered.
Let's look at the cost of a typical bind-in order form with envelope. Prices range from $12 to $20 (or more) per thousand depending on the size, quantity printed and use of color. For purposes of this illustration, let's assume the cost for an 8˝x19˝ bind-in order form is $14 per thousand for 1 million copies. If the catalog mails at the Standard A postal pound rate (weighing 3.30 ounces or more) the use of a bind-in order form with envelope will also increase your postage costs by $11 per thousand. Therefore, in our example, the cost for the order forms is $14,000 plus $11,000 additional postage for a total cost of $25,000 or $25 per thousand for a bind-in order form with envelope. If your catalog mails at the piece rate (weighing under 3.30 ounces), your postage costs would not be affected by the use of the bind-in.
No doubt about it, a bind-in order form is expensive and that's why many catalogers are looking at alternatives.
Consider These Benefits
The order form completes the catalog like a bottle of wine completes a nice meal. Mail order buyers are conditioned to look in the center of the catalog to find the terms and conditions and other important how-to-order information.
Today, catalogers typically receive fewer orders (10 percent or less) in the mail. Most orders are received over the toll-free 800 lines, by fax and now via the Internet. Older catalog buyers (60 years of age and older) tend to use the order form more and often pay by personal check.
However, the bind-in order form is still used throughout the buying process regardless of how the customer orders. Many times, the catalog shoppers complete the order form first to speed the ordering process even if they plan to place the order over the phone or through the Internet. What's more, consumers do not like to cut up their catalog to remove an order form when it is printed on a page.
The order form also creates a "hot spot" in the center of the catalog. This is why catalogs position their best-selling products in the center of the book. What's more, bind-in order forms cause the catalog to feel more substantial to the hand depending on the total page count. A bind-in order form is also more "user friendly" when it comes to encouraging gift orders because of the number of "ship to" spaces normally shown on the order form. For catalogers who process a large percentage of gift orders, I would think twice before giving up the order form.
Giving up the bind-in order form means using valuable four-color pages in the catalog for the order form and how-to-order information. If you print this information in the body of the catalog you are using full-color real estate that could be used to sell merchandise. Therefore, the opportunity lost (i.e., the selling of merchandise) in most cases will more than justify the cost of the bind-in order form.
This is where the analysis does not go far enough. The thought process to arrive at a decision to eliminate the bind-in is often limited to how much money will be saved on printing and does not take into consideration the gross margin dollars that will be lost from the elimination of a page (or two) from the printed catalog. If the bind-in order form is eliminated, the cataloger then needs to decide where to print the order form and other ordering information. If this information is printed in the centerfold of the catalog, it eliminates an important "hot spot" that should be used to sell product. On the other hand, if the order form and how-to-order information is printed somewhere else within the catalog, it may be difficult for the consumer to locate it. Again, mail order buyers tend to migrate to the center of the catalog for this information.
By using a bind-in order form/envelope, a catalog can put all of the order information, including the order form, in one location. The bind-in can go directly in the center of the catalog without having to eliminate the "hot spot." In fact, a bind-in order form at centerfold helps to focus even more attention on this important section of the catalog.
Tests Show …
The effectiveness of using a bind-in order form can easily be tested. I have been involved in several A/B splits, i.e., bind-in order form vs. order form printed in the catalog. If you look strictly at the results, you may conclude that the order form does not pay for itself and that the percentage of orders you receive in the mail remains the same. You might say that it's the total revenue from each method of ordering that's important and you're right. However, the average order size of a phoned-in order is generally higher than an order received through the mail. This is due to the fact that phoned-in orders are credit card sales and mailed-in orders are commonly paid by personal check. When consumers purchase using their credit card, they generally spend more.
The bind-in order form does serve an important function. It would seem that the additional gross margin dollars generated from the full-color space in the catalog on the one or two pages you would have to give up for the order form would more than offset the cost of the bind-in.
But, you should do your own arithmetic in order to convince yourself. Let's look at an example. Let's assume our catalog is 64 pages and that the total sales generated from a mailing to 750,000 customers and prospects was $1,315,000 in revenue. If we do not count the front cover in our analysis, the average sales per page (63 pages total) would amount to $20,873. The average sale per page from a "hot spot" like the centerfold would probably be higher than this overall average. However, for purposes of this example, we will treat all pages equally. Let's also assume our returns rate is 6 percent and our gross profit is 55 percent of net sales. Per this example, the gross profit dollars we would be giving up by using a page or two from the catalog would amount to $10,830 per page on gross sales of $20,873 per page. The calculation is as follows:
If we use two pages of the catalog for the order form and how-to-order instructions, we have given up a minimum of $21,660 ($10,830 x 2 = $21,660) in gross margin dollars. It would cost $14 per thousand to print 750,000 bind-in order forms with an envelope for a total cost of $10,500. This means we would be giving up $11,160 ($21,660 - $10,500 = $11,160) of gross profit if we use two pages from the catalog for the order form as opposed to using a separate bind-in order form with envelope. In this example, this cataloger would have generated $11,160 more gross profit dollars with the continued use of the bind-in order form. This is for one mailing only. Consider the gross margin impact if this cataloger mails eight or nine times a year! Obviously, if only one page of the catalog had been used for the order form, the conclusion could be much different. This is for example only. The point is, the decision to use or not to use a bind-in order form is not always clear-cut and should include a similar gross margin calculation.
I believe in using a basic black-and-white (or two-color) order form with envelope to minimize the cost. In other words, I would not invest in an elaborate four-color order form with several folds designed to sell merchandise. It is too expensive. While some catalogers may have success selling products from the order form, space cost comes at a premium. I'd rather use the four-color pages in the printed catalog to sell merchandise and use the bind-in order form to provide important how-to-order information.
If you are going to eliminate the use of the bind-in order form envelope, try giving up only one printed page in your catalog. The Alsto's catalog, a Dick Blick company, does a nice job of utilizing the space for its order form. It limits the order form and how-to-order information to one page. Alsto's prints the order form on the left-hand page of the center spread and ink-jet images the source code, customer number and the name and address fields on the page just like they would do if they used a bind-in version. They feature merchandise on the right-hand page at centerfold.
Don't give up both pages of your center spread for the order form and how-to-order information!
In summary, I believe the bind-in order form serves an important function. It is not designed to sell merchandise. But, if you do have extra space on the order form for merchandise, it might help to offset your cost. The true purpose of the bind-in is to provide customers with all of the information they need to aid the ordering process. Don't just look at the amount of money you would save but rather factor in the loss of sales and gross margin dollars you would lose by printing the order form in the body of the catalog. Consider the age of your customers, the number of gift orders you receive and all of the other things which should be factored into this important decision.
Lots of successful and respected catalogs have eliminated the use of a separate bind-in order form envelope and I am sure with good reason. One-third of all catalog companies can't be wrong. Therefore, I am not suggesting these firms have made a bad decision. I certainly understand their points of view. The purpose of this article is to encourage you to look beyond the amount you pay for the bind-in order form with envelope in order to be certain you are coming to the right conclusion for the right reasons.
Stephen R. Lett is president of Lett Direct Inc., a catalog consulting firm specializing in circulation planning, forecasting and analysis. He can be reached at (317) 844-8228 or through his Web site, www.lettdirect.com.
