September 03, 2015

Find The Merchant At Your Company Who Is This Passionate

Look at this image ... do you see merchandising passion?

Ok ... because it is the Friday of Labor Day weekend and you're not doing anything meaningful at work anyway ... how about taking eight minutes to watch this video ... click here please!

There are two examples of merchandising brilliance in this video.
  • The bread guy ... do you think this person loves the merchandise (bread/butter) he sells?
  • How about the professional who created the video ... Liza de Guia (follow her on Twitter here)? As she signs off, she labels herself a "Storyteller". Amen!
Find the merchant at your company who cares as much as the guy baking bread. Find the merchant at your company who cares as much as the professional who made the video. Let that person run wild!

September 02, 2015

Product Breadth

It is very difficult to see the impact of product breadth via digital analytics. Very, very difficult.

Here's how a lot of this stuff works. Let's say you only offer one product line (Widgets). Last year, you had 100 customers purchase widgets. In the next twelve months, of the 100 customers who purchased widgets, 40 purchase again. Your job, as a marketer, is to find at least 60 new+reactivated buyers to keep widgets moving forward.

Somebody in Management, or somebody in your merchandising organization ... somebody decides it is time to sell Wudgets.

It is here, now, that things get interesting.

No longer do 40 of 100 widget buyers purchase widgets. Nope. Now, 25 of 100 widget buyers buy widgets. 10 of 100 widget buyers purchase widgets and wudgets. And, importantly, 10 of 100 widget buyers switch over to wudgets. Also interesting ... it becomes harder to find enough new+reactivated widget buyers to fuel the business ... in the short term, because now customers have to choose between widgets and wudgets. Finally, the wudgets product line brings in new customers as well.

The following year, the two product categories find and equilibrium. In most cases, one of the product lines becomes primary, the other secondary. In most cases, one of the product categories does the new customer heavy lifting, while the other product category siphons off customers from the category doing the heavy lifting.

It is the management of these dynamics that is so very interesting. When done well, the impact is multiplicative. When done poorly, the impact results in cannibalization of product categories.

Once you understand the dynamic, you can grow many categories by simply growing one category. When I worked at Nordstrom, the family and team intuitively knew how these dynamics worked - they didn't need my geeky math to tell them that Womens Shoes and Cosmetics brought the customer into the business, satisfying customers that then migrated into Accessories or Apparel or whatever.

Amazon takes product breadth to amazing extremes. They are an example of a multiplicative pattern.

Most retailers are going in the opposite direction ... the omnichannel movement results in significant inter-channel and inter-category cannibalization. Few of the experts understand this dynamic - but it is lying there in plain sight - for if the dynamic were multiplicative, retailers would experience overall 20% gains, year-over-year. Instead, online grows and retail shrinks - certain in-store product categories die as their demand is pushed online - and the slow death experienced there results in fewer customers buying from other in-store categories - resulting in smaller and smaller store formats. Again, too few of the experts understand this dynamic. Almost nobody measures it. And it lies there, in plain sight, waiting to be discovered.

September 01, 2015

New and Risky

I once worked with a company that launched a new business. The new business went from three million to eight million to seventeen million to twenty million ... and then ... it stalled. The brand killed the business, as the business was losing money. We'll never know if the business could have made it through the dip.

Way back in the late 1990s, when I ran circulation at Eddie Bauer, we introduced new creative - younger models, branding, less product density. It was a disaster ... -10% across the board. It is very painful to lose $60,000,000 demand and $15,000,000 profit because of creative changes. Very painful. No bonuses for managerial employees because of the decisions of two or three people. Twelve to eighteen months of pain is all it takes before you reverse course ... and then it's terribly hard to make up the $60,000,000 demand and $15,000,000 profit. But, again, we'll never know if you lose $60,000,000 demand every year, or if in three years, you are posting $90,000,000 positives once customers get used to the change.

The great sadness of the "data driven" era is that we simply cannot afford to measure success on a long-term basis. And as a result, we''ll never know if changes can work, because we kill off the changes before they every get a chance to work.

One company told me that they instituted a huge change to their website ... posted -20% for about three months, then flat performance, then positives, so that by the end of the year, the results were positive. Now, in a short-term data-driven world, you'd never ever get the opportunity to see that the outcome could become positive, because some data-driven analyst would kill off your initiative and potentially cost you your job in the process.

