Strategy : Cost-Cutting, Revenue-Building Checklists ’09

Don’t cut recklessly; it’ll cost you

The economy’s in the tank. Costs continue to increase. Response rates are down. What can you do to cut costs that you haven’t done already? You can’t slash and burn your way to prosperity, even in difficult economic times. I see catalogers making cost-cutting decisions that’ll negatively affect their businesses in the long term. It’s not just a matter of reducing expenses, but rather a combination of continued marketing with smart expense control.

One of the first things catalogers do to save money is cut circulation. In his B-to-B Cataloging column in this issue (see pg. 26), my fellow columnist George Hague explains some effective ways to do that when you basically have no choice and management insists you do so. But my personal opinion on circ cutting is it’s a wrong move, period. A drastic cut in circ doesn’t necessarily mean improved profitability. Circ cutting can accelerate a downward spiral, which is difficult to reverse.

Reducing circ will reduce the amount of business you do through the Internet (the catalog remains the largest single driver of traffic to the Web — see my February column for more on that).

Above all else, don’t let your 12-month buyer count decrease. With this in mind, here’s my five-step economic checklist for reducing expenses, followed by a three-step plan to increase your revenue affordably.

5 Steps to Cut Costs
For this list, consider first and foremost a tactic I’ve strongly recommended in past columns: co-mailing (even for smaller mailers); then take it from there …

1. Stop mailing one-time-only Internet buyers. Most first-time Internet buyers never make a second purchase. They were surfing the Web for a specific item they wanted, so mailing them catalogs has little impact. Start by eliminating them from your circ plan.

2. Stop mailing rental multibuyers generated from the co-op databases. There’s a 25 percent to 30 percent duplication rate from one co-op to another. Rental multis created from co-ops against co-ops generally don’t perform well, although rentals against rentals, and rentals against co-ops, are fine.

3. Reduce paper costs. Paper prices have been coming down, so push your printer to ensure these savings are passed on to you. Get a competitive bid from a reliable catalog paper merchant. Consider buying your own paper and managing its use as a way to control costs. Don’t just switch to a lower-weight paper or a super cal sheet (i.e., SCA) without first testing the effect on response. Lost sales can more than offset the savings.