B-to-B Cataloging: Are You Right Sized?
The metric that provides a quick overview to reach this objective is your sales-to-space ratio, a simple metric that compares a merchandise category’s percentage of sales to its percentage of advertising space. Ideally, the percentage and contribution of a category’s sales will meet or exceed its percentage of advertising space in the catalog. Here’s the formula:
Category sales/total sales / Category pages/total pages
Fortunately, most big book catalogers organize their catalogs by merchandise category, often with color-coded pages. So, counting a merchandise category’s pages is a straightforward task.
Example: In Chart A (below), Category A nets $100,000 in sales, and the entire catalog nets $1 million. It took 100 pages in a 1,000-page catalog. The formula would be ($100,000/$1,000,000) / (100 pages/1,000 pages). In this case, the sales to space ratio for the formula is 1.
Now, I’ll say Category B netted $50,000 on $1 million in total catalog sales, and it also took 100 pages out of a 1,000-page catalog. The formula is ($50,000/$1,000,000) / (100 pages/1,000 pages). The ratio is now .5. On the other hand, if Category C netted $500,000 out of a total $1 million in sales while using 100 pages of a 1,000-page catalog, its sales-to-space ratio would be five.
If a category’s sales-to-space ratio is one, the category is balanced in terms of its sales to space, such as in the example with Category A. However, for Category B the sales-to-space ratio is .5, well below one. This is problematic, because Category B isn’t carrying its weight in sales compared to its advertising space. On the other hand, Category C is relatively strong, producing five times the sales compared to its portion of advertising space.
This ratio easily is converted to a contribution-to-space ratio by using your contribution for each category instead of your net sales — or to a margin-to-space ratio following the same principle. This formula conversion is helpful if you have a category that has high net sales but a low margin, or vice versa. The same ranges outlined in the accompanying charts still apply, but you’re now analyzing contribution or margin rather than net sales.
A columnist for Retail Online Integration, George founded HAGUEdirect, a marketing agency. Previously he was a member of the Shawnee Mission, Kan.-based consulting and creative agency J. Schmid & Assoc. He has more than 10 years of experience in circulation, advertising, consulting and financial strategy in the catalog/retail industry. George's expertise includes circulation strategy, mailing execution, response analysis and financial planning. Before joining J. Schmid, George worked as catalog marketing director at Dynamic Resource Group, where he was responsible for marketing and merchandising for the Annie's Attic Needlecraft catalog, the Clotilde Sewing Notions catalog, the House of White Birches Quilter's catalog and three book clubs. George also worked on corporate acquisitions.