New = Risky. We may need to give new a longer chance to succeed.

August 31, 2015

Netflix and Merchandise Forensics

You pay attention to stuff happening in other industries ... stuff that matters to you ... right?

Like Netflix losing movies like The Hunger Games? (click here).

There is a difference between giving your customers "The Hunger Games" and creating your own series for viewing on Netflix. It's akin to Nordstrom creating their own products, or selling Coach. Your own products are riskier, but if they work, they are much more profitable.

The quote about "exclusive to Netflix" is really key. There has to be merchandise that locks the customer in to Netflix, or eventually, Netflix becomes Blockbuster, right?

And you read the stuff about TV ratings falling because viewers are watching TV reruns on Netflix. That's another interesting merchandise dynamic ... Netflix doesn't control the merchandise there, either.

In television, it's called a "Golden Age" due to quality. There are likely to be over 400 new series introduced in the Fall 2015 - Spring 2016 season. New ones. New merchandise, if you will.

Every client I work with who is succeeding does so via knowing the right mix of new and existing merchandise. On average (there are exceptions - continuity programs come to mind), these businesses over-value the importance of new items, and are rewarded for their short-term investments with long-term success.

August 30, 2015

Reinventing Lands' End: A Discussion With "Catalog" Craig Paperman

Let's try a different approach when discussing the branding changes happening at Lands' End. We'll have a discussion with a fictional catalog marketing expert - a person named "Catalog" Craig Paperman. Heck, we can bring Craig back into the mix for other catalog-centric discussions. It might be fun.

Are you ready?


"Catalog" Craig Paperman: This might be the dumbest thing I've ever seen.

Kevin: What's that?

Craig: The new Lands' End catalog. What a flippin' disaster.

Kevin: Why is it a disaster?

Craig: Branding spreads? Low product density. Models thirty years younger than their core customer. It is as if they've lost their mind.

Kevin: Looks like the dog deflated the soccer ball.

Craig: It is the dumbest thing I have ever seen in cataloging. Guaranteed. Period.

Kevin: You're offended, aren't you?

Craig: I've been in catalog marketing for almost forty years. I wrote COBOL code to accept credit cards in 1980. Those were the days. I've seen every possible variant of a branding strategy invade catalog marketing. None of them work. None. Somebody who is fully disconnected from the real business of catalog marketing has a vision, they put their vision into practice, avoiding best practices in an effort to be "aspirational", and next thing you know sales drop by 20% and the Executive team is thrown out of the building and the former CEO is on CNBC telling pundits all the reasons why employees refused to change. "It's their fault".

Kevin: But they're saying you can still buy the same merchandise you've always loved. Just go online and buy it.

Craig: But the catalog IS Lands' End. It is who they are.

Kevin: It isn't.

Craig: It is!

Kevin: The catalog is who Lands' End was. Back in 1980. In the days of COBOL.

Craig: Oh stop it. Catalogs are a powerful tool in the omnichannel marketing mix.

Kevin: If catalogs are so valuable, then why did Lands' End, maybe one of the two or three greatest catalog marketers of all time, observe a sales decline (click here) in the past fifteen years and see their market capitalization cut in half, even though they kept mailing catalogs and they dove head-first into discounts and promotions and expanded into retail? They did everything pundits like you told them to do, and it backfired.

Craig: The economy didn't help.

Kevin: That economy helped Amazon. eBay. Overstock.com. Newegg. Warby Parker. Zappos. 

Craig. Stop it.

Kevin: But you see my point?

Craig: Somewhere outside of Building 5 in Dodgeville, there is an Inventory Manager who is throwing up into a dumpster trying to figure out how to forecast sales from a branding strategy where one item is featured on a full page spread, worn by an angst-ridden thirty-one year old model suffering under the appalling pall of grey skies. How do you forecast that? Do you take 10% of last year's demand figure?

Kevin: I wouldn't want to be the marketing sales forecasting manager. If business doesn't meet expectations, it's going to be her fault.

Craig: The new CEO doesn't know anything about catalogs, and she doesn't know anything about classic adult apparel. She's out in front of her skis.

