December 16, 2019

Cut Back 10%, Make More Profit

So your traditional catalog brand that has been around since 1978, a brand that survived the dot-com crash and anthrax in the mailbox and a Great Recession is finally taking on water. Executives blame Amazon. A thirty-four year old named Hailey has a lot of answers and nobody will listen to her. Somebody on an "advisory board" (nobody will pay anybody to be on a real board) thinks catalogs are making a comeback and has a 42 page study from a paper brand proving that the future is bright.

You perceive that you are the only person possessing "common sense" in your brand. So you run a simulation. You measure the five year trajectory of your brand as-is, and you measure it if you cut back on housefile mailings by 10%, straight across the board. Granted, you'd never execute this way, but you need to paint a picture to Management regarding what the business "could" look like.

Here's your base case.

And here's a five-year simulation of what your business looks like if you cut back by a straight 10% across the board, across the 0-48 month file.

Over five years you give up just $1.8 million in housefile demand (and this is for a business with a 24% organic percentage ... your organic percentage is likely to be considerably higher). You save $900,000 in ad cost. You increase profit by $110,000 in total.

If you share this with somebody ... heck, just about anybody ... you'll learn that NOBODY CARES. The difference isn't enough to motivate anybody to change.

Tomorrow we'll discuss the "optimal" housefile solution.

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