The Economics of Mailing a Catalog vs. Postcard

To compare the economics of mailing a catalog vs. mailing a postcard or direct mail piece, you need to compare the cost of mailing, the different response rates, the breakeven and the profitability of the different formats.

Catalogs would cost between 50 cents and 80 cents in the mail with the cost of printing, paper, postage, mailing lists and creative. A postcard would cost between 22 cents and 35 cents to print and mail. Therefore, breakeven can be compared as follows:

Format               Cost          Margin %          Breakeven                      

Catalog               $.60           50%                    $1.20

Catalog               $.80           50%                    $1.60

Postcard              $.25           50%                    $.50

Postcard              $.35           50%                    $.75

A postcard or direct mail piece has both a lower postage cost and a lower printing cost. However, while the cost is less, the issue is whether the response rate and profitability will also be less.

Postcards’ response rates are almost always significantly less than the response rates to a catalog. A 6x9 postcard can show an offer, but can’t include the merchandise offering that a catalog can. So what's the profitability of a postcard vs. a catalog given the lower response rates to postcards and direct mail formats compared to a catalog?

Format      Cost Breakeven       Response Rate          Profitability       

Catalog      $.60  $1.20                  $1.30/catalog               $.10/catalog

Postcard     $.25  $.50                    $.60/postcard              $.10/postcard

In this example, the profitability is the same for a postcard responding at 60 cents vs. a catalog responding at $1.30.

Is there a general rule that can apply? No. You have to test the different formats to have data on the response rates of alternative formats.

Here are some general guidelines to consider:

• Postcards have a much shorter shelf life and order curve, and may last only 72 hours or a week compared to the longer order curve of a catalog.
• Postcards are good at giving an offer, but not nearly as effective at selling merchandise because you have much less selling space than a catalog.
• The only way to compare top-end sales and bottom-line profitability is to test. A simple A/B test of your best customers will tell the relative response rates and shelf life of alternate pieces.
• For postcards, the default format seems to be the 6x9 4/c postcard. It's big enough to stand out in the mailbox, and has enough space for an offer and compelling creative of your brand.
• Longer and larger direct mail pieces may allow you to capture the less expensive postage for Standard Mail and have much more space than a postcard, allowing you to actually sell product.
• Postcards work well for retailers that are looking to drive store traffic with an offer. They can also work profitably for catalogs when trying to get an offer in front of your best buyers.
• If you assume that response rates will be less than half for a postcard than for a catalog, then a postcard mailing plan for a cataloger could be to test those housefile segments that are now at or above twice your break-even sales.
• One huge advantage of postcards is the flexibility in terms of quick production time. They allow catalog mailers to avoid the long lead times of catalogs. Postcards can also be produced for small quantities of just the very best buyers, allowing catalogers to tap their best customers in between regular catalog mailings.
• While postcards and direct mail are much more expensive than email, they're also much more responsive and may prove more profitable and more effective than email for getting all your buyers to read about your sale or your strong holiday offer.

The biggest difference between a catalog and a postcard is a fundamental difference that goes beyond the break-even economics of cost and response rate. Postcards and self-mailers are able to convey an offer but aren't effective at selling merchandise off the page. If you have a strong offer, then a postcard may be the right vehicle.

Catalogs actually create demand, then harvest that demand and are proven effective at selling merchandise off the page. So while catalogs cost more than a postcard, self-mailer or email, a catalog goes far beyond harvesting demand and actually creates it.

So the first step in deciding which format to use is knowing what you want your direct mail format to accomplish. If you want to get an offer in front of your customers with more power than an email, then a postcard may be the best format. If you want to either create demand for your products, build brand awareness or sell specific merchandise, then a catalog is your preferred format.

Jim Coogan is the founder and president of Catalog Marketing Economics, a consulting firm focused on catalog circulation planning.