November 30, 2015

What Does A Customer Acquisition Problem Look Like?

There is a big difference between a Merchandise Productivity problem and a Customer Acquisition problem.

When you have a Merchandise Productivity problem, you run your comp segment and new+reactivated comp customer count tables, and you learn the following:
  • November Comp Segment = -5%.
  • November New+Reactivated Comp Customer = -5%.
When there is a Merchandise Productivity problem, both numbers are down, equally.

When you have a Customer Acquisition problem, you run your comp segment and new+reactivated comp customer count tables, and you learn the following:
  • November Comp Segment = +2%.
  • November New+Reactivated Comp Customer = -8%.
You see the latter happen in retail. That's how you know that your merchandise resonates with your core customer. That's how you know that you are not appealing to non-customers. That's how you know that you are doomed, long-term.

The Merchandise Productivity problem dooms you in the short-term. But that problem is easier to fix ... you just fix your new merchandise issue, and the business moves along (yes, I get it, it is hard to fix merchandise problems ... but it is easier to fix merchandise problems than it is to fix a structural customer acquisition problem ... just ask catalogers).

Online and in Cataloging, you can overcome the new+reactivated comp customer issue by over-spending to horrific levels. The p&l looks awful, but you keep the customer file strong, and that protects the future of the business.

In Retail, you don't have the same levers ... when you advertise, advertising impacts all customers, and often, it resonates with your best customers.

Run your comp segment tables, and run your comp new+reactivated customer tables.

Run your comp analytics for new merchandise, and for existing merchandise, by merchandise category.

And if you don't have the resources to do this, contact me ( and I'll do it for you. Customer Acquisition in the story of 2016-2020.

Already More Than 1,100 Downloads: Updated Slides - VT/NH Presentation in March

With more than 1,100 downloads in a week, it appears that the content is popular. So, I added nineteen slides, including topics from Black Friday / Cyber Monday, some recent research into loyal buyer behavior, and a handful of catalog-centric tips that go beyond the general theme of the presentation. Finally, there are several slides about Duluth Trading Company ... a cataloger who is going public and growing by leaps and bounds. I know, I know, a cataloger growing by leaps and bounds. Who knew?

Otherwise, please read the slides below. Then send me an email message ( with your thoughts and recommended topics. As always, I will modify the presentation until it has the content you want to see in March.

November 29, 2015

Elite Members Were Sent A Tidbit About Cyber Monday Trends

Send me an email ( announcing your participation in the MineThatData Elite Program!

In addition to learning how your business performs during the October / November / December / January timeframe, you'll learn other tidbits as well. For instance, I recently emailed Elite Program participants a tidbit about how Elite Program Brand customers behaved during the Thanksgiving - Cyber Monday window during the past three years. The trends are interesting, of course, and the trends do influence the profit and loss statement. (assuming you measure profit during the Christmas season as well as during the Thanksgiving - Cyber Monday window). 

Elite Program participants have this piece of knowledge. Others don't.

You are also hearing about retail failures ... Macy's in particular. You hear that JCP is up, Kohl's is marginally up, Nordstrom is disappointing, Macy's is on the verge of melting down. You don't really know what to believe, do you? Well - Elite members know the average of all other Elite members ...they know something you don't know.

Cost is just $2,000 per run ... and there are three runs per year. You learn what your merchandise productivity looks like ... and you learn how overall trends look in merchandise productivity and new+reactivated buyer behavior.

Get in now, before rates go up!

P.S. on a Cyber Monday Tidbit: I've studied an awful lot of businesses that have Cyber Monday promotions. My nature is to look for things that are negative ... I should tell you that I haven't seen the downside that I expect to see ... with one caveat. In other words, if you assume that Cyber Monday transactions are truly incremental and would not otherwise happen, then the level of discounting required to generate the purchase is acceptable in the short term. Long-term, of course, discounting reduces customer propensity for future full-price purchases, but almost nobody seems to care about that.

You'll notice that existing customers and new customers seem to purchase on Cyber Monday at comparable rates to other days between 11/20 and 12/5. You'll see that future repurchase rates are comparable to other customers ordering between 11/20 and 12/5.

