July 06, 2015

Sometimes These Meetings Get Pretty Interesting

I'm at lunch with a digital executive - a professional on the vendor side of the equation. This individual is kind and charming and intelligent. He simply faces the kinds of pressures most of us face. Yup - this person is under pressure to deliver growth.

The individual is speaking about a major client ... a huge business. This individual wants this huge business to utilize even more digital advertising, and for good reason ... it's time to get paid.

This individual doesn't know something I know.
  • The client is also my client.
  • I have analyzed every penny this client spends with the individual sitting across the table from me.
  • I know the ROI of the digital advertising sold by the individual sitting across from me.
  • I cannot tell the individual that we share the same client.
The individual theorizes (quite accurately) that the digital advertising his agency sells touches 3/4th of the customers that shop digitally with the client in question. Because his agency is ultimately touching 3/4th of the customers/orders, he wants to impose a much larger toll on the large client. He argues that he is responsible for generating 3/4th of the orders. Never mind that sales at the company are flat since the dive into retargeting ... the vendor wants to impose a serious toll.

The individual asks me to call any of a large number of Executives at this company. The individual asks me to convince the Executive Team that, just because this individual can get an ad in front of nearly every customer, the individual should get credit for just about every order placed by customers.

For the cost of a caesar salad, this individual wants me to convince Executives that interrupting customers with ads causes orders to happen, and because it causes orders to happen, the individual deserves to receive increased toll payments.

There would be no return-on-caesar-salad-investment (ROCSI) on this day.

But most important, folks, is the world view of some in the digital community. This worldview is no different than somebody arguing that without a cash register, money could not be collected - and therefore, the cash register deserves credit for all orders.

You, yes YOU, the smart digital merchant, you create demand. The customer never knew she needed to purchase that jean jacket. You made that happen. The fact that somebody can follow the customer across the internet reminding her that she wants this jacket is largely irrelevant. You, yes YOU, created the demand. You deserve to keep the profit.

Your attribution work must be really, really special, folks. You must know your organic percentage? Why? Because the digital toll collectors are coming after it. A good retargeting program might be worth 1% to 2% of your sales. Don't let them come after 75% of your sales. Know your stuff.

July 05, 2015

The Story Ends Differently

Have you had a chance to read this little ditty (click here)? It isn't hard to find people who disagree with his thesis. But it is hard to observe otherwise.

Click here for additional commentary ... I particularly enjoyed one of the hand-picked quotes.
  • “The peculiar development, full of dramatic irony, is that television, with its more circumscribed audiences making much more active selection and choice, becomes upscale media, and digital, with its mass reach and reflexive actions, becomes the downscale side.”
Oh my goodness. Does that not outline what digital has become in our marketing world?

"Align channels to create a seamless customer experience" ... have you ever noticed that so much of this seamless customer experience includes making sure that the customer gets twenty percent off plus free shipping ... and by making the digital experience a constant search for the lowest possible price, digital destroys the very environment it was promoted to build?

The story, so often, ends different from what we were originally sold. What I've learned, from analyzing +/- thirty-five brands this year, is this:
  • Merchandise Productivity is king. Merchandise productivity has largely been ignored for at least a decade, and we're now paying the price for our lack of attention.
  • Customer Acquisition is getting harder and harder. A small number of businesses possess a disproportionate stranglehold on customers.
  • In the image above, Tolls are being collected all throughout the customer journey. Most of my clients are dealing with profit-and-loss statements peppered with tolls. The tolls allow the businesses to grow (net sales), but do not allow the business to earn a high-quality level of profit. As a consequence, the minute a -5% merchandise productivity hit happens, the business loses money ... lots of money. Quality businesses absorb the -5% merchandise productivity hit without stress.
Undoubtedly, my story, the one I am telling you, will end differently as well.

But I will say this ... focus on merchandise productivity. Merchandise productivity covers up a lot of marketing, creative, inventory, and finance sins.

