More Money Must Come In Than Go Out

Allow me to tell you a brief story.

Last summer (2016), my family drove US-2 across Northern Montana. This is a part of the country that has largely been abandoned by the modern world. That being said, there were two industries that were thriving.

1. Hospitals and Urgent Care Centers.
2. Drive-Ins

But overall, it was clear what was happening. As industry left the small towns along US-2, good paying jobs were hard to come by. And without good paying jobs, there wasn't a lot of money to spread around ... and this caused local businesses to close ... and this drove the small towns into even more trouble. 

Now throw Amazon into the mix - they'll deliver anything in a couple of days to Cut Bank ... so money that would have been spent locally instead goes to Amazon, causing Downtown Seattle to thrive.

Who has a plan to revive a small town along US-2 in Northern Montana?

• The plan would require more money to come into the town than leaves the town.

This brings us to Modern Catalog Marketing ... a situation not fundamentally different than the small towns dotting US-2 in Northern Montana.

• On average, a cataloger pays $25 - $35 of every $100 spent by a customer to various vendors ... with about two-thirds of that going to paper, printing, and postage.
• The printing industry (in particular) uses the money to pay their onerous long-term debt load.

So the cataloger gets to keep $5 of every $100 the customer spends ... while the vendor community gets to keep $25 - $35 of every $100 that a catalog customer spends. More money is going out than is coming in (not really, but you get the point ... too much money is going out).

One of the reasons why Nordstrom has been successful over the past 15 years and has been able to hang in there when business is bad is because they spend very little money with marketing vendors. More money comes in than goes out.

Even Amazon, with advertising you cannot miss, is spending less than 7% of sales on advertising (click here).

How in the heck can you compete with Amazon when you spend an additional $20 of every $100 you take in with print-centric vendors ... while Amazon and other online marketers do not have to do that?

In other words, what could you do if you had an additional $20 of every $100 spent by customers available to you?

This is why I continually ask you to consider the low-cost / no-cost customer acquisition programs that I share on this blog ... programs that my online clients gladly leverage to grow.

Tomorrow, I will share with you scenarios of what business could look like if spending was different. You'll probably disagree with me ... that's fine ... send me an email message (kevinh@minethatdata.com) and I will print your rebuttal provided it is logical and fact-based. You can 100% disagree with me, and that's fine, the industry needs to hear your opinion.