Polish Your Merchandising Skills

When we consult with catalogers about merchandise, we’re asked questions about products that didn’t sell as well as expected.

Some clients often wonder if they should try selling the product again, and if so, how many times and in how many different ways before finally giving up on it. These are legitimate questions, and some time should be spent on determining the answers.

However, catalogers often waste too much time trying to revive losing items when they should instead spend time on those things that offer a bigger bang for their efforts.

Questions & Answers

The question “Should you try selling the product again?” should be answered “Yes,” but only if you can demonstrate something that will change the next time you market it, for example, the price, the season in which it was sold, the quality of the photo or how the copy for it is worded.

The question “How many times should you run a losing item before giving up on it?” is best answered “once”—unless something was wrong with the creative, list or mailing the first time. Many prospects and customers saw the item—and voted on it with their wallets. Accept the results of the “vote” and move on.

Spend enough time on your mistakes and failures to learn what you need to avoid repeating them. Dwelling on mistakes or spending too much time trying to recover from them often can misdirect your efforts and resources. In many cases, it’s better to focus on the things you already know are good. Smart merchants and marketers know how to build around their successes, not dwell on their failures.

Many catalogers are tempted to leave what works alone. If a product is profitable, keep running it. If a list is beating breakeven, keep renting it. On their face, these seem like reasonable decisions; but dig deeper. Don’t accept that if an item worked well it couldn’t have done better. Don’t be happy with a list that performs above breakeven; turn it into one of your most profitable. Effort spent on these things will pay back much more than trying to revive dead horses.

Spending time improving your best items or lists will pay off. Take a simple example of two catalog items: One is a top-20 item (in sales dollars), and the other is in the bottom one-third of your offerings.

The catalog cost per-square-inch is $250, and each item takes the same amount of a 20-square-inch page. The margin for each is 55 percent, and the price point is $39.95. The top-20 item is selling 2,500 units, has about $100,000 in net sales and is therefore making a contribution to overhead of $50,000 (50 percent) after product and square-inch costs.

The other item is moving 275 units, garnering $11,000 in net sales and is contributing $1,050 (10 percent). If your overhead costs are about 25 percent of sales, this item won’t be contributing enough to even cover overhead.

To get this item to contribute as little as 25 percent, you’d need sales of 425 units, or $17,000. That equals a 155-percent increase in response to that item and an additional contribution of $3,300. In short, you must increase response to this item by 155 percent in order for it to pay for its space in the catalog and contribute to your overhead—a mighty task indeed.

To get that same incremental contribution of $3,300 from the top-20 item, you’d need a lift of only 155 units, or an increase of 6.2 percent—certainly an easier goal.

The same scenario holds true for your circulation analysis. Trying to get a loser list to work is difficult, if not impossible. However, making your best lists (or even marginal ones) better by a few percentage points is a reasonable challenge and will pay back big profits.

Five Ways to Improve Your Best Products

1. Increase the margin. No doubt you’re moving a lot of your best items. Leverage this volume with your supplier and renegotiate the price.

If your vendor is unwilling to change the unit price, look for other negotiating points such as better terms, free freight or an end-of-year rebate for a certain volume of orders. If the vendor won’t budge, find another supplier who can offer you more favorable terms.

2. Add more choices, such as color or size options. Or include another version of the item that can be line-

listed without an additional photo or by using a small inset shot. This additional choice should be a higher price point, such as a deluxe version of the item.

Be careful not to encourage customers to trade down to something less expensive. Also, ensure that each of the extra choices is garnering at least 15 percent of the copy block sales. If not, you’re spreading the sales across too many items and probably are adding too much in operational costs to be effective.

3. Freshen up the product. If the item has been a winner, don’t drop it. (I often see merchants tiring of a winning product much faster than their customers.) Let your customers tell you when to drop that winner.

In the meantime, keep the item fresh. If it has color choices, make sure the colors are updated to the most appropriate for the season or current trends. If the vendor added features, decide if these are right for your customers, and then offer the new and improved version.

To stay competitive, continually evaluate pricing. And consider multi-unit pricing with a small discount, or try adding a larger version at a higher price.

4. Freshen up the creative. Don’t completely change the creative if you already have a winner. But don’t also assume it’s the best it can be. Continue to make refinements in each catalog issue. Can the headline be a little stronger? Should you add an inset shot? Should you expand the copy and give it more space?

5. Build around the item. This holds true if the item can be the start of a new category or sub-category. If it’s a new item you’ve just tested, and it ended up on your top-20 item list, immediately look to add a complementary product. Be careful not to add “competitive” choices for the item; instead, offer add-ons or additional purchases.

New products and lists are the lifeblood of a successful catalog. Keep in mind that the 80/20 rule is alive and well in every catalog company. In general, more than 80 percent of your profits come from 20 percent of your products and customers. Spend plenty of time on the 20 percent, and your time spent will pay back immensely. n

Phil Minix is executive vice president and general manager of J. Schmid & Associates. He can be reached at (913) 236-2408 or at philm@jschmid.com