March 03, 2015

Target Sacks Thousands Of Salaried Employees - And Other Omnichannel Nonsense

Click here for the news about Target.

Omnichannel experts want you to fully digitize your business ... they want you to allow your customers to buy wherever, whenever. Expand in Canada! Grow your online business! Digitize the store! Do it all!

Did you read the article yet? Go back and read it. Ok, you're lazy. You want me to outline the facts for you. Fine. Here we go:

  • Target's omnichannel international expansion failed miserably.
  • Target winds up being $2,000,000,000 in the red in Canada.
  • Wall Street doesn't like it when you lose billions of dollars on an omnichannel international strategy.
  • Wall Street wants $.
  • Target cuts costs, to the tune of $2,000,000,000 (why does that number sound so familiar ... oh, it's, coincidentally, the same amount that was lost in Canada).
  • Thousands of Target employees, the vast majority of course had nothing to do with international expansion, get the benefit of being fired as part of a reorganization of the business.
  • Wall Street, however, is thrown a bone, to the tune of $2,000,000,000 (there's that number again) to $5,000,000,000 of current and future stock buy-backs. In other words, Target takes cash that could be used to grow the business (or pay employees) and instead buys back stock, driving up the price of the stock, allowing Wall Street to sell the stock and earn a profit.
Omnichannel!

Why do we listen to vendors, trade journalists, researchers, consultants, and other third parties who demand omnichannel expansion? Those folks get paid when you pay attention to them. Why are we letting the non-accountables run our businesses for us? Notice that the non-accountables don't get fired (yet) ... nope ... just Target employees get fired.

Assigning Scores In The Partner Dashboard

Vendor Leadership Management is a big deal, folks. If you aren't clear about how your vendor team should support you, your vendor team will support you in a way that is most beneficial to individual vendors, right?

Each month, you update your entire vendor team on their comparative overall status.


In the email sent to every vendor, every employee in your department, and every member of your Executive Team, you give specific praise to the top 20% of the list ... in our case, the top three (Social Media Agency, Email Service Provider, Pay-Per-Click Vendor). Be specific about what each group is doing well ... your Social Media Agency is providing the best customer service ... your Email Service Provider increased company profit ... your pay-per-click vendor ramped-up the performance of winning new items (makes sense). Tell everybody what these folks are doing well.

I would not spend time on the bottom three in the list, publicly at least. I'd just let the two co-ops and the affiliate vendor sit there, at the bottom, for all to see. Trust me, your vendor partners are going to pay close attention to the partners that land in the relegation zone (bottom three).

Only six of sixteen vendors earned Net Scores > 50%. That's not acceptable. Make sure your team understands what your expectations truly are.

Privately, I would contact the bottom three vendors, and clearly explain why their performance is not acceptable. I would clearly explain what they have to do in order to improve. I would explain what happens if performance does not improve. If you're not going to do anything different with the vendors at the bottom of the table, well, then don't even bother with this framework. The framework is designed to help your vendors improve their performance so that your business generates increased sales and increased profit.

Make sense?

Tomorrow, we'll dive into an example of evaluating a specific vendor.

March 02, 2015

Aligning Goals With The Vendor/Partner Dashboard

Ok, you spent an hour at your Vendor Accountability Summit communicating the situation your company is in. Your vendor partners took diligent notes.

Now, you're going to share with your vendor partners how they will be evaluated in the upcoming year.

Your goals and objectives are split three ways ... profit ... new + reactivated buyers ... and winning new items.

This means that you must evaluate your vendor partners via the same objectives. You have no choice, folks. If you want to be successful, and your employees are aligned along these objectives, then you must hold your vendor partners accountable as well.




In the Vendor / Partner Dashboard, I have one row for each vendor. Then, there is a column for each objective that is important to me. I give my three key objectives equal weighting ... 20% for profitability ... 20% for new + reactivated customers ... 20% for winning new items. Then, I add two objectives, objectives that are important to me ... customer service (at 30%), and innovation (at 10%).