Kevin: Might she have skills that are more valuable than traditional catalog skills? Might her prior experiences be exactly what Lands' End needs at this point in time? Who are you to decide what Lands' End needs?

Craig: If she had half a brain, she'd never ruin a catalog by turning it into a festival of urban Millennial branding.

Kevin: But Lands' End has thousands of employees who know every aspect of catalog marketing inside-out, right?

Craig: Absolutely! They're the best.

Kevin: And yet, the very best minds in the industry couldn't grow the business in the past fifteen years. So what good was all of that knowledge?

Craig: Sears ruined them.

Kevin: Why is it always somebody else's fault? Is it possible that catalog experts struggle to deal with a world where more than half of all online traffic is from mobile devices?

Craig: I have clients where 15% of the orders are mailed to the call center with a check. I'm not sure where you get these mobile stats from.

Kevin: Please wait four to six weeks for delivery.

Craig: Look at the home page.



Kevin: There's not a lot of product there.

Craig: Who in the name of Dick Anderson is Cara, and why should I care about her?

Kevin: You care about her, because in the small print at the bottom of the image, it says "Vogue Market Stylist content is advertiser-sponsored and used solely for advertising purposes."

Craig: You mean I cannot find a squall jacket because I have to pay attention to a paid ad? On the home page?

Kevin: Use the search box, you'll find your squall jacket.

Craig: I am 62 years old. Cara and her advertiser-supported lifestyle have nothing to do with my desire to purchase a squall jacket.

Kevin: Use the search box. You'll arrive at a landing page that has what you are looking for (click here).

Craig: But this cuts to the heart of the problem. The CEO at Lands' End cares more about a paid ad featuring Cara than she cares about me, the long-time catalog shopper.

Kevin: In twenty years, you won't be buying from Lands' End. The CEO has to think about protecting the future health of the business, don't you think? She has to try to protect today while pivoting to the future. That's not an easy task. There isn't a Woodside Research Report titled "Eight Easy Ways To Pivot Out Of An Old Business Model".

Craig: I plan on buying from Lands' End when I am 89. Mock turtlenecks are very popular among octogenarians. Why not keep the business model, as-is, and simply try harder to be successful?

Kevin: You want the CEO of Lands' End to walk the business back to the path they were on two years ago, when it was easy for you to find your squall jacket, presented in a masculine tone?

Craig: Yes! Thank you.

Kevin: The very same strategy that led to fifteen years of flat growth and a 50% reduction in market capitalization?

Craig: Take a look at the Men's landing page. Do you see the old dude on the far right? That's me! That's the classic long-time, loyal Lands' End shopper. Do you see how they are pushing me right off the image? That's not just a metaphor. The CEO is actually pushing me off to the side.



Kevin: Oh come on!

Craig: I don't want to sit in a luxury box with three Millennial bros who are too busy sipping artisan micro-brews to care about what is going on around them. 

Kevin: That's not very nice.

Craig: I want a world where Garrison Keillor pads his retirement account with Lands' End advertising dollars while telling me a compelling story about Lutheran angst and hot dishes served in a fictional city in Minnesota. I sure don't want a world where Vogue pays Lands' End to have Cara lecture me about the latest fashion trends. It's been twenty-five years since Madonna told us to care about Vogue.

Kevin: So what is your solution? You've done a lot of complaining, but I don't hear a solution.

Craig: Get back to the basics. Classic merchandise targeted to the classic catalog customer.

Kevin: The strategy that caused sales to stall for fifteen consecutive years? That's what you want? The strategy that is causing most catalogers to struggle so badly that they're being rolled-up by private equity into holding companies that leverage fixed costs across brands while catering to a retired Baby Boomer? You want a world where, in ten years, five private equity firms own five thousand catalogers that all sell to the same 72 year old customer?

Craig: I just don't think you have to nuke a business.

Kevin: What is your solution?

Craig: This is the dumbest thing I've ever seen. It won't work.

Kevin: What is your solution?

Craig: Can you imagine the back-office conversations long-time employees are having? 

Kevin: What is your solution?

Craig: Gary Comer must be rolling over in his grave.

