Strategy How to Use Selling Expense Ratios

It's not unusual for 15 percent or 20 percent of the current customer file to account for half or more of the sales from any given mailing. In fact, I see approximately 25 percent of total revenue often coming from 5 percent to 10 percent of the customers. The selling expense to sales ratio would be pretty low if you only were able to focus on these segments of the housefile. While circulation to the housefile needs to be expanded beyond this level, you need to be careful to avoid mailing too deep or too often to certain segments of your housefile. This is why it's important to properly segment the housefile and to mail by recency, frequency and monetary value (RFM). The more you dilute the results from your top tier customer group, the more you'll increase the selling expense to sales ratio. And, the more you increase the selling expense to sales ratio, the less profit you'll see on the bottom line.