What you will notice, however, is that demand between 11/1 and 12/24 isn't growing a whole lot ... whereas Cyber Monday demand is growing. This tells you that Cyber Monday demand is not incremental ... it is demand that is shifted out of different time frames. This is where the magic happens. If you can quantify the percentage of demand that is incremental, that would not happen otherwise (and you can do this ... if you can't, please contact me at, then you can measure if the deep discounts pay for themselves.

On average, if 70% or more of the demand is incremental, truly additive to the business, then deep discounts have the potential to pay for themselves.

But if 69% or less of the demand is incremental, then deep discounting on Cyber Monday is pointless for your business ... though it generates page views for everybody else.

November 27, 2015

Cards Against Humanity

You are busy trying to figure out how much to discount your merchandise on Black Friday and/or Cyber Monday. You attempt to balance competitive practices with the CFO down the hall who will demand that your department is downsized by 20% if you give away too many gross margin dollars.

It's a tough balancing act.

Then you have Cards Against Humanity. I don't play the game they sell, but plenty of people do.

Today, on Black Friday, this was their offer.
  1. You give them $5.
  2. They give you nothing.
As of this writing, 63,555 customers gave them $5 (assuming that the metric is true ... and that is a big assumption).

Ask your CFO what the gross margin is on a customer giving you $5 and you give the customer absolutely positively nothing in return? I'll bet it is north of 98% ... after factoring in credit card processing fees.

There are two themes that keep coming up, when folks talk to me.
  1. We're unique, we're different.
  2. We are having a difficult time finding new customers and keeping our existing customers.
This (above) is unique and different.

If you are truly unique and different, there will be a customer base that opens the wallet for you.

P.S. If you want a low-cost customer acquisition program, hint - this is one. Just take a look at the free marketing they're getting today. It's the kind of free marketing that Glenn Glieber would be happy with.

November 26, 2015

It's Black Friday!!!!

It is Black Friday, and that can only mean one thing ... free guns!!

Or how about an HD video drone (click here).

Once you get to December 26, here's what I want you to do. Take the November 1 - December 24 timeframe, and do a deep dive. How have sales shifted over the past five years? Who took advantage of the opportunity to claim a free gun? Who shopped on Thanksgiving evening? New customers? Best customers? Do sales on Black Friday cannibalize sales on November 13? Or on December 13? And what about Cyber Monday? Who is the customer who takes advantage of 40% off plus free shipping? How much profit do you generate on Cyber Monday, compared to the day after (Boring Tuesday)?

Make sure you perform a thorough "post mortem" on the November 1 - December 24 timeframe, for the past five years.

November 24, 2015

Something Is Missing

McDonalds is selling mozzarella sticks.

Sometimes, to quote the immortal Frank Costanza, "something's missing".

Something's missing, all right.

I've done more than fifty Merchandise Forensics projects. Eighty percent of those projects illustrate a merchandising challenge.

The image here represents a merchandise challenge. This is new merchandise. If many customers have this experience, then new merchandise doesn't work, does it? And when new merchandise doesn't work during a time when existing merchandise is struggling, you have problems.

McDonalds has problems.

Analyze winning new items, and failing new items. What are the trends? Are there quality issues with new items? Are there reductions in the number of winning new items over time?

So much of business performance is within your control. Amazon has nothing to do with a lack of mozzarella in a mozzarella stick - and Amazon has nothing to do with your development of new, high quality items. That's stuff that you control.

November 23, 2015

This Is Why Retailers Are Being Told They Must Be "Omnichannel"

The omnichannel thesis always smelled putrid to me ... digitizing the business after catering to the needs of best (middle-aged) customers which caused store traffic to turn into online traffic which caused stores to underperform and eventually close (read retailer 10-K statements for details) or get smaller. How is that a growth strategy? 

It made no sense why industry pundits demanded a no-growth strategy.

But now, it makes perfect sense.

There is a process in business.
  1. Startups are funded by VC folks.
  2. Startup goes public, VC folks get paid.
  3. Middle-aged brand maximizes growth potential, early public investors get paid.
  4. Mature brand cashes out, late public investors get paid.
  5. Business closes, or is purchased cheaply by the Private Equity community.
Omnichannel theory satisfies (4).