In other words, my vendors are going to be evaluated at 60% on my goals, 30% on customer service, and 10% on the innovation they bring to the table.

This is important, folks.

Vendor goals are aligned with my goals. Then, I give extra credit to organizations that provide outstanding customer service, and I give extra credit to organizations that promote smart innovation.

Innovation is going to be a tricky one. I don't want to reward vendors who tell me to "be omnichannel", or recommend that I "personalize or die". In fact, if this is the advice I get, well, I'm going to hammer the vendor on the innovation score. I don't want to see vapid innovation, and I don't want to see innovation that is aligned with innovation that generates profit for the vendor. I want to see truly innovative ideas.

Each month, I will evaluate my vendors on the criteria in the table above. I will rank my vendors from best performing to worst performance. I will share the results with my vendors. Every vendor will know where the stand.

Tomorrow, we'll shift the conversation from what I demand of the vendor team to evaluation of each vendor.

March 01, 2015

Communicating Goals

Ok, by now, your vendor partners are shocked - they cannot believe that your business is still, well, in business!

Every VP of Marketing has a series of goals and objectives. The Executive will be evaluated based on how well she performs against the objectives.

For instance, the Marketing Executive might have the following objectives:

Objective: Grow New + Reactivated Buyers To More Than 450,000 Per Year.
  • Exceeds Expectations = 450,000 or more new + reactivated customers, annually.
  • Meets Expectations = 350,000 to 449,999 new + reactivated customers, annually.
  • Missed Expectations = 0 to 349,999 new + reactivated customers, annually.
Objective:  Increase The Number Of Winning New Items To > 40 Per Year.
  • Exceeds Expectations = 41 or more winning new items.
  • Meets Expectations = 31 to 40 new, winning items.
  • Missed Expectations = 0 to 30 new, winning items.
Objective:  Increase Company Profitability.
  • Exceeds Expectations = $2,000,000 or more Earnings Before Taxes.
  • Meets Expectations = $1,000,000 to $1,999,999 Earnings Before Taxes.
  • Missed Expectations = < $1,000,000 Earnings Before Taxes.
These objectives are shared with your vendor team. They have to be shared. Your vendors need to know how you will be evaluated. Then, your vendors need to know that they will be evaluated similarly.

If the Marketing Vice President fails to meet/exceed expectations, she loses her job. We've all been there. Consequently, vendor performance should be aligned with Executive objectives.

The objectives are folded into the Partner Dashboard, and are weighted appropriately. More on that in the next post.

February 26, 2015

Aligning Objectives via Diagnostics

When I worked at Nordstrom, I held an annual Vendor Accountability Summit. Given that this was in the pre-Google days, the primary attendees were the co-ops, list organizations, printers, paper reps, and database vendors (until we moved our database in-house in 2002).

I received permission to share the profit and loss statement with our vendors. I know, I know, you'll never do that. But imagine if you did do it?! Your vendor partners deserve to know if your business is dying, or if it is thriving. How else can your vendor partners possibly give you optimal support if they have no idea what you need?

At the Vendor Accountability Summit, I would share the profit and loss statement. In the case above, I'm going to show my vendors just how miserable business is.

Next, I'm going to dig into the findings of my Diagnostics project. I'll gladly illustrate that my company is having a hard time selling new items.



If you have a website optimization vendor, don't you think that vendor wants to know that your new item productivity is in collapse? Don't you think they want to help you make new items as productive as possible? These people care, they want to assist you. They cannot assist you when you're not honest with them.

Show your vendors that the twelve-month buyer file is dying.



Show your vendors that to keep the business afloat, you're trying to prop up the business by raising prices.



Show your vendors that customer order frequency is in decline.


Show your vendors that you are promoting the living daylights out of your customer file, trying to keep the file afloat. Tell your vendor partners that there is no more room for promotional strategy.


Show your vendor partners that your business started to die in September 2013, and continued to struggle through October 2014.


Show your vendor that you simply cannot acquire new customers - you have a real, fundamentally business problem here.


Yes, it is time to open the books. Share the plight of your business with your vendor partners. They deserve to have information necessary to grow your business.

