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The three most basic – and important – elements of any direct marketing business are revenue, marketing costs and operations expenses.
Sales volume and circulation may be growing, but revenue can shrink due to higher marketing or operating expenses. A typical reaction would be to reduce the budget, causing the house file to shrink, low response to prospecting and a reduction in the average order value. Even product selection could become stale with fewer new products each season.
While most catalogers would not find themselves in such dire circumstances, some key relationships perhaps may go unscrutinized. Here are some tips on analyzing where you are.
Start with the most recent three-year history and begin with revenue, catalog expenses, fulfillment and income.
Follow that with catalog circulation, cost per book and sales per book, and go on to segment performance and response rates.
Go back for another look at revenue, this time keeping fulfillment and operating dollars in mind.
Stay with revenue and progress through returns, net sales, cost of goods and margin dollars. Expand your analysis of the product line by merchandise margin percentages and complete a price-point distribution of items and demand dollars.
Of course, not all troubles can be uncovered by statistics. One way to arrest any decline is to build brand equity by repositioning the catalog. A slightly revised or totally new approach to the creative platform and a new direction on the copy voice may be the answer. It could be as simple as marketing differently to customer segments. Perhaps new merchandise would be introduced and product lines developed. New marketing and circulation strategies would enhance relationship marketing.
If you’re looking for new tactics to jump-start your strategic direction, consider these five ideas:
• Develop two catalogs of different sizes. Put out a full-size and a slim jim against different segments of your house file and prospects, using the same creative.
• Build out additional sections of related categories. Take winners from related merchandise lines and present them as anchors in an expanded four- or six-page section.
• Get rid of the deadwood at the low end. Act deliberately and shift the assortment weight up above the mean to drive the average order up.
• Change the focus when investing in higher value goods. Look at the transaction from a monetary point of view. Remember, you can’t take percentages to the bank.
• Get ahead of yourself. Start the season ahead of your average curve and garner sales from all over the country. It’s never one season at one time everywhere.
Choose one of these big ideas for testing, or in combination with your base program. They could provide the spark that halts and reverses the decline in gross revenue, grows volume substantially with a corresponding increase in average order value, and lowers operating costs.
With knowledge, imagination and support of management, you can improve the bottom line of your catalog, even under the most difficult circumstances and in highly competitive environments.
• Richard Biele is vice president of marketing and new business development at Bel-Aire Associates, New York, a full-service direct marketing and consulting agency.