May 21, 2017

The MineThatData Elite Program: New Direction For June

I'm going to try something different this June.

Instead of the typical Elite Program analysis comparing comp segment performance and new+reactivated buyer performance, I am going to give Elite Program participants a chance to "experiment" in the new research I'm performing for clients.

Here's what you will get.
  1. Your typical comp segment performance and new + reactivated buyer performance.
  2. No aggregated results as has been common over the past two years.
  3. A five year file forecast coupled with a historical view of how your customer file evolved over the past few years.
In my projects, I am seeing interesting trends involving the "evolution of the online business". In other words, things are happening - business is changing - and the impact on the future of the "brands" we manage is something we need to understand.

Remember last month when I shared with you how various businesses were evolving and changing? This was an example where a store closed (please visit the website if the .gif doesn't work via email).


This was another case where a business was evolving/changing over time.


In this case, the traditional catalog business and products associated with the traditional catalog business were being de-emphasized, coupled with significant changes in promotional rhythm. The red cells were where there were many customers - and in the upper right portion of the image those cells had good customer value (and were being strategically shrunk-down over time).

So we'll do something different this time.
  1. Existing Members pay the $1,000 fee they've always paid.
  2. This time, non-Elite members will pay $1,800 for this run, and $1,000 going forward.
  3. I'll run the comp segment analysis per usual.
  4. I will show you how your file has evolved over time.
  5. I will show you how your file is going to evolve over the next five years.
Contact me right now (kevinh@minethatdata.com) for details for the June run!


P.S.:  I understand that budgets are tight ... that's why I'm doing something like this. You pay virtually nothing, I tell you how your business is evolving and then share with you where your business is headed. What's not to like about that?

May 18, 2017

Hillstrom's "Fix It"!!!

Today I announce that "Hillstrom's Fix It" is available for purchase on Amazon (click here to visit Amazon and see the booklet).


The booklet covers some of the ground contained in the Diagnostics / Merchandise Forensics booklets. More important, the booklet illustrates how I piece together different aspects of your customer performance to identify what is wrong with your business, so that we can "Fix It"!
  • Rolling 12 Month File Analysis (identifies customer issues).
  • Comp Segment Analysis (identifies merchandise productivity issues).
  • The Annual Repurchase Table (tells us whether merchandise or customer acquisition is most important to your business - or both).
  • The Life Table (illustrates the critical importance of marketing to new customers within the sixty days following a first purchase - demonstrates when a customer becomes "loyal").
  • Merchandise Forensics (to identify the specific merchandising issue holding back your business).
  • Forecasting (which shows us where the business is headed and allows us to stop problems before the become too big to manage).
  • Trade Area Analysis (for retailers who are struggling with declining performance).
  • When A Store Closes (illustrating if the online channel can recapture sales lost by a closed store - critically important in the era of store closures).
The booklet is designed to provide HOPE ... sure, there are "economic headwinds" and there's "Amazon" ... but there's also all of the stuff THAT WE CONTROL!! Why not figure out what we control and then do something about it!

We have the skills to fix the problems that are within our control.

The booklet figures out what is going on that is within our control ... so we can "fix it".

So buy the booklet and get busy fixing your problems ... just follow the prescription and you will figure out what is wrong. It's not hard!


AND A SPECIAL OFFER FOR LOYAL MINETHATDATA READERS AND CURRENT/PRIOR CLIENTS ONLY!!!

Normal project pricing looks like this - and introductory "Fix It" pricing is now included (I have not run a prior "Fix It" project from start-to-finish, FYI).

You can see the pricing in the "Fix It" column ... let's try something for long-time loyal readers. For the first three affirmative responses prior to 11:59pm PDT on May 22, your prices are $7,200 / $12,000 / $16,000 / $22,400 / $28,000 / $32,000 instead of the regular prices of $9,000 / $15,000 / $20,000 / $28,000 / $35,000 / $40,000.

As you know, you only get "deals" from me when I introduce something new and interesting. This project structure is certainly interesting, because it links all of the tools / techniques used in ten years and 200+ projects to identify what is wrong with your business, allowing you to "fix it"!!!