All you have to do is actually perform an analysis of individual customer data to understand how omnichannel satisfies (4). Simply put, the digitization of the business caters to best customers, the customers who are most profitable. Digitization pushes traffic out of stores, into the online channel. Stores lose traffic and stores lose sales. Poor performing stores are closed. Cash is available. Cash is not used to invest in the business (i.e. new customers), but instead, cash is used to pay shareholders via stock buybacks and dividends.

Omnichannel = Shareholder ATM.

In the article, you can run charts for your favorite retailer. Run a chart for Target, Wal-Mart, Home Depot, and Lowes. In sum, they are cashing out. They are paying shareholders as much via stock buybacks and dividends as they earn in profit. And in just the past week, you've read articles promoting Target / Wal-Mart and their "omnichannel is the future" nonsense. Coincidence?

Well, omnichannel is the future if you want to close stores in an effort to free up cash to pay shareholders. It has nothing to do with taking care of "the customer". It isn't what "the customer" wants. It's what shareholders want. And that's fine ... they own the business. But don't assume that their monetization strategy applies to you.

Finally, all of this omnichannel nonsense makes sense to me. It's the end-game for extracting cash out of a mature retail business. Omnichannel is like an ATM machine for mature brands. The problem, of course, is that loyal customers are never retained, long-term, meaning that a failure to invest in new customers in the short-term will ultimately hurt stage four retailers. We see it all the time - just look at your own customer acquisition reporting.

November 22, 2015

Customer Acquisition Must Read: The Story of 2016 - 2020

Recall last year - I previewed slides for a presentation at the VT/NH Marketing Group. Well, it's that time, once again!

Here's the working set of slides for the 2016 event. Click here if you cannot see the slides. I will add/remove as we get closer to late March.

Give the slides a look - it's Thanksgiving Week and you don't have anything important to do anyway, right?

I'm sure you will disagree with some of the customer acquisition tactics ... so why not leave a comment or send me an email message ( with your suggestions. Or send me a message and let me know what you'd like to see added/removed from the presentation.


November 19, 2015

The Optimized Business: Merchandise Productivity

You optimized the business (click here for the spreadsheet) by entering the following parameters.
  • D6 = 0.700.
  • D7 = 0.250.
  • D8 = 0.100.
  • D9 = 0.100.
  • D10 = 0.100.
  • D11 = 0.450.
  • D12 = 0.300.
  • D13 = 0.300.
  • D14 = 0.200.
  • D15 = 0.100.
  • D17 = 2.000.
Then we added 10% merchandise productivity. Here's what we learned:

Optimized Case (Year 10) = $124,495 demand (in thousands) ... $22,708 marketing spend ... $27,090 variable operating profit.

10% Merch Productivity Gain (Year 10) = $156,466 demand ... $25,805 marketing spend ... $36,782 variable operating profit.

But with a 10% gain in merchandise productivity, you are able to spend more marketing dollars, in an effort to optimize the business. Now, the business is optimized at the following levels:
  • D6 = 1.000.
  • D7 = 0.300.
  • D8 = 0.150.
  • D9 = 0.100.
  • D10 = 0.050.
  • D11 = 0.650.
  • D12 = 0.450.
  • D13 = 0.350.
  • D14 = 0.250.
  • D15 = 0.150.
  • D17 = 2.300.
Our three comparisons now look like this:

Optimized Case (Year 10) = $124,495 demand (in thousands) ... $22,708 marketing spend ... $27,090 variable operating profit.

10% Merch Productivity Gain (Year 10) = $156,466 demand ... $25,805 marketing spend ... $36,782 variable operating profit.

10% Merch + Marketing Optimization = $182,744 demand ... $35,778 marketing spend ... $37,320 variable operating profit.

Do you see what is happening here?

