WHERE TO NOT CUT COSTS
First published on MyTotalRetail.com blog March 2015
© 2015 Susan J. McIntyre
Cost cutting has been wide-spread for the past few years and with good results. It's kept many catalogers afloat during the recent bad times, has built profits, and has also built operational disciplines.
All that's swell, but beware of going to extremes and over-cutting in ways that could harm.
Here are four ways that, reliably for most, increase sales and ROI that should be on your do-not-cut list.
Testing is one of your best ongoing tools for increasing sales and profits. Yes, it has more up-front costs than not testing, and so seems to the uninitiated to be ripe for cutting. But don't get sucked into no-test arguments from short-term-thinking bean-counters or you'll regret it in the long run.
Affordable tests I've seen with excellent payoffs:
- Mail frequency. Segment by segment you can really fine-tune who needs more catalogs, who needs fewer, and with what timing. Result: maximizing ROI and often cutting costs big-time in the long run.
- Offers and order-size hurdles for those offers. Investing in offer tests can deliver big paybacks. They let you fine-tune who gets offers, when, and how much margin to give away to each group. Be sure to track one-year response and ROI which can look very different from initial test results.
- Freshness. That is, when to have new covers, new 2/3s, new page rearrangements. A fresh-looking catalog for each mailing usually lifts response at the small cost of plate changes. I've seen impressive results.
I've seen catalogs go into serious tailspins from cutting prospecting too much. It takes years to recover and some never recover at all.
Yes, most prospecting loses money on the initial send. But track your 12-month and 18-month ROI. If you're patient, you'll find a point at which each prospecting effort passes break-even — at which point you've added a tidy new group of loyal customers. You must prospect in order to keep your house list stable or growing. If you seek stability, not growth, then you still need to test the prospecting quantity that delivers that stability.
If you must cut prospecting, just cut back to enough to keep your 12-month buyer counts stable during a fixed austerity period.
Cutting page count can be a good thing...up to a point. But try to not cut back below the USPS postage weight break-point. If you're going to mail, you might as well mail as many pages as you can up to the point that mailing any more pages would increase your postage. That way more products will get in front of customers, and you'll get the maximum response bang for your postage buck.
GOOD ADDRESS HYGIENE
It's worth getting your mailing list as clean and deliverable as you can. Ask your merge/purge vendor and/or your printer what products they have that can improve your address hygiene even more. That means that more of your catalogs get in the mailboxes of potential buyers. And names that get omitted due to good hygiene can be replaced with better names. It's worth investing more in improved address hygiene if you can apply even better list-cleaning products to your lists.