Catalog KPIs … Keeping Your Eyes on the Ball
Key Performance Indicators (KPIs) are important to any print catalog or digital marketing business. Knowing how often and which KPI to track can make a huge difference to your profit & loss statement. You need to separate the “nice to know” from the “need-to-know” information. Tracking nonessential KPIs might make you feel good, but are they measurable and will they make a difference in your business?
First of all, Key Performance Indicators need to be quantifiable. They need to be actionable too. Tracking something that cannot be measured or improved upon is not important. Ask yourself what you are going to do with the KPIs you track. For example, can changes be made to a particular KPI that will improve performance?
Over the years, I have seen companies go into time-consuming detail to track results and data that would give them a headache. I’ve seen pretty graphs and KPIs that were not important. This month, I want to share with you the universal KPIs that I feel are important to track and watch on a regular basis. What’s important is not any particular week or month but rather the trend over a given period of time. Here are the catalog KPIs that I feel are important to track at least on a monthly basis.
The gross dollars per catalog, especially as it relates to the catalog breakeven (on a per book basis), is most important. Breakeven points have always varied by mailer due to different factors. A common range of breakeven points was $1.00 to $1.25 per book. Based on today’s economics, breakeven points are higher. The incremental breakeven point builds in the catalog cost in the mail, i.e., printing, paper, postage, etc., the cost of goods sold and merchandise returns/cancels. This is the most concise way to know if the results are strong. Obviously, the higher the revenue per catalog mailed, the better.
The customer repeat factor is right up there, too. If the dollars per book and the customer repeat rate are strong, a nice profit should be the result. A good rule-of-thumb is that 25% to 30% of your 0–12-month buyer file should make a repeat purchase within one year.
Another important KPI to track is the size of your 12-month buyer file. There is a correlation between the size of your buyer file and gross revenue. I have always said that your gross revenue should increase by approximately the same percentage increase as your 12-month buyer file. For example, if your 12-month buyer file increases 10% your gross revenue should also increase by approximately the same percentage. This KPI is important because your 12-month buyer file needs to increase if you expect your revenue to increase. Focus on increasing the size of your 12-month buyer file and your gross revenue will follow.
The selling expense to sales ratio is another important KPI to track. For a consumer catalog company, this ratio should be approximately 30% of net sales. This means that $.30 out of every dollar of net revenue is spent on printing, postage, service bureau, prospect lists, etc. For a business-to-business cataloger, this ratio will range from 15% to 25%. Keep in mind that the higher the gross profit ratio, the higher the selling expense to sales ratio will be. The opposite of this is also true.
Your gross profit ratio is another KPI to follow. Again, it is the trend over time that should be measured. If you can increase your gross margin ratio, profits will also increase. If your gross profit ratio slips, your bottom line will follow. The typical gross margin ratio for a consumer catalog company will range from 50% to 65% or higher. Business-to-business gross profit margins are typically lower.
There are other KPIs you might want to track. I have given you the ones I feel are the most important. You need to determine which KPIs are important for your company. Don’t let analysis paralysis set in by trying to track too many or those unimportant KPIs. Be sure you are focused on the important KPIs for your catalog business. The KPIs that will make a difference. The number of KPIs you track is not important. Which KPIs you track is.