Look, you are dealing with a lot of junk these days. It's hard to run a store when 20% of the traffic is gone because your competition is failing. It's hard to run a catalog when your online customers are fundamentally different and are pushing your business in a new direction. And most important, it's become really hard to run a solid e-commerce operation when Google/Facebook/Amazon have cut off customer acquisition opportunities.

So please, take advantage of this opportunity and we'll figure out how to fix what is in your control!! Let's do something positive. Let's identify what is going on within our control ... and then let's "fix it"!!

May 17, 2017

Trying To Drive Retail Sales With Print (Gasp)

Here's your list of tips ...

  • Only evaluate incremental sales (mail vs. holdout lift) ... do not fall for vendor-measurement methods that over-credit sales (and by proxy, result in vendor over-payment). This tip is non-negotiable. If your vendor doesn't recommend this style of measurement, find another vendor. Now.

  • Not all customers are equal. Your 0-12 month online-only buyer who lives 14 miles from a store is much less likely to buy in-store than a 13-24 month retail-only buyer.

  • Know how all channels fit together. It may be much smarter to use email and social to get a customer to get in a car and drive to a store than to pay vendors $1.00 to send a catalog that is merchandised to drive a customer to your website.

  • The merchandise that causes an in-store customer to respond is different than the merchandise that causes an online customer to respond. Know these differences, and merchandise your marketing activities accordingly. Avoid the omnichannel-thesis, which demands "sameness" across channels.

  • Today it is easier to get a retail customer to buy online than to get an online customer to buy in stores. Strongly consider hiring retail creative professionals to improve your marketing efforts to drive a customer into a store.

  • Strongly consider marketing programs that find new retail customers, given that so little of retail spend is incrementally driven by marketing.

  • Consider using print to promote events. There has to be a reason for a customer to purchase in a store ... or else the customer simply buys online.

May 16, 2017

I Don't Believe My Eyes

About two years ago, I got into a real "rhubarb" with a VP at a Major Catalog Vendor that my catalog readers know and love.

This person, who knows math, decided to ignore the simple math of a year-long mail/holdout test outcome.

The results are listed in the table here ... dummied up to protect the innocent.

In total, the test showed that for this retail brand with a catalog channel the organic percentage was 83%. In other words, if you didn't mail catalogs to a 12-month housefile buyer for a year, 83% of the volume would remain. Worse, because so much of the volume was organic, the $17.00 of incremental sales (after subtracting the holdout group from the mailed group) was unprofitable. Finally, the test results showed that the catalog was terrible at driving retail sales ... with 92% of retail sales being organic and just 8% driven by a catalog.

I told the Vendor Executive that this is why this client had cut back on catalog circulation ... you simply run the p&l at a segment level and it made no sense to send 12 catalogs a year when you could send 2-3 catalogs a year.

That's when the Vendor Executive went off.

"You don't actually believe the results of the test, do you? I don't. I don't believe my eyes."

The Vendor Executive then executed the strategy that catalog vendors love to execute. The Vendor Executive used "Mail" results to defend profit.
  • Mail Results = $101 * 40% Profit Factor - $12 Mailing Cost = $28.40 Profit.
This, of course, is Lizard Logic.

You don't look at how the mailed group performed, you look at how the mailed group performed vs. how it would have performed if it had not been mailed.

You look at your results this way, right? 

If we look at results this way, the Vendor Executive loses a lot of money.

The Vendor Executive doesn't want to lose a lot of money.

So the Vendor Executive told me that I should follow industry best practices and "protect" $28.40 profit. Which (of course) I told the Vendor Executive was not the right way to analyze the situation.

The Vendor Executive then told me that they had signed a contract with this retailer and that they would put in the "new" method of analyzing results ($28.40 profit) and that my services were no longer needed.

Think about who gets paid when results are read "incorrectly".
  • The USPS makes more money.
  • Boutique Catalog Marketing Agencies make more money.
  • Merge/Purge vendors make more money.
  • Your Paper Rep makes more money.
  • Your Printer makes more money.
  • Your Co-Ops (3+) make more money.
Who makes less money?
  • You.
Who are you in business to protect?
  • You.
It's time we started choosing to support our own co-workers and our own company ... prioritizing our co-workers over the vendors we pay to provide services ... especially when vendors tell us to sub-optimize our results so that their results are optimized.