In upcoming posts, I'll get back to linking this information to the Partner Dashboard.

Vendors Do Not Call The Plays

Here's what happens in basketball when the coach calls the plays and the player ignores what the coach wants to do (click here).

I spoke at the VT/NH Marketing Group conference last week. More than 170 folks in attendance, mostly direct marketers from New England. Here is what so many of the folks in attendance said to me, paraphrased for emphasis:
  • "We told our co-op that performance is awful. We told them that performance has to improve. They told us to trust the models. It's as if they don't even care what happens to us."
In sports, you do what you're told, or you are benched, and then suspended. Players play, coaches coach.

In business, you are the coach. End of story. The vendor doesn't get to call the plays.

You hear me go off about co-ops in catalog marketing, and omnichannel vendor theory in retail. There's a good reason for that. In both cases, the vendors are calling the plays. You can't let that happen. Vendors will call plays that optimize their performance. You hire vendors to optimize your performance!!

Vendors do not call the plays.

It is time to take control over your vendor relationships. Enough is enough.

February 25, 2015

The Partner Dashboard

The most important component of Vendor Leadership Management (VLM) is the Partner Dashboard. Click on the image for details.


Now, your list of vendors is going to be significantly different than this list, a typical list for a catalog brand. So please follow along, and sub in your vendors where applicable.

In this example, I evaluate my vendors on the basis of five objectives.

  • 20% = Increasing Company Profitability.
  • 20% = Increasing New + Reactivated Buyers.
  • 20% = Increasing The Number of New Winning Items.
  • 30% = Outstanding Customer Service.
  • 10% = Innovative Ideas.
Within each category, each vendor is graded from 0 (horrific performance) to 100 (exemplary performance).

I know, I know, I can hear folks screaming already ... "We host your database, how the heck can we ever contribute positively to the number of new, winning items?" Tough. There are all sorts of ways you can contribute. Create custom variables in the database that segment customers who purchase new items on a regular basis - how about that? Every vendor can contribute. Every. Vendor.

The criteria come from the objectives the Marketing Vice President is evaluated against for the upcoming year - by doing this, we align vendor incentives with the objectives that determine if the Marketing VP gets to keep her job or not. Fair enough?

After scores are tabulated, a weighted average score (called "Net Score") is calculated. The table is then ranked, from highest "Net Score" to lowest "Net Score".

You don't want to be on the bottom of this list, do you?

But if you are on the bottom of the list, you know exactly why you are on the bottom of the list.
  • Co-Op #3 is at or below average at everything. I wouldn't want to be this co-op, with three co-ops outperforming it.
  • The Affiliate Vendor is horrific at customer service. That one should be easy to fix, right?
  • Co-Op #2 gets high marks for innovation, and those high marks keep Co-Op #2 out of the worst spot on the list ... probably keeping names flowing through Co-Op #2 and not Co-Op #3 as a result.
  • The paper rep gets low marks for customer service and profitability ... that's what will happen when you lock your client into long-term deals that are only beneficial to the paper rep.
I would share this dashboard, on a monthly basis, with every vendor. Create an email distribution list, and share the list - share it with your Executive Team, share it with the employees in your department, and share it with every vendor.

Yes, Co-Op #1 should know that Co-Op #3 is performing poorly, and Co-Op #3 should know they are worse than all other Co-Ops. Everything should be transparent. If you're at the bottom of the list, you know exactly why you're at the bottom of the list.

In upcoming days, I will talk about annual objectives, and I will talk about how to determine the 0-100 scores for each vendor.

February 24, 2015

The Vendor Accountability Summit

So your vendors are not listening to you? Your co-op tells you to trust the models. Your pay-per-click vendor tells you that it's going to cost more and more and more on Google until Google is the only profitable company on the planet. Your boutique agency is forcing a product upon you that you don't need. Your research brand wants you to engage in consulting because their core business model is failing and they told Wall Street this is their future growth area - not that you need their consulting in the first place?

Sound familiar?

