Making a Plan: How to Develop Three-year Projections
1. Add in each segment’s response rate to your AOV and the number of times you expect to mail it. If seasonality plays a role in your response rates, you may have to run two, three or more sets of parallel numbers. With these figures, you have a first pass at your sales and orders from your housefile.
2. Based on the formulae and projections you’ve just created, repeat the process to develop a plan for the next two years. This spreadsheet is your template for your three-year plan.
If you calculate your projections to flow from cell to cell in your spreadsheet, you’ll see that your housefile grows with more prospecting and declines with less.
Fill That Bucket
3. Any cataloger’s housefile essentially is a leaky bucket. Regardless of your best efforts, some customers will migrate down the recency scale into reactivation and finally into segments that aren’t profitable to mail. If you never prospect, your file likely would shrink to a fraction of its current size. To grow a company, fill the top of the bucket with names faster than they leak out of the bottom. This is why prospecting is essential.
4. Based on your successful prospecting, calculate your known prospect universe count. This number indicates the total number of proven prospects available to you. Multiply each list count by the number of times you expect to mail it every year to calculate the number of prospect pieces from continuations.
Keep in mind that it’s difficult to know what kind of growth or decline your prospecting continuation counts will see in the future. But the history of these files will give you an indication of this. If you see steadily growing counts, project growth based on that percentage. If you see a decline, you’ll want to take that trend into account. Once you enter your continuation count into your spreadsheet, you have a reasonable financial projection of what’s possible based on known factors.
A columnist for Retail Online Integration, George founded HAGUEdirect, a marketing agency. Previously he was a member of the Shawnee Mission, Kan.-based consulting and creative agency J. Schmid & Assoc. He has more than 10 years of experience in circulation, advertising, consulting and financial strategy in the catalog/retail industry. George's expertise includes circulation strategy, mailing execution, response analysis and financial planning. Before joining J. Schmid, George worked as catalog marketing director at Dynamic Resource Group, where he was responsible for marketing and merchandising for the Annie's Attic Needlecraft catalog, the Clotilde Sewing Notions catalog, the House of White Birches Quilter's catalog and three book clubs. George also worked on corporate acquisitions.