Catalog Costs: How Low Can You Go?

Direct mail is experiencing a long overdue resurgence for retailers, hastened by the pandemic. Increasingly crowded ads on social media and Google, full email inboxes, SMS dings all day long ... while the much-maligned mailbox remained emptier as credit card offers dwindled and in-store postcard coupons were recycled.

It’s not surprising that many e-commerce brands decided to communicate in a new “old” way and test direct mail. We had the pleasure of assisting several launches in 2020 — some planned before the lockdowns, others as a new COVID strategy.

Two of the biggest surprises for folks new to mail are:

1. the amount of time it takes to properly put together an effective mailing; and
2. how expensive mailing can be.

One of our print partners and I assisted a pure-play that mailed within three weeks of our first discussion … this is NOT typical and we don’t recommend it. Haste makes waste. A well-thought-out plan needs time and the proper foundation, and the first mailing should allow for the upfront prep in list analysis and preparation, along with creative. A tip for new mailers: most seasoned mailers have already booked press time for Q4 2021 by the end of Q1.

Results from fall and holiday 2020 came through strong. Now, new mailers want to continue, and increase quantity. And then there’s the BIG question: How can I cut my costs so I can easily achieve a higher return on investment? Let’s explore the undeniable facts around mailing and why scale can’t cut costs in half.

The biggest out-of-pocket expenses when mailing are:

1. Postage
2. Paper

You also need:

3. Printing and manufacturing: ink on paper, trim it to size, fold and bind it
4. List preparation, segmentation, and processing: the list you're mailing to needs to be defined, segmented and “scrubbed” so you’re not mailing to the wrong audience or nondeliverable addresses. If you're prospecting, you need to rent the names.
5. Preparing and processing the mailer into the mail stream: name and address ink-jet onto the catalogs, and a key point — you have to pay USPS upfront, no 30-day terms.
6. Post-campaign analysis: response rate alone doesn't tell you if the mailing was profitable.

Let’s keep this simple and look mostly at Nos. 1 and 2, and the choices you can make to reduce costs, along with how reducing these costs may actually cost you gross revenues.

So, let’s assume you mailed your first catalog in Q4 2020. It was 24 pages and “full-sized,” meaning somewhere in the 8” x 10.125” trim size. We’re going to print 50,000 for this scenario.

POSTAGE = Approximately 50% of Your Costs

Postal rates are affected by the size and mode of your mailings.

• Catalogs (anything over 6.125” x 11.5”) fall into Marketing Mail and are called “flats.”
• Smaller trim catalogs (6x9, Slim-Jims), postcards and flyers (trifolds, double-gate folds, etc.) mail as “letters.”

Postage for 50,000 standard size catalogs of 24 pages will be around $.50 per piece. Smaller trims equal around $.295.

Postage for 500,000 of this same catalog will range between $.38 and $.40 per piece. Smaller sizes, approximately $.28.

Conclusion: Postage is your biggest expense and fairly non-negotiable. Volume cannot cut postage in half.

Postal Services

Your printer should also be a savvy mailing partner, with customer service staff to help you navigate how to take advantage of any/all postal discounts available for your national mailing.

PAPER = 30% to 40% of Your Costs

This is a 21^st century case of Supply and Demand. Paper is in less demand than it was 10 years or 20 years ago. There are also fewer paper plants producing papers for catalog (web) presses, as well as a lot of consolidation. Therefore, costs are up and will continue to rise. In fact, on April 1 there will be a increase on some common stocks used for catalogs.

Paper can be negotiated when you're a volume player or regular mailer with a great printer that negotiates on your behalf or you have the resources to purchase your paper directly.

EVERYTHING ELSE = 10% to 20% of Your Costs

If postage and paper aren’t very negotiable, how do you reduce your costs? Here are some steps to consider:

1. Explore printers and most effective trim on press.

All printing presses are not the same. Web presses are typically how catalog runs of 25,000 and up are printed due to their efficiencies. Your print partner’s capabilities can affect your cost. By insisting on a particular special trim, you may be wasting paper because those great big rolls of paper flying through a web press now have to be trimmed to your special size. Analyze the value in response of an oversized or undersized “special” trim before leaving excess paper — aka money — on the pressroom floor.

2. Explore paper weights/types.

Make sure your paper reflects your brand, but it’s not necessary to go overboard. Catalogs of a lower page count (16 to 36) typically print on 60# or 70# paper. There’s matte, satin and glossy finishes. You can “beef” up your catalog’s heft and feel in the recipient’s hand by looking into a heavier cover stock for a small additional cost.

3. Explore a larger page count.

Until your full-size catalog exceeds 4 oz., the postage is the same. If you have the SKU count or your product lends itself to lifestyle imagery, consider doubling a 24-page book to 48. Page count also drives higher response.

4. Explore a different, SMALLER trim size.

Full-size catalogs cost more to mail than Slim-Jims (6” x approx. 10.125” to 10.625”) or Digests (approx 6” x 9”).

• Positives: Less paper cost, lower postage.
• Negatives: Lower response rate. Also, trim sizes that mail at letter rate need tabs to go through the processing equipment. These can inhibit opening the print piece. Think of it like requiring someone to click twice to open your email or a slow page load time.

There was a time when a full-size catalog consistently outperformed a smaller trim size. We're finding this is no longer the case, especially for new mailers without a benchmark. Although the smaller trim may affect total sales, the savings in postage and paper can deliver higher net revenue. Once you’re established, it’s a great test to see how trim affects your response. Consider your catalog your “store.” The number of items, number of “departments” (pages) will improve your overall sales. However, it takes experience and savvy analysis to make sure you're actually turning a profit vs. just improving your brand recognition. You can learn more about catalog costs and profitability in our two-part series, “How Much Does it Cost to Mail a Catalog.”

Direct mail isn't for everyone; identifying its potential short- and long-term effectiveness for your brand BEFORE making the investment is crucial. Understanding your cost/benefit ratios and committing to a program — not a one-hit wonder — will exhibit the true lifetime value of your multichannel customers.