What are you going to do about it? Yell at 'em? That doesn't work.

I would hold a Vendor Accountability Summit. Invite every single vendor who supports your marketing department ... yes, every single one. Demand that a Vice President and your rep be in attendance from every vendor, where applicable.
  • Invite each Co-Op.
  • Invite your Printer(s).
  • Invite your Paper Rep.
  • Invite your Merge/Purge Vendor.
  • Invite your Database Vendor.
  • Invite your Paid Search / PPC Vendor.
  • Invite your Affiliate Vendor.
  • Invite your Email Service Provider.
  • Invite your Website Optimization Vendor.
  • Invite your Website Analytics Vendor.
  • Invite your Retargeting Vendor.
  • Invite Google.
  • Invite Facebook.
  • Invite your CRM Vendor.
  • Invite your Circulation Consultant.
  • Invite your E-Commerce Consultant.
  • Invite your Boutique Agency.
  • Invite your Attribution Vendor.
  • Invite any other Vendor / Consultant / Research Sales Person etc.
If your vendor won't attend, well, that tells you something about that vendor, doesn't it?

The framework I will describe is directionally similar to what I used at Nordstrom, though I am going to expand on the concept given the explosion in vendor-to-employee ratios in modern marketing. We need more detail today than used back in 2001 to achieve greater accountability.

This is a day-long event. Here's the agenda.
  • 9:00am - 9:15am = Introductions.
  • 9:15am - 10:00am = Overview of Business Performance, and Goals For The Coming Year (you perform this presentation ... sharing everything ... the good ... the bad ... the ugly ... profit ... loss ... your feelings of desperation).
  • 10:00am - 10:15am = Break.
  • 10:15am - 10:30am = Meet With Your CEO. Your CEO will explain why marketing partners need to significantly improve performance. I always did this early in the day.
  • 10:30am - 11:00am = The Partner Dashboard. Here, on a dashboard, you show a rank-ordering of grading of each of your partners, evaluating their annual performance from best to worst. If your affiliate is performing best, and provides the best customer service, put them at the top of the list. If your paper rep hiked prices and is simply ignoring you unless JCP decides to mail a catalog and then sends you an email telling you that JCP is the future, rank them at the bottom. Share the rank-ordering on the list with every person in the room, regardless whether feelings will be hurt or not. Feelings will be hurt. You are simply holding folks accountable. Make it clear how the rankings are created. More on this in later, and in upcoming posts.
  • 11:00am - 11:15am = Meet With Your Merchandising Leadership Team. This team will explain the merchandising strategy for the upcoming year, and hopefully, the folks in the room can interpret the process and help you sell better as a result.
  • 11:15am - 12:00pm = Open Question and Answer. Folks in the room get to ask questions, given the information shared in the morning session.
  • 12:00pm - 1:15pm = Lunch. Feed these folks well ... something better than wrapped sandwiches, moist pickles, and chocolate chip cookies. But that doesn't sound too bad, either, so go with that, why not?
  • 1:15pm - 3:30pm = Partner Presentations. Each partner/vendor is given 15 minutes to publicly share how they are going to improve performance in the upcoming year. Your partners may need assistance from other partners to obtain improved performance, your partners may need you to spend more to increase sales, it doesn't matter ... this is their opportunity to make a difference, and to impress the competition. All folks, employees and partners can ask questions.
  • 3:30pm - 3:45pm = Break.
  • 3:45pm - 4:45pm = Follow-Up Plan. Host this meeting once per year. However, you will provide reporting to the entire team on a monthly basis, illustrating to the entire team how well everybody is performing. Clearly communicate that, based on your evaluation formula, you will rank-order the entire team monthly, from best to worst. Make it clear that they don't want to be at the bottom of the list (the relegation zone, to use an English Premier League soccer comparison). Hammer home the criteria you will evaluate folks on.
  • 4:45pm - 5:00pm = Tell everybody that you do like them, you do respect them, but you'll be out of business soon without better support. If you feel like the day went well, praise everybody, and send them home. If you feel like the day went poorly and your partners didn't care, let everybody know that you will be talking to NEMOA leadership about illustrating the results of your year-long evaluation at the 2016 Spring Event as part of a keynote presentation.
Given that we're in late February, I'd hold your first-annual summit in April, so that your vendor partners have plenty of time to impact fourth-quarter results.

