Problem #1 With Digital Marketing

FYI - yesterday's quiz apparently sent some of you to the unsub button. It's not my fault you don't know the answers to the questions ... that's on you!

On to today's topic.

Here's actual data, showing the twelve-month rebuy rate of newly acquired buyers based on how many items were purchased in a first order. Tell me what you observe.

Customers buying just one item have an approximate 30% chance of buying again in the next year.

Customers buying multiple items have ever-increasing chances of buying again in the next year ... nearly a 40% chance for those with three items purchased.

I know, I know, this is the point in the program where you tell me that you have an automated AI-infused cross-sell and up-sell program. Good! Now why the heck does it do such a poor job?

Your AI-infused program might not be doing a bad job. Your source of new customer traffic might be responsible.

For instance, look at these results from recent work:

• New Customers via Catalogs = 43% purchased multiple items in a first order.
• New Customers via Email Marketing = 44% purchased multiple items in a first order.
• New Customers via Google = 33% purchased multiple items in a first order.

Repeatedly, I see instances where the marketer goes for the easy win ... paying Google/Facebook to do the heavy lifting ... those channels are doing heavy lifting ... they're identifying customers who want a specific item at a specific point in time. Those channels have no responsibility to send you a quality prospect, they are responsible for sending you ANY prospect. You don't want ANY prospect.

It's your job to identify prospects who want to buy from your full assortment, both today and in the future.

Do you see the difference? It's an alignment issue ... your marketing efforts are not aligned with subsequent success efforts.

When I measure companies with low long-term value, it's frequently because of the decisions marketers made 1-3 years ago to acquire easy-to-find customers who want an item at a point in time instead of acquiring hard-to-find customers interested in a relationship where they buy from your full assortment multiple times.

New Customers

A few years ago I analyzed a business that was struggling with new customers (duh). Upon digging into the information, another issue revealed itself.

• The customers the brand acquired STUNK. They were lousy customers.
• The brand didn't always acquire lousy customers ... the brand changed their marketing strategy and the customers they now paid Google for were not "customers", they were "Google Users" who had a need at a point in time and Google facilitated the transaction.

This isn't the only brand that has problems. In the post-COVID era, there are all sorts of acquisition nightmares taking place. Some of this is facilitated by the easy nature of modern digital marketing. Marketers know the creative and subject lines and offers that attract customers. Marketers have NO IDEA whether the customer being attracted is worthwhile. None. Modern digital reporting is notoriously bad at helping marketers understand what they are doing.

So, let's ask a few questions. Count how many times you answer YES.

Question #1:  Do you know the percentage of new customers who purchase 2+ items in a first order?

Question #2:  On the acquisition order, do you know if your new customers prefer new merchandise more than existing merchandise?

Question #3:  On the acquisition order, do you know if your new customers prefer winning items (best sellers) over hard-to-find items?

Question #4:  On the acquisition order, do you know if your new customers prefer higher price point items than are preferred by your loyal customer base?

Question #5:  On the acquisition order, do you know if your new customers prefer full price items or discounted items?

Question #6:  Do you know if September is a better month than December to acquire a new customer?

Question #7:  Do you know how much worse customers acquired from Google/Facebook are compared to other sources, in terms of future value?

Question #8:  Do you know which merchandise category delivers new customers with the best future potential?

Question #9:  Do you know the percentage of new customers who will repurchase in the twelve-month following a first purchase?

Let's grade your efforts.

• 6+ Yes Responses = You are a very smart marketer and likely know more than most of your peers.
• 4-5 Yes Responses = You are likely an average marketer, good job!
• 2-3 Yes Responses = Talk to your analytics team and get some answers.
• 0-1 Yes Responses = Oh oh.

If you answered "Yes" to only 0-3 of the nine questions, please follow along in upcoming days because issues you have could be connected to your level of knowledge regarding the customers you are acquiring.

Buc-ees

Recently somebody emailed me and said "where have all the customers gone?"

They're at Buc-ee's, founded in 1982, expanding in 2025 like there is no tomorrow.

Let me just start by saying that I thought it was a tad inappropriate to take a picture of the restroom (for obvious reasons) ... but the stunned look on my face when I walked in ... I mean, this is Making America Great Again. I've been in some filthy latrines in all sorts of Shell / BP / Amoco stations this year. I mean, red/green led lights to show you if a bathroom stall is being used? I get it, your CFO will tell you that you don't make money on a modern restroom. Your CFO needs to stop talking.