May 15, 2017

Multiple Online Channels Have To Be Good, Right? (Please Say Yes)

Probably not.

Let's compare two customers. The first customer spent $200 weighted historical dollars online. You remember her future profile, right?
  • Call Center = $4.40
  • Online = $60.83
  • Email = $6.29
  • Search = $9.85
  • Retail = $12.84
  • Total = $94.20
Let's say that we instead get this customer to spend $200 weighted historical dollars via email and search ... a hundred dollars each. What does the future profile look like now?

  • Call Center = $2.00
  • Online = $12.63
  • Email = $34.29
  • Search = $32.25
  • Retail = $10.84
  • Total = $92.00.
Look at that! Three things happen.
  1. Once the customer is hooked on channels, the customer doesn't spend much money online ... the "channels" have to exist for the customer to purchase. Without email and without Google, the customer isn't buying. Hint - Google likes that!
  2. Total spend doesn't really change - channels actually cause a drop in spend of about 2%.
  3. Retail spend drops by more than 20%. Hooking the customer on online channels diverts some spend away from stores. Omnichannel!!
These things are all happening at a macro level, and they are contributing to the slow drain of the retail channel and the slow drain of loyal online buyers who buy because they love your brand.

Worse - the email dynamic is frequently fueled by zealous marketers who offer the biggest discounts/promotions to shop via email marketing - we convert a customer to the email channel because of low prices and 40% off. 

You are running these models and you fully understand how your channels interact with each other, right?

May 14, 2017

But Email Marketing, That Helps, Right?

Here are our models from a few days ago.

Now one might think if we just use email marketing to push customers into stores, then things will be fine.

But what happens if the customer buys "right now" from the email marketing campaign?

Here's the story for a $200 retail-only buyer.
  • Call Center = $6.00
  • Online = $5.83
  • Email = $2.89
  • Search = $6.45
  • Retail = $77.64
Let's say that the customer becomes a $100 retail / $100 email buyer.
  • Call Center = $3.90
  • Online = $9.63
  • Email = $32.19
  • Search = $8.15
  • Retail = $43.34
This isn't much different than the online scenario - the act of a customer buying via email instead of retail transitions the customer toward a future that is skewed more toward direct-channel purchases than in-store purchases.

I know, I know, you think you are a magical marketer who can get the customer to buy something "extra". So what does it look like if the customer spends $200 in stores and $100 via email?
  • Call Center = $5.30
  • Online = $12.43
  • Email = $32.89
  • Search = $9.85
  • Retail = $78.04
If that happens, retail spend is essentially not impacted, but online spend increases.

But that's generally not how the world works. In general, the customer trades off between channels and doesn't increase spend across channels.

In my retail-centric projects, I repeatedly observe cases where hawking retail customers via email marketing ultimately yields an online purchase because of email marketing - and that purchase changes the trajectory of customer behavior moving forward. All of our "digital" efforts over the past fifteen years have had an impact - we've pushed the customer right out of stores. This is good for "digital" ... not as good for "retail". For "the customer", it's usually a wash.

May 11, 2017

What Do Channel-Centric Models Look Like?

Here's an example of very simple models predicting how much a customer will spend next year in each channel, based on weighted historical spend. More on model development in a moment.


The models are built (in this case) just for twelve-month buyers.

Historical spend is weighted as follows (based on another modeling process):
  • 0-12 Month Spend = 100%.
  • 13-24 Month Spend = 60%.
  • 25-36 Month Spend = 36%.
  • 37-48 Month Spend = 22%.
Let's evaluate a handful of customers. We'll start with a $200 weighted retail customer.
  • NY Call Center Spend = $6.00
  • NY Online Spend = $5.83
  • NY Email Marketing Spend = $2.89
  • NY Search Marketing Spend = $6.45
  • NY Retail Spend = $77.64
We easily see that this customer is going to spend money in stores next year, end of story. That's where the marketing effort needs to be. Still - customers are spending $21 in the direct channel ... that's a lot. We'll compare that with the pure online customer later.

