Reduce Catalog Costs
By Jim W. Gilbert
It's likely we'll see a 5.4 percent increase in postal expenses in 2006. To us mailers the meaning is simple: 5.4 percent less contribution to overhead and profits. We'll need to rethink list and circulation strategies to keep some of our marginal lists within our allowable metrics.
Therefore, we'll either have to:
* scrap the mailing lists that aren't performing within allowable metrics;
* review customer lifetime value and allow for a longer payback process (the time it takes to recoup the investment into acquiring a new customer), and a deeper loss per customer acquired; or
* reduce catalog expenses to an amount commensurate to the postal increase in order to maintain the status quo.
In this article, starting with postage, I'll focus on seven ways to effectively reduce your catalog costs.
1. Destination entry discounts. Your catalogs get palletized and trucked with other catalogs closer to your customers and prospects. The trucks deliver the catalogs to regional postal centers called Sectional Center Facilities (SCF) and Bulk Mail Centers (BMC). By sharing the trucking charge with other catalogers, your cost is minimized. But such expenses are offset by postal savings greater than the trucking charges.Your savings could be as high as .03 cents per unit mailed.
2. Co-mailing. Catalog printer Arandell Corp. defines co-mailing as "combining two or more mail streams (different customers/permit numbers) into one mail stream, thus increasing the enhanced carrier route presort, which saves postage dollars and increases delivery service." Savings per unit should be a minimum of .03 cents, but in the past I've done co-mail programs that saved almost a nickel.
Points about co-mailing: Each catalog in the mail stream must be the same trim size, and all of the catalogers going into the program must share the same mail dates. So coordination is key between your printer/mailing house, service bureau and the other mailers.
3. Catalog trim. A small decrease in the trim size of your catalog can both save you money on paper and decrease the weight of your catalog, thus decreasing postal costs, which are calculated by weight. More importantly, ask your printer to ensure your catalog's trim size and page configuration are set up to garner the maximum efficiency on the printer's presses.
4. Paper basis weight and grade. Before I tackle this topic, let me offer a caveat: Your brand's image is deeply tied to the look and feel of your catalog's paper. For that reason, any change in paper can affect your brand and should be tested. When doing your profit-and-loss statement's post analysis, look at the effect on all segments of your housefile and all prospect lists. In tests such as these, I've seen some segments perform very differently. Look at the response on both a mailing and list level.
Often times, a paper change to a less expensive grade will go unnoticed by your customers. And small reductions in paper basis weight and grade could save money. As an option, change the paper only on part of your catalog. For instance, ask your printer about the most efficient configuration possible to keep your outside pages the same, and change a portion of the paper used to print the inside pages of your catalog.
5. Gang print. One of the more effective ways I've reduced catalog costs is to gang print certain catalog pages that are common from book to book. Work with your creative and merchandising teams to determine items or product groups that can run for a season or multiple seasons with no change. Then ask your printer to configure a common core in the catalog for the period. For instance, if you determine you have 12 pages of products that can run consistently, and you produce four catalogs in a season, have your printer print this section of the catalog on the first press run, and store it (at the printer) to be bound for each successive catalog.
Another successful strategy: Create a core catalog for a season, and swap out a group of pages on the outside of the book to keep the catalog looking fresh. For instance, changing an eight-page signature can make the first four and the last four pages in the catalog look new, a powerful and cost-effective remail strategy.
Other ideas for common printing include order forms (especially if you use the traditional bound-in order form), and other items such as sizing guides and customer service and shipping information.
6. Cut pages. While cutting pages is certainly an option, it's not one I'd immediately recommend. I'm an advocate of adding pages. If you can cut costs in other areas and then funnel those savings back into additional pages, you actually could increase your response rates and average order size. More products equals more options for your customers to buy. Ask your merchandising team to find solid, time-tested products that have great sales appeal.
7. Quote it out. Do vendor reviews. This isn't an easy process for me, as I tend to build strong alliances and partnerships with the vendors I choose. But it's a necessary part of business, even with long-standing vendors.
Rules to remember: When quoting out printing and mailing vendors, compare apples to apples, that is, the same paper, trim size, ink-on-page coverage, number of pages, versions, circulation and drops. Quote out all aspects of the print job. I'll even go so far as to have printers participating devise a spreadsheet with all of the secondary items such as binding, inserting and other items that will come up, so there are no surprises later.
The spreadsheet the printer prepares should include postage (and discounts for destination entry and trucking to BMCs and SCFs as defined above). Have your service bureau send a final mail tape to the printers you're reviewing, and let them estimate the postage from that. Once you have a comprehensive spreadsheet from each print vendor, you can make your comparisons.
But price is not the only point to shop. Customer service and quality (especially in printing), while not tangible, are super important. In the end, I always allow my current vendor partner to meet or beat any better pricing I get in the quoting process.
By taking some of the steps above, you can trim your catalog's costs to meet or beat the coming postal increase.
Jim Gilbert is the former vice president of operations and direct marketing for Under The Canopy catalog. Currently, he is a catalog and direct marketing consultant and professor of direct marketing at Miami International University of Art and Design. He can be reached at (561) 302-1719, or email@example.com.