Catalogue Circulation Planning & Finance

Ray Morris-Hill

Ray Morris-Hill Associates

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How do we plan a circulation?

• Start with your database

• Maximise the profitable mailings to house file

• Determine the available recruitment activity and the likely costs of recruiting buyers

• Mail prospects to the point of acceptable cost per buyer

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Simple Database Segmentation

• Buyers versus Enquirers

• Recency: 0-6 months, 7-12 months, 13-18 months etc

• Frequency: 1, 2, 3+

• Monetary: 0-£50, £50-£100, £100+

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Database Example - Buyers

Recency 0-6 mths 7-12 mths 13-18 mths Total10,512 7,658 4,562 22,732

Frequency 1 time 2 times 3+ times Total15,431 6,254 1,047 22,732

Monetary 0-£50 £50-£100 £100+ Total4,526 16,538 1,668 22,732

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Buyer Circulation - Example

• Mail all our buyers in first drop - 22,732

• Remail all buyers in second drop - 22,732

• Remail best buyers in third drop - 10,000

• Mail hot line buyers in drops 2 and 3 - TBD

• We expect all these buyer mailings to be profitable

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Database Example - Enquirers

• 0-6 month enquirers – 6,523

• 7-12 month enquirers – 4,542

• 13-18 month enquirers – 3,754

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Enquirer Circulation - Example

• Mail all Enquirers in Drop 1 - 14,819

• Mail 0-6 month Enquirers in Drop 2 - 6,523

• We expect all these enquirer mailings to be profitable

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Prospect Circulation

• Only time to consider lists here

• Rank list history by the profit or loss of acquiring a new buyer

• Determine cut-off point by pay back criteria

• Maximise roll-out to successful lists remembering statistical variation in results

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Payback Criteria

• What is an acceptable cost of acquiring a buyer?

• Depends on propensity to buy again and the profit from those future orders

• If I recruit 1,000 new buyers today and mail them my catalogue programme, how much profit will I make over the next 6 months?

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Sample Answer to Payback Question assuming 3 mailings in next 6 months

Mail Spring Catalogue Drop 1 1000 @ £15.00/book Demand £15,000Profit £5,000

Catalogue Costs (£500) Net Profit £4,500

Mail Spring Catalogue Drop 2 1000 @ £9.00/book Demand £9,000Profit £3,000Catalogue Costs (£500)Net Profit £2,500

Mail Spring Catalogue Drop 3 1000 @ £4.50/book Demand £4,500Profit £1,500Catalogue Costs (£500)Net Profit £1,000

Total Profit in next 6 months from 1,000 buyers is £8,000 - £8 per buyerIf it cost more than £8 per buyer to recruit, payback will be longer than 6 months

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Prospect Circulation ExampleList PLANB Action Quantity

A – 0-12 +£3 Mail all available on same select 30,000

B – 0-12 -£4 Mail all available on same select 25,000

C – 0-12 -£8 Consider tighter select 10,000

D – 0-12 -£12 Consider re-test with tighter select 6,000

E – 0-12 -£20 Drop -

A – 13-24 Not tested Test extension 6,000

F - 0-12 Not tested Test 6,000

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Gross Net Sales Average Demand OrdersQuantity Quantity per Book Order

Drop 1 01-Feb

Buyers 0-6 10,512 10,512 15.00£ 80£ 157,680£ 1,971 7-12 7,658 7,658 8.00£ 80£ 61,264£ 766 13-18 4,562 4,562 5.00£ 80£ 22,810£ 285

Enquirers 0-6 6,523 6,523 3.00£ 75£ 19,569£ 261 7-12 4,542 4,542 2.00£ 75£ 9,084£ 121 13-18 3,754 3,754 1.50£ 75£ 5,631£ 75

External ListsA 0-12 30,000 25,500 2.20£ 70£ 56,100£ 801 B 0-12 25,000 21,250 1.50£ 70£ 31,875£ 455 C 0-6 10,000 8,500 1.20£ 70£ 10,200£ 146 D 0-6 multi 6,000 5,100 1.20£ 70£ 6,120£ 87 A 13-24 6,000 5,100 1.35£ 70£ 6,885£ 98 F 0-12 6,000 5,100 1.20£ 70£ 6,120£ 87

Drop 2 15-Mar

Buyers 0-6 10,512 10,512 9.00£ 80£ 94,608£ 1,183 7-12 7,658 7,658 4.80£ 80£ 36,758£ 459 13-18 4,562 4,562 3.00£ 80£ 13,686£ 171 Hotlines 1 1,000 1,000 4.00£ 80£ 4,000£ 50

Enquirers 0-6 6,523 6,523 1.80£ 75£ 11,741£ 157

Drop 3 01-May

Buyers 0-6 10,512 10,512 4.50£ 80£ 47,304£ 591 7-12 7,658 7,658 2.40£ 80£ 18,379£ 230 Hotlines 1 1,000 1,000 1.80£ 80£ 1,800£ 23 Hotlines 2 1,000 1,000 4.00£ 80£ 4,000£ 50

Grand Total 170,976 158,526 3.95£ 78£ 625,615£ 8,068

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Summary

• Start with your own database• Maximise profitable buyer mailings• Maximise profitable/acceptable enquirer

mailings• Evaluate acceptable loss per new buyer• Rank lists by profit/loss of acquiring a new

buyer• Mail prospects down to acceptable loss

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Further Information

Ray Morris-Hill3 Bickley Court 12 Southlands GroveBickley Kent BR1 2BZ

Telephone/Fax: 020 8464 2545

Email rmh@dial.pipex.com