Ok - how about a customer with $100 online and $100 in store?
  • NY Call Center Spend = $5.20
  • NY Online Spend = $33.33
  • NY Email Marketing Spend = $4.59
  • NY Search Marketing Spend = $8.15
  • NY Retail Spend = $45.24
The customer mixes dollars across channels - but notice that more money is spent in the future in the direct channel (call center + online + email + search) than in retail. This is a dynamic that is slowly imploding the retail industry.

How about a customer with $200 online and $0 in store?
  • NY Call Center Spend = $4.40
  • NY Online Spend = $60.83
  • NY Email Marketing Spend = $6.29
  • NY Search Marketing Spend = $9.85
  • NY Retail Spend = $12.84
The direct channel gets $81 of volume to just $13 in stores.

We have a unique shift happening, don't we?
  • Retail Only buyer spends $21 in direct channel next year.
  • Online Only buyer spends $13 in stores next year.
These shifts are helping drive the implosion in traditional retail. When customers have reasonably equal historical spend, future spend shifts online ... the only way stores overcome this is to increase customer acquisition activities ... and that's hard to do when stores are closing.

More on the topic after the weekend.




FAQ From Catalog Mail / Holdout Posts

There were three posts (click here and here and here) ... and you had questions about the posts.


Question:  Attribution routines have to be better than catalog mail/holdout tests, right? They take all advertising channels into account, and they use machine learning, or so I've heard. So they're just better, and I don't have to execute catalog mail/holdout tests. Ok?
  • If your vendor tells you that you do not need catalog mail/holdout tests in your attribution routine, please go find another vendor. The best attribution routines measure what happens when you do / do-not mail catalogs, and adjust accordingly.
Question:  We only have 90,000 twelve-month buyers, so we cannot execute holdout tests. Sorry, that's just life.
  • You can execute holdout tests, you are choosing not to and are using a small twelve-month buyer file as the excuse. There is nothing stopping you from holding out 3,000 twelve-month buyers for six months. Nothing. Hold them out. Learn. Then run your business more profitably.
Question: We aren't going to run tests in every segment in every mailing, that's just stupid. What is the "right" test design?
  • There is no right test design. There are your goals. And then there is a testing plan that allows you to see if your goals are being met or not. Most of my client base pick one of two paths ... they either test every single mailing (not as smart) or they test customer segments across 4-6 months (much smarter). But again, if you want to test every mailing, have at it, it's better than doing nothing (which is what many catalogers do).
Question:  What is the "right" sample size?
  • There is no right answer to this question.
  • Have too few customers in your test and your test results will bounce all over the place ... 38% organic, 83% organic ... and then you'll say "I don't trust testing" and you'll be right and it will be on you because you had too few customers in your test panels.
  • If you only have 50,000 twelve-month buyers, you are better off going with 2,000 or 2,500 in your holdout group ... but then DO NOT measure the incremental value of each catalog ... only measure results 4-6 months later, in total.
Question: Our results are all over the board. Why?

  • Remove outliers.
  • Adjust all orders in the lowest 5% and highest 5% to the lowest 5% and highest 5% and your results are going to look much more consistent.
Question: After eight weeks, our test results change. Why is that?
  • The role of prior catalogs diminishes after eight weeks. Focus on that third month and beyond. And this is why you focus on long-term results.

