May 24, 2016

Problems With Reactivated Buyers

There's a lot of nonsense out there about reactivating inactive buyers ... discounts ... promotions ... digital to print strategies ... artificial intelligence ... blah blah blah blah blah.

These are things that make vendors money. And they'll make you money, too, so I'm not saying you shouldn't use these tactics.

I am saying you need something that moves the needle in your brand ecosystem.

Look at the column featuring the New Customer Acquisition Problem. This brand had 100,000 twelve-month buyers last year, and has a new + reactivated buyer problem, resulting in a drop in the twelve-month buyer file ... from 100,000 customers to 94,000 customers.

Ok, now you're going to partner with your favorite vendor ... and your favorite vendor promises to improve reactivated buyer counts by a whopping 10% ... TEN PERCENT!! First, if the vendor is able to accomplish that, go hug your sales rep, because that's fantastic performance.

Now that you are finished with your hug - let's run the numbers for the brand with the new customer acquisition problem.
  • 7,000 reactivated buyers * 10% improvement = 700 additional twelve-month buyers.
So instead of ending the year with 94,000 twelve-month buyers ... your vendor clearly performed well and you're all hugging each other ... and you end up with 94,700 twelve-month buyers.

You haven't solved your problem.

In fact, you barely moved the needle on your problem.

You're gonna be fired for this ... but your vendor got paid.

Our industry is stuck in this type of thinking. We celebrate the smallest of victories. We don't bother to focus on the bigger game, do we?

Your brand ecosystem is highly dependent upon customer acquisition. You need big numbers to move your business into the future ... you need 17,000 additional customers, not 700.

Let's get busy finding ways to find 17,000 additional customers.

May 23, 2016

Under Pressure

I fielded a call a few weeks ago ... very interesting. Here's what the caller said:
  1. Big Companies (> 1 billion) are moving everything in-house. Integrated database with unlimited targeting opportunities. Teams of Data Scientists. Automated decisions that few outside of the data scientist team understand.
  2. Small Companies (< 50 million) are fully dependent upon numerous vendor solutions. Nothing is integrated. Few analysts. Many questions. No answers.
The caller asked me about his observations. The observations are reasonable.

But both organizations ... the huge ones and the small ones, are under pressure via a common thread.

Almost nobody is studying ecosystems.

We have data scientists figuring out how to target the right ad to the right customer at the right time. No doubt that, for a large company, there are tens of millions of dollars of profit opportunity to be had - so yes, dig in and get busy.

Smaller companies are pulled where the vendor community wants to pull them. Be it using clickstream data to integrate print strategies or segmenting email lists to identify discount-centric buyers, the vendors pull small businesses in directions that make vendors money. And yes, their clients will make more profit - so this isn't a bad thing.

But it's not optimal.

The understanding of the ecosystem - that's missing, isn't it? What does it "mean" when a lapsed buyer appears on your website? Shouldn't we figure out what a behavior means before we "target" the visitor with a digital ad or throw a catalog in the mail?

If I asked you what role paid search plays in your customer ecosystem, could you tell me in two sentences or less?

If I asked you how personalization impacts the five-year trajectory of your housefile, could you tell me in two sentences or less?

If I asked you if "content" plays any role in any ecosystem, could you answer the question accurately?

If I asked you which source of new customers is most likely to buy from multiple categories in the next two years, could you tell me?

Increasingly, when I speak with you, I sense that you are under pressure. You simply haven't been given the tools to understand what I'd call your "brand ecosystem". So you perform random tactics and then wonder why your business never grows.

If you were able to deliver the perfect ad to the perfect customer at the perfect time, other than increased profit, what has been accomplished, and how have you changed your brand ecosystem?

The caller asked me what I call my hypothesis? I didn't have a name.

But the name, quite honestly, is "Brand Ecosystem". We simply don't understand how our brand ecosystem works, do we?

And until we understand how our brand ecosystem works, we're under constant pressure ... we're constantly pushing buttons and hoping for the best.

May 22, 2016

Lands' End - Wall St. Journal Article

You probably read the article in the Wall St. Journal a few weeks ago, but if you haven't and are not a Wall St. Journal Subscriber, go into Google and type these words exactly ... New Lands' End CEO Delivers High Fashion - and a Culture Clash, then click through the WSJ link and you'll be able to read it (you can try this link first).


I'm going to talk more about Brand Ecosystems this summer.

