How frequently can you mail your buyers, and how frequently should you mail your buyers? These are critical questions for planning your catalog’s profitability. The common wisdom in catalog circulation is to prospect at breakeven and make your profits from mailing to your buyers. Calibrating how often to contact your buyer file is a key question. What are the factors that go into answering that question?
The first issue is determining your sales and profit goals. Do you want to maximize sales? If so, mail your house file more frequently. Do you want to maximize profit? Then you mail your house file less frequently and maintain a higher profitability with the house file circulation.
The first metric you should know about your buyer file is the incremental sales from a mailing. You get some sales from your house file even when you don’t mail. You can measure the baseline sales coming from the house file by running a mail vs. no-mail test. If you get $.50/catalog from a house file segment without mailing that segment and your breakeven is $1.20/catalog, you shouldn’t mail any house segments that don’t deliver at least $1.70/catalog mailed ($1.20/ catalog is breakeven plus the $.50/catalog you would receive even if you hadn’t mailed the catalog.)
The second metric is the difference in profit or contribution to overhead between mailing a house segment once vs. mailing the same house segment twice. Here’s an example:
Assumptions:
Mail once @ $5.00/catalog mailed
Mail twice @ $3.50/catalog mailed for the first drop and $3.00/catalog for the second drop.
Catalog cost is $.65/catalog
Merchandise margin is 50%
So in this example, mailing twice yields sales of $26,000 vs. $20,000 for mailing once and an increase in contribution or “profit” of $400 ($7,800 vs. $7,400) from mailing the same segment twice rather than mailing a single time.
You need to know the increase in contribution from an increased frequency of mailing and not just the increase in sales. Don’t confuse an increase in sales with an increase in profit!
What tactics can you use to increase the frequency of mailing your buyer file?
- Find “hotspots” for more holiday mailings.
- Switch up your formats and alternate a full-size catalog with a digest-file sized book. Change your page count or your merchandise mix.
- Use cover changes to economically squeeze in more house buyer mailings. But don’t bore your customers with too many cover wraps.
- Find promotions, themes or cover wraps to mail to your very best buyers.
If you know your true breakeven from house file mailings, you won’t mail too deeply into your house file. If you know your increase in contribution from multiple mailings, you’ll know how frequently you can mail to optimize profits or to optimize your sales. Look for ways to squeeze more frequency and more profitably out of your most important business asset – your house buyer file. If you understand your numbers, mailing more frequently to your buyer file is the easiest, most straightforward way to grow sales and profits.
The easiest way to grow profits may be to simply layer on more buyer file mailings. You should spend time planning ways to mail your buyers more frequently because when the profit pressure comes – and it’s inevitable – having more buyer file mailings planned and ready to go is the way to meet the pressure of increased profit expectations.
Jim Coogan is president of Santa Fe, NM-based catalog consultancy Catalog Marketing Economics.