Kevin: If you are so upset, why not email the CEO - she freely offers her email address and wants feedback (frederica@marchionni@landsend.com)?

Craig: This must read like a comedy episode to the folks at L.L. Bean.

Kevin: So you don't want to actually give her your feedback, you'd rather just complain to me?

Craig: And you cannot possibly use a catalog to advertise all of your brilliant changes. That's silly. You are mailing the catalog to a 62 year old customer to tell the customer that you're going to appeal to a 37 year old customer in the future, while not communicating directly with the 37 year old future customer, and then you de-emphasize what the 62 year old wants to buy, causing sales to decline, and then you'll chew out the poor marketing sales forecasting manager because it's her fault the business didn't meet expectations. It's lunacy.

Kevin: What happens if the strategy works?

Craig: It won't.

Kevin: It could.

Craig: You know it won't work.

Kevin: But business as usual isn't working.

Craig: They've lost their minds.

Kevin: What is your solution?

Craig: I can't wait to hear everybody at NEMOA bash Lands' End. It's going to be a great conference.

Kevin: #OhBoy.

August 28, 2015

Ways To Listen To The Analytics Podcast - MineThatData Radio

If you are an Analyst or Manager looking to understand the intersection between Analytics and Executives, then my podcast is for you. Now, I'm not going to use the blog to publish updates going forward, so this is the place where you can find out how to listen to the podcast. And yes, there are many ways for you to find the content. Click on each bullet below for your preferred "channel", if you will:
The latest podcast features a discussion about Executives - I help the aspiring Analyst understand how Executives are motivated, why Executives sometimes don't listen to data-driven arguments, and I share how Analysts can get a leg-up on the competition in getting ideas heard and acted upon. Click here for the fourth episode.


August 27, 2015

Retail Interest Payments

Have you ever looked at the profit and loss statement of your favorite retail brand?


In the past five years, they've paid $2,200,000,000 (yes, 2.2 billion) in interest ... INTEREST!

Think of it this way ... every time you waltz into your favorite Macy's and spend $100, banks get to take $1.40 right off the top ... that's how the math works. Heck, with a gross margin in the 36% range, the math is even more extreme. When you spend $100, Macy's gets to keep $36 ... and then the banks take $1.40 off the top of the $36 that remain, or 4%.

That, my friends, is what is called a toll ... a self-imposed toll, no doubt.

I worked with a retailer that wanted to pay down debt - the CFO told the investment community of his intent - the investment community then communicated their intent - if the debt were paid down, the stock price would be taken down as well. Who is in charge of that business, you might ask yourself?

Here's another way that math is working against retailers. For retailers, most of the debt came from store expansion. More stores, more square footage. That's the way life worked from 1990 - 2010.

From 2016 - 2025, the math is likely to work in an opposite direction. As business continues to leak online, the lowest third of the retail portfolio become unprofitable. Stores are going to close - they already are closing. As stores close, sales decline. The debt, however, remains. So the online channel must grow at an ever-increasing rate to make up enough profit to cover the debt. And we all know that online sales cannot grow forever.

Hence, there's reason to be concerned.

Look at your favorite retailers. Look at their interest payments. Then look at their comp store sales increases/decreases. The future of the business is right there, buried within the story of the numbers.

August 26, 2015

Burning Man & Home Depot


Now, if you worship at the altar of personalization, then this is for you ... no, not the "Dear Kevin, Here Is 20% Off Because You Previously Bought Widgets" digital nonsense that some demand you adopt because some make money when you adopt their ethos.

No, this is merchandise personalization.

In an omnichannel world, you are told you must have the same products at the same prices across all channels. Sameness. You are told that "the customer" demands it.

In the real world, you run a local shop. You tailor the assortment to the audience in your local area, that's how you stay in business. What you do in Reno is different than what you do in Raleigh or what you do in Rochester. You do this because "your customer" demands it.

Think about how many customers you alienate by homogenizing your assortment across channels?

Authentic And Meaningful Relationships

Chief Merchant is hosting a webinar about how the Atlanta Falcons. One of the sentences is particularly meaningful ... "where brands are creating authentic and meaningful relationships." More on that in a moment.