June 30, 2015

A Break

Let's take a few days off, and enjoy Canada Day and the 4th of July?

I'll see you again on July 6!

Macy's / Trump

As always ... Merchandise > Omnichannel. What good does a seamless customer experience do when there are merchandising issues?

It's the same thing with DirecTV ... #1 in customer service ... but the picture goes out during the Womens World Cup game (hint - the picture = merchandise). You can have all the commercials with talking horses and people on beaches - but none of it matters when there isn't a picture.

We're a half-generation into not focusing on what is most important to our businesses - coupled with an inability to think three steps ahead and understand how short-term decisions yield long-term consequences.

We are smart marketers. All of you reading this, you're smart. Focus on what matters!

June 29, 2015

The Secret

So now we know the secret.

You saw the Disney example ... they leveraged an "omnichannel" approach in the 1950s ... THE 1950s!!!!

The Disney secret was easy to identify ... use the "brand" as the connection between numerous mutually exclusive spending opportunities.

The reason the omnichannel approach doesn't work for our businesses is also simple ... we use the "brand" as the connection between numerous activities that lead to (usually) just one spending opportunity.

In other words, the Disney example has worked for more than a half-century because of a diversified portfolio. Meanwhile, we've put all of our eggs in one bucket - same merchandise in all channels at the same price with the same promotions and same creative. Our implementation is fundamentally different ... and the difference explains why it doesn't work.

We now know the secret to success.

Let's go do something about it!

June 28, 2015

Disney Magic

Read every single line connecting boxes in this image. Every. Single. One.

In the current omnichannel thesis, this image would exist ... but all of the words that support the lines that connect the boxes would be empty.

In other words, the current omnichannel thesis lacks any semblance of business understanding or vision or strategy.

In this one image, you can clearly see that the author understands how business works.

This truly is Disney Magic!

Let's think about our world. What might our image look like?

This is my opinion only (many of you will disagree), but our process has been created and consequently, evolved in a fashion different than the Disney example above. The process has been overrun by marketing influences, often from outside the companies we work for. The process moves up the page ... from Marketing to Content ... the Content is then Distributed via Channels, causing the Customer to Interact with Mobile and/or our Website.

At this point, Product Research begins ... and this is a big deal ... if we are happy with our Product Research, we move on to Price Research ... and that's where Google and Affiliates and others charge their tolls.

If the customer makes it this far, it is time to consider the purchase. This is where physical channels enter the story ... a Full-Price Store, an Off-Price Store, Digital Commerce, or Other Channels (continuity programs, for example). Here, a Merchandise Purchase happens, and the Merchandise Purchase theoretically causes the customer to have a completed and happy experience with The Brand.

At that point, the Marketer re-ignites the process.

Do you see how fundamentally different (and flawed) the omnichannel process is, compared to the Disney example (an example from the 1950s)?
  • Disney Example: Each box feeds upon each other, multiplying demand.
  • Omnichannel Reality: Each box lowers the probability of purchase, reducing demand.
In other words, Disney is giving the customer multiple opportunities to spend money differently. Our omnichannel reality gives the customer multiple opportunities to bail out of spending money one way.

This is why Omnichannel Theory (and Multichannel Theory a decade ago) fail to generate sales increases. We're just giving the customer more ways to complete one task. Disney is giving the customer more ways to complete more tasks.

That's Disney Magic!

June 26, 2015

Omnichannel Fans: Read This Immediately, You'll Love It!!

This strategy, of course, is modern and exciting and synergistic and ... oh ... wait ... it's from the 1950s?

The 1950s?

This is what the omnichannel community is arguing for, when it comes right down to it ... and it makes perfect sense!

Here's the secret.

Notice that the "brands" in the story are common across each box ... but the purpose of each box is fundamentally different. Comic Strips are different than Disneyland ... a fundamentally unique experience. Same brand, completely unique experiences.

The modern omnichannel approach is same brand, same experience.

Therein lies the problem with the omnichannel thesis.

