Catalogue Circulation Planning & Finance

1. Catalogue Circulation Planning & Finance Ray Morris-Hill Ray Morris-Hill Associates

2. 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 Ray Morris-Hill Associates

3. 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+ Ray Morris-Hill Associates

4. Database Example - Buyers Ray Morris-Hill Associates

5. 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 Ray Morris-Hill Associates

6. Database Example - Enquirers • 0-6 month enquirers – 6,523 • 7-12 month enquirers – 4,542 • 13-18 month enquirers – 3,754 Ray Morris-Hill Associates

7. 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 Ray Morris-Hill Associates

8. 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 Ray Morris-Hill Associates

9. 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? Ray Morris-Hill Associates

10. Sample Answer to Payback Question assuming 3 mailings in next 6 months Mail Spring Catalogue Drop 1 1000 @ £15.00/book Demand £15,000 Profit £5,000 Catalogue Costs (£500) Net Profit £4,500 Mail Spring Catalogue Drop 2 1000 @ £9.00/book Demand £9,000 Profit £3,000 Catalogue Costs (£500) Net Profit £2,500 Mail Spring Catalogue Drop 3 1000 @ £4.50/book Demand £4,500 Profit £1,500 Catalogue Costs (£500) Net Profit £1,000 Total Profit in next 6 months from 1,000 buyers is £8,000 - £8 per buyer If it cost more than £8 per buyer to recruit, payback will be longer than 6 months Ray Morris-Hill Associates

11. Prospect Circulation Example Ray Morris-Hill Associates

12. Ray Morris-Hill Associates

13. 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 Ray Morris-Hill Associates

14. Further Information Ray Morris-Hill 3 Bickley Court 12 Southlands Grove Bickley Kent BR1 2BZ Telephone/Fax: 020 8464 2545 Email rmh@dial.pipex.com Ray Morris-Hill Associates