Catalog Business Plan
May 11, 2016
The catalog business plan is the next step after doing the catalog feasibility study. Developing this plan is critical to the success of the catalog. The plan should include these sections:
- Merchandising plan
- Marketing plan
- Fulfillment plan
- Financial plan
- People plan
Merchandising Plan – Catalog Business Plan
You can’t have a catalog without merchandise and to merchandise a catalog correctly, you need to have a merchandising plan. The plan should include not only the products that are going to appear in it, but also the method, or how the merchandise is going to be chosen for the catalog. It needs to cover inventory control practices and procedures as well as financials related to the products offers: product turns; buying processes and procedures; rebuying processes and procedures; and inventory projections and stocking levels. The merchandise plan should include a thorough product analysis and most important a plan on how you intend to dispose of returned and excess inventory. Returns and excess inventory liquidation need to be factored into the overall P&L for the catalog as well as at an individual product level. Products and product categories have different rates of customer returns. For example, anything involving fit, like women’s apparel is going to have higher returns than a hard goods item. Representation of the merchandise in the catalog can also affect customer returns, such as the color being different than what is pictured in the printed catalog. This can be an even bigger problem for digital catalogs, because colors can differ from device monitor to monitor. Inventory liquidation also has to be factored into the plan in terms of practices and procedures as well as cost factoring. Merchandise disposed of through liquidation can return anywhere from 75% down to 1% on the dollar depending on the category and specific product. Generally apparel has the lowest recovery rate, while home goods and some electronics have higher recovery rates. Seasonal merchandise can sometimes have no recovery and disposal will have to occur through donations to non profit organizations.
Marketing Plan – Catalog Business Plan
The next part of the catalog business plan is the marketing plan and we’re really talking about marketing communications here from who gets the catalog, to what it looks like, to how it’s distributed and when. The actual components of this part of the plan need to include:
- Circulation plan which involves customer list development and name acquisition which could involve list rental and secondary media and channels to promote the catalog and acquire catalog requesters.
- Creative image…what niche do you want the catalog to occupy? This is driven both by the product offer and the target audience for the catalog and well as the company brand imagine if for example it’s an established retailer launching a new catalog for women’s apparel.
- Creative execution…what is the catalog going to look like inside and outside? Is it going to have multiple covers? Is it going to have sections targeted at a segment of your target market that get, say, the version with different merchandise and pricing? Creative execution may also be dependent on how you intend to use the book. Is it a customer acquisition tool? It may have fewer offers/products than say a catalog going to your current customer file. Or let’s say it’s going to former customers who haven’t purchased in some time.
- Test plan and method of evaluation…are you going to be doing different versions of the catalog to test formats and offers? Are you going to be testing new media, lists for the catalog?
- Annual mailing schedule…finally, the marketing plan for the catalog needs to have an annual mailing plan. The plan covers lists, drop or mail dates, quantities, etc., as well as which or what catalog is mailing at a specific time.
Fulfillment /Operations Plan – Catalog Business Plan
This is where a lot of catalogs fail or never make it off the blocks. If not planned and executed properly fulfillment can cripple a catalog and create a lot of unhappy customers who will take their business elsewhere. The components of fulfillment and operations include:
- Order processing
- Data processing
- Warehousing, picking, packing and shipping
- Customer service
- Credit and controls
Typically this part of the plan is created by operations staff that has experience in this area, whether it’s in-house or sourced from outside vendors who specialize in providing fulfillment services. Direct order fulfillment is vastly different from running a warehouse operation that receives and distributes merchandise to stores. It involves processes and practices that many retail warehouse operations are not setup to handle. Many multi-channel merchants including those focused only on eCommerce outsource this function to such organizations as Amazon.com which is both an eCommerce merchant and a fulfillment operation.
Financial Plan – Catalog Business Plan
The next part of the catalog business plan is the financial plan and it’s the last step in the process before actually moving forward with a catalog. Typically, the components of the financial part of the business plan include:
- Breakeven analysis, usually at both a catalog, category and product level. It involves factoring in all of the costs…product, fulfillment, catalog production and advertising costs, etc. (To see and use an app to conduct this analysis, click here.)
- Annual financial projections
- Name flow projections
- Order flow projections
- Five year financial plan
- Cash flow projections
- Return on sales calculations
- Return on investment calculations
People Plan – Catalog Business Plan
The last part of the business plan is setting down the numbers and types of people and specializations that you will need to manage and run your catalog business. Where will these people come from? In-house? Outside? What of the people functions need to be in-house and what if any can be provided by outside suppliers? How many will be needed at each stage to help reach your financial objectives?
These are the necessary sections and components of a catalog marketing business plan. It’s a lot of work, but it’s a necessary step before making huge investments in both merchandise and catalog production and distribution.
Dudley Stevenson, founder and CEO of DWS Associates, has over thirty-five years’ experience in consumer marketing, business-to-business marketing, and direct marketing, including developing, planning, and implementing go-to-market strategies. He's also the author of "Marketing Direct: Breaking Through The Clutter." Working with organizations ranging from start-ups to Fortune 100 companies, he and his team have helped clients such as IBM, Sony, Neiman Marcus, Arizona Highways, Marshall Field & Co., Mrs. Field’s, UNICEF, and Patagonia implement successful direct marketing programs. A longtime member of the Direct Marketing Association and the American Marketing Association, Stevenson is also a sought-after speaker. He’s given hundreds of presentations and workshops on marketing and direct marketing. His “Marketing Planning 101” workshop alone has reached more than 100,000 marketing and sales professionals.