by Stephen Lett
There are two main ways to grow a catalog business. One way is to increase circulation. Another way is to increase page count, which is the focus of my article this month.
If your catalog weighs less than 3.3 ounces, increasing page count will not increase your postage cost. If your catalog weights more than 3.3 ounces, the incremental increase in postage will be marginal if you add additional pages.
Page count does make a difference when it comes to maximizing the response rate. Any increase in page count (up to a point) will increase response and therefore sales. In fact, sales will increase by approximately one-half the percent increase in page count. For example, a 20% increase in pages will increase sales by approximately 10% as a general rule of thumb.
There is a favorable relationship between the incremental costs of adding pages versus the actual return. Pages generate a high ROI (Return on Investment). For example, increasing page count from 52 to 60 pages (+8 pages) yields a 15.4% increase in the number of square inches of selling space. Yet, typically the cost is only 7.4% more for the 8 extra pages (approximately depending on the quantity printed).
Adding pages means maintaining the proper page density. It does not mean that you should devote more space to the items being added. Nor does it mean that you should give more space to existing products simply as a way to fill more pages. For the economics to work, proper density must be maintained as page count is increased. If you typically put eight items on a page, maintain that same product density. Simply put, the bigger the store (i.e., the catalog), the greater the sales. Often when pages are added, there is a tendency to want to promote “the brand” versus selling merchandise. Keep in mind that every page in the catalog except for the front cover should generate measureable sales and profits. Think of a catalog as a piece of real estate where every square inch of selling space generates a direct return.
Don’t reduce page count as a way to save money, especially if you are a piece rate catalog (weighing under 3.3 ounces). This will have the opposite effect on what you are hoping to accomplish. The loss of sales and the gross profit dollars on those sales will be greater than any reduction in costs.
Adding pages is a solid, cost effective growth strategy. I have always encouraged our clients to add pages as a way to grow. This assumes, however, that there is merchandise available to support the extra pages.
By all means, use square inch analysis to validate page count changes. Square inch analysis provides insight into what items you should retain, drop or add to the catalog. In a properly merchandised catalog, the 1/3, 1/3, 1/3 rule will apply. This means that approximately 1/3 of the items will always be the winners, 1/3 of the products will sell close to your square inch break-even criteria and 1/3 of the items will be the losers. These items will need to be replaced with new products.
Aside from the decision to add pages, about 30% of the products in a typical hard goods (i.e., gifts) catalog will be replaced each print cycle. If less than 30% of the pages lose money, consideration should be given to adding more pages. Add 8 pages, do your square inch analysis and determine if you should add another 8 pages next time. Also keep in mind that if more than 30% of the pages lose money, you might want to think about reducing the page count by 8 pages. It is a matter of proper balance and to be careful that you do not have too many underperforming items as a percentage of the total number of unique products in the catalog.
Through this type of analysis, pay particular attention to products that are being carried over to appear in the next book. Knowing when to drop a particular item is critical. Products that are repeated in a catalog will tend to have a revenue drop-off of approximately 20% each time. If the decrease is more than this, consideration should be given to replacing the item.
The number of merchandise offers (as opposed to the number of SKUs) in a catalog is what drives the revenue. An offer is defined as a product. A SKU could be a different color, size, etc. Again, look at offers not items. I like to see a minimum of 250 (300 is even better) different offers in a catalog.
Catalog companies who can grow by increasing page count and circulation at the same time are in a win-win situation. Don’t depend entirely on circulation increases to grow. Consider increasing page count as another tool in your marketing toolbox.
Stephen R. Lett is the President of Lett Direct, Inc., a catalog consulting firm specializing in circulation planning, forecasting, and analysis since 1995. Mr. Lett spent the first 25 years of his career with leading catalog companies; both business-to-business and consumer. He is the author of the book, Strategic Catalog Marketing. He can be reached at 302-539-7257 or by email at firstname.lastname@example.org.