B-to-B Cataloging An Introduction to Merchandise Analysis
Cost of goods sold per product: This number represents the cost of goods for each product. Often, catalogers don't have this figure tied into their order tracking system. If so, pull this information separately. Worst case, you'll need to work with averages by vendor or category.
When you look over this list of metrics, you'll find that many of them can be pulled together during the catalog's production process. In fact, one of the most effective techniques for future catalog preparation is to create your pagination in Microsoft Excel. Now you've actually improved your efficiency: You've prepared your pagination and basic squinch template for that catalog's response at the same time!
The calculated metrics are developed and calculated based on the above-mentioned raw data.
Promotion cost: Determine your entire promotion cost, including printing, postage, mailing, rented lists, data processing and creative. Take this number and divide it by the total number of inches you've measured. This is your cost per square inch. Now multiply this number by the number of square inches for each product. That number is your promotional cost for each product. To cross check, add up your promotional expense for each product. It should total your entire promotion expense.
Don't fall into the trap of trying to subtract non-selling space from your costs. A square inch of non-selling space costs just as much as a square inch of selling space. It's a real cost that needs to be included in your calculations. By taking the entire promotional cost of the catalog and dividing it by the number of selling square inches, you can accrue your promotional expense — selling and non-selling — in an effective way.
Net contribution: Start with your gross sales of the product. Subtract your cost of goods and your promotion cost. This is your net contribution number.