As you drive in, you notice that no semi-trailer trucks are allowed. None. There was a Loves right across the freeway and Buc-ee's says "you can have those customers, we don't want 'em". Meanwhile, you're taking every customer Facebook will allow you to pay for. Heck, we even saw truckers walking a quarter mile from their rigs to visit Buc-ee's.

The gas pumps ... all three hundred of them (I have no idea what the actual number is, it felt like 300, it wasn't) were generally being used.

Cars packed the parking lot.

Inside, the store is busier than a 1990 Mall the Saturday before Christmas.

Many readers work for apparel brands. You want to know where your customers are? They're inside this store in Amarillo! I walked off the square footage ... 3,000 square feet dedicated to apparel, until my wife told me I missed a section ... 4,000 square feet. 2/3rd the size of a mall-based store. My home town just leveled a mall ... it's time for apartments ... meanwhile, Buc-ee's is reinventing apparel retail.

"But Kevin, I just want to get a bag of Doritos after getting gas." Ok, have at it. They have Doritos. But they prominently feature THEIR in-house brands ... and they merchandise a lot of products!

You'll also find a jerky bar, a candy bar, and essentially an entire restaurant paired with performing employees.

Can I ask you a question? Do you post your salaries anywhere / everywhere for anybody / everybody to see?

The Assistant Food Service Manager is making $80,000 a year.

One of those "strategic leaders" on LinkedIn messaged me about a job paying $180,000 a year, wondering if I'd be interested? The "strategic leader" needs to look at what Buc-ee's is paying a GM and re-evaluate ... well ... just about everything. I mean, if I have to hear one more person tell me that "nobody wants to work" or "young people just don't want to work" ... it's just cruel. It means your work environment does not attract top-level talent. Either your culture stinks, your leadership stinks, you aren't paying enough money, or some combination of all three is true. Look in the mirror.

The people in the Buc-ee's store were working their living butts off ... they had no choice, because customers were just opening their wallets and throwing money at 'em.

Businesses with a heritage that pre-dates e-commerce all decided to jump off the omnichannel deep end ... tethering old with new, forcing sameness everywhere, offering tepid products that are perpetually available and always 30% off or more, focusing entirely on discounts/promotions for success while constantly throwing money at Google/Facebook for customers that have well-below average lifetime value. We called this a "best practice". We were so dumb.

Walk into a Buc-ee's and see what real leaders were doing while we spent decades aligning channels. My goodness.

P.S.:  This is where many of you email me and tell me the reasons why Buc-ee's is "wrong". Here's my email address:  kevinh@minethatdata.com

Accountability

A couple of interesting things I heard in the past month.

1. It's not my fault, our merchants stink.
2. It's not my fault, my industry is dying (looking at you, catalogers).
3. It's not my fault, the CFO asked me to stop spending so much money.

Merchants always stink ... and merchants are frequently brilliant. They have a HARD job. When they fail at their job, it is YOUR job to optimize their failure.

Industries always die. Horseshoeing was a burgeoning industry at one point. In every dying industry, there are winners. Why aren't you a winner in a dying industry?

CFOs always try to reign in spend. It's their job to protect cash. When the CFO takes your budget away, it's your job to optimize what you "can" do. Leverage all the marketing that doesn't cost you anything. There's this channel called YouTube just waiting for you to build an audience. Get busy!

You are accountable. Yeah, you! It may not purely be your fault that your merchants stink, but it most certainly is your fault that you didn't do anything about it.

Doing Something Different

On a recent Supper Club Tour of Wisconsin, one notices all sorts of interesting things.

Yes, I said "Supper Club Tour". Your state doesn't have Supper Clubs. Wisconsin does. People line up outside of dive restaurants at 3:45pm to make sure they get a seat at McGregor's Blink Bonnie.

When you smell the sizzling steak being served ... when you see the smoke wafting nearby, you understand.

Stuff like garlic toast ... sets one place apart from another.

Bakeries serve peanut squares/cake. Ohhhhh boy!

Ishnala, the top Supper Club in Wisconsin, serves five hundred Old Fashioned drinks ... PER DAY! They expect to sell nearly 100,000 OLD FASHIONED drinks this season, at $9.50 each that's nearly a MILLION dollars a year ... on ONE DRINK! You have stores that don't do a million dollars a year selling six hundred styles.

