What They Think – Commentary & Analysis
HBR Study Finds 28% Lift in Sales and 600% ROI by Adding Print Catalogs
In a large-scale field study conducted by Harvard Business Review, a luxury e-commerce retailer found that by adding print catalogs, it increased sales by 28% and inquiries by 77%. It also yielded a direct ROI of 600%.
By Heidi Tolliver-Walker, Published: January 5, 2022
Did you see the eMarketer article on the comeback of print catalogs? Maybe if it weren’t a digital publication, it wouldn’t have stuck out to me so much. But to hear eMarketer praise the value of print catalogs was kind of fun. Then there was the fact that I received a direct mail piece from Google the same day. That was fun, too.
These experiences got me thinking about the current data set on the power of catalogs, especially among companies that are 100% online. (Check out this interesting list from Modern Fellows of 46 online retailers, including Amazon, that are now marketing using print catalogs.) Most of the data—and it’s good data, don’t get me wrong—that I find is older. What has there been recently that is new? That sent me searching for more current research, especially that showed not just that catalogs work, but by how much.
That’s why I got excited when I found this study reported by Harvard Business Review. It was a large-scale field experiment conducted in 2020 with a luxury jewelry e-commerce retailer with no physical store. The company has $60 million in annual revenue, with an operating profit of $12 million and a database of approximately 28,000 customers. (It acquires customers primarily through online search and other online platforms.) The study was designed to discover, not just whether people read catalogs, because we have tons of data that they do, but how much a catalog directly impacts sales.
Here’s how the experiment worked
On HBR’s recommendation, the retailer launched a new, bi-monthly catalog featuring “professional and artistically rendered product photography with high-quality printing.” The company then randomly selected 30% of its U.S.-based customers for the experiment. Of those…
• 5% received neither email nor catalogs for six months (the control group),
• 55% received a weekly marketing email, and
• 40% received the new bi-monthly catalogs in addition to the weekly email marketing.
To control for the effects of content, more than 90% of the products were the same between the emails and the print catalogs. The same sets of photos and descriptions were also used in both. The research team then tracked purchases and product inquiries across all three groups. The results?
• The retailer saw a 15% lift in sales and a 27% lift in inquiries from the email + catalog group compared to the “email only” group.
• It saw a 28% increase in sales and 77% lift in inquiries from the “email only” group over the control group, but a 49% lift in sales and 125% lift in inquiries from the email + catalog group over the control.
• Based on follow-up surveys, HBR ascertained that more than 90% of the customers had browsed through the catalogs and kept those catalogs for an average of seven days. It also found that, when the print catalog was added to the mix, order sizes increased by 15%.
According to the report
A quick ROI calculation indicates that a 15% increase in sales on an average order size of $6,700 due to the catalog campaign, at approximately 30% gross margin, translates to an additional $90 profit (or $180 additional annual profit) per customer. The average cost of the mailing with front-end design cost factored in is $5, yielding a direct ROI of 600%, not to mention the additional customer engagement from increased inquiries. If this campaign [were to be] instituted across the entire customer base, similar response rates would result in an incremental annual profit of over $5 million, a boost of 40% from its current profit level.
Just by adding catalogs! But why? HBR attributes these results to what it calls “vividness,” or the experiential influence on purchases. To test its theory, it surveyed 500 random customers from each of the “email only” and “email + catalogs” groups and asked about their perceived vividness of each marketing contact. It asked, “How easy it is for you to imagine wearing the product?” and “How vivid are the product descriptions in the email (or catalog)?” Respondents were asked to rank their answers on a seven-point scale. Those in the “email only” group gave an average rating of 4.3, while those in the “email + catalog” group gave a rating of 5.6. The difference between the two was statistically significant. Thus, the results of this field experiment provide evidence that catalogs can increase sales by enhancing product vividness and by helping customers imagine themselves using those products.
HBR notes that, while there are many benefits to catalogs, including staying power and maintaining top of mind, catalogs’ real power is “how—for certain products—they increase the vividness of a product by enhancing consumer’s ability to visualize and imagine product usage experiences. Vividness is highly influential in consumer behavior as it can increase consumer involvement and joy in the purchasing process, ultimately influencing preferences and sales.”
Catalogs, it further explained, are more likely to work for products that are “hedonistic,” or purchased for fun, enjoyment and pleasure rather than for utilitarian purposes. In other words, jewelry over stoves, vacations over roof replacements. Catalogs are also more likely to work for products that contain richer experiential aspects:
The psychological theory of vividness suggests that visually rich categories such as luxury goods are more responsive to vividness, and utilitarian and functional products such as household tools, cleaning products, and home security systems would not benefit from catalogs. Just like the evolution of the retail landscape, catalogs have also evolved—they should no longer be a rambling collection of product pages reminiscent of Sears’ golden days. Instead, firms need to focus on…creative presentation of products to evoke emotion…and narrating the experiences of others so that consumers can almost live vicariously through [them].
This analysis not only provides research support for the revenue-building value of catalogs, but also which types of products for which they are most valuable. Got ideas churning? Great! That’s the point.