July 28, 2014

An Example of Merchandise Success

Have you read this ditty in The Wall Street Journal - about Filson Bags (click here)?

What, in your merchandise arsenal, is considered "ubiquitous"?

We keep focusing on how/where to sell what we offer.

We need to think a lot more about offering merchandise people must possess.

Credit Card Hacked

Well, there I was, folks, buying merchandise at one of America's great omnichannel brands late Monday morning (no need to hang them out to dry here). A small transaction, paid for via credit card.

Within a half-hour, I couldn't pump gas ... "cannot authorize credit card, see attendant". Instead, I called my bank. Thousands of dollars in fraudulent transactions accrued in the thirty minutes since visiting this highly reputable "omnichannel leader".


I know, I know, you're going to tell me that somebody hacking my credit card following a transaction at a major retail brand is not an omnichannel failure, it's a crime. You're right about half of the statement!

We wonder why retail is in a "funk", to quote the words of a reputable omnichannel CEO. Merchandise, entertainment (fun), and security is thrown under the bus in a rush to digitize an inherently analog experience. We're not focusing enough on what matters. We're focusing too much on the things that keep research brands, vendors, and consultants in business.

Spend your limited resources on the things that matter. It's irrelevant if I can compare inventory levels across stores if my credit card is not safe after purchasing the item.

What Has Changed Since "Hillstrom's Merchandise Forensics"?


It's the reason customers purchase from the businesses we manage. And in early 2013, it became obvious that many businesses crawled into a hole in late 2008, conserving cash, and never popped back out of that hole. Hence, I wrote Hillstrom's Merchandise Forensics (click here).

See, I'd sit in meetings or participate on calls, listening to the marketing team get beaten over the head because the business was down 8% to plan. You'd hear all sorts of interesting comments.

  • "Did you forecast the business incorrectly?"
  • "Are your SEO efforts sub-standard? Why are we paying for terms that we could get for free?"
  • "Email marketing stinks - nobody buys from email unless there's 30% off plus free shipping. You marketers ruined that channel, didn't you?"
  • "Why do you insist on mailing the wrong customers all the time?"
  • "Amazon doesn't have a catalog and they seem to be doing pretty well, maybe it is time to bring some of those folks in here to shake things up."
Meanwhile, the merchandising team got less scrutiny. Much less scrutiny. Sometimes they were so immune to criticism that they piled on the marketing team.

I conducted 27 Merchandise Forensics projects since conceiving the content in the booklet.

In 22 of the 27 projects, there was a clear merchandising problem that was easy to understand, and potentially easy to fix. If the problem could be fixed, marketing productivity would immediately increase, and the level of criticism over marketing tactics would (theoretically) cease, or at least change to topics more strategic in nature.

What changed since releasing the booklet?


I get emails from many of you. I'm told that you've implemented the reporting in the book yourself, and you, too, learned that there are merchandising issues, issues that can be fixed. You've told me that company reporting focuses on counts (what sells, what day it sells, what channel it sells in), and does not focus on merchandise dynamics across time. That is changing. You tell me that both marketing and information technology folks are producing reporting that enables marketing staffers to understand how merchandise productivity is impacting the business.

You tell me that you've restructured your departments, that you've added links between marketing and merchandising, matrixed relationships, so that each side can teach each other how the business works.

You tell me that you've created new product goals.

You tell me that you've created a "path to success" for items, giving more digital and print real estate to newer items moving up the productivity ladder.

In other words, you've exceeded my expectations!

You've done really, really good work.

You decided that merchandise is truly important. And for that, I am grateful.

July 27, 2014

What Has Changed Since "Hillstrom's Personas"?

Oh boy!

One of the primary reasons for releasing "Hillstrom's Personas" (click here) was because of the dramatic changes I was seeing in customer behavior, courtesy of the Multichannel Forensics framework.

In the framework, it was becoming apparent that customers were no longer switching channels (i.e., to e-commerce). There was a large group of shoppers who simply liked shopping via old-school techniques (continuity programs, mailing a check along with an order form, purchasing via the telephone). These customers, it appeared, were "opting-out" of e-commerce.

Similarly, on the other end of the spectrum, it was becoming clear that e-commerce was going to be eaten by mobile, among customers < 35 years old. The Multichannel Forensics framework showed that e-commerce was losing customers to mobile, and that mobile wasn't feeding customers back to e-commerce. It was the same trend I observed a decade earlier with catalogs and e-commerce, but now e-commerce was losing customers.

When I explained the dynamic via the Multichannel Forensics framework, marketers offered me full, blank stares.

When I explained the dynamic via Judy, Jennifer, and Jasmine, the world lit up. Anybody could understand Judy, Jennifer, and Jasmine.

Once you release information into the world, you don't control how it gets used.

I spoke at a conference. A member of the USPS was in attendance. He looked particularly uncomfortable. Eventually, he raised his hand, and issued a simple question:

  • How do we train Jasmine to love mail?
I answered, "we don't train Jasmine to love mail, Jasmine is going to love what she loves, and right now, that's her mobile phone."

Well, you could just see the disappointment in the faces of those sitting at the USPS table.

Back in 2012, I presented Judy, Jennifer, and Jasmine to the crowd at NEMOA. I, of course, wanted to see catalogers embrace Jennifer, moving a portion of their ad budget to Jennifer, helping them grow. I presented Judy to the audience. You should have seen their faces. Cheeks brightened with joy. Attendees looking at each other with knowing glances. A general warmth spread through the audience.

That warmth turned into a cold March rain shower when I put Jennifer up on the screen. I could hear an audible groan from five hundred folks. This catalog-loving audience DID NOT LIKE JENNIFER. At all.

What changed since publishing this booklet?

Catalogers have, by and large, moved all of their chips into the middle of the table, going "all in" on Judy. This was the exact opposite outcome from what I expected when I introduced Judy, Jennifer, and Jasmine to the audience. In the two-and-a-half years since publishing the booklet, catalog customer files have aged rapidly. I've been in numerous conversations where the CEO, President, or EVP said "our customer is Judy". Catalogers embraced Judy.

The outcome is great for Judy. Thousands of companies now embrace a customer as she enters the retirement phase of her life.

The outcome is not so great for catalogers. I recently asked an Executive "what happens when Judy, currently 61 years old, becomes 71 years old, or 81 years old?" The Executive looked at me and said, "by then, I will have retired, and it won't matter."

Instead of teaching that Jennifer was an important bridge for catalogers to walk over in a path from the past to the future, many catalogers instead opted to blow the bridge up, staying on an island with Judy. It was the opposite outcome from what I expected.

That's what changed, folks. You lose control over the information when it leaves your mouth, your keyboard, or printed pages. Maybe the catalog industry was pre-destined to adore Judy, and I'm the one being pig-headed here! Maybe following a customer cohort for thirty-five years, from young adult to middle age to retirement, is just the natural order of things. Time will tell.

July 24, 2014

What Has Changed Since "Hillstrom's Catalog Marketing PhD"?

This booklet came out at exactly the right time in history ... 2010, coming out of the Great Recession.

Catalogers were busy finding ways to trim expenses. The key methodology in the book (click here), called the "organic percentage", would finally answer a question that nagged our industry for a decade ... "why, if matchbacks prove that catalogs drive online traffic, are catalog businesses not growing?"

The organic percentage was derived from mail/holdout tests. Repeatedly, I noticed that when catalogs were not mailed to online buyers, half or more of the demand still happened. And in a retail environment, ninety percent or more of demand still happened! All of this demand was matched back to the catalog, causing catalogs to get credit for orders catalogs did not cause.

It became obvious why matchbacks were touted so heavily by the vendor community.

  • By giving catalogs credit for orders catalogs did not create, co-ops generated more revenue, paper reps generated more revenue, printers generated more revenue, merge/purge vendors generated more revenue, and basically all vendors supporting the catalog industry generated more revenue ... for them.
I had to write the booklet. 

For the next twenty-four months, the consulting projects rolled in. This book, coupled with blog articles, resulted in about 70% of my consulting revenue in 2011.

What changed?

Big Data and Attribution.

The vendor community rebranded matchbacks as "attribution". Now, more sophisticated techniques are used to parse the twenty-four channels a customer touched, in order to understand how each channel impacted the order. Most of the time, the attribution routines are as flawed as matchbacks ... not employing any semblance of print mail/holdouts, email mail/holdouts, or search spending changes to identify incremental orders.

And big data is the center square in your buzzword bingo game. Now, you have to combine data from myriad channels and sources, so that you can unearth nuggets of gold in your database. Your data has to be linked to "the cloud", so that vendors can absorb your customer purchases, merging them with social data and mobile data, allowing the vendor to make money off of you. Yup, your vendors slice and dice your data and re-sell your own data back to you, in a different form. In other words, the Catalog PhD seems dated in a world of a thousand channels, big data, and attribution routines.

In reality, the concepts in the Catalog PhD booklet will help you be just that much smarter, because the concepts apply to the big data / attribution environment that dominates marketing four years after the release of the Catalog PhD booklet.

July 23, 2014

What Has Changed Since "Hillstrom's Multichannel Forensics"?

This $95 ditty was written in the 2006, published in late 2007 (click here).

This was the peak of the "multi-channel" movement, a movement symbolized by the phrase "multichannel customers are more valuable than single channel customers". The logic still lingers today, in spite of having been debunked more times than can be reasonably counted.

I got a reasonable amount of feedback from the book. The feedback came in three large buckets.

  1. You must be really arrogant to charge $95 for a book. It's obvious you don't know the first thing about book publishing.
  2. I'd love to try the methodologies in the book, but I can't write code, so your book is pretty much useless. When Google Analytics embraces your techniques, I'll know that what you are talking about is important.
  3. Could you please work on a consulting project for us, and tell us how our channels interact with each other?
For a full year, this book provided a healthy amount of consulting income. Eye opening, folks. Eye opening. Books would become the second most important source of consulting income. No, not book income - I learned that you don't write books to sell them, you write books to establish yourself as a resource.

The book looked at numerous business models, illustrating ways to understand how channels fit together. The book helped Executives understand that, at the time, customers were switching from old school ordering techniques (phone) to e-commerce, and that customers would not go back the other way (largely debunking popular old-school theories about customer behavior). The book predicted that e-commerce would be a primary driver of store traffic, something that held up well for several years. The book allowed the reader to figure out how best to grow a business, given the dynamics of the business.

What changed?

E-commerce and Mobile, that's what changed.

The techniques in the book are well-suited for the massive shift from e-commerce / fixed location online tactics to mobile / fluid location tactics. The methodologies in the book help me understand what is going on in 2014.
  • E-commerce, which largely supported retail and drove sales to retail, is changing, and is now effective enough from a discovery standpoint to reduce retail traffic.
  • Mobile, among customers < age 35, is going to cannibalize and ultimately eat e-commerce.
  • Mobile has the potential to steer traffic in and out of stores (think Yelp) much in the same way that Google steered traffic to various e-commerce sites.
  • Many catalog customers no longer wish to shop via e-commerce. The methodologies outlined in 2007 now show completely opposite trends ... customers don't transfer from phone to e-commerce ... instead, e-commerce and phone are in isolation mode ... meaning that catalog businesses are frequently left with a 60+ year old rural shopper who actively chooses to not participate in e-commerce.
In other words, the business models described in the book really don't exist anymore. Business is a lot more complex than what was outlined in that book. But nearly a decade later, the methodologies can be used to understand how mobile is interacting with our businesses. What we learn, folks, is going to cause us to think very carefully about the future of an online business.

July 22, 2014

What Has Changed Since "Hillstrom's Database Marketing"?

We're going to take a few days, and talk about how times have changed, through the eyes of books and booklets.

This book was first, folks (click here). It took about six months to write the thing. Don Libey graciously published the book.

The book was essentially a retrospective of the work I'd done in my last year at Lands' End, and covered a ton of the work I'd done at Eddie Bauer. To promote the book, I started a blog, a place where I'd write on a daily basis. In March of 2006, the first post was published. I was thrilled, months later, when a post would go viral and I'd see ten or fifteen visitors an hour. Today, between blog visitors, blog subscribers, and Twitter followers, we're north of 10,000 folks a month. So let this be a lesson to the kids ... if you do something every single day for eight or more years, you might attract an audience.

What changed since publishing the book? Big Data.

I can still remember a person, back in 2011, publishing a link to the book on Twitter and copying me on the tweet ... "how does it feel to work in an industry that died and was replaced with something more interesting?" Good question!

I use many of the techniques in the book today, when working on projects for private equity folks. Many of the concepts in the "Buddies" series in the book are applied to private equity projects. And the Gliebers Dresses series wouldn't have happened had the response to the Buddies pet store section of the book not been so positive.

But by and large, the concepts in the book are not congruent with the popular style of digital analytics leveraged by modern analysts. The book helps one see how a business might evolve and change over time. What changed is that, across the board, modern measurement is about understanding a point in time instead of changes over time.

If you do the kind of work I do, you are blessed to do work that is not commoditized. To my knowledge, few (if any) vendors have elected to put the methodologies outlined in this book into their software applications. That's been a good thing!