But executed in a manner with same brand / unique experiences, yes, you can get me to buy into the theory.

Notice that this is one big, bubbling ecosystem, with gains in music feeding into theatrical films, which feed into Disneyland, which feed into Merchandise Licensing and so forth. Dollars keep flowing into different boxes, for different reasons. That's the secret. Modern omnichannel theory wants dollars flowing into different boxes for the same reasons, and that just isn't working.

June 25, 2015

The New Merchandise Email Marketing Tournament

Is your business trapped in a Merchandise Mega-Trend downswing? Have your merchants shut you out, did they "ice" you after you mentioned that they are having problems?

Do something to help your merchandising team.

Find eight new items that show promise. New items are critical to the future success of your business. The faster you can get a new item to high-selling status, the lower the odds are of that item falling off a cliff.

In other words, go find eight new items that have demonstrated potential, and run a merchandising tournament. You are going to help your merchandising team look good.

Pick the eight new items, and seed them 1/2/3/4/5/6/7/8, based on sales in the past month.

Next week, use email marketing to alert your customer base that you are having a merchandising tournament. Ask your customers to pick which item, of the eight, the customer expects to win the tournament (use Facebook & Twitter & Instagram & Pinterest to promote the tournament). If the item that the customer picks wins the tournament, give the customer something ... if you love discounts/promotions, then you're already giving away the farm, so no harm giving away 30% off or whatever your standard discount is.

Now, run the tournament!

On Monday, send out an email campaign, featuring #1 vs. #8.Sum up sales over the next twenty-four hours. The item that generates the most sales volume move into the semi-finals.

On Tuesday, send out an email campaign, featuring #4 vs. #5. Same rules apply.

On Wednesday, send out an email campaign, featuring #2 vs. #7. Same rules apply.

On Thursday, send out an email campaign, featuring #3 vs. #6. Same rules apply.

On Friday, use email to update your customers as to the semi-final qualifiers. Have a few interviews with the merchants responsible for the winning items - treat the merchants like Head Coaches, ask them about their chances in the semi-finals. Call out the upsets! Let your marketers do video as if they are hosts on SportsCenter. Try to have some fun. Maybe, for once, you will actually "engage" your customer base.

On Monday, run out the winner of 1/8 against the winner of 4/5. Same rules apply.

On Tuesday, run out the winner of 2/7 against the winner of 3/6. Same rules apply.

On Wednesday, use email and social media to prime the pump for the title matchup.

On Thursday, host the title matchup. Same rules apply.

On Friday, crown the champion. Any customer who purchased that item or picked that item to win gets a bounceback or some other promotion - you are always running promotions anyway, why not give the promotion some meaning?

There - you just did something to help your merchandising team grow the number of new, winning items! Do you think your merchandising team won't appreciate what you are trying to accomplish?

I know, I know, there's 57 reasons why you cannot do this ... and there's 87 reasons why I am an idiot to even suggest you do something clever in the dog days of summer when no customers are paying attention ... and there are 107 reasons why you don't have the in-house reporting to analyze the promotion in real time. Fine. Come up with something different. Be creative. What is your idea to promote new items?

For crying out loud, don't just sit there and watch merchandise productivity erode into nothing. Do something to help your merchandising team, and maybe your merchandising team will be more likely to work with you in the future.

June 24, 2015

Matched Market Testing

Maybe you want to test whether a series of digital strategies work in retail stores. Have you considered matched market testing?

I realize this is an old-school topic. Oooooooooollllllldddd school. But valuable.

Here's the concept. You don't want a customer who received "Strategy A" to stagger into a store where "Strategy B" is being executed, ruining your carefully designed test. So you execute tests within a market ... you test "Strategy A" in Kansas City ... you test "Strategy B" in St. Louis.