Notice that I mentioned something called the "Partner Dashboard".

The "Partner Dashboard" is critical. This is a dashboard that evaluates each vendor based on the criteria that is most important to you. Vendors are rank-ordered, from best to worst, for all to see, based on performance. This is the dashboard that you use to hold folks accountable. Your vendors will know if they are exceeding, meeting, or missing your objectives, in comparison to their competition. Yes - if you work with two boutique agencies, each will get to see how each other is evaluated.

Yes - you need to do this.

There's nothing that inspires competition more than a dashboard that rank-orders vendors from best to worst, based on the criteria important to you.

I have found that it is best to be very firm in this first meeting. Honest, open, and firm.

  • Share the five year profit and loss statement for your company. Your vendors are under non-disclosure, so this should not be a problem. If your CFO objects, invite your CFO to the meeting and have her present the information sans tables/charts.
  • Share every single customer metric you have. Annual Repurchase Rates ... Orders per Buyer per Year ... Items per Order ... Price per Item Purchased ... Average Order Value ... Annual Demand per Buyer ... 12 Month Buyer Counts ... Annual First-Time Buyers ... Annual Reactivated Buyers ... Website Traffic ... Conversion Rates by Segment ... Twitter Followers.
  • Share your marketing budget - broken down by advertising channel ... ad-to-sales ratios, cost per new customer - then compare it with lifetime value.
  • Share your five year customer file forecast ... you have one of these ... right ... right? Show your vendor partners why you need new customers.
  • Share the lifetime value of your customer.
  • Share inter-channel metrics ... all these omnichannel customers that are not increasing your profit by a single penny.
Your vendor partners are going to be a lot more helpful when you treat them like an actual employee, and grant them access to actual customer data.

Then, be firm. You need results, or your job is at risk. In so many ways, your vendors determine if you get to keep your job or not. You cannot lose your job because co-op performance is at -22% and they simply tell you to have faith in the models.

This is a new way of working with your vendors ... who, quite honestly, are your employees.

Rest assured, some of your vendor partners are going to freak out ... freak ... out. They will hate this. They will hate the accountability, they will hate being compared to others, they will make excuses, they will refuse to attend, they will stonewall you in the months after this day-long summit, they will lie, they will badmouth you publicly, telling others that you are a "bad client". This means that you that you should not be working with this vendor. Other vendors will give you lip service, then, they'll go home and nothing will change. Unless productivity is well above average, this means that you should not be working with this vendor.

In the catalog world, I'm exhausted by all the complaining about the co-ops - complaining that is not associated with action on behalf of the co-ops. Your business is dying ... and nobody seems to care. It is time to hold folks accountable. It is your job to hold folks accountable. Let's get started.


Tomorrow, I will share a mini-dashboard, as an example of what you need to be doing to start to hold your vendor partners accountable.

February 23, 2015

Vendor Performance Review (VPR)

When you are employed at a company, you are usually subjected to an Annual Performance Review (APR). We've all been reviewed, many of us have reviewed hundreds or more individuals. 

The process isn't much fun, for either party. It's not fun to tell somebody that they are not performing well. We've all been on the receiving end of a bad review, justified or not. But the process serves a purpose. We accept the feedback, and we improve.

In 1995, when you led a department of 24 people, you evaluated 24 individuals. You rank-ordered them, you knew who to promote, you knew who to not keep around.

In 2015, when you lead a department of 8-10 individuals and 20 unique vendors, you have different challenges. You give annual performance reviews to your staff of 8-10 individuals. Do you give a vendor performance review to the 20 unique vendors?

