When economic times are hard, it’s tempting to call a halt to prospecting in order to conserve cash. Sounds harmless enough, but think twice before you do. Unless you replenish the buyers you lose to attrition, it’s amazing how fast you can dig yourself into a hole that’s awfully tough to climb out of. Here’s what I mean:
Let’s assume you have a catalog with 100,000 buyers, and your average order size is $50. Let’s also assume that 80% of them buy from you every year, a very good retention rate. Even so, look what happens:
Current: 100,000 buyers, $5,000,000 sales
Year 1: 80,000 buyers, $4,000,000 sales
Year 2: 64,000 buyers, $3,200,000 sales
Year 3: 51,200 buyers, $2,560,000 sales
In only three years, the business is down by nearly half! If your retention rate is less than 80%, then the plummet is even worse.
Or course, when you start prospecting after a significant drop like that, budgets are smaller and the trip back up to your former level can take much longer than the trip down. If you must make budget cuts, think twice before you include prospecting among them.