You're told that if you are more strategic, if you execute better, you will increase productivity and cover the paper / printing / postage costs that come at you unabated.
Here is the optimized solution with a 12.5% ($0.10 per book) ad cost increase.
Optimal strategy drops from $9.18 profit at 12 catalogs to $8.17 profit at 9 catalogs.
We need to add merchandise productivity to offset the increase in ad cost if we want to get our profit back. We can do that in theory - let's do that in theory here. How much merchandise productivity do we need to get back to an equal amount of optimized profit?
We need average $/book to go from $3.50 to $3.71 (+6%). If that happens, we get back to $9.18 profit ... but something else happens ... optimal catalogs are at 10 instead of 12, meaning we generate $45.44 demand per customer for the year in this segment instead of $46.96 ... we give up a bit of top-line to get a bit of bottom-line.
In other words, a 6% merchandise productivity gain offsets the 12.5% ad cost increase, but results in two fewer catalogs being mailed (10 vs. 12) which leads to less top-line demand.
Paper / Printing / Postage increases set off a chain reaction of events, none of which will be positive for anybody.
1 - The optimal profit strategy for my clients is to reduce annual contacts and/or reduce pages per contact.
2 - The optimal profit strategy for my clients is to shift dollars out of print into digital, accelerating a twenty-five year transition. Many companies have completed the transition (hint - Orvis). Other clients are well into a major shift in strategy.
3 - All of this ultimately ends badly for advocates of Paper / Printing / Postage.
4 - Blaming my clients for not being strategic, for executing poorly, represents an amazing level of hubris - given the ones doing the blaming are the ones forcing this accelerated transition upon my clients.
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