March 04, 2012

Dear Catalog CEOs: What Would You Take?

Dear Catalog CEOs:

Recently, I polled folks on Twitter, asking them a simple question.
  • "If your analyst came to you with a $500,000 profit opportunity, or came to you with an opportunity to increase conversion rate by 12%, which would you prefer?"
You're the CEO ... what would you prefer?  One opportunity has no context around sales growth, one opportunity says nothing about how much it would cost to increase conversion rate.

On Twitter, not one person said "profit".

Everybody is a VC these days, trying to "scale", trying to dominate a world that is likely to be dominated, in the short-term, by Google, by Amazon, by Apple, and by Facebook.

I recently met an owner of a $3,000,000 online business.  He told me he made $300,000 profit last year.  Another individual said to him, "Wouldn't you rather be a ten million or twenty million dollar business, wouldn't it make sense to forego profit and try to scale?" ... as if earning $300,000 a year isn't desirable.

When it is somebody else's money, you want for that person to "scale".

What about when it is your money?

In the past decade, personal savings dropped to 0% (personal savings, of course, are the household version of profit).  Maybe we've forgotten how to even calculate profit?

Right now, many of us are losing the profit and loss game.  We're spending 25% of net sales on putting catalogs in the mail before we ever get paid back with a dollar of net sales.  This was a good strategy in 1990, because it was the only game in town.

Newer business models are mastering the "two-step" process ... generating an inexpensive list of prospects that can be mined for purchases.  We pay up-front in the co-op model, newer models pay bills at the time of a click or transaction.

It seems like there's an opportunity to watch what folks are doing right now.  Maybe we can improve conversion rate by 12% and increase profit by $500,000!

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I See Dead People

From LinkedIn, where I wrote this on Sunday: