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In the last few weeks, we have had several clients ask if they should change from their full-size catalog to a slim-jim. In this issue of the Food-by-Mail Industry Update (FBMIU), we’ll discuss how to answer that question, and we’ll outline a few other ideas that can help you cut costs and boost profits in the upcoming holiday season.
SLIM-JIM VS. FULL-SIZE CATALOG
The general consensus among food mailers is that the slim-jim format produces lower revenue per catalog than the full-size format. However, the slim-jim has a significantly lower in-the-mail cost, so how do you decide what’s the right format for your business? As usual, our recommendation is to run the numbers.
The table below shows the typical cost difference between a full-size and slim-jim catalog.
Due to lower printing, paper and postage costs, slim-jims are about $.15 cheaper to produce and mail than a full-size catalog. That’s the good news. The bad news is they (slim-jims) will probably produce fewer orders and sales.
To determine which format makes sense for you:
Calculate your break-even sales requirements for the two formats.
Divide the added cost by your marketing margin (i.e., sales less COGS and all variable operating expenses). Note if you have never calculated your marketing margin, 40% is a safe bet to use for most specialty-food mailers.
With a 40% margin, to break even on the added costs, the full-size catalog will need to generate about $.35 more sales per book than the slim-jim.
Factor in the added creative and production costs of changing from one size catalog to the other. Most specialty-food mailers only change about 1/3 of their catalog pages from one year to the next. However, if you change your format, it will require a complete design and production redo - every page in the catalog will need to be redone. This may cost more than the savings you would see if you change from full-size to slim-jim.
Don’t forget to consider the impact on your brand and how customers perceive you and your catalog. If customers are used to seeing your usual-size catalog in their mail boxes, they may not respond at their normal rate to a different format.
There are new tabbing, weight and thickness regulations for slim-jims. Before deciding to make a switch, ask your printer to send you a tabbed sample based on your actual paper and page counts. Ask yourself honestly if you feel your customers will like the look and will tear through the three tabs to see what’s inside. If you answer yes, the slim-jim may be right for you. If not, you should probably stay a full-size catalog.
In short, every mailer’s situation is different. In some cases, the full-size book will generate much more than the extra orders and sales needed to cover the added costs; for other mailers, there is no way - their base sales per book is too low to expect enough lift to cover the costs.
Below are a few other simple ideas to consider before finalizing your holiday 2009 mail plan.
Evaluate page counts - it may make sense to cut pages and save money. The savings would drop straight to the bottom line and boost your profits, or you could redeploy the money into higher circulation, enhancements to your website, or more online marketing efforts.
Use a square inch analysis (squinch) to help guide your decisions. If you have several pages in your catalog that are unprofitable and/or barely making money, you can probably cut pages and see a minimal loss in sales and a boost to your bottom-line profit. If you plan to keep the items, be sure to tell customers the items are still available online.
Another effective technique for cutting pages while keeping the items in your line is to use a “pantry insert.” This is basically a laundry listing (sorted alphabetically, by category, or by price point) of everything you sell.
Depending on the number of items, the pantry listing can be one page (in the core of your catalog or on the back of your order form insert) or it can be an entire four-page form bound into the center of your catalog. This is a low-cost way to let customers know you have tens, if not hundreds, of other items they can buy by calling or going to your website.
If well over half of your orders are transacted online, and you have a reasonably effective website, you should consider reducing pages. Use your catalog more as a vehicle to drive traffic to your website than as a stand alone selling piece. Use the limited number of catalog pages to feature top selling and new items.
One note of caution: the bigger your current catalog, the easier it will be to effectively cut pages. For example, if your current catalog is 40 pages, it’s going to be easier to find a “home” for those products in a 32-page catalog. Conversely, to go from a 16-page to a 12 or even 8-page format may not be easy. Moreover, with less than 16 pages, the book feels more like a flyer than a credible catalog.
Ask your printer for samples of catalogs with different pages counts to see what “feels” like the right number of pages for your situation.
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Tighten up house file segmentation - you may not need to mail to all of the names you have mailed to in the past.
If you have enough names on your list (enough to generate about 100 orders per segment per mailing to get statistically readable results), add more variables to your segmentation scheme. For example, if you currently segment only on year of last purchase, further segment by life-to-date number of orders. Or if you have the data available, segment based on web vs. phone buyers.
You will likely find that you can profitably “cherry pick” customers from your list - mail the highest responding names more often, and cut back mailing frequency to the low responders.
Reevaluate who gets mailed and how often based on current marketing costs, marketing margins and expected response. With current costs and expected holiday 09 (soft) response rates, you may find the road to higher profits lies in scaling back your house file mail plan, not expanding it.
With the internet, your customers know where to find you and what to do to find your most current product and pricing information. Therefore, you may be able to cut your mailings to web-based customers and see a minimal loss in sales.
To measure the impact of this approach, conduct a simple hold-out test. Take a portion of your house list, key code them as a unique group, and mail them less frequently than you normally would. At the end of the season, measure on a per name basis the sales, costs and profits you generated from the hold-out and control groups. In the current environment, you may find that more (mail) is less (profit).
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Also as a result of the internet, some specialty-food mailers are finding they can mail a post card more profitably than a catalog at certain times of the year. This is working extremely well for some of our clients who sell fresh produce such as peaches, cherries, Florida citrus, and other “get it while it’s fresh” type products.
We have found three keys to making post cards successful:
Keep it simple - post cards almost always work better when they only have one major message to convey. Focus your headline, body copy, photo and graphics on reinforcing that one message. Post cards are a quick-hit medium, so keep copy relatively short and not in tiny 8 pt type.
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Make an offer - more times than not, post cards work better when you include some type of promotional offer, be it 10% off, discounted shipping or some other promotion to get the reader’s attention.
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Be very selective when picking names. For example, if you are using a post card to announce that you have a new olive oil, the best target for that mailing is recent olive oil buyers.
Evaluate how you grow your mailing list of customers. It’s easy to say, “Cut or eliminate the list rental program, it costs too much money!” However, without a replacement method of acquiring new customers, your house list and your business will quickly shrink! New customers are the lifeblood of a mail-order business, so the question is how will you add as many or more customers to your list than you lose each year?
Before you decide where to cut prospecting, run a few numbers. From your order processing system, get the number of new buyers you added and their sales in 2008 from each of your major sources of new names - list rentals, paid search, unpaid search, other online programs, retail store sign ups, referral programs, etc.
Prior to scaling back any of these programs, be sure you have a plan to offset the reduced name flow they generated for you last year. Without an offset or name replacement plan, your customer list will get smaller, sales will fall and losses will quickly mount. Once this trend starts, it’s very, very difficult to reverse it, so please think long and hard before making a decision to severely cut or eliminate prospecting programs.
We hope these ideas will be helpful to you as you finalize your holiday 2009 mail plan and catalog.
In the next few issues of the Food-by-Mail Industry Update, we will provide additional ideas you can use to improve your offline and online marketing efforts
Warmest regards,
Tony Cox
President
The 5th Food Group and Catalog Solutions, LLC
ABOUT 5TH FOOD GROUP & CATALOG SOLUTIONS
5th Food Group helps specialty-food companies grow and make more money by developing, managing and implementing their mail-order
and online marketing programs.
We are the only catalog/Internet marketing firm that works exclusively in the specialty-food industry.
Helping smaller companies and larger companies with small mail-order or Internet divisions is what we do best.
To download a copy of our free booklet, The Seven Habits of Highly Ineffective Catalogers, and for information on our fully guaranteed introductory program called JumpStart,
back issues of the FBMIU and other information on our services, visit us online at www.5thFoodGroup.com.
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