We were told that Ishnala serves six hundred people per day. Our wait was 2 hours 25 minutes on one visit, 2 hours 49 minutes on the second visit.

There were three common themes across our seven-day Supper Club Tour of Wisconsin.

1. Merchandise (i.e. food ... like sizzling steaks with smoke filling the restaurant at McGregor's Blink Bonnie). Good food matters. A lot.
2. Scarcity that forces people to line up well before the restaurant opens because seating is limited. Why accommodate everybody then sit empty most of the time when you could have limited seating that forces people to line up at the door before you open?
3. A "hook" ... something that sets one apart from everybody else.

I'm sure I sound Old Fashioned (see what I did there), but we've kind of lost the plot in the past fifteen years. You see all the YouTubers doing things differently, you go out in the real world and see all these businesses doing things differently ... then we sit here and think to ourselves about how many tepid channels we can sell tepid products in at 30% off??

P.S.:  I frequently think about scarcity these days and how the omnichannel era ruined our businesses by demanding that all products be priced the same in all channels and are constantly available. Wrong! Look at soccer - especially now in the United States. When an MLS team used to share a stadium with an NFL team and put 27,000 people in the stadium it looked like the stadium was 2/3rd empty (it looked that way because it was 2/3rd empty). When an MLS team erected a purpose-built stadium that seated 23,000 fans, you had a sellout and 4,000 people who could not get in. The former situation is an "omnichannel" solution that makes the brand look unloved. The latter situation is a sellout!

P.P.S.:  It only makes perfect sense that if you want to make your email marketing program a robust one that "works", you'd use it to advertise the products that you only bought a few hundred units of ... then you create FOMO via email marketing (and social, the concept would work even better there) that the customer must act now or the items will not be available.

• Try it with a clearance item ... you have 200 of 'em left ... tell the customer that they're at 50% off and they'll be gone in an hour unless the customer acts now. Try it and see what happens. Don't be a Lemonhead!

Uh Oh

It's fifteen months after The Lemonhead was hired.

The results? They aren't good.

• Net Sales are down 12%.
• Comp Segment performance is up 4%, strongly suggesting that existing customers like what the brand is selling.
• New/Reactivated buyer counts are down 25%.
• Loyal buyer counts are down 5% even though The Lemonhead implemented a brand new loyalty program nine months ago.
• The Executive Team didn't earn an annual bonus, and that's a problem because the VP of Operations wanted to buy a new BMW.
• The Marketing Team has been gutted ... a team of eight individuals has been replaced by eleven individuals (three new people to manage the loyalty program) ... three employees from the old regime and five hand-picked mini-Lemonheads hired by The Lemonhead.

Four months later, an announcement is made by the CEO ... "The Lemonhead" is going to leave the company to spend more time with his family. The CEO thanks The Lemonhead for his service and for modernizing marketing efforts. At the same time, the Chief Merchandising Officer is taking a new role with a new line of business that focuses on "the digital customer" (i.e. the Chief Merchandising Officer has been demoted). The CFO will move to a new role to support this new line of business (i.e. she has been demoted).

If you think this story is a parable about modern marketing situations, trust your instincts.

The Damage Is Done Before The Results Are In

The Lemonhead has a playbook, tried and true, tested under the most intense of circumstances. 

It's the exact wrong playbook for 90% of brands, likely including the brand you work for.

The Lemonhead believes in Customer Loyalty. Of course he does ... he worked for a multi-billion dollar brand that sold addictive products on a daily basis ... so of course his formula of applying a loyalty playbook on your brand who sells sundresses that the customer only needs 1x or 2x per year will "turbocharge" your brand.

The Lemonhead immediately ends wasteful "customer acquisition" tactics, saving the brand a fortune. "WHY ARE WE DOING THIS?" The Lemonhead screams. Of course, this angers the long-term employees who know that without new customers the brand will never had loyal customers. The Lemonhead labels these employees "Luddites" ... "THEY DON'T GET IT!"

The Lemonhead celebrates three months in charge with a p&l that looks spectacular. Sales are roughly flat, maybe down a percent or two ("THE MERCHANTS DON'T GET IT!"), but profit is surging.

Everybody in Leadership is pleased with the results.

Several key employees on the marketing team elect to leave the company ("I'm not working for this stupid lemonhead"), taking a ton of institutional knowledge with them.

The damage is done before the results are in.

Next, we review results a year later.