Fact Checking the Catalog Effect

ikea-2016-catalog-coverNot sure if your catalog’s worth the expense? Here’s one (hard) way to find out: Stop mailing it.

In the face of rising postage rates and production costs, it’s easy to consider sacrificing your catalog mailing and trying an all-digital approach. We don’t recommend this; there are plenty of big name retailers out there who tried it and learned the hard way that sales sank when they stopped mailing catalogs. Still, if you’re facing pressure to try it, at least do so with your eyes wide open.

Jim Coogan, writing in My Total Retail, offers a valuable lesson that many retailers have learned the hard way in trying to forgo catalogs in favor of digital prospecting.

“A major problem many catalogers are experiencing is that customers who are coming from the web simply don’t convert into profitable house buyers,” Coogan writes. “Why not? Many catalogers’ flows of new buyers are from affiliate relationships, and those customers are either loyal to Amazon.com, eBay or they’re simply buying based on price and aren’t loyal to any brand. Catalogers are segmenting their web buyers and tracking their profitability, and so far have seen greatly diminished response rates to follow-up catalogs.”

“Catalogers who have tested holding out catalogs to their buyers and relying on emails only for sales see that top-line sales revenue quickly falls off the cliff,” Coogan continues. “It’s easy to test the difference in response with and without a catalog. Run mail vs. no-mail tests before you consider dropping your catalogs and hoping that top-line sales and bottom-line profitability will be maintained.”

As in any marketing, testing should be part of the program, so Coogan’s advice makes absolute sense. When setting up your tests, Coogan offers some critical questions you’ll want to ask to make sure your decision is based on quantified information:

  • What’s the difference in sales to you house buyer file when housefile segments are mailed and not mailed a catalog?
  • What’s the proportion of new buyers that are coming from the catalog vs. noncatalog channels?
  • What are the profitability metrics on the various types of internet marketing channels (e.g., email, affiliate, social, paid search), and what are the unrealized profitable marketing opportunities on the internet side of the business? What’s the potential for scaling up the proven profitable internet marketing channels? Can those online campaigns replace catalog sales and profitability, or are you going to be covering your fixed costs with significantly smaller sales volume?

For some companies, maybe eliminating the catalog will test out to be the right course. For others, they may discover that they are cataloging like it’s 1999, and need to update their practice.

For most companies, though, they’ll likely find that the reasons to send catalogs far outweigh any cost savings that might be found in leaving them behind for an all-digital approach.

Why does the industry continue to send catalogs? Because catalogs work. Plain and simple, printed and mailed.