Old-School Cataloging: Optimization Of Pages And Circulation Depth

Old school catalogers spend considerable time optimizing circulation depth and pages per catalog (please click on the image for more information).

There is a formula that you can use to make high-level estimates of sales performance at different circulation depths and page counts. We've talked about this previously, but it is worth mentioning again.

Demand Prediction = ((Proposed Pages / Last Year Pages)^0.5) * ((Proposed Circulation Depth / Last Year Circulation Depth)^0.5) * (Last Year Demand).

Many catalogers play with the (0.5) factor, testing different combinations and then fitting the appropriate factor.

Using this formula (and the factors that are right for your business --- a free software tool called CurveExpert can help you find the right factor to use), you can create a table like the one at the start of this post. The table clearly shows that the "optimal" circulation depth and page count for this catalog is at any one of the following combinations:

• 80 pages to 500,000 customers.
• 96 pages to 500,000 customers.
• 112 pages to 400,000 customers.
• 128 pages to 300,000 customers.

When you look at the four optimal combinations, what do you observe?

Yup, smaller page counts allow one to contact many, many more customers. This is why you see so many companies with small prospecting catalogs.

The equations were created at Eddie Bauer, way back in 1998. We used the equations to optimize page counts for each merchandise division, then rolled-up the pages, and optimized circulation depth. It was like sweeping up money, tremendous fun for a math geek, lots of profit for the company.

By the way, e-mail folks ... you can run a similar exercise. But the metrics change.

• Circulation Depth still matters. If you have an e-mail list of 100,000 customers, you'll generate less demand mailing only the top 20,000 customers.

• Pages are replaced by contacts. Instead of 64/80/96 pages, you have 1/2/3 contacts per week.

• Using this framework, you can quantify demand by circulation depth and number of contacts.
  

Catalog Profitability

Click on the image to enlarge it.

One of the challenges catalogers have to manage is determining the right circulation depth, and the right page count in a catalog.

Circulation depth is pretty easy to determine, once the number of pages are assigned. A straight forward calculation of sales and profit determine the right number of households to circulate to.

Page count presents more challenges. Merchants like to add pages, offering the customer more merchandise to purchase. Creative folks occasionally want to reduce density, adding pages that are less dense, easier to read.

More pages = more cost.

Are more pages better?

In the example at the top of this page, last year's catalog had 80 pages, and was mailed to 1.5 million households. The catalog drove $7,000,000 demand through the telephone and online channels.

When planning this year's catalog, the analyst builds a relationship between pages and demand. As pages increase, demand increases, but at an ever decreasing rate. Therefore, demand is maximized by sending as many pages as possible to as many households as possible.

Using a straight forward profit calculation, notice where profit is maximized. Based on last year's results, profit is maximized by sending a smaller catalog to as many households as is possible.

Here's a fundamental truth in catalog marketing:

• Increased Circulation Depth > Increased Pages

In other words, given the choice between adding pages to a catalog, or mailing a smaller catalog to as many households as possible, try to mail a smaller catalog to as many households as possible.

You can clearly see this when evaluating circulation plans. Businesses that like to mail catalogs with many pages tend to have shallow circulation, tend to be unable to do a lot of prospecting.

Businesses that are parsimonious with pages tend to circulate to many households, have robust prospecting programs, and a healthier housefile.

Who Wants A Free Book? Submit Your Article By February 4

If you work for a company that sells merchandise to consumers via a catalog or a website, I have a homework assignment for you.

Between now and February 4, write a brief article about one of the topics listed below. After a review of the submissions, I will post your article on The MineThatData Blog on February 5. You get a little bit of recognition, and at least one of you will be chosen at random to receive a copy of my book, "Hillstrom's Database Marketing". Simply e-mail me your submission by February 4.

Valid topics include the following:

• Any discussion about the future of multichannel retailing.
  
• Creative ways that web analytics tools have been used to improve business performance.
• Interesting ways to leverage online advertising for sales growth.
  
• Any discussion of the pros and cons of using compiled lists (i.e. Abacus) verses rented lists for catalog prospecting purposes.
• Any discussion of the trends in catalog circulation to drive catalog + online sales.

Articles should be between 250 and 1,000 words in length.

Are you up to the challenge? E-mail me (kevinh@minethatdata.com) your submission no later than February 4.

Multichannel Catalog Advertising Strategy

Over the past ten years, I have been very pessimistic about the future of catalogs. Catalogs as a true sales driver have become relegated to an audience over the age of forty-five. Younger consumers increasingly use search, e-mail, and social media to complete their direct-to-consumer transactions.

Recently, I've been able to envision a future for a catalog that is purely advertising-related. As multichannel retailers move from mass media (television, radio) to more accountable forms of marketing, catalogs have the potential to drive sales in a more productive way than mass media. It is in this manner that catalog may have a future.

Between the past and future of catalogs is this quirky time known as 2006-2007. You'll continue to see multichannel retailers change circulation strategies. Page counts have to decrease over time, as the catalog becomes nothing more than a targeted advertising vehicle. When page counts decrease, it is possible to increase circulation.

The multichannel retailer could test these strategies in 2007, to understand the sales impact on the business as catalogs evolve from sales drivers to targeted advertising vehicles. Most likely, the evolution to smaller page counts will result in decreased sales. The multichannel retailer can increase reach, save expense, and potentially drive increased profit. For instance, a 160 page catalog mailed to 500,000 customers might drive $3,900,000 across channels, yielding $1,120,000 expense and $128,000 profit. A 48 page catalog mailed to 1,000,000 customers might drive $2,900,000 across channels, yielding $580,000 expense and $343,000 profit (send an e-mail if you want to see the spreadsheet outlining the simulation). The smaller catalog strategy, mailed to more households, could yield increased profit. Over time, multichannel retailers will figure out how to calibrate creative in order to better drive sales across all channels. It's time to start testing!