Changing the Business Model
We separated 200,000 non-buying sweeps members from the 150,000 good and loyal customers that made up our bread and butter. It turned out that the percentage of the 150,000 buying customers that took the main selection was more like 50% than the 70% that was forecast. In other words, instead of printing 265,000 copies of a main selection, the actual number of books sold—50% of 150,000 members—was more like 75,000.

Understand, if you can send a mailing and get a 50% response, it's hugely profitable—but not when you're spending $1.5 million a year circularizing 200,000 people who don't buy anything and overprinting 2.8 million books that don't sell.

I wrote a long, thoughtful memo to Meredith management explaining the lose-lose arithmetic of the current business model and telling them what I planned to do:

1. Write the 200,000 nonbuying members a warm, fuzzy and highly flattering letter to be included with the next mailing cycle. It would say that we loved having them as members, but since they had not bought anything in a year, this was going to be the last offer they received unless they placed an order. Virtually all of the 200,000 nonbuying members went bye-bye.

2. Cut the print orders for main selection from 265,000 to 75,000. Alternate selection print orders were commensurately cut.

3. Put the 200,000 sweeps-sold names on the list market as sweeps responders (as opposed to active book club buyers) so we could get a little bit of our money back.

4. Test a series of acquisition mailings and space ads that featured yummy premiums rather than sweepstakes. This would acquire readers as new members, rather than the freebie scavengers at the bottom of the mail order food chain.

5. Include in the monthly mailings a series of tacky flyers on newsprint announcing a huge warehouse sale with books starting at $1—cash only.

6. Call Nat Wartels of Crown Publishers, who was a major buyer of remainder titles for sale in his various outlets, and offer him titles at pennies on the dollar.

Next Week: More changes in the business model and the uproar that rippled through meredith.