Let's look at Atlanta's record the past two seasons:
  • 2013 = 4 wins, 12 losses.
  • 2014 = 6 wins, 10 losses.
In other words, the merchandise is failing. The team has won 31% of their games over the past two seasons ... following five consecutive highly successful, winning seasons. That's a difficult transition ... anybody who loves a sports team knows what this feels like (#notgood).

So, the case study ad suggests you'll learn how to connect the dots and get customers through the customer journey to the on-site experience. Heck, IBM & the Falcons may have done a great job using technology, right? Who knows? And Chief Marketer may put on a great webinar that is helpful. All could be true.

But there is a problem.

The process they are going to talk about, of course, ends with the realization that fans were not given a great experience, on two fronts.
  1. The team (merchandise) was horrible.
  2. Fake crowd noise (click here) was pumped into the stadium to make the experience seem more authentic and exciting. Atlanta was fined by the NFL and had draft choices taken away for the infraction. The in-game experience was astroturfed (i.e. faked).
The webinar offers the following premise:
  • From the text for the webinar: "Fans and your customers are moving from a series of disjointed brand experience “moments” and are starting to expect a completely integrated experience “system” – where brands are creating authentic and meaningful relationships."
The webinar uses the Atlanta Falcons as a case study of fulfilling an authentic and meaningful customer relationship - but the organization in the case study used technology to drive customers to an in-game experience where the Falcons created a non-authentic environment by faking crowd noise.

This is the stuff our industry partners ask us to believe in.

Focus on making sure that your customers love your merchandise.

August 25, 2015

When Marketing And Testing Interact - Panera Bread

This is always tough ... marketing wants to perform a marketing tactic, and somebody else wants to test a strategy (often the marketing team).

This image represents a marketing tactic ... use your mobile device (#mobilefirst) to order food ahead of time, and receive $5 off for choosing this tactic.

In a marketing world where you don't test anything, this is fine. The tactic works, or the tactic does not work.

In the real world, this tactic decomposes into a series of questions that somebody will want answered.
  1. Will a customer switch to mobile once awareness of the channel has been achieved?
  2. Does $5 off your purchase work as a tactic?
  3. Does mobile cannibalize sales from other marketing tactics?
  4. Does $5 off your purchase cannibalize sales from other marketing tactics?
  5. What is the interaction between mobile advertising and a $5 off promotion?
  6. Does the combined tactic work better on best customers, average customers, or new customers/prospects?
  7. Will a customer who uses a $5 off tactic pay full price using the mobile tactic in the future?
  8. Does $5 off diminish the likelihood of a customer paying full price in the future?
  9. What does it mean when a customer won't pay full price for a meal but will happily purchase with a $5 discount?
  10. Will a customer using the mobile device revert back to old habits, or will the customer switch to use of the mobile device in the future?
  11. Which combination of tactics is most profitable?
In the real world, there are at least these eleven questions, and probably many more questions to boot. These are the questions your Executive Team want you to answer. You know this, because these are the kind of questions they throw at you at high and unanticipated velocity when you present your findings.

Describe for me how you would answer the questions for your Executive Team. Use the comments section, or send me an email, and describe how you would address the intersection of marketing tactics, testing tactics, and Executive Questions.

August 24, 2015

When Merchandise And Data Driven Logic And Technology Meet

Two stories to enhance your Tuesday experience.

Story #1:  A check engine light comes on. The computer suggests that there is a problem with my Diesel Exhaust Fluid. That's curious, because 30 miles earlier, I drove the vehicle away after an oil change that included 2.5 gallons of Diesel Exhaust Fluid being added to a 4.0 +/- gallon tank. This vehicle has 4,100 miles on it ... so whew, it's covered under the warranty, right? So I take it to the dealer. The check engine code is read. Here's the discussion that follows.

Dealer: Mr. Hillstrom, you may have voided your warranty.

Kevin: Wut?

Dealer: Yes, the check engine code suggests you ran out of Diesel Exhaust Fluid.

Kevin: That didn't happen.

Dealer: It did.

Kevin: It didn't!

Dealer: Didn't somebody tell you that you had to fill the tank, often?

Kevin: Of course. That's why I had another dealership fill the tank during the oil change.

Dealer: And then you ran it dry!

