Why Catalogs Fail
Why, then, is it so difficult to cut circ when times are bad? Why is it so difficult to monitor the impact of incremental costs that are necessary to gain incremental sales? The answer is, It’s not if you stick to the basic economic fundamentals. Go find the marketing analyst sitting in the far corner of your office; he/she has the answer. If you don’t have one of these analysts, you’re probably already in trouble and don’t know it … yet.
When times are bad, the normal response is to cut overhead. This is exactly the wrong response. Constantly monitor results at the micro level, understand when incremental costs exceed incremental margin, then react by re-evaluating your circ. Cut it when you have to. Leave your overhead alone unless you’re going out of business.
It’s All in the Analysis
The first thing I do when taking on a new client is I go back through two to three years of history and look for instances when incremental costs are too high to support the incremental margin. I'm constantly amazed by the number of times this happens. This is a very sensitive analysis; it doesn’t take much to turn the numbers red.
If you understand response curves and know how to accurately forecast your results, you don’t have to wait for a mailing response to be complete before you undertake this analysis. I’m a spreadsheet geek, so I build this measurement into all my analyses and can tell early on when things are headed south — and by how much.
How to Measure, What to Measure
If you’re a catalog owner, do the analysis. Do it every week. Constantly measure your incremental sales, and compare them to your incremental costs. And don’t forget the cost of taking and shipping an order; this can make a big difference in the results. Your bottom line will thank you.