MAKE EVERY PAGE COUNT

Every marketer could use a game changing event in 2009. Here is what we are finding repeatedly: The over circulating of pages is being treated very similarly to a “Hail Mary” pass. We know companies say they do square inch analysis (I don’t necessarily believe this to be true); we know that companies are not using circulation techniques on paid search and do not determine spend by contribution; and we know very few if any catalogers look at circulating pages through merchandise down to contribution.

With the seemingly ever rising costs of postage, paper, and printing, plus the consumer concern for excess paper, it is critical to make every page of communication with your customers the most effective and efficient it can be. In planning a catalog or store/web driver mail piece, you want to know – What is the optimal number of pages to deliver the highest revenue at my target return on investment?

Let’s answer that question looking at the last point first.

All marketing expenditures should have a target return on investment goal. What contribution after returns, cancels, cost of goods, marketing expense, fulfillment, and postage in terms of actual dollars and in terms of a percent of gross revenue do you require to justify the marketing spend (creative, paper, printing, postage)? Today we are seeing healthy companies strive for a 15-20% contribution margin on total demand but many are getting about 5% to 15%.

Next, what does highest revenue mean? As we noted above, you want to create a plan that will deliver a target return. This criterion requires that costs must be controlled. The goal is not just to generate top line results. Without a handle on expenses, a company could sell itself into a deficit position. When this loss occurs, it is not always obvious where the revenue leakage is occurring. Striving for the highest revenue must be tempered by using specialized tools to gauge the direct impact on profit and loss by understanding key relationships such as merchandising to circulation.

So, how do you make every page count? We start with the components of a square inch analysis of the most comparable mail piece, usually what was mailed at the same time last year. And we build on those results to determine whether or not a product category breaks even, and with what product mix. The outcome of this analysis gives insight into how many pages should be included in the mailer for each product category, should density be increased or decreased, should products be shown more than once in the catalog, should a product be showcased alone on one page, what other strategies feed in to optimizing pages by category?

Marketsmith has detailed process we employ for our clients to answer these questions.

Below we provide the basic steps in this analysis followed by a discussion of how to use this information to best advantage to improve marketing efficiency, and more importantly, overall marketing effectiveness.

1. Calculate the net profit/contribution for each product in the product category, making sure that you include all relevant costs.
2. Classify every item in the mail piece by its product category. Determine the product categories that comprise all items sold. As mentioned above, the goal is to determine a strategy for each product category.
3. List all products in the category by net profit/contribution and determine a breakeven by product category.
4. Calculate the total space occupied by all of the products up to the point of breaking even. This will tell you how many pages have performed at breakeven or better for this product category.
5. Identify which products have shown a positive contribution or were just at the breakeven point. Calculate the number of pages these products filled in the mail piece.

Now for each product category you can see the total number of pages by count and percent that the product occupied, how many of those pages were above breakeven individually and how many cumulatively.

This analysis can be used to determine page counts for product categories, determine overall page count for the book, and identify areas where product density should perhaps be increased. In looking at this analysis, several points stand out:

1. While there are five categories where the cumulative breakeven is 100%, four of those show that the actual percentage of pages in those categories that broke even were 55%-65%, meaning that the product category is one that is received positively by customers but that many individual products in fact are not showing a positive contribution. This discrepancy is particularly significant for category B which fills over 30% of the pages in the mail piece, more than any other category in the book; 13% of total pages showed a loss. The strategy moving forward in this category would be to identify those products close to breakeven and increase the density of their placement in the book and eliminate products with significant losses.
2. Category I does not seem to work for this mailer. We would recommend that it be eliminated all together.
3. If the cataloger were considering increasing pages in this mail piece, we would recommend against it. There appear to be opportunities for fine tuning and consolidating within categories at the current page level. Possibly the total number of pages could be decreased slightly, depending on how much new product the cataloger wants to introduce.

This analysis can also be done for price bands to provide insight into pricing strategy.

Finally, a Brand must always look at where and how it goes after R&D, research and development. There must be a careful and stable approach to R&D around new products. Over circulating pages is one testing method; others include using online venues. Since, at best one in three new products actually breaks even or shows a positive contribution, the merchandise team should have a testing plan and goals which can be measured and evaluated. Goals include conversion of new products by season, by price point and by product category.

We remind mailers that content and real estate should be used in away to promote the web/email/retail, additional SKU’s, and a grander product experience, enhancing your customer’s interaction with your Brand.

We at Marketsmith believe it is critical that mailers look carefully at the pagination and content of their mail pieces to make sure the mailings are an efficient use of marketing dollars, optimizing both pages and return on investment. Our analysis uses metrics to determine what the customers tell us they are buying. Then creative can be used to put heart into each page and give it a purpose. We work closely with our clients to make sure that every page counts.

If your catalog pages have been creeping up but your bottom line is sinking, contact us and let Marketsmith’s evaluation provide the insights and actionable recommendations to reverse the trend.

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