The holiday season is over. Those record orders and sales days have finally come to an end. You are feeling optimistic about the season ending but then—reality sets in! You now find your company very short on cash. What do you do? Where do you turn? How can your company continue to operate? Welcome to the dilemmas of the mail order catalog business! Post-holiday rush is the time of year that many catalogers find they need to implement a turnaround plan to ease under-capitalization. Under-capitalization is a common problem among small- to medium-sized catalog companies, especially in times of low activity when
Lett Direct Inc.
Any discussion of catalog circulation and analysis requires a look at three very important topics: 1. Determining your break-even point on an incremental and fully absorbed basis; 2. Calculating how much you can afford to spend for a new buyer; and 3. Determining key ratios and the best format for your profit and loss statement. Finding Your Break-Even Point Break-even points are either incremental or fully absorbed. It is important to make a distinction between the two because not all mailings can be measured, as is commonly thought, strictly on an incremental basis. The incremental break-even point includes direct costs only, and
The “house file” is the most valuable asset of any mail-order catalog company. It is a file containing the names of all previous mail-order buyers—that is, people who have actually made a purchase from your catalog. In maintaining your database, it is important to separate previous buyers from general inquiries, as each group requires a very different mailing strategy. It is also necessary to make a clear distinction between a buyer and a customer. I prefer to think of a buyer as a person who has made only one purchase and a customer as a person who has made repeat purchases. Obviously, customers must
By Stephen Lett Your catalog is like a piece of beachfront real estate: every square inch of space is valuable. And every square inch of space should be considered selling space—from the front cover to the back cover. On every page, every product must pay its way for the space it occupies. Some catalogers like to use a traditional "square inch analysis," fairly common in the industry. I prefer a somewhat different method to measure the performance of any given product, which is based on the calculation of a "hurdle rate" —the amount of sales a product needs to bring in, given its