Where NOT to Cut Costs in Your Catalog Business
Cost cutting among catalog brands has been widespread for the past few years — and with good results. It's kept many catalogers afloat during the recent tough times, and helped build profits as well as operational disciplines.
All that's swell, but beware of going to extremes and overcutting in ways that could harm. Here are four ways that, reliably for most, increase sales and return on investment, and therefore should be on your do-not-cut list:
Testing is one of your best ongoing tools for increasing sales and profits. Yes, it has more up-front costs than not testing, and so seems to the uninitiated to be ripe for cutting. Don't get sucked into no-test arguments from short-term-thinking bean counters or you'll regret it in the long run.
Affordable tests I've seen with excellent payoffs include the following:
- Mail frequency: Segment by segment you can really fine-tune who needs more catalogs, who needs fewer, and with what timing. Result: maximizing ROI and often cutting costs big time in the long run.
- Offers and order-size hurdles for those offers: Investing in offer tests can deliver big paybacks. They let you fine-tune who gets offers, when and how much margin to give away to each group. Be sure to track one-year response and ROI, which can look very different from initial test results.
- Freshness: That is, when to have new covers, new 2/3's, new page rearrangements. A fresh-looking catalog for each mailing usually lifts response at the small cost of plate changes. I've seen impressive results.
For high returns, I'd way rather put my money into testing than into the stock market.
I've seen catalog brands go into serious tailspins from cutting prospecting too much. It takes years to recover — and some never recover at all.
Yes, most prospecting loses money on the initial send. However, track your 12-month and 18-month ROI on those prospects. If you're patient, you'll find a point at which each prospecting effort passes breakeven, at which point you've added a tidy new group of loyal customers. You must prospect in order to keep your house list stable or growing. If you seek stability, not growth, then you still need to test the prospecting quantity that delivers that stability.
If you must cut prospecting, just cut back enough to keep your 12-month buyer counts stable during a fixed austerity period.
Cutting page count can be a good thing … up to a point. Try not to cut back below the USPS postage weight breakpoint. If you're going to mail, you might as well mail as many pages as you can up to the point that mailing any more pages would increase your postage. That way more products will get in front of consumers, and you'll get the maximum response bang for your postage buck.
It's worth getting your mailing list as clean and deliverable as you can. Ask your merge/purge vendor and/or your printer what products they have that can improve your address hygiene even more. That means that more of your catalogs get in the mailboxes of potential buyers. Furthermore, names that get omitted due to good hygiene can be replaced with better names. It's worth investing more in improved address hygiene if you can apply even better list-cleaning products to your lists.
Susan J. McIntyre is Founder and Chief Strategist of McIntyre Direct, a catalog agency and consultancy in Portland, Oregon offering complete creative, strategic, circulation and production services since 1991. Susan's broad experience with cataloging in multi-channel environments, plus her common-sense, bottom-line approach, have won clients from Vermont Country Store to Nautilus to C.C. Filson. A three-time ECHO award winner, McIntyre has addressed marketers in Europe, Australia and New Zealand, has written and been quoted in publications worldwide, and is a regular columnist for Retail Online Integration magazine and ACMA. She can be reached at 503-286-1400 or firstname.lastname@example.org.