Describe the traditional Lands' End brand ecosystem - circa 1999.
  • Catalogs.
  • Quality.
  • Customer Service.
  • No Discounting ("We Will Never Create A Fake Markup And Then Discount - Gary Comer - Founder - Lands' End").
  • Basic Merchandise.
  • Basic Presentation.
Then describe the Lands' End brand ecosystem - circa 2012. 
  • Catalogs, E-Commerce, Sears Stores.
  • Customer Perception of Lower Quality.
  • Customer Service.
  • Rampant Discounting (Destroying The Promise Of The Brand, But Mr. Comer Isn't Here Anymore So We'll Remove His Words From His Creed, Who Cares, It's As If It Never Happened).
  • Basic Merchandise.
  • Basic Presentation.
The theme was that "Sears Ruined Them". The company was spun off. A new CEO was brought in.

Describe the Lands' End brand ecosystem that is coming.
  • Catalogs, E-Commerce, Sears Stores, Engaging Content, Shedding Traditional Catalog Customers, Digital Initiatives.
  • Customer Perception of Lower Quality.
  • Customer Service.
  • Modest Reduction in Discounting.
  • Move to Fashionable Merchandise.
  • Move to Fashionable Presentation.
  • Additional Brands.
Now go read the comments in the article. Former employees, "former" customers, and pundits are all piling on, with a common theme ... "PLEASE GO BACK TO THE WAY THINGS WERE IN 1999".

The company that Gary Comer sold that Mike Smith led is not coming back. Is Seinfeld coming back? Jerry Seinfeld is sixty-two years old. Sixty-two!!

When Lands' End was spun off a few years ago, it was the same size it was when Mr. Comer sold the brand a decade-and-a-half earlier. And it was in hundreds of stores. And it moved to discounting (discounting/promos grow sales, right?). Back those two factors out, and merchandise productivity likely declined by 20% or more.

What you have, then, is a patient that was sick. Very sick. Stage four slow-growing cancer. And the new CEO comes in and is in the process of applying chemotherapy and radiation to the patient. She might kill the patient. The patient might die anyway. Or she might return the patient to health.

Decisions have been made over seventeen years - and the world has changed over seventeen years. You cannot go back to 1999, no matter how loud the former employees and associated customers/pundits yell in the comments section of the article. Ask any cataloger ... every cataloger is dealing with this issue ... most catalogers still act like it is 1999 and they are not growing, so the prescription cannot be "go back to 1999".

What we do know is that the track record of brands applying chemotherapy and radiation and having instant sales success / growth is, well, not good. Look to JCP for a case study. But notice something about JCP. When JCP went back to doing what they were doing, sales did not rebound. And now sales are falling at JCP once again. Going back to doing what has always been done appeases a few of the boisterous nostalgics and 60% of the existing customer base. It does not solve the core problem ... the core problem is that the brand is sick.

Here's what I want you to do. I want you to play Doctor. Lands' End is sick, and you cannot shave seventeen years off of the age of the brand ... just like when you are sick and you are 55 years old and cannot go back to being 38 years old. You have to fix what you have, and you cannot go back and make things like they were. Please answer the following question.
  1. How do you position yourself as new/interesting to new customers while positioning yourself as being "the same" to existing customers ... how do you do both at the same time?

P.S.: One of the terrifying things companies like Lands' End have to deal with is the concept of a "local maxima". Look at the graph below.


Look at the peak of the curve at the x-axis value of about -1.5 ... what if that is where Lands' End is, and the only way to get to x = 4 on the graph is to go through what they are going through? And conversely, what if they are going down the path at x = -4? You never know. But the critics, well, they jump all over any decision that takes a brand off of a local maxima.

May 19, 2016

The Deadline For The Next Run Is 12 Days Away

We're closing in on the third run of The MineThatData Elite Program!

Contact me now (kevinh@minethatdata.com) and get yourself included in this run of the program (click here for additional details from the original announcement).

Key Dates:
  1. Payment Must Be Received By June 15, 2016.
  2. Data Must Be Received By June 21, 2016.
  3. Three Years Of Customer Data At An Order Level ... June 1, 2013 to May 31, 2016.
  4. You Will Receive Your Personalized Write-Up By June 30, 2016.

May 18, 2016

Traditional Retail vs. Modern Retail

Here's what happened during the ill-fated Omnichannel Era of 2010 - 2016.

