Growing profits by planning ahead

Jun 01, 1998 9:30 PM  By

Business consultants consider three years the standard time frame of a strategic plan, a fundamental tool of entrepreneurs and managers. Yet many catalogers, particularly the smaller and midsize companies, plan only as far ahead as the next mailing.

These catalogers may feel that they’re spending so much time and money on day-to-day challenges that they have no resources left for long-term strategic planning. But two midsize catalogers, Hello Direct and Territory Ahead, that recently devised their first long-term strategic plans say the effort is well worth it.

Telecommunications products mailer Hello Direct used an outside “facilitator” (it won’t specify whom) to help formulate its plan. “You need someone focused to help you through the process; otherwise you’ll ramble on,” says Ray Nystrom, vice president of operations and chief financial officer for the $51.6 million b-to-b cataloger.

The San Jose, CA-based company examined its product mix, channels of distribution, cost of acquiring customers, and cost of order fulfillment to create both a one-year and a three-year strategic plan. Although Hello Direct won’t divulge the details of the process, Nystrom says that in the end, the company decided its most profitable strategy would be to focus more on its proprietary headset and speakerphone products, which currently account for 51% of its business. The company intends to invest more in research and development to develop and support those products.

Hello Direct also concluded that it should focus more on its profitable outbound telemarketing program. In 1997, outbound telemarketing accounted for 20% of sales; the company is refining its operations in hopes of increasing that to 30% by the end of ’98.

Anticipating growth Upscale casual apparel cataloger The Territory Ahead says it beta-tested a strategic planning program offered by its service bureau, St. Paul, MN-based Catalog Marketing Services (CMS) and used the results to set its ’98 budget. The program, which uses Excel spreadsheet software, features a large number of variables that the $30 million mailer can alter to see how they will affect sales, profits and buyer counts, among other things.

According to Mark Gallo, vice president of catalog marketing, The Territory Ahead is analyzing the effects of sales growth rates of 10%, 20%, and 30% over the next three to five years. The cataloger is also exploring the effects of adding catalog pages, mailing more or less deeply into the house file, and assorted prospecting scenarios. “The planning model either supports or refutes what our expectations are for a three-year business plan, so it’s really a tool to support long-term planning,” Gallo says.

Because the Santa Barbara, CA-based mailer has experienced 25%-plus annual growth, it felt it could benefit from testing the CMS program. “At this stage, in terms of size, we need to have more discipline,” Gallo says. The company had had a “cursory” long-term plan, he adds, but the CMS program made it more “sophisticated.”