March 30, 2008

Part 3: What If Catalog Prospecting Stopped Because Of Do Not Mail Legislation?

In part one of this series, we explored how rapidly a catalog brand implodes when prospecting is discontinued. In part two of this series, we got to see the bottom of the pit, with the majority of employees being laid off from a crippled catalog business.

Light At The End Of The Tunnel

Most catalogers shudder at the thought of third parties telling them how to run their business. In reality, the third parties wouldn't exist if customers weren't frustrated. Do not mail legislation wouldn't be a possibility unless customers were tired of their mailbox being stuffed with advertising they weren't interested in. So this is a reality that we helped create via our actions.

But there is light at the end of the tunnel! The reality is that there is an online channel, a channel that allows customers to purchase from catalog brands, regardless whether catalog advertising exists or not.

Take a look at the profit and loss statement from years four and five of the simulation. Please click on the image to enlarge it.

Notice that the business is finally growing. Yeah!!

What happens is that the catalog side of the business hits rock bottom. Customers who are no longer mailed catalogs trickle over to the online side of the business, purchasing small amounts without advertising. The end result is a business that is beginning to become profitable again.

Of course, the business is sixty percent of the size it was five years ago. But that's the consequence of not prospecting via paper for a long period of time.

From this point forward, this is an online brand. In reality, the brand could quit mailing catalogs, as the entire exercise of mailing catalogs to loyal phone customers only breaks even.

In part four of the series, we'll talk a bit about the strategic implications of this simulation.

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