From: Jason Katz

To: AZ Hiking Venture corporate headquarters

Date: 3/04/2008
Subject: Electronic Frequent Shopper Program Catalogue Proposal

Executive Summary

AZ Hiking Venture has been growing exponentially over the years. One of the reasons for this
success is greatly due to our Frequent Shopper Program. As the general manager of the Phoenix
store, I have seen this to be true.

However, there is a significant problem with the Frequent Shopper Program that is costing the
company $90,000 a year. This problem comes in the form of the hard copy catalogue that we
mail members of the Frequent Shopper Program once a year. Not only is this a waste of money,
but it is ineffective way of getting the store more income as a majority of the catalogues are
either put in the garbage, overlooked, or outdated when the customer tires to make a purchase.

As a solution to the problem, I propose an electronic on-line catalogue that can only be accessed
by members of the Frequent Shopper Program. This catalogue would be accessible from
anywhere in the world and would be updated four times a year. The initial cost of starting the
website would be $125,000 and then an additional $10,000 for each quarterly update. If
approved, the website would begin construction immediately and would be finished in time to
start the next year.

Problem

The main purpose of the hard copy catalogue is to give our Frequent Shopper Program members
something that all other AZ Hiking Venture shoppers do not get. It is supposed to keep our
members informed about our new and regular items, provide them with the convenience of
ordering from home, and also give them special offers and deals that our normal shoppers do not
receive. Although a good idea, the hard copy catalogue has multiple flaws.

1. Expensive: The catalogue costs the company $90,000 a year to manufacture, produce,
and mail. Over a ten year period, this adds up to $900,000. Also, this estimate does not
take into account the rising price of sending mail, and also assumes that within a ten year
period, we will have the same number of members in the Frequent Shopper Program as
we do today.
2. Inefficient: Since the catalogue is only sent once a year, it also means that it is updated
only once a year. This constantly leads to confusion and frustration among our Frequent
Shopper members and staff. As we all know, our line of products is always changing
throughout the year, which cannot be reflected in the hard copy catalogue. Customers are
 frequently disappointed come middle to end of the year when they find out that the item
or items they were looking for are sold out or no longer one of our carried items.
3. Wasteful: Producing the hard copy catalogue consumes great quantities of materials like
paper and ink. On top of that, the results of a survey taken by my store last year show
that out of all the members in the Frequent Shopper program, half simply put the
catalogue in the garbage and another fourth misplace or lose their catalogue, meaning
those catalogues were a waste of money and resources.

Solution

I propose the creation of an electronic catalogue that would only be viewable by the Frequent
Shopper Members. This catalogue would single handedly fix all above mentioned problems and
add a few bonuses.

1. Inexpensive: Although the initial cost of starting the electronic catalogue would be
significantly greater in the short term than sticking with the hard copy catalogue, in the
long run, the electronic catalogue would be saving the company $375,000 assuming a
fixed cost for both the hard copy and electronic copy of the catalogue.
2. Efficient: Because of its electronic and therefore nonpermanent nature, all mistakes in
the catalogue can be fixed easily and promptly. In addition, the catalogue will be updated
quarterly reflecting all of our product, price, and stock changes. The electronic catalogue
would also add the bonus of being able to order items not only by phone like the hard
copy catalogue, but on line as well.
3. Conservative: Unlike the hard copy catalogue, there would be no need for construction
or materials for a physical item. This also means that there is nothing for our Frequent
Shopper members to lose or discard. The company would also not have to pay the
expensive mailing cost of a heavy hard copy catalogue.

$1,000,000.00
$900,000.00
$800,000.00
$700,000.00
$600,000.00
$500,000.00
Hard Copy Catalogue
$400,000.00
Electronic Catalogue
$300,000.00
$200,000.00
$100,000.00
$0.00
Year  Year  Year  Year  Year  Year  Year  Year  Year  Year 
1 2 3 4 5 6 7 8 9 10
 
Displayed above is a chart of the projected costs of both the hard copy and electronic copy
catalogue. As it shows, in the long run, the cost of the electronic catalogue is far less than the
cost of the hard copy catalogue.

Conclusion

Although the Frequent Shopper Program is a huge success and continues to be, it can still be
made much better by implementing the electronic catalogue in place of the hard copy catalogue.
If the decision is made to accept this proposal, the electronic catalogue will save the company
money in the long run and construction can be started immediately. I will personally oversee all
phases of the website’s construction so it is assured everything is done properly and correctly the
first time negating any chances of potential setbacks or added fees.