March 02, 2020

Adjusting Ad Spend / File Power

Folks are in a froth about the potential for a global pandemic ... both from a health standpoint and from a business standpoint.

We do not know whether "nothing" will happen, or "something" will happen, or "something awful" will happen.

We do know that people will react, regardless.

Pay close attention to your daily sales totals, and compare them to your forecast. In the next few weeks, you might see a downturn in sales.

When a downturn in sales happens, it is common for there to be consequences.

  1. Sales disappear, and the do not return.
  2. Sales are suppressed for a week/month, and then sales reappear so that in total there is minimal impact on the business.
This issue is directly tied to File Power. If sales reappear, you do not lose File Power. If sales disappear, there is a chain of events that transpire that further impact File Power.
  1. Marketers will cut back on marketing budgets to align the expense structure with the downturn in sales. This hurts File Power, making it difficult to grow the business later this year.
  2. Marketers incorrectly cut back on marketing spend with new/reactivated buyers, making it difficult to grow the business in subsequent years.
Catalog brands (about 35% of my audience) have a unique advantage ... they can cut back on marketing spend and have minimal impact on top-line volume ... consequently, minimal impact on File Power.
  • If your in-house staff can accurately measure your Organic Percentage and then cut back appropriately on catalog ad cost, have them prepare the methodology RIGHT NOW so that you can act when the time is appropriate.
  • If your in-house staff cannot accurately measure your Organic Percentage, have me measure it RIGHT NOW (at an individual customer level) so that in a month or three months you can act in a way that doesn't hurt your top-line but aligns business expenses with a potential downturn in sales.
The key, of course, is to act RIGHT NOW so that you are ready to pull the trigger if sales should decline. Make sure you protect future File Power ... you don't want to pile problems on top of each other.

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