Question:  My vendor says you are nuts and that clients don't need to execute tests.
  • It's easy for a vendor to point out what everybody else does right/wrong in a private conversation with you with the doors closed.
  • Ask your vendor to point out where they publish how their methods generate more profit for clients than Mail / Holdout tests ... ask them to show you where you can find their published works, for free, shared for the world to see, ok? If the vendor doesn't even have the courage to publish their findings (for free) and earn attention that leads to new clients, how good can their findings be?
Question: E-commerce brands are using print all over the place, and they're not measuring via mail / holdout tests, so that means we're fine too, am I right?
  • No.
  • There are two reasons e-commerce brands are not using mail / holdout tests results. They either don't know they should, or the are being bamboozled by their vendor to demonstrate that they are generating $11.00 per customer per mailing (which will cause the e-commerce brand to mail more catalogs, which gets vendors paid even more). It is sad when e-commerce brands are being bamboozled by their vendor partners and don't know they're being bamboozled.
Question:  I executed six tests last year. Here are the organic percentages I measured ... 50% ... 58% ... 61% ... 39% ... 43% ... and 54%. What is the organic percentage I should use?
  • Average your results ... 51%.
  • When you execute a test, you are getting an outcome that fits within a normal distribution of potential outcomes. This is why you have to repeatedly test, so that you find out what a reasonable outcome actually is.
Question:  What does it mean when our organic percentage was 50% three years ago, then 54% two years ago, then 57% one year ago, and is now 60% today?
  • It means that your business is becoming less and less dependent upon catalog marketing.
  • It means you need to have an honest conversation with your Executive Team.
  • Run scenarios and tell your Executive Team how much of a profit difference there is between what "as-is" strategy yields and what could be done using an ever-increasing organic percentage.
Question:  How do I apply the organic percentage to individual segments?
  • Let's assume you already measure the organic percentage for online customers and traditional catalog shoppers and already know that there is a big difference.
  • Ok, say a segment generated $3.00 during an eight-week period, and you know from prior testing that the segment is 60% organic. This means that 40% is catalog-caused. 
  • Your calculation is $3.00 * 0.40 = $1.20 catalog driven demand.
  • Your profit calc, assuming 40% flow-through rate and a $0.60 ad cost is $1.20 * 0.40 - $0.60 = ($0.12). You lost $0.12. The mailing (to this segment) was unprofitable.
  • Your vendor will use the following equation ... $3.00 * 0.40 - $0.60 = $0.60 ... PROFITABLE! Your vendor will tell you to keep mailing.
  • See how this stuff works? Your paper rep, your printer, your boutique agency, your merge/purge house, your database provider ... they all generate more money if you use the fraudulent $3.00 figure ... you generate more money if you use the accurate $1.20 figure derived from Mail / Holdout test results.
  • This is the very reason why some in the vendor community steer you away from Mail / Holdout test results. You hurt their bottom-line when you measure things the right way.
Question: If you stop mailing for a year or more, the organic percentage gets worse. This is proof that catalogs work, right?
  • This is proof that you shouldn't stop mailing altogether. Mail 1x or 2x per year instead of 24x per year and you'll see a different outcome.

If your vendor partners are quoting numbers to you that are not derived from Mail / Holdout results, please question your vendor partner why they are purposely misleading you? They might mislead you because they don't honestly know that they should be using Mail / Holdout results. That's fine. Then teach them why they are not providing accurate results. I'm 100% ok with that.

If your vendor partner is purposely misleading you (and it comes up all-the-time in my work), have a serious discussion about "why" your vendor partner is misleading you on purpose. Are they frightened that they will struggle to stay in business if they don't make catalog performance look great? That happens, and often. I understand that one as well, and am forgiving of that possibility.

But if your vendor partner is purposely misleading you so that they can be more profitable while you are less profitable, please, go find another vendor partner. It's hard enough just to stay in business these days, much less have a third-party skim your profit from you so that they can make more profit themselves.

And yes, readers, you already know who falls into that last paragraph ... we all know who falls into that last paragraph. If we keep working with those folks when we know they are ripping us off, then we are the problem, right?


May 10, 2017

Sending Catalogs To Drive Increases In Retail Sales

With traditional retail in full "implosion mode", it's simple common sense to try to use catalogs to push a customer into a store. Vendors love this stuff - and for good reason ... think about the partnership between boutique agencies and paper reps and printers and the USPS ... all folks who get paid when they tell you what you should do.

Pretend you are J. Crew - you send a veritable plethora of catalogs to customers. Do catalogs push customers into stores? Sometimes.

There are many things that a company like J. Crew would evaluate.


Step 1 = Mail / Holdout Tests:  Vendors ask you to "match back" retail purchases to the four-week life of a catalog. They'll tell you that you are generating a whopping $10.00 per mailing, and then they'll tell you that catalogs are the "linchpin" in your omnichannel strategy. Nonsense. Your catalogs may be important, but their effectiveness is measured via mail / holdout test cells. If the mailed group spends $10.00 in stores and the holdout group spends $9.25, then the catalog drove an incremental $0.75 ... and was most likely unprofitable. Congrats!! But at least you are reporting honest results. It's darn hard to get a customer to get in a car and drive to a store.

