Strategy: Logical Maneuvers for Hard Times

My entire career since graduating from Indiana University in 1971 has been devoted to catalogs. There have been good years and off years. I can honestly say, however, that this is the most difficult and challenging year I’ve seen for catalogers. Gas prices, consumer debt and the national election all combine to create the perfect storm.

In such tough economic times, it’s logical and necessary to reduce expenses and save where possible. But these cuts aren’t always made in the best places. Some catalogers have reduced page counts without doing a proper square-inch analysis. Many have eliminated mailings to Web-only buyers without proper testing. Others have changed paper stock/grade, eliminated mailings to prospects and so forth. All of these reductions are well-intended, but they’re emotional attempts to cut expenses without regard to the long-term effect on the business. It’s short-term gain and long-term pain.

It’s difficult to slash and burn your way to prosperity. Some of these decisions may save money short term, but long term, they can hurt.

When the going gets tough, the tough don’t cut circulation or stop prospecting. They weather the storm. Even the perfect storm. Here are six things to do — and not do — in the face of these most difficult times.

1. Mail Internet Buyers
You can mail your zero- to 12-month catalog buyers with much success; they’re the heart and soul of your housefile. But the same may not hold true for the zero- to 12-month, one-time Internet buyers.

The lifetime value of an Internet buyer is often not as great as that of a catalog buyer, because a large percentage of online buyers never make a second purchase. They often search the Internet for specific gifts or other items and aren’t always “shopping,” per se. So test eliminating these one-time/first-time buyers from your circ plan. Key code and mail them as a group, track the results, and see how they perform after you do a matchback.

2. Suppress Co-op Multibuyers
When multiple co-op databases are used in a mailing, there will typically be 25 percent to 30 percent duplication of names from one co-op to another. The “hits” go into a multibuyer pool, and they can be remailed. Multibuyers created from co-ops against co-ops, however, generally don’t perform well. (Rentals against rentals and rentals against co-ops are fine.)

How can you reduce the number of duplicate records from one co-op to another? The names you rent from any co-op are “net” of your housefile, so any duplication comes from using more than one co-op. Therefore, if you stick to using one co-op per mailing, you’ll reduce the number of duplicate records.

This approach works if you’re typically taking the same level of circulation and the results and names from each co-op are about the same. Another approach is to send the co-op database the dupes from co-op lists you’ve used after every merge to suppress their own dupes against.

Best practice: When running the merge/purge, give priority to co-op databases over other outside lists. Have your service bureau give the co-ops, as a group, the proper random allocation.

3. Page Count
Look to increase — not decrease — your page count. Do so only after you do the proper square-inch analysis. Adding pages and selling more products to your existing customers is often a good strategy for increasing sales, especially when business is hard to come by.

Pages are a good value, as the chart on pg. 29 shows. The cost to increase pages is approximately one-half the percent increase in page count. For example, increasing from 52 to 60 pages yields a 15.4 percent increase in square inches of selling space. Yet the cost increase is only 7.4 percent. Sales should increase by one-half the percent increase in the page count.

Therefore, if the page count increases 15 percent, demand revenue should increase approximately 7.5 percent. Cutting pages will decrease revenue, and the cost won’t decrease proportionally because, again, pages are a good value for the dollar — even with sky-high paper prices.

4. Change Trim Size (but Not to a Slim Jim)
Some catalogers have jumped to a slim-jim format without testing. To qualify as a slim jim, the trim size can’t be less than 6 inches wide or more than 11 inches tall. It costs a little more to print books at this size, but the postage cost is less. Overall you’ll save some money. But there’s a catch.

Before you convert, understand the catalog must be tabbed or wafer-sealed to qualify for the postal savings — i.e., the letter rate. Having to break that seal has been known to reduce response rates by 7 percent or more. If your catalog is full-size and you mail at the pound rate, you’d be better off reducing your head-to-foot trim size slightly.

If your catalog measures 10½ inches from top to bottom, for instance, you can convert to a 101/8 inches trim size. This will reduce postage costs by approximately 4 percent without any loss of revenue. You can save 8 percent to 10 percent if you reduce the horizontal dimension as well. Ask your printer if it has a short cutoff press that can print this size efficiently.

5. Don’t Reduce Catalog Drops
Eliminating a mailing to the housefile is never good. The housefile is what generates income. It’s your lifeblood. In fact, I strongly recommend adding a housefile drop to certain segments by recency, frequency, monetary analysis. It’s difficult to overmail your housefile, particularly zero- to 12-month buyers. Leverage your best asset, your housefile customers, by mailing to them more often.

Obviously, not all segments should be mailed. Your RFM results will tell you how deep to mail. Forty percent to 45 percent of your 12-month buyers will make a repeat purchase within the year, so mail them
more often.

6. E-Mail Campaigns, Appending
E-mail your customers on a regular basis — every week or more during your busy season. It’s an easy and cost-effective way to keep in touch. Coordinate your e-mail campaigns with your catalog mailings. Let e-mail blasts work between catalog drops.

By all means, start an e-mail append program, and run it at least twice a year. Approximately 25 percent of consumers change their e-mail addresses every year. Update these “bad” addresses, and add e-mail addresses where they’re missing to your zero- to 24-month buyers and catalog requestors with a regular, ongoing e-mail append program. I’m seeing match rates of 20 percent or higher.

Finally, stay the course. Companies that cut circulation, reduce page counts or make other radical changes without prior testing wind up paying the price. These slash-and-burn tactics never pay. Absolutely, you should cut your marginal circulation. But maintain your 12-month buyer count; don’t drop it below the previous year. Your 12-month buyer count is a key performance indicator to watch on a monthly basis. What’s more, don’t adjust mail dates to try to save money.

Weather the storm. Stay on course. This too shall pass.

Stephen R. Lett is president of Lett Direct, a catalog consulting firm specializing in circ planning, forecasting and analysis since 1995. He’s the author of “Strategic Catalog Marketing.” You can reach him at (302) 539-7257 or at steve@lettdirect.com.