This example is a generalization, of course, but it does help explain the story of the past ten years. And the story is a whopper.
  • Merchandise Productivity Is Dying.
  • Marketers Spend More Trying To Prop Up The Top Line.
  • Profit Slumps.
  • The Business Is Terribly Sub-Optimized.
  • To Optimize The Business, Housefile Spend Is Cut, And Top-Line Demand Drops.
  • Executives Hate Top-Line Demand Drops.
  • Customer Acquisition Spend Is Frequently Sub-Optimized.
The narrative can be changed. Go do something!!
  • Optimize Housefile and Acquisition Spend. You'll Save $$ On Housefile Buyers.
  • Take Housefile Savings, Invest In Free Shipping, Invest In Customer Acquisition. Business Improves!
  • Work With Your Merchandising Team - Work Hard To Get A 10% Merch Productivity Gain. 
  • Feature Winning Items In Digital Initiatives - Home Page, Landing Pages, Email.
  • Feature Up-And-Coming New Items Digitally - Home Page, Landing Pages, Email. Tell A Story.
  • 10% Merch Productivity Gains Are Multiplicative Over Time.
  • 10% Merch Productivity Gain Allows The Marketer To Spend More, Across The Board.
  • Increased Marketing Spend Grows Top-Line Significantly, While Growing The Bottom Line Marginally.
  • The End Result = A Healthy Business Where Sales Grow, Profit Grows, And Marketers Get To Spend A Fortune!
This is what I've been harping on for the nearly nine years I've been writing this blog, for the nearly eight years I've been running my consultancy.

I have a simulation tool that helps me test hypotheses. The path to a successful future is apparent.

If you disagree with me, that's fine. But make darn sure you have the simulation tool or appropriate mathematics to back up your hypothesis.

Do you have a simulation tool that helps you see the future?

Do you need a simulation tool that helps you see the future?

Contact me ( for assistance.

November 18, 2015

Now Imagine If Your Merchandising Team Kicked-In Some Assistance

You optimized the business (click here for the spreadsheet) by entering the following parameters.
  • D6 = 0.700.
  • D7 = 0.250.
  • D8 = 0.100.
  • D9 = 0.100.
  • D10 = 0.100.
  • D11 = 0.450.
  • D12 = 0.300.
  • D13 = 0.300.
  • D14 = 0.200.
  • D15 = 0.100.
  • D17 = 2.000.
Now, I want you to do one more homework assignment for me. Here's what we are going to do. Please change cells G19 - P19 from 1.00 to 1.10. This simulates a 10% increase in merchandise productivity. Look at what happens to top-line demand, marketing dollars, and profit.

Optimized Case (Year 10) = $124,495 demand (in thousands) ... $22,708 marketing spend ... $27,090 variable operating profit.

10% Merch Productivity Gain (Year 10) = $156,466 demand ... $25,805 marketing spend ... $36,782 variable operating profit.



The 10% increase, over time, compounds ... yielding a 25% increase in demand, increased marketing spend (because there are more customers to market to), and another 33% increase in profitability.

Your merchandising team means everything to your business.

Here's the fun part.

We're not done, yet. Now, as a marketer, it is your job to optimize spend once again. Better merchandise productivity yields increased marketing spend.

Your homework assignment:  Go back to cells D6-D15, and D17, and enter new spending estimates until you optimize the business.

We'll go over the results tomorrow. 

November 17, 2015

Acquisition Results

Remember, our housefile spend was way, way, way out of line. By cutting way back, we optimize profitability, growing it by 50% while shrinking the top-line by $27 million dollars.

Even though this is the "best" answer, your Executive Team will probably through you out of the conference room when you share the results. They will find every conceivable reason why your math is wrong and their instincts are right.

Now you fight back.

In the simulation, you modify cell D17 until you maximize long-term profit. That happens, in this case, when you double your customer acquisition spend each year.

Notice what happens to demand, too. The top-line outpaced the base case. The customer file is bigger. Profit is much better. Everybody wins.

The secret to business is in customer acquisition.

Conventional wisdom suggests success is in retaining loyal buyers.

You can do both - but I know, based on 200+ projects, what pushes the peanut.

Find low-cost customer acquisition solutions. They mean everything to your business. Everything!

The smartest catalogers and e-commerce brands are working their way through a transition.
  1. Greatly reduce marketing spend to housefile customers.
  2. Re-invest those dollars on free shipping.
  3. Re-invest those dollars on low-cost customer acquisition programs, in an effort to maintain (or grow) sales and profit.
Do you have a simulation tool like the one I shared over the past two weeks, a tool that helps you understand where you are and where you are headed?

Do you know how much you are overspending on housefile buyers?

Do you want to know?

Contact me for assistance (