Circulation Planning: Five Critical Steps

More than 60 percent of the success of any mailing depends on the lists used and the circulation plan in general. Catalogers don’t always spend enough time on the critical steps to effective and proper circulation planning. They worry more about the design and layout of their catalogs.

To be sure, the look of your catalog is important. But in the end, it’s the circulation plan that determines your ultimate success.

This month, I’ll review the critical steps to circulation planning.

1. Evaluate your historical results.

Start by examining the strengths and weaknesses of previous mailings. Compare mailings against the same drops the year prior. Understand the current trends as well, recognizing there are seasonality factors to consider. Knowing what didn’t work is just as important as knowing what did.

Trace historical results with a weekly “percent complete” report. Rank the results by mailing based on the revenue per catalog generated from each list and from all housefile segments: best to worst. Apply an incremental breakeven point to determine where the cut-off should be.

2. Understand your objectives.

Know your growth expectations. For example, do you want to grow your business aggressively, take a more conservative approach or stay even? Be sure the objective and the circulation plan support company goals. Understand, for example, that aggressive growth comes at the expense of short-term profits.

A balanced approach often is best. Be sure the prospect universe supports your desired growth rate. For instance, it may not be possible from a circulation standpoint to grow at a given rate.

Growth comes at a price, and there are limits for most niche-oriented catalogers.

3. Prepare an outside list recommendation.

Your list broker enters the picture here. A good broker is an important part of any marketing team. He or she must have a basic understanding of what lists work for your offer. The broker then will develop a comprehensive list recommendation, which will provide current universe counts. And he or she will suggest new lists for testing.

Also ask cooperative databases for a list of recommendations with respect to new models to test.

4. Develop the circulation plan.

Balance mailings to your housefile with the desired level of prospecting. Following are a few rules of thumb for developing your circulation plan:

- About 40 percent of your circulation should be going to your housefile, and 60 percent to prospects. (This ratio will change if you’re in a growth mode.)

- Prospect list continuations should consist of 70 percent of the total circulation going to prospects and 30 percent to new tests. Prospect tests should contain a good sample of out-of-category lists, too. When you find an out-of-category market that works, you’ll increase the ability to grow your business.

- Look at “like” buyer segments to determine which drop is strongest. For instance, if your zero-to-12-month buyer file performs best in January and September, most likely all other segments will, too. Now you can shift your circulation to maximize your strongest mailings and reduce your weakest.

For example, if you mail your 37-plus-month buyers only twice annually, be sure they’re mailed in March and September when they’re more likely to perform well. Remember this must be analyzed with like groups (preferably zero-to-12-month buyers) because the depth of circulation influences results.

- Create a contact strategy for each segment mailed. Don’t plan each drop in isolation. Consider that each mailing has some influence on the prior and subsequent mailings. If you plan each drop independently, you won’t maximize results. Look at segments in time and across all mailings to find out if you’re over- or under-mailing specific segments. This could be missed if you plan mailings only off of the corresponding drop from the prior year.

Another example of this is mentioned in No. 3. By looking at which mailing is the strongest, you can shift circulation into the best and out of the worst mailing; this should maximize performance.

However you would be above breakeven if you were to reduce circulation to some of the under-performing segments. If you were to do this by drop without considering the number of times mailed, you might cut too much. By looking at the progression of results and the number of drops sent, you may decide to stagger the number of drops or mail the segment only to the best drops.

You also may find that by staggering to under-performing segments, demand per book increases for those segments. By making decisions while considering all drops and segments together — and not just one drop at a time — you’re starting to create a contact strategy.

- Use an overall percentage for orders/gross demand from the Internet, catalog “tails” (i.e., orders and sales that come in from catalogs mailed in prior years), and miscellaneous or unknowns. Your Internet percentage should be in the range of 20 percent to 30 percent; “tails” from older mailings should range from 1 percent to 3 percent; and your percentage of unknowns shouldn’t exceed 20 percent.

- Include price adjustments. But don’t assume that 100 percent of the price adjustment will materialize. Rather, assume that 50 percent of the price increase actually will result in additional revenue.

5. Review the plan.

Don’t leave any circulation behind. Devise realistic projections and base them on actual, historical results. Generally it’s best to put the plan draft aside for a day or two, then review it again with an open mind and make necessary adjustments. Once the plan is approved, it becomes the budget for the year. While adjustments are made to the individual circulation plans, the overall budget doesn’t change for the year.

Be sure the final plan assumptions support the objectives of the company and meet profit and loss goals. Know your incremental breakeven point and what the dollar contribution to profit and overhead must be to support the company’s financial goals. Again, over-mailing will negatively impact your income statement.

Conclusion

By all means, plan from the bottom up — not from the top down. Let the circulation plan determine how many catalogs to print and mail. Maximize results by taking the proper steps to develop your next circulation plan.

Stephen R. Lett is president of Lett Direct, a catalog consulting firm specializing in circulation planning, forecasting and analysis. He spent the first 25 years of his career with leading catalog companies in both the business-to-business and business-to-consumer markets. He can be reached at (302) 541-0608, or by e-mail at steve@lettdirect.com.