In the upcoming days, I am going to talk about the Vendor Performance Review (VPR). More specifically, I am going to integrate three concepts.
  1. A Diagnostics Project, which is essentially similar to getting an annual physical. The Diagnostics Project outlines what your company needs to improve upon in order to be successful.
  2. A Vendor Summit, where you invite all of your key vendors in for a day-long discussion about your business, describing how you want your vendors to support your business in the upcoming year, based on the outcome of a Diagnostics Project.
  3. A Vendor Performance Review (VPR), where, on a monthly basis, you describe to each vendor, via a scorecard, where the vendor stands among all other vendors, in terms of performance.
I used this framework at Nordstrom, to great success. The approach I describe will build upon the Diagnostics Project and Partner Summit used at Nordstrom. I will explain, in much more detail, how my thinking regarding the Vendor Performance Review (VPR) has evolved since my time at Nordstrom.

It is my opinion that most of the folks I work with are really, really struggling to hold vendors accountable, in a framework outside of hiring/firing vendors. Progress doesn't happen from hiring/firing, progress honestly happens when a vendor knows exactly what needs to be done to create success in your organization, and then improves performance and delivers upon your goals.

If the co-ops knew that cataloger customer files were dying and rapidly aging, and the co-ops knew specifically what they had to do to be successful, we'd see better co-op performance. Those co-op folks want to please you, but without good information, they're not able to please you.

So, tomorrow, we talk about the Partner Summit. Be ready!

February 22, 2015

The Co-Op Feedback Loop - One Final Time

It's the story of 2015 among catalogers.
  • "Our housefile performance is reasonable, but our co-op customer acquisition efforts are bad. Really bad. And nobody in the vendor community seems to care."

I've been asked by clients to visit the co-ops, to help the client get the productivity needed to move the catalog needle once again. I've been told that when clients talk to the co-ops, with the notable exception of Wiland (keep that in mind), they get nowhere, even when they demonstrate that co-op productivity is down 10% to 30% vs. 2013, and 2013 was frequently down vs. 2012.

Do you realize that I've been talking about the co-op feedback loop for nearly nine years? In two weeks, this blog turns nine years old. I have consistently discussed the negative ramifications of the co-op feedback loop with you ... over and over and over and over and over again.

There's a direct correlation ... the more I talk about the negative impact of the co-op feedback loop, the more you shift your customer acquisition activities to the co-ops.

So I am going to outline the co-op feedback loop one more time. Once more. After today, I'm done. I have about 10,000 uniques who see at least one bit of my content on a monthly basis - clearly the majority of the catalog industry has read something from me over the past nine years outlining the problem. 

Obviously, you are entertained by what I say, as demonstrated by record readership levels, but most of you do the opposite of what I recommend. So I, too, am now going to do the opposite. I am going to stop talking about it. If most of you consistently do the opposite of what I recommend, then maybe you will, as an industry, finally address the problem if I stop trying to address the problem.