Kevin: In 30 miles?

Dealer: That's what the data says. These computer chips record everything.

Kevin: Did the computer chip record when I filled the tank, and did it record how much fluid was put in the tank?

Dealer: Yes.

Kevin: What does the data say?

Dealer: It says you added 10 liters of DEF.

Kevin: And how big is the tank?

Dealer: It says it is a 16.5 liter tank.

Kevin: So the tank wasn't empty, was it?

Dealer: But the code says the tank is empty.

Kevin: We just ran through the logic. The tank wasn't empty.

Dealer: But the code wouldn't lie.

Kevin: Would the computer chip lie?

Dealer: No!

Kevin: Then why won't you believe what the computer chip is saying? Doesn't the same computer chip issue the check engine light and record the fluid level fill quantities?

Dealer: Because you ran the tank dry.

Kevin: Your own data says I didn't run it dry. 39% of the tank still had fluid in it.

Dealer: That's odd.

Kevin: That means I did not run it dry.

Dealer: But you had to.

Kevin: How many times do I have to tell you, your own data shows us that the tank was never empty, and then the tank was filled, and then the check engine light came on saying that the tank was empty, and you looked at the tank visually this morning, and the tank is full. So something is wrong with how the check engine code was generated.

Dealer: You could have added the fluid anytime after the check engine light came on.

Kevin: But you have data that proves I didn't do that.

Dealer: I have data that proves you ran the tank empty.


Later, the Dealer would tell me "you have to understand how complicated this stuff is ... we have to send the data to corporate, and their system is down today, so we cannot even get an answer for you ... and when we do get an answer for you, we have to have corporate pass codes back to us to reset everything ... it's just too complicated."


This is the problem with the nonsense of the "data driven" argument. In the real world, you can have all the data you want - and the data will contradict itself, often!! Now what do you do? The very same "#dashboard" shows that I ran the tank empty and it shows that it is impossible for me to run the tank empty. Think this happens with your data? It happens every day. And then your systems are down (#cloud) and you cannot even get access to your data. The key isn't to be "#datadriven", the key is to be smart enough to know how to deal with conflicting information. We've raised a generation of e-commerce experts who struggle mightily with conflicting information. Don't agree? Sit in an Executive Meeting sometime when there is conflicting information, and watch the sparks fly.


Story #2: Recall the image from the start of the blog post? That's a family, standing in front of me, trying to figure out how many pieces of Popcorn Chicken are in a 5.6 ounce container. They'd ask the question (how many pieces), and they'd get an answer (5.6 ounces). This went on for five minutes. Worse, one of the two adults in the image says to the other "I have no idea what this menu board means, all I want to do is order a chicken tender and I cannot figure out how to do that? Where is there a picture of a single chicken tender?'

I'm sure that there are Data Visualization experts at KFC (#dataviz) who are partnering with Norm McDonald to figure out how to visually illustrate the vast array of choices in a non-threatening, image-centric manner that de-emphasizes the expense of the purchase. 

We have an inability to present the information effectively. We have the customer (how many pieces) and the associate (5.6 ounces) speaking different languages. In other words, technology and language and data visualization stand in-between the customer and the merchandise, making it terribly hard for the customer to make the staggeringly simple choice of ordering a piece of pre-processed, breaded chicken.


Modern marketing has been broken down into pieces - manageable pieces that teams and/or ecosystems can tackle. The paid search guru gets to own 3% of the business. The #dataviz person gets to be in charge of the menu, without ever entering a store and listening to the struggles a customer deals with when trying to order. The dealer service rep has a data-integrated system across dealerships and corporate (#omnichannel #datadriven), and yet, the whole things falls apart when the information conflicts and the service rep and the customer are at odds over how to analyze and interpret the information.

We're focusing too much on technology - on bells and whistles and data-driven nonsense and integrated channels and focusing on, in general, pure nonsense. Of what good is that big visual menu if the customer cannot even identify the item s/he wants to purchase?

We need to focus on how customers interact with merchandise. In both cases above, the presentation of information got in the way of the customer and the merchandise. Maybe merchandise productivity is bad because of the omnichannel, data-driven nonsense we stick in-between the customer and the merchandise? It warrants some thought, don't you think?