Match markets based on a combination of demographic attributes, population density estimates, and merchandising preferences. There are all sorts of markets that naturally pair up with each other:
  • Seattle / Portland.
  • San Francisco / Los Angeles.
  • San Diego / Phoenix.
  • Dallas / Houston.
  • Pittsburgh / Cleveland.
  • Minneapolis / Chicago.
  • Des Moines / Omaha.
  • Baltimore / Washington DC.
  • Charlotte / Atlanta.
  • Tampa / Miami.
Now, things don't always end up that way ... you'll have surprises ... Minneapolis / Austin or Jacksonville / Louisville or Boise / Tucson. Regardless, your target customer and your merchandise assortment, when clustered properly, will yield an appropriate matched market strategy.

Show of hands ... how many of you are executing matched market testing?

June 23, 2015

We Can't Stop Paying Tolls, We'll Be Out Of Business!!

Did you know that if I put an image (any image) in a blog post, you tend to "engage" with the post (i.e. read it) at rates 10% - 20% above when there is no image? It could be any image ... like this one of a random dude wearing a tie.

That's one way to get new customers for free. No toll has to be paid.

I know, I know, you're going to tell me that the tip I just gave you doesn't relate to your business. Your business is special, it's complicated, it's unique. Your customers are different.

The more special / unique a business is, the easier it is to acquire customers at no cost.

This is the point where some folks will say this:

  • "Kevin is telling you to be unique and special. You cannot be unique and special when you sell widgets. Worse, he's telling you to stop using Google, to stop using the Co-Ops, to stop paying Facebook. Kevin would rather you be out of business. Don't listen to his silly advice. Use Google and Facebook and the Co-Ops to your advantage. Partner with them. Be smart!"
That is not what I am saying.

You can generate plenty of long-term profit via Google, via Facebook, via the Co-Ops.

But why depend fully on third parties?

Why not take control over your marketing strategy?

Every business should have a strategy for acquiring customers at no cost.

Look at the profit generation from email marketing and organic customer generation.

Would you prefer to generate $5.1 million EBT on $19.0 million demand (email + organic)?

Or would you prefer to generate break-even EBT on $29.0 million demand (catalogs + paid search + online marketing)?

Your external business partners (vendors) could care less about your organic and/or email brilliance - they don't get paid when your marketing team demonstrates organic and/or email brilliance, do they? They demand you break-even on $29,000,000 demand ... because that's how they generate profit.

We've forgotten how to generate $5.1 million EBT on $19.0 million demand, via email and organic.

I'm asking you to take control of your own business.

I'm asking you to be a marketer, not somebody who knows how to push vendor buttons to grow sales.

I'm not asking you to stop doing all the fun work you love doing with Google, and your Co-Op friends, and Facebook, and Retargeters, and Affiliates, and Comparison Shopping Engines, and countless other intermediaries.

I'm asking you to spend more time on the most important part of your business ... the part of your business where customers love your brand so much that they don't need advertising ... when that happens, you make a ton of profit, and maybe, just maybe, you share in the profit via bonuses and 401k contributions and stock options and salary increases.

June 22, 2015

I'm A Marketer - I Have No Control Over Merchandise

How do I combat mega-trends by improving my merchandising assortment? I'm just a marketer / analyst / social media manager. I don't have any say over what the merchandising team does.


I can still recall one of the most fascinating meetings of my career. It's back in 1993. That's a long time ago. I'm just a lowly statistical analyst at Lands' End, and for some God-forsaken reason I was invited to attend a meeting of Directors and Vice Presidents - a meeting where a recent catalog was going to be analyzed.

Aside - the best companies find ways to expose lowly analyst-level employees to Executives in an educational setting. Lands' End was one of those companies - they (not necessarily consciously) believed in employee development.