  1. Traditional Retail tried to make the same item available in all channels, assuming that the issue was that it was hard to seamlessly shop a business across channels.
  2. Modern Retail assumed that merchandise (i.e. something cute) and experience and price were the issue ... and then went after folks age 18-39 with cute / new stuff at great prices.
  3. Traditional Retail spent five years building the infrastructure to make shopping seamless across channels.
  4. Modern Retail spent five years figuring out how to get inventory turns up to 25x - 100x per year.
  5. Traditional Retail assumed that existing customers wanted a seamless shopping experience, and by default, did not focus on what prospects wanted.
  6. Modern Retail assumed that prospects wanted a great experience and cute merchandise and new merchandise at great prices - and consequently put a moat around the 18-39 year old customer.
  7. Traditional Retail assumed that 40% off is thrilling to a customer.
  8. Modern Retail assumed that merchandise scarcity is thrilling to a customer.
  9. Traditional Retail assumed that "digital" is about getting an existing customer to shop online.
  10. Modern Retail assumed that "digital" is about creating awareness that supports sales in a store with customers and prospects.
  11. Traditional Retail tried to compete with Amazon.
  12. Modern Retail tried to avoid Amazon.
  13. Traditional Retail asked customers to stay at home.
  14. Modern Retail created an in-store frenzy that required customers to go to a store.
  15. Traditional Retail thought it was cheaper to serve existing customers, and consequently, began running out of new customers in the past two years.
  16. Modern Retail decided to find new customers who would eventually become existing customers, and was successful in this endeavor.
  17. Traditional Retail decided to integrate everything, creating a slow organization.
  18. Modern Retail did not integrate everything, creating a more nimble organization.
  19. Traditional Retail loses energy when it is unable to hire the best 18-39 year olds.
  20. Modern Retail gains energy by being able to give significant responsibility to 18-39 year olds.
  21. Traditional Retail tries to avoid hard change by reconfiguring presentation style / visual / creative (think JCP), then tries to sell via reconfigured presentation style.
  22. Modern Retail uses merchandise scarcity to fuel buzz via presentation style (think Instagram / Zara).
  23. Traditional Retail spent five years prioritizing digital and largely ignoring stores.
  24. Modern Retail spent five years using digital to create buzz for stores.
Solution?

Read (2) (4) (6) (8) (10) (12) (14) (16) (18) (20) (22) (24) ... and develop a strategy that aligns with the even numbers. This strategy will take a few years to bring to fruition, and the industry will lose ground in the process.

May 17, 2016

An Interview With Former Chief Marketing Officer Carly Hirsch

Yes, this is a fictional interview with a recently fired CMO at a large department store that is struggling to grow. If you don't like hearing the truth via storytelling, read this article from the NY Times about department stores and discounting (click here).


Kevin: Carly, your tenure at Feldman's came to an end last week.

Carly: Yes.

Kevin:  Are you doing ok?

Carly:  I'll be fine. My severance package includes twelve months of base salary and bonus.

Kevin:  Congratulations.

Carly:  I'm living the dream.

Kevin:  What went wrong?

Carly:  Our comp stores sales wobbled in 2014, and they collapsed this spring.

Kevin:  That's the outcome. What went wrong?

Carly:  I don't think anybody truly knows the answer to that question. We all have hypotheses.

Kevin:  What did your Executive Team think went wrong?

Carly:  Obviously, some people think we're struggling because we did a poor job of marketing our brand.

Kevin:  That's why you were fired.

Carly:  But the whole situation is so much more complicated than marketing.

Kevin:  Please explain.

Carly:  Retail is about community. In many ways, we depend upon the competition for customers. We all succeed when customers shop all of us at the same time. We need foot traffic to make that happen.

Kevin:  Meaning if a customer enjoys shopping at Macy's, the customer will shop at Ann Taylor just because the stores are part of the same mall-based ecosystem?

Carly:  Exactly. But we took a different path. So did our competition. That path hurt all of us.

Kevin:  What do you mean?

Carly:  In our case, we really bet on e-commerce as a commerce channel.

Kevin:  That's why they put the word "commerce" in e-commerce.

Carly:  Did you know that H&M didn't have an e-commerce division in the United States until a few years ago? It was almost like the customer didn't even care. By not having a digital focus, the H&M customer had no choice but to shop in a store. And they retail channel grew by billions by having a focus on retail.

Kevin:  Are you suggesting that Feldman's shouldn't even sell via e-commerce?

Carly:  Not at all. But there is a fundamental difference in the way Feldman's approached e-commerce, and how other brands approached digital.

Kevin:  Is there a difference between e-commerce and digital?

Carly:  A huge difference.

Kevin:  Explain.

Carly:  In our case, we invested heavily in making sure that our customer had what we called a "frictionless shopping experience". If the customer wanted to buy the item online, great. If the customer wanted to buy in stores, fine. If the customer wanted to ship an item from a store to home, great!

Kevin:  That sounds reasonable.

Carly:  Of course it sounds reