July 23, 2017

Circulation Theory: Part 1

Note - if you aren't in the catalog industry, this is a good time to take summer break, because I'm going to spend two weeks discussing Catalog Circulation Theory. I'll see you in two weeks, ok? Or at least read this article about L.L. Bean (click here).

Here we go!

See the grid featured here? This is the dollar-per-book for a recent catalog via whatever attribution algorithm you like to use.

Your homework assignment for tomorrow? Tell me the dollar per book you'd expect if you were to mail Segment 8, Segment 9, and Segment 10.

Fill in your answers, and we'll move the discussion along tomorrow. And hint ... you see the 32 / 64/ 96 / 128 page columns? We're eventually going to fill those page count cells in as well. 

July 20, 2017

An Example Of A Low-Cost / No-Cost Customer Acquisition Program

Here's an example (click here).

This costs you close-to-nothing. Get a sprinter van, wrap the van in your company logo, and go out there and mingle with the public and do something clever.

Or not. Maybe you don't like the idea. No worries. But let's do something!

July 19, 2017

Big Events

So I had a conversation on Twitter with a trade journalist. This individual had fifteen mentions about Amazon on his home page, and nine of the fifteen (this was the day after Prime Day) article mentions had nothing to do with Prime Day.

I questioned the "free advertising" this person generated on behalf of Amazon ... and of course, the individual fired back with the predictable "This is the biggest story right now and we'd be stupid to not cover it" ... so I mentioned that 9 of the 15 mentions had nothing to do with Prime Day ... and this brought us the predictable "But Amazon is 40% of e-commerce and therefore they have earned the right to dominate our home page and overall coverage" ... causing me to point out that the publication will completely ignore the fact that Nordstrom invented selling at Christmas levels in July (Anniversary Sale) and that the publication will ignore this fact next week when Nordstrom launches the sale ... and that brought out the predictable response that "Nordstrom is comparatively tiny vs. Amazon and nobody is copying Nordstrom and people copy Amazon so we have to write about Amazon because of their dominance in the industry."

This is where I exited the conversation.

Why would I exit the conversation?

Because I found myself fighting my own hypothesis about where commerce is headed, and why in the world would I do that?

Commerce is headed in the direction of Sports, Politics, and Religion (yes, I added Religion to the mix). There are big events, and those events bring in traffic that wouldn't normally exist. The big events get people talking, generating word-of-mouth that results in low-cost / no-cost customer acquisition.

So why would I fight my own hypothesis when Amazon "invented" a big event in July that caused trade journalists to cover the big event? The trade journalist is doing exactly what my hypothesis demands of the trade journalist ... right?

We're all headed toward a world where there are 4-8 big events on an annual basis ... a featured event (like WrestleMania or the World Series of Poker or Joyce Meyer coming to the Tacoma Dome or mid-term Congressional Elections) and a bunch of supporting events that get people talking. In the old days, catalogers did this with catalog in-home dates ... a dozen a year that the customer actually looked forward to.

We'll know that our events are successful and are building a tradition when trade journalists breathlessly cover the events.

July 18, 2017

Recency, Frequency, Monetary

I was recently asked to evaluate how a catalog selects names for upcoming mailings. The Executive told me that her vendor asked her company to switch from model-based selections to ... are you ready for this ... to RFM ... prompting me to offer a predictable response.

And I laughed and laughed. What idiots! My goodness. The vendor community is really failing my client base ... again.

One problem.

In my arrogance, I forgot the original request - to evaluate how this company should select names for catalog mailings.

So I evaluated models against the RFM strategy.

The RFM strategy performed to within 0.3% of the prior modeling strategy - a modeling strategy that while not outstanding was at least credible.

Why would a 40 year old methodology perform almost as well as a credible regression-based modeling strategy? Several reasons.
  1. The annual repurchase rate of reactivation candidates at the margin is only about 7% in this example. When repurchase rates are low, RFM is competitive.
  2. The organic percentage is about 40%. So if the annual repurchase rate is just 7% at the margin, and 40% of the 7% will happen with/without aid of catalogs, then the effective annual repurchase rate is actually (1 - 0.40)*0.07 = 4.2%. A lower effective annual repurchase rate makes RFM more competitive.
Instead of judging a vendor for using a 40 year old methodology, I should have judged my pre-conceived notion that I am right and a vendor is wrong. I should have let the data make the case for using the methodology.

July 17, 2017

Aligning Resources

Let's pretend that your annual repurchase rate is 30%.

If true, then your marketing resources need to be aligned squarely against the singular goal of finding new customers, correct? I mean, you have to replace 70 of 100 customers every single year, what other conclusion could you come to?

Most of my client base possesses an annual repurchase rate under 40% - it's the general nature of catalog marketing and/or e-commerce (retail is different, with higher annual repurchase rates). So most of my client base (and most of my readers) are likely to fall into a situation where finding new customers is easily the most important initiative.

At conferences, I'll ask how much time the audience spends trying to get more customers to become more loyal ... and I'll frequently see that the majority of attendees spend the majority of their time trying to get the majority of existing customers to spend more money.

In other words, resources are not aligned properly.

When I speak of low-cost / no-cost customer acquisition programs, loyalty-driven employees stare like I've got green steam coming out of my ears. There's a good reason for this ... loyalty-driven employees have spent a career honing loyalty-driven skills.

As we look to 2018, one might consider if we're aligning resources properly? Frequently, the answer is no.

July 16, 2017

Rolling 'em Up

We're in the process of rolling up weaker companies, aren't we (click here)?

This book is from 20 years ago, but it is one of my ten favorite books of all time (click here). The authors demonstrate how an industry expands (many new companies), then is rolled-up (big companies buy weaker companies), then innovation happens once the industry is too concentrated.

The traditional catalog ecosytem was rolled-up in two stages ... 10-15 years ago the co-ops rolled-up the data ... today a half-dozen companies (+/-) are rolling up brands. This seems to be the way the world works now ... in e-commerce Google+Facebook rolled-up the data, and then retail brands are rolling-up e-commerce brands in response to Amazon owning e-commerce.

There are three big trends surrounding businesses that are being "rolled-up".
  1. Access to New Customers.
  2. Reduced Fixed and Variable Expenses.
  3. Access to Merchandising Trends.
Catalogers are being starved of new customers - no two ways about it. If a cataloger is part of a "brand portfolio", there are a ton of customers that can be "accessed" (but not necessarily converted).

The standalone cataloger has to have a response when competition is being "rolled up".
  • Low-Cost / No-Cost customer acquisition programs to defeat access to sister brand lists.
  • Greatly reduced catalog marketing expense to free up resources to be invested elsewhere.
  • A strong New Merchandise program designed to protect the future health of the business.
The three strategies above are not strategies that a ton of catalogers are focusing on ... which does not bode well for standalone catalogers going forward.

We know where we need to expend energies. Let's go do that!

July 13, 2017

Nordstrom Anniversary Sale - Early Access For Cardholders

When I suggest that commerce must move toward Sports / Politics, many readers grind their teeth in disapproval.

Meanwhile, customers happily hop aboard the event train.

Look at that ... Nordstrom cardholders get to load up on Fall merchandise at sale prices a week earlier than everybody else. It's like there is an event, and Season Ticket Holders get to "reap the rewards" as the trade journalists like to say.

Go ahead, click here to learn more about it.

Commerce is aligning more with Sports and Politics as time progresses. What is your monthly/quarterly/annual event that customers cannot possibly miss - and what are you doing to market the event like there is no tomorrow?

July 12, 2017

Fixing The Car

There's nothing like the thrill of a CHECK ENGINE light to bring your peaceful drive to a haunting close.

You make an appointment ... 8:30am ... and you arrive on time. You pull the car up to an expansive six-lane bay where a worker in a blue shirt waves you in to the far left lane. He asked "who is your service advisor?" and you dutifully respond "I think his name is Chet."

Within seconds, you've been separated from your car. This really tests your relationship, because there is no loaner car in your future. It's just you and Chet.

Chet invites you to sit down at a pseudo-cube and offers you a quenching 16oz bottle of ice-cold water. You tell Chet about your problem - and Chet is really not listening to you because Chet knows that the technician ... Boris ... is going to use a code reader to figure out what is wrong. It simply doesn't matter that you turned the steering wheel a hard left and then a check engine light came on ... your story is irrelevant ... the facts are buried and Boris is going to do what Boris does to solve your problem.

After communicating a mandatory $149 fee, you sign three pages of documents and secretly wonder if you just handed over the title of the car to the dealership? At this point, you are graciously walked over to the customer lounge. What a place! There is an assortment of apples and bananas to choose from, more free ice-cold plastic-bottled water, and the opportunity to take in a half-hour of insight courtesy of Matt Lauer on the giant 68 inch LED television.

This is where the action happens.

Ronaldo sits down next to a fifty-ish woman. He has a sheet with seventy-nine categories coded green, yellow, and red ... and he placed an "X" in magic marker through three of the red boxes ... apparently there is an unanticipated issue with the cabin filter. Another twenty-nine dollars are absorbed into the automotive ecosystem.

Two hours later, Chet informs you that the check engine light was an anomaly - an oxygen sensor apparently threw a code but the "technician" cannot identify the problem and the oxygen sensor is working properly. So after they wash the car for you (retail value = $14.99) you can leave ... you'll part with $149 plus sales tax and an assurance from Chet that if the problem happens again, bring the car in and they'll address the issue free of charge.

You never get to talk to the person who performed the actual work, do you?

Do you even feel comfortable that the actual problem has been solved?

Sure, you have a cold bottle of water and a granola bar in your possession, and your car has been washed. But you don't talk to the actual person who did the actual work. You talk to Chet.

When you work with your vendor partners ... are you working with Chet, or are you getting to actually speak with Boris? Do you get to learn what actually goes into the "algorithm" that determines who your new customers are? Or are you given a sheet with red boxes ... better known as a "dashboard" in our industry?

I keep running into challenging situations ... where my clients are working with Chet and they need to be working with Boris. Sure, my clients are getting granola bars and cold water and the occasional banana - but they need to have an honest discussion with Boris.

If we're gonna "fix it", then we need to speak with Boris, don't you think?

July 11, 2017

Why Catalog Craig Paperman?

On Monday, I wrote about Amazon Prime Day.

On Tuesday, I had a pretend discussion with Catalog Craig Paperman about Amazon Prime Day?

Which discussion did you enjoy more?

Which discussion resonated more with you?

When you give me feedback at a conference (something you aren't shy about), you routinely tell me you enjoy hearing from Catalog Craig Paperman and that you enjoyed the old Gliebers Dresses series. In other words, you digest the message better when it comes from Catalog Craig Paperman than when it comes from me.

Is there a parallel in your business?

Is there a persona or employee with a unique voice/personality who could sell your message more effectively than a copywriter telling us that a suitcase is 19x15x6?

Who is the person in your company who communicates with such passion that your customer base cannot wait for the next communication?

A brief story - when I worked at Nordstrom, I had a team that swelled up to 24 analysts at one time. One of the very best analysts was not a great communicator - this person's ideas went nowhere, and my boss wanted the person fired ... saying once that if I didn't fire the person I should at least not let the person out of the cubicle area. Meanwhile, I had an analyst with below-average analytics skills and outstanding communication skills. Eventually I figured out that this person would be the public voice of my analyst community. This person spoke to other departments. And when this person spoke, things happened. Even I couldn't pull off what this person could accomplish - and I was a Vice President for crying out loud.

The reason for this brief story? It's important "who" communicates your story. In my case, you digest issues much better when Catalog Craig Paperman communicates than when I communicate.

Who is the person in your company who communicates with such passion that your customer base cannot wait for the next communication? And why the heck are you not paying this person a quarter-million dollars a year to be your version of "Flo" at Progressive Insurance?

I know, I know, you have a hundred reasons why you cannot pursue this strategy. I'm asking you to consider just one reason why you should pursue this strategy.


July 10, 2017

Catalog Craig Paperman on Amazon Prime Day

Yup, more business fiction for you - this is the stuff that is generally most popular, FYI. If this isn't your cup of tea, then how about reading this favorable article about Bonobos from September (click here) and then consider if they actually reinvented anything after becoming a division of Wal-Mart, ok?

Kevin: Craig, you look like you forgot to bring antacid tablets on this trip.

Craig: Oh, I'm just frustrated about Amazon Prime Day.

Kevin: Why?

Craig: It's yet another excuse for the customer to choose Amazon instead of catalogers who do things the right way.

Kevin: The "right" way?

Craig: We celebrate the holidays that matter, like Cyber Monday.

Kevin: A day when we have to give 40% off plus free shipping so that trade journalists can make money talking about how much profit we give away?

Craig: Exactly! Look at the hair on my arms, standing at attention as I think about how exciting Cyber Monday is.

Kevin: So you'd rather ride the coattails of the trade industry than create something innovative and exciting for your own brand?

Craig: Who needs the stress of creating your own event, an event that has a 95% chance of failure? I'm at a stage in my career where I don't need failure.

Kevin: You endured an entire career of failure.

Craig: The first thirty years weren't that bad. There were a few good times. When we introduced credit cards as a form of payment, that was a lot of fun.

Kevin: Were you at the front of the credit card movement?

Craig: Oh heck no. We made sure somebody else took the risk and learned how to do it. Then we copied available best practices. That's how you earn a 4% cost of living increase, my friend.

Kevin: And that's what you are doing with Amazon Prime Day - waiting to see how it works and once Prime Day is a best practice you'll create something on your own?

Craig: Kind of like those Friends and Family Events. We waited until everybody had one. That's how you know an industry embraces a movement, and more importantly, that's how you know the customer embraces a movement.

Kevin: Is it possible that by always being behind the curve, you miss out on valuable opportunities?

Craig: Valuable opportunities?

Kevin: Name something that the catalog industry invented in the past five years that pushed the entire commerce industry forward?

Craig: Um.

Kevin: Exactly.

Craig: Cataloging is a mature industry. You don't invent anything in a mature industry. Well, let me take that back. Printers can do amazing things. They can create 80,000 different versions of a catalog. Think of the possibilities.

Kevin: Do you think about the possibilities?

Craig: No.

Kevin: Why not?

Craig: My inventory manager couldn't possibly forecast how many units to sell because she wouldn't know what specifically is being sold on each page.

Kevin: But your inventory manager has no idea what the online visitor will choose to look at, and somehow she figures out how to manage online inventory.

Craig: That's different.

Kevin: How is it different?

Craig: I have no idea.

Kevin: Alright.

Craig: Why can't we sell stuff without effort? That's all I'm looking to accomplish at this stage of my career.

Kevin: Tell me you didn't just say that.

Craig: Wouldn't it be great if we could have vigorous discussions about which cover photography is most likely to work on the August catalog? We could all offer our opinions, none of which really matter, and we'd kill two or three hours in the process! Then we'd go with a version that nobody likes and it wouldn't work and then we'd all criticize Liz about how she messed up the creative strategy for the mailing. It would be her fault! That's how I'd like to spend my time.

Kevin: You like to spend your time criticizing Liz?

Craig: Nonetheless, how much fun can you have personalizing a website when the customer can enter through one of a thousand different ways? Only the numbers geeks enjoy that stuff, and they're no fun to argue with.

Kevin: Why?

Craig: Because they have facts. Once somebody has facts, they aren't fun anymore. How do you debate somebody who has facts? They're right, you are wrong. That's why I don't like Amazon Prime Day. It works. They advertise. They get sales. Their business grows. There's nothing to discuss.

Kevin: But I thought you were a follower who liked best practices? We just talked about letting people take all the risks. So you don't like best practices when best practices are fact-based, is that correct?

Craig: I like it when you are told to offer a discount in the subject line of an email message. See, that's a best practice, but we can have endless discussions about the "right" way to execute the best practice, and there isn't a fact-based answer. Amazon Prime Day? It works, end of story. No fun there.

Kevin: Amazon gets to have fun.

Craig: I hate Amazon.

Low-Cost / No-Cost Customer Acquisition: Amazon Prime Day Edition

When I talk about low-cost / no-cost customer acquisition programs, people stare at me like I was in an episode of the X-Files and had a green mist surrounding me.

  • "Do you mean saving a nickel on paid search costs on Google?"
  • "Do you mean a lower cost per thousand on Facebook?"
Have you looked at all of the free advertising Amazon gets for Prime Day? Heck, your own industry trade journalists fawn over it, as well as others.
Look, I could list a hundred thousand links if I wanted to. Everybody is doing the marketing for Amazon. Yes, Amazon has to kick-start the process with their own marketing, but when you have CNN doing the marketing for you, or USA Today using their distribution system of local papers, well, that's a lot of low-cost / no-cost customer acquisition going on.

I know, I know, you have two gripes with this line of reasoning.
  1. They're Amazon, and you sell widgets. You are unique, and you are special, and you are smaller than Amazon.
  2. Amazon isn't acquiring customers because they already own every customer.
You are a marketer or merchandiser or an analyst. You are paid money, and you are given health insurance. In exchange, it is your job to compete against large companies. You are paid to have your own version of Prime Day, something that draws attention to Your Company, something that causes other people to perform marketing for you at low-cost / no-cost.

Describe why you don't have a low-cost / no-cost customer acquisition program? What is stopping you?