Anyway, I walk into the room ... Merchandising Executives and Inventory Executives and Creative Directors and the CEO and my department head, the Director of Circulation, are in attendance. On the wall I see boards ... each board represents a spread in the catalog ( a spread is, say, pages 8-9 in the catalog). Each board is one of four colors.
  • Gold
  • Green
  • Blue
  • Red
The colors map to variable profit (contribution) levels, pre-fixed costs.
  • Gold = 30% or better variable profit, as a percentage of net sales.
  • Green = 20% - 29% variable profit, as a percentage of net sales.
  • Blue = 10% - 19% variable profit, as a percentage of net sales.
  • Red = < 10% variable profit, as a percentage of net sales.
As I sit down, I think something to myself that I haven't thought often when attending meetings.
  • "Oh oh, there's going to be a discussion about true business accountability, and I'm actually sitting in the meeting. Stunning."
The meeting begins. You'd think a Merchandising Executive would start talking, but no, my department head, the Circulation Director, she starts biting her co-workers in the ankles.
  • "Why do we have four consecutive red-colored spreads on pages 8 - 15? Aren't the first twenty pages the most important?"
  • "Why are we still running an item with a 40% return rate? That item alone reduced the profitability of that spread from Gold to Blue".
  • "How can we possibly be sold-out of an item on page five? If we had enough merch in stock, the whole spread would have been Gold. We can pin that one squarely on the inventory management team."
  • "Why do we continue to put that item on a model? We already know that when that item is featured in a stack, it performs 30% better. Why do we sabotage ourselves like this?"
  • "Don't we already know that we shouldn't feature risky, new, unproductive items in a prospect catalog that has low productivity?"
Within minutes, the room was in full backpedal mode ... everybody was on their heels.

Oh, sure, some in the audience fought back.
  • "Oh yeah? Can you prove you mailed the right people? Because if you mailed the wrong people, then every other thing we're looking at here today is irrelevant."
Seconds later, the discussion circled back to accountability.

I learned more in that two-hour meeting than I learned in five years working at Eddie Bauer.

I learned "how the business worked".

I learned "what increased sales and what increased profit".

I learned inter-Executive dynamics.

I learned what future analyses needed to be created to answer questions that came out of our interdisciplinary discussion.

I learned that marketing, yes, MARKETING, can drive merchandising strategy. I learned that it is critically important for MARKETING to have a voice.

If you want to combat merchandising mega-trends (ever-lowering merchandise productivity), then change your current merchandise/creative evaluation meeting structure, or get yourself invited (invite yourself if necessary) to these meetings, and bring a new perspective to the meeting ... a perspective of accountability.

The Marketing Director who spent hours biting the ankles of everybody in the room went on to have a satisfying and successful career, ultimately selling a business she built from scratch to a catalog holding company, for millions.

Nobody showed her HOW to do something. She just did what she felt was right ... she held merchants and creative folks and inventory staffers accountable for merchandise productivity, generating outstanding results in the process, clearly angering her co-workers along the way.

You, too, can do this. You don't need special skills. You do need conviction, however. And you can do it without irritating people - you can do this and be kind and caring in the process. It's your choice.

But you do need to have a good working relationship with your in-house co-workers. You can't do that if you spend all your time trying to force an omnichannel listcicle upon your company in an effort to please your industry marketing tribe.

Taylor Swift

See, Apple is introducing a new streaming service. They wanted the customers to have the service for free, for three months. During the three month period of time, they didn't want to pay the artists.

That's called a toll, folks.

So your friend, a twenty-six year old woman named Taylor Swift, wrote this open letter (click here). Ms. Swift felt that it was important for artists to be paid. Artists would agree.

Too many of you tell myself, and folks like me, that "there's nothing you can do", that you feel helpless as vendors push you in directions that benefit them.

You are not helpless.

And do not retort with the "but Taylor Swift is huge, and we're small and powerless" argument. Stop it! Why not collaborate with companies you don't compete with, and as a group, argue for better terms from your vendor partners? Why won't you do that? Is it because it is hard work? You bet it is!

There is something you can do about the toll-based utopia the digital elite are thrusting upon you. It's on you, now, to make something happen. Don't just sit there. You have the skills and the goodness to make something happen. Go do it. I have faith in you!