Evaluating The Segment

In the catalog world we are seeing a "paper panic".

Let's pretend that we have a segment of 10,000 customers.

• The organic percentage (you actively measure this, right?) is 50%. In other words, 50% of what a customer will spend in October has nothing to do with catalog marketing.
• The customer has a 3% chance of buying in October, and will spend $100 if the customer purchases.
• A mailed catalog costs $0.70.
• 35% of sales flow through to profit.

We now know what the segment looks like with/without paper.

• With paper = 0.03 * $100 = $3.00. Profit = $3.00*0.35 - $0.70 = $0.35 profit.
• Without paper = 0.50 * 0.03 * $100 = $1.50. Profit = $1.50*0.35 = $0.53 profit.
• Total profit gain = 10,000 * 0.18 = $1,800.

You will generate MORE profit by NOT mailing this customer a catalog.

Now, in theory you'll also look at what you lose long-term by not converting 150 customers. If you lost $8.00 future profit (i.e. next 12 months) because you didn't convert 150 customers, then you lose 150*8 = $1,200 of future profit.

• Gain $1,800 today.
• Lose $1,200 in the future.
• Net Relationship = Positive.
• Result = Don't mail the segment.

Don't let a crisis go to waste, folks. Wean yourselves off of print where appropriate, invest your advertising dollars elsewhere.