Hillstrom's Optimizer: Short-Term vs. Long-Term Tradeoff

This was our base case.

Last week, I talked about expanding search marketing ... and showed how you can overspend in the short-term to generate long-term health.

The same issue happens in catalog marketing (and in all marketing, for that matter). We have to decide if we want profit today, or sales + profit tomorrow.

For instance, here is a five year scenario if we increase the customer acquisition budget by a factor of 1.8x for five years within catalog marketing.

Look at what happens to top-line sales ... you have a business that is growing ... growing faster than the tepid growth rate otherwise witnessed.

Look at the change in profit. Here is the case where catalog customer acquisition is increased by a factor of 1.8x.

• Year 1 = $7.8 million.
• Year 2 = $9.5 million.
• Year 3 = $10.7 million.
• Year 4 = $11.6 million.
• Year 5 = $12.2 million.
• Net Sales After Year 5 = $141.5 million.
• Five Year Profit = $51.7 million.

Here is our base case.

• Year 1 = $9.2 million.
• Year 2 = $9.9 million.
• Year 3 = $10.5 million.
• Year 4 = $10.9 million.
• Year 5 = $11.2 million.
• Net Sales After Year 5 = $124.6 million.
• Five Year Profit = $51.6 million.

Which business would you prefer to manage in the short-term?

Which business would you prefer to manage in the long-term?

We're not having the right conversations, are we? We look for "Three Tips To Improve Your Instagram Strategy" when we should have a conversation about "What Is Our Strategy"??!!

If you have your own Optimizer spreadsheet, you know what the tradeoffs are, and you've had the appropriate conversations with your Owner/Board/CEO/CFO/Executive Team.


P.S.:  If you love catalog marketing, you'll love this glowing review of cataloger marketing - the Editor promised me that her organization did not receive compensation for this article. (click here).

P.P.S.:  Speaking of folks writing about catalog marketing, here's another piece for your consideration (click here).