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It costs money to add new buyers to your housefile. In fact, very few catalogers can prospect at breakeven (which we will define shortly). Therefore, new buyers are added to your housefile at an incremental loss to your bottom line. Prospecting for new buyers must be cost justified based on their lifetime value. For purposes of definition, it is important to understand the difference between a buyer and a customer. A buyer is someone who has purchased one time only. A customer has made more than one purchase. Obviously, you have to have buyers before you can have customers. While it is important to

Two things are common to many database marketers. First, they can measure acquisition cost well (what it takes to turn a prospect into a customer), but they don’t employ a sound method of judging lifetime value (LTV). Second, they emphasize prospecting rather than retention/cross-selling/upselling. The combination of these two traits, measuring acquisition but not LTV and concentrating on prospecting rather than retention, often leads to profitability problems when testing new media. For a “traditional” cataloger, who sells only through direct mail and prospects only with rented lists, there can be a major difference in the long-term profitability of buyers from different sources. For

Several years ago I went to Peter, my doctor, for a routine checkup and saw some colorful boxes on the end of the counter. Patricia, the office manager and Peter’s wife, said they were dietary supplements for people over the age of 50. “Should I get them?” I asked. “I take them and I feel wonderful,” she said. “Do you and Peter get a piece of the action?” She said she did, which I had no problem with. So I ordered LifePak Prime for my wife Peggy and myself—60 little cellophane packages, each with four horse pills to be taken twice a day with