Here it is, the co-op feedback loop, for one final time. Soak it in. Bookmark this post (click here for the url), so that you can refer to it in 2025 when co-op response has been down at a compounded 20% rate for ten consecutive years and you cannot afford to use them anymore and have no way to acquire new names because your core customer is 78 years old.
  • In 1995, co-ops were a great idea, because the average catalog shopper was around 40 years old. Catalogers struggled with the concept, and did not fully embrace it.
  • In 2005, the co-ops were already past their prime, with an average catalog customer being +/- 50 years old, and Google / Amazon were undercutting the co-ops, fully owning customers age 35 and younger. However, catalogers were fully embracing the co-ops, and in the process, drove the catalog list industry into extinction.
  • In 2010, with an average catalog customer being +/- 55 years old (often much older) and co-ops now fully owning the customer acquisition process for catalogers, a terrible dynamic took over.
  • The dynamic:  Co-ops sent catalogers 55+ year old customers. These older Baby Boomer shoppers loved a specific set of merchandise ... merchandise that older Baby Boomers loved, of course! As a result, your merchandising teams responded to what older Baby Boomer customers were buying, and made sure plenty of it was in the catalog. Then, you sent the names of customers who purchased this merchandise back to the co-ops. The co-ops modeled their names, found that older Baby Boomer customers were most responsive, and sent you even more older Baby Boomer names. Your merchandising team observed that older Baby Boomer names loved more merchandise desired by older Baby Boomer names, and fundamentally shifted the assortment away from what a younger customer would ever consider buying. As a result, online, younger customers had terrible conversion rates when visiting your website, because they didn't want to buy what Grandma and Grandpa liked to buy. Where online conversion did exist, it existed among catalog source coded names, and it existed on merchandise that older Baby Boomers loved to purchase. So catalogers sent these responders back to the co-ops. The co-ops, meanwhile, were being starved of younger customers by Google / Amazon, and increasingly, Facebook. The co-ops could only send older Baby Boomer customers to catalogers, because that's who catalogers sent to them. This is a tough nut to crack for co-ops, too.
  • The co-op feedback loop was in full force, beginning in about 2010.
  • Today, in 2015, the co-op feedback loop has damaged both catalogers and the co-ops. I am not certain that catalogers and/or co-ops can get out now. I think it is too late. The cataloger can get out by using a bridge merchandising strategy coupled with online marketing tactics. The co-op cannot ever get out.
  • With the audience limited to older Baby Boomer customers, and with remaining catalogers aggressively targeting the co-ops (no other choice), response rates began to swoon.
  • With response in free fall in late 2013 and through most of 2014, the feedback loop is about to chew up both the co-ops and catalogers. Both sides are about to experience unfortunate long-term productivity declines that could have been avoided had action been taken five to ten years ago. There will be short-term gains, from time to time, but the long-term trend is not looking good. Go look at your productivity metrics from 2005 - 2014, trend the co-op numbers, and tell me what you see. Be honest.
  • No matter how hard your co-op models names for you, the problem cannot be reversed long-term, because the names are too heavily skewed to older Baby Boomers and are now over-contacted by catalogers using the co-ops, driving down response.
  • The only way (my opinion - your mileage will vary) to reverse engineer the problem is for catalogers to apply a bridge-merchandising strategy, identifying similar merchandise that young Baby Boomers and Gen-X appreciate, selling the merchandise via online marketing. This is a long process, a risky process, and a process that will not help the co-ops anyway, because the names are all part of a mass online ecosystem.
  • In case you were wondering, the Amazon / Google / Facebook ecosystem is about to be obliterated as well, by a yet-to-be-determined mobile ecosystem ... their dependence upon Jennifer / older Jasmine is shutting out younger Jasmine / Jadyn. Nature has a funny way of revealing fundamental truths to marketers.
That, my friends, is the co-op feedback loop.

And I'm done talking about it.

I know, I know, you're asking me, "Kevin, what else can you write about to entertain us, and when we finally cannot take it anymore, how will you help us get out of the co-op feedback loop?"

There is a core problem that most catalogers, e-commerce marketers, and retailers need to deal with. This core problem overrides what is happening with the co-ops, it overrides the pay-to-play structure that has overwhelmed conferences that give you non-stop vendor-centric messaging. The core problem explains why when you ask your co-op to help improve catastrophic response declines you instead get no assistance and are told to be more omnichannel or to trust the models or to work with boutique agencies that "get it" or are told that it is your fault because your merchandise stinks (even though housefile names are performing just fine).

The core problem is vendor accountability vs. employee accountability.

See, in 1995, I worked at both Lands' End and Eddie Bauer. The direct marketing department would have averaged about 24 people, between the two companies. Almost all tactics were managed in house.

In 2015, at comparable companies, you'd have maybe 8-10 employees, and the 8-10 employees would manage 20 different vendors, maybe more. In other words, your modern direct marketing team is comprised of more vendor staffing than in-house staffing.

With your 8-10 employees, when performance is bad and the employee refuses to help you, you fire the employee and find somebody more talented and more cooperative. You have control.

With your 20 different vendors, when performance is bad, do you have any control over the employees working for the vendor? No. You have no control. At all. If a co-op employee tells you to trust the models, well, you're stuck. There are only four big co-ops, and you're already in all four, so what exactly are you going to do? You're not going to leave the co-ops, and you're unlikely to be able to fire the folks who are not giving your account attention.

