It is Xmas time again and we are inundated with catalogues of all shapes and sizes - in our already overstuffed post boxes, even at home on our pavements (and gutters), in our newspapers and handouts on street corners.

As a true direct marketer I always look for the basic and traditional merchandising and marketing disciplines when designing a catalogue, especially the 'response' part. And let us not forget the 'dot-commers' who believe that technology will ultimately drive buying activity to the Web.

I searched in my extensive library for guidelines that with assist retailers and cataloguers - and their agencies to look at what is best (or better) when planning their catalogues.

Jim Harkins from New York who has 25 years experience in the catalogue industry says: "It's still the merchandise that counts!"

Retailers and cataloguers both generally adhere to the principal that a strong merchandise offer should be the core of their businesses; effective advertising and sales promotion can then be better leveraged off an appropriate merchandising positioning.

Tracking merchandise performance in a more disciplined way will support a timely response to marketplace changes.

Review your Merchandise Analysis Program Track Density: Striking a density balance is a key to catalogue
performance.

	Too few items-per-spread and the offer won't have enough mass to support itself.
	Too many items-per-spread and the catalogue will begin to look cluttered and copy-heavy.
	Look at your most successful editions and compare densities to unsuccessful catalogues.
	Track your average items per spread over a 5-year period.
	Include both 'up' and 'down' seasons.
	If density is not managed, the natural drift will be toward fewer items per spread and a mysterious decline in response over time.
	Many catalogues have cut trim size over years, so be sure to look at items per square-centimetre, in addition to items-per-spread.
	A reduced trim size will sometimes force a subtle change in items per spread that the plan didn't call for - and a decline in response.

Analyse for Profit, not Demand: Make sure that your analysis looks at bottom line profit, not top-line demand for each item.

	The formula for profit needs to include the merchandise cost-of-goods, an allocation of the advertising cost of running the item based on the square centimetre it occupies, as well as an estimate of customer returns.
	Taking the analysis down to the profit level will help to allocate space better in future, as well as manage your return rates.
	Be sure to adjust your reporting as the factors are refined over the life of the catalogue (or book).
	Use real-return percentages for each item, as they become known.
	And most importantly, rerun the calculations when the catalogue forecast gets taken down.
	Changes on the overall catalogue forecast will have the biggest impact on item and department profits.
	Keep the merchants up to date with these changes.
	Also report profit per-square-centimetre, otherwise, reporting profit by item will generally reward items that make inefficient use of space.

Key price points: Pay close attention to key price points like R9.99 and R19.99.

	Many customers buy at these price points, which means response and file growth.
	Break them out separately in the analysis and know what they are producing for you.
	Watch for changes in these offers - there may be pressure to change a key item from a R9.99 to R12.99 and 2-for-R9.99 each to fix a margin problem.
	Avoid it at all costs; it will usually severely depress response to the item and ultimately profit.

Margin analysis: Group items by gross margin and mark-up and review profit.

	Are high margin items really driving profit to the bottom line, or is it the volume sold at lower margins that really registers?
	Today's customer is more educated about product and price than ever, due to widespread Internet use.
	The customer has a nose for low margin items and will seek them out.

Product development: Pay special attention to your proprietary products' profitability.

	Break out your product development items and report them separately.
	Make sure that they get a fair allocation of the extra overhead required to develop and manage them.
	Development usually allows for a higher initial margin due to middleman elimination, but often requires very long lead times and significantly bigger inventory commitments.

Creative analysis: Analysing creative can be dangerous. Taken to extreme, it can stifle creativity and make the presentation formulaic. Avoid it at all costs.

	Model analysis: Clothing catalogues can use anywhere from 5 models upwards for a particular shoot. Start at the beginning of the season and review the performance of new merchandise by the model it's pictured on. You will almost always see some startling trends - models do impact on sales.
	On-figure versus Off-figure: Clothing customers (in focus groups) prefer to see clothes photographed on models. YET! When the results are reviewed, off-figure presentations, on average, almost always out-pull on-figure. Why? They use their imagination. However, don't pursue it too far.
	Hint: Watch return percentages for off-figure presentations - they're almost always higher.

How to help your staff merchandise for the upcoming season

	Let your merchants know the average advertising cost per item. If they knew that it cost R35000 in ad cost to run a new risky item - they will think again.
	Include ad costs per square centimetre in your first plan distribution.
	Educate your merchants and inventory control people on the cost (and benefit) of liquidation.
	Overstocked liquidation is a real cost of the business.
	Don't continue to use up costly ad space and customer impressions trying to liquidate a 'dog' that should be in a clearance sale.
	Develop a merchandise metrics history - similar to a 5+ years of marketing history you begin with in each season's planning process.
	Crack the merchandising code.
	If you are in the marketing department, don't assume that these things are being done in the merchandising area - they may not be.
	And don't hesitate to call a consultant if you need help.

Wherever possible, start building a permission based e-mail list. E-mails will never replace your paper catalogue. However, used strategically, e-mail will enhance the ability of each catalogue to acquire and retain customer and will increase response, build cost-effective customer relationships, increase annual sales and profits. But this is another subject at another time!

Winnifred Knight, email win@cubesquare.co.za or phone 082 575 9922

Back to www.bizland.co.za