Catalina's colour coupons boost redemption by 25%
Catalina Marketing has reported on the progress of Catalina Marketing Services' (CMS) project to install approximately 140,000 colour printers for targeted communications in its US retail store network - a technology which has reportedly increased coupon redemption rates by more than 25% in live trials.
According to CEO, Dick Buell, the company is pleased with the early progress made in the colour printer project, and tests of inkjet printers at pilot retail locations are yielding encouraging results.
More effective Preliminary testing in ten pilot stores indicated that colour communications printed by the new printers improved average redemption rates by more than 25%, compared to the company's existing black and white coupons.
Buell added: "We are implementing a price increase of two cents per standard colour communication for CMS programmes. The increase in price reflects the improved value and effectiveness of our communications."
Nationwide plans National rollout of the colour printers and their associated software is expected to begin in mid-2006, and be completed by the end of 2007. When the rollout is complete, colour communications are projected to account for more than 85% of the company's coupon distribution.
There are 20 stores involved in the current pilot programme, using colour inkjet printers that match the speed of existing black and white thermal printers. In total there are 140,000 thermal printers that need to be replaced during the nationwide rollout, which will cost some US$100 million to complete.
Financial situation Catalina anticipates investing some US$100 million (mainly in capital expenditures) in the completion of the project. The anticipated increase in capital expenditures in the fiscal year 2007 will increase depreciation expense for the year, as well as future periods. The colour printers will be depreciated over seven years.
According to Rick Frier, Catalina Marketing's executive vice president and CFO, "Although it is still difficult to forecast the full impact of the project because we are so early in the rollout, our current models for the colour printer project forecast that Catalina Marketing Corporation will maintain a consolidated return on invested capital of over 30%."
The company has previously warned that its investment in the colour printer project will put pressure on its operating margins, with the largest impact being felt in the initial year of rollout. Taking other factors into account, CMS expects its operating margins to be negatively impacted by up to 5 - 7 percentage points in the fiscal year 2007, while returning to more normal levels in 2008.