July 21, 2014

Forrester Research Annual Report

If you're going to read retail annual reports, then you should read research brand annual reports as well. Click here to take a peek at the Forrester Research 2013 Annual Report (or click here).

A few tidbits for you.
  • Client retention dropped from 80% in 2011 to 77% in 2012 to 73% in 2013. 
  • Net income is at a five year low.
  • Cash is at a five year low.
  • It costs Forrester $39 to produce $100 of services.
  • It costs Forrester $36 to sell and market products and services. Is your ad-to-sales ratio 36%? It's really tough to generate profit at a 36% ad-to-sales ratio.
  • Pre-tax profit dropped from 13% in 2011 to 11% in 2012 to 6.7% in 2013.
  • Growth is coming from consulting services - not from the traditional research they sell to clients.
  • If you look at the salary information for top employees, you'll quickly see that these folks are not compensated at rates you might think they should be compensated at. Few are earning bonuses, which tells you that Forrester is not achieving internal financial projections.
  • Social tactics are considered "brand building". Contrast that with what the experts tell you about social tactics.
  • Client erosion is blamed on sales force issues.
News got worse in the first quarter of 2014. 
  • Revenue was flat.
  • Expenses were up.
  • No profit at all ... in fact, they posted a small loss.
  • 1% of employees were "terminated" as part of a reorganization. 
  • The company lost money on consulting, one of the few growth areas in 2013/2014. 
  • Client retention is down again, continuing what may now extend to a four year trend. 
  • Selling and marketing increased to 40.9% of net sales.
Forrester's stock price is a shade under $40 ... it was a shade under $40 in early 2011. In other words, the stock price hasn't fundamentally changed in three years (up and down and up again), a timeframe during which the S&P 500 gained 50% in value.

You have to feel really bad for the analysts at Forrester. Really bad. Can you imagine the pressure those poor folks are under, pressure to generate revenue? 

It's hard for me to go to a meeting or to spend ninety seconds on Twitter without somebody quoting a Forrester Research fact that if you're not mobile, you're dead - that you have to adapt your business model now (#mobilemindshift ... click here to see).

But Forrester is also struggling mightily to adapt and change - the mobile mindshift is not paying dividends for Forrester, at least in the past five years - in fact, the multi-year results are dreadful. They are in the same boat many of us are in. In fact, their position is arguably worse - they're competing against free resources (me), you're just competing against Amazon. 

Forrester financials do not look good. Keep that in mind the next time you read a particularly powerful tidbit from Forrester Research - consider the motivation behind the tidbit, and the need to "sell" ideas. It's got to be tough to be Forrester Research, or any research brand.

July 20, 2014

Elevating Bread And Butter

Have you had a chance to watch this video (click here)?

What does bread and butter have to do with your business? EVERYTHING!!

Do me a favor. Go take a walk through your merchandising department, and identify the one person who possesses this level of passion. Once identified, give that person an opportunity to represent your brand.

Think carefully how the message in the video, about bread and butter for crying out loud, compares with the message you see below.

July 17, 2014

Maybe The Best Article I've Read In 2014

Click here to read this article about restaurants and mobile. Seriously. Do it now.

Use the comments section to describe how you'd fix this challenge.

Think carefully how this change in behavior impacts your business.

July 16, 2014


In an omnichannel world, you are supposed to align all channels with beautiful creative, impressive campaigns, and robust technology. You're supposed to tear down all silos (though the vendors who tell you to do this still seem to have siloed sales teams, don't they), and you're supposed to provide a 360 degree view of your business to the customer.

Few, if anybody, talks about merchandise and creative.

Your creative presentation says a lot about your business. If you were a 27 year old looking for a wig, and you end up on the Paula Young website, you're more than likely to be presented with a creative style that is fundamentally different than what is appreciated by your generation ... and for good reason.

Conversely, younger brands break all rules for home page real estate in an effort to sell to their customer.

Go overlay some demographic data on top of your website - then measure conversion rates by creative presentation and age cohort. Modern omnichannel agendas frequently fail to quantify the influence of creative demographics on selling stuff.

July 15, 2014

Pay Attention To Birchbox

Click here, retail fans.

Look past the glitz of artificial intelligence and machine learning, which simply means that "they're going to recommend product that a customer should purchase, just like retailers have been doing for hundreds of years", and think about the experience they're trying to create.

Compare the experience being created at Birchbox to, say, this:

Again, go past the obvious data-driven, omnichannel message, and think carefully about the experience.

Compare and contrast the new approach to retail to the approaches being vacated due to financial challenges.