In other words, you've lost control. You outsourced pay-per-click, you outsourced your database, you outsourced all customer acquisition to the co-ops, you outsourced email to an email service provider, you outsourced housefile planning and circulation strategy and merchandising analytics to a boutique agency. Every one of those decisions was probably a good one at the time, when made individually. In total, however, your decisions represent a catastrophe. These folks, your vendors, they control your future. Not you. You don't control your future. They control your future.

How, exactly, do you get all 20 of the vendors on the same page, doing exactly what you want, 24/7/365? Go ahead, tell me how?! How much time do you, personally, spend with the modeler in Denver working on your co-op models, for instance?

This, my dear readers, is the core problem.

I'll bet you can lose your job when your company isn't profitable. Your vendor employees, well, they lose their job when their company isn't profitable. Do you see the conflict of interest there?

This is the core problem.

Going forward, I'm not going to single out the co-ops, or anybody else. Instead, I am going to focus on vendor accountability. Vendor accountability is the true problem you're vexed by. You don't have a credible way to nudge a vendor down the path that is most beneficial to your business. Vendors, however, have an entire ecosystem of trade journalists, pay-to-play relationships, consultants, and conferences to nudge you down the path that is most beneficial to their business model.

You want an example?
  • Did you get an email from a printer or paper rep when JCP decided to mail one (1) catalog, an email "proving" that catalog marketing is back in vogue?
  • Did you get an email from a printer or paper rep when SkyMall went bankrupt, an email lamenting that catalog marketing is dying?
Vendors have an entire ecosystem designed to nudge you down the path that is most beneficial to the vendor business model. Your job depends upon bending that system into a system designed to be most beneficial to your profitability.

Tomorrow, we begin the process of holding your vendors, of which there are more individuals working on your issues at vendor brands than within your entire in-house staff, fully accountable for your business performance. It won't be easy. But I've used a system in the past, a system that was highly successful at Nordstrom. I will expand upon the system, building upon it in upcoming posts this week and next week.

February 19, 2015

From Prospect To Loyal Buyer

Here's what I overheard, from a CEO:
  • As far as I am concerned, the whole purpose of social media is to obtain an email address. We need to get the prospect interested enough to contribute an email address.
  • The job of email marketing is to educate the customer, to inspire the customer, to get the customer to visit our website.
  • The job of our website is to show off the entire merchandise assortment, and to generate a profitable transaction.
  • Once we have a profitable transaction, our job is to migrate the customer into our app. There, we show the customer new merchandise, and new merchandise fosters loyalty.
Tell me what you think of the statements outlined above?

February 18, 2015

Poor 1-800 Flowers: Merchandise Productivity

Did you hear about the poor folks at 1-800 Flowers? Click here for details. I cannot imagine the nightmares associated with shipping live plants to customers, especially in sub-freezing weather. It's easy to ship a sweater. It's harder to ship something that is alive.

You can be the smartest omnichannel marketer in the world ... a real channel master ... and yet, when the customer receives the image at the start of the article (click here to see the image on Facebook), well, omnichannel becomes irrelevant, doesn't it?

I recently worked with a business that grew by 62% over three years ... 50% of the growth came from an increase in merchandise productivity. This business figured out exactly what the customer wanted to purchase, and in the process, grew to over a hundred million in annual sales solely by being an excellent direct merchant.

When you are an excellent direct merchant, all of your marketing channels perform better, allowing you to spend more on marketing in all available channels, allowing your channels to perform better, allowing sales to increase, exposing the business to more customers, creating more word of mouth, increasing inexpensive customer acquisition, further growing the business.  All of that, simply from improving merchandise productivity.

Conversely, you mess up your product strategy, and no amount of omnichannel brilliance will save you.

Omnichannel is a tactic, probably a necessary one.

Merchandise, however, means everything. Too few marketers focus on merchandise. It's time to focus on merchandise.