Square-inch analysis is a method used by direct marketers to evaluate the profitability of the offers appearing in the pages of a mail-order catalog. The results of square-inch analysis are used to improve the process of assigning merchandise offers to pages and allocating space in future catalogs, a process called page planning or pagination. Theory Direct marketing businesses must record the revenues and profits received from merchandise sales in order to satisfy basic legal requirements and calculate tax liabilities. Sales of individual items must be tracked in order to fulfill customer orders and manage inventories. As a result, the gross profit and profit margin for each item sold can be calculated as a means of determining which items are most profitable to the business and its owners. The costs of producing and distributing mail-order catalogs can also be measured. These costs include graphic design, copywriting, photography, print production, postage, and mailing list rental. These costs are typically tracked and totaled for entire publications, rather than for individual items of merchandise offered for sale on the pages of the publication. Square-inch analysis provides the means of allocating these costs to individual items according to the amount of space their sales offers occupy on pages, on a percentage basis (as measured in square inches). History Space-based analysis of profitability of individual items originated with self-service retail stores. This method of analysis was applied to mail-order catalogs starting in the 1990s, when the popularity of mail-order shopping rose sharply and direct marketers sought to increase their profitability. One of the earliest mentions of this technique in published articles was in 1996. The principles have remained largely unchanged to the present day, but the increasing complexity of interaction between marketing channels (direct mail, mass media, internet, retail) and sales channels (postal, telephone, internet, retail) make precise space-based profitability analyses of merchandise offers more and more difficult to obtain. Rationale The planning stages of catalog production involve assigning merchandise offers and their space allocations to pages in a publication of finite size. Based on an assumption that increased exposure leads to increased customer response, direct marketers seeking to maximize profits will choose to increase the exposure of their more profitable items by increasing the amount of space allocated to their offers. Square-inch analysis provides a means of normalizing the basis on which the profitability of published offers can be compared. Place in Direct Marketing Cycle