The 10 BEST Catalog Benchmarks

Jun 01, 1999 9:30 PM  By

Having gauges against which to measure improvement, or lack thereof, is healthy both for the business and for management’s peace of mind. Because all companies need to adapt their goals as their businesses grow, benchmarks are fluid, living measurements that should be adjusted at least yearly, and in some cases, per mailing.

Benchmarks can be specific to a company’s overall goals, but this list indicates the measurements that are close to standard for catalogers. Though we have ranked these benchmarks, remember that, with few exceptions, the order of importance depends on the size of the catalog, its particular problems and opportunities, and a host of other considerations.

THE TOP 10 1. Revenue per book vs. cost per book. The most important indicator of the profitability of a catalog, this should be computed per mailing so that you can fully understand the impact of variances such as season and number of pages on your income.

The preferred benchmark is revenue on a per-book basis (in other words, $2.00 gross sales per book), but some also use revenue per 1,000 books ($2,000/M). At any rate, the number needs to be broken down into gross revenue and net revenue per segment mailed.

You should also benchmark the contribution and costs of various promotions, which you can look at in terms of marketing expenses. A rule of thumb is that marketing expenses should account for 25%-30% of net sales for consumer catalogs, and 15%-20% for business-to-business catalogs.

2. Order-taking/fulfillment speed. How long do your customers wait before an operator answers the phone? Among participants in the 1999 Catalog Age Benchmark Report on Operations (May issue), 59% average no more than two rings before answering. How quickly do you ship orders? Of the Benchmark Report participants, a mean 49.5% of all orders ship within 24 hours. The speed at which you fulfill orders may depend on the size of your company and your resources, but remember that fast, accurate order turnaround is becoming a catalog industry standard.

3. Return rates. Customers who are forced to return a product just might be susceptible to slipping over into the competitors’ pocket. Carefully benchmark not just how much is being returned (this should be a daily report), but also, by product and by vendor, what is being returned.

A low-ticket hard goods cataloger with quality merchandise might be able to attain a 3% return rate; a high-end fashion-forward apparel cataloger (or any mailer selling products with fit as a major consideration) is probably happy with a 20% return rate.

To keep returns to a minimum, be certain that items are accurately and completely depicted in the catalog. Insist on stringent quality control. And do not run items, even big sellers, with a history of returns. Kill offending items, work out the return problems, then run them again-quickly.

4. Merchandising strategy. A well-merchandised catalog needs benchmarks for sales of both new and pickup items. Without repeatedly placing new items on the best seller list, you will find yourself repeating the same products. Relying solely on old best sellers can cause you to become stale-and hurt your sales.

Among participants in the Catalog Age Benchmark Report on Merchandising (October 1998 issue), new items account for a mean of 22% of the respondents’ merchandise mix; for gifts catalogers, a mean 32% of their merchandise is new, compared to 36% for apparel catalogers, and 54% for electronics and high-tech mailers.

5. List strategy and analysis. The response-per-list benchmark is calculated by dividing the number of orders for each list by the number of catalogs mailed to the names on that list, then multiplying by 100. How did your prospects-both rented names and catalog requesters-do on a gross and net dollars generated per thousand basis? Review the current catalogs against the past efforts, both immediately previous and season to season.

Overall, how many lists worked against those that did not? “Worked” is a sales number that each catalog must determine, usually based on what it has learned it can afford to spend for a customer. How have individual segments of your house list performed against previous efforts?

6. Positioning enhancement. Research can help you determine the effect of your catalog on the consumers’ mindset. This can be particularly important for marketers that use other sales vehicles, such as stores and field sales teams, in addition to catalogs. Pre- and post-mailing research will show you how your customers and prospects viewed the company behind the catalog prior to receiving it, and how the catalog influenced their propensity to purchase after receipt of the book. You can then use these initial results against which to monitor future performance.

7. Reactivation of inactives. Active buyers are as indispensable to your business as merchandise or postage. Almost all marketers get a higher return on investment by spending more money activating inactives (and converting one-time buyers) than they do by prospecting.

So benchmark your success ratio. How many inactives do you have on your list? (Most companies define inactives as those who have not purchased for at least two years.) How many have your activation techniques been able to reactivate? Have inactives since become a smaller percentage of your overall house file? Try to reactivate 5%-10% of your more recent inactives per mailing.

8. Test and promotion results. Most catalogs use promotions at one time or another. Understanding which ones will work for you is critical. Almost all mailings should test offers (not always discounts, but also incentives such as free gifts or free shipping) to certain segments. Benchmark your “hit” rate with offers the same way you benchmark new items and winning lists: How many did you test, how many worked, to whom, during what season, in what presentation?

9. Conversion of single buyers into multibuyers. Single buyers, also known as trial resisters, are one-time buyers who have tried the catalog but resist becoming loyal buyers. To get these folks to buy regularly from you, test a variety of incentives and offers that encourage them to convert into multibuyers, and benchmark your success rate against the cost of retaining them.

Ditto for catalog requesters, since leads without conversions simply cost you money. You should know, per source, per date, how those requests translate into buyers and how those buyers perform over time. Half of all the participants in the 1999 Catalog Age Benchmark Report on Marketing (February issue) obtain a conversion rate of up to 5% for free catalogs, while 56% claim conversions of up to 5% from catalogs they charged for.

10. Accuracy of projections. Knowing how good you are, and forcing yourself to work at getting better, is important. How close, or far off, were you from book to book and season to season? Better projections mean happier customers (they get the merchandise when they want it), lower operations costs (fewer overstocks), contented vendors (you bought what you told them you would buy), and cost-efficient warehouse staffing. To improve your projections, forecast demand weekly, and try advance mailings, which can help point up best sellers and absolute dogs.