Step 2 = Geography:  The best retailers know that catalogs (and email) play a different role via distance to a store. If a customer lives 0-5 miles from a store, the catalog is more likely to drive traffic into the store. If the customer lives 25 miles from a store it is more likely to drive a customer online. If the customer lives 50+ miles from a store and is in a rural area, well, that catalog might drive a customer to the call center. Your mileage will vary, but these are general truths learned across many different projects over the past decade.

Step 3 = Proper Variables:  You'll want historical purchase variables for each marketing channel ... weighted by history. You'll often find that recent online orders are not significant or have negative coefficients ... meaning that a recent online order does not lead to a future in-store order.

Step 4 = Size Matters:  Ignore vendor-industry nonsense and do what is right for your business. Just because the USPS gives you discounts doesn't mean you should have more pages ... you're still paying for paper / printing, right? Maybe a postcard is best, maybe 500 pages is best. Simply do what is right for your customer. I don't have a horse in this race. Just do what is right for the customer (and your p&l).

Step 5 = Merchandise Matters:  Ignore vendor-industry nonsense about an integrated product assortment across channels. Every retailer knows that merchandise purchased in stores is subtly different than what is sold online. If you send out a catalog designed to drive a customer to the call center, don't be surprised if the effort fails to inspire a customer to drive to a store. Merchandise a retail-centric catalog and send it to retail-centric customers. Ignore omnichannel theories that have been proven to not work for a decade (but get vendors paid).

Follow-Up To Classic Catalog Analytics Blunder Article

This was the article yesterday (click here).

There are a few things I need to follow-up on.


(1) If your vendor tells you that you do not need to execute Mail / Holdout results for catalog marketing (or for email marketing), find a new vendor. They are purposely hiding something from you (hint - it could be the truth).

(2) If your catalog marketing team is not conducting Mail / Holdout tests, ask them why. They must give you a credible answer. If you don't get a credible answer, be worried. You need to generate profit ... now.

(3) If your Executive Team says you cannot execute Mail / Holdout tests because you will lose sales, fine, execute small cell count tests over 4-12 months instead of large cell count tests each month. Executive Teams are frightened by sales declines ... they lose their jobs over sales declines. Their incentives/salary are at odds with your testing plan.


P.S.:  (1) is probably most important. The Catalog Vendor Industry has a vested (and strong financial) interest in not executing Mail / Holdout tests. If you get pushback from your vendor today, listen carefully to the pushback they provide. Mail / Holdout tests in catalog marketing, made popular in the late 1980s, are easy to execute and quickly reveal truth. Why are folks afraid of the truth?

May 09, 2017

Classic Analytics Blunder in Catalog Marketing

The e-commerce leader says the following:
  • "We sent a catalog to our loyal customer base, and the catalog worked wonders! Those who received the catalog spent an average of $11.88 per customer. Do you have any idea how profitable that is?"
I do have an idea how profitable that is.
  • "It's not very profitable."
Did the e-commerce leader execute a mail / holdout test to understand the incremental impact of the catalog on her customer base?
  • "No."
This is a common narrative in the past three years.

Here is what mail / holdout results tell us.
  • Mailed = $11.88 spent on average, eight week results.
  • Not Mailed = $9.01 spent on average, eight week results.
  • Incremental Value = $11.88 - $9.01 = $2.87 on average, eight week results.
On the surface, the catalog looks wonderful.
  • Profit = $11.88 * 0.40 - $1.00 = $4.75.
In the real world, the catalog looks ... ok.
  • Profit = $2.87 * 0.40 - $1.00 = $0.15.
Now, we can't expect e-commerce leaders to measure things properly when 80% of catalogers purposely overstate catalog results so that they can continue to mail catalogs.

But in a "data-driven" world, we need to do a better job of analyzing the "incremental value" of marketing efforts. So let's start doing that today ... it's not hard ... and it's FUN ... and you'll generate a lot of profit for your company.

Mail / Holdout results.

Demand simple excellence, ok?

May 08, 2017

Seasonal Buying Habits

Red = Above Average Sales.

White = Average Sales.

Blue = Below Average Sales.

Watch the image (click here to visit the website if rss/email doesn't emulate the gif) as it cycles month by month.

When you #personalize your email campaigns and home page / landing pages, you make sure to merchandise 'em with products that align with the geographic location of the customer/visitor, right?