Print-Plus: Focus on an Incremental Break-Even Point

Calculating requires the following information:

• catalog costs, in the mail;
• customer cancel/refund ratio; and
• gross margin ratio.

And this formula:
catalog cost / ((1-cancel percentage) * gross margin percentage) = break-even point

Example: $.65 / (.95%*60%) = $1.14.

Some catalog mailers won't prospect below the incremental break-even point. They want to be certain all of their prospect lists — not just the average of the prospect lists used — perform at breakeven or above. This philosophy can severely limit growth, however, because you're unlikely to find enough lists that perform above breakeven to sustain the desired level of growth — or even maintain the same sales from year to year. Catalog mailers need to invest in acquiring new buyers, and this can only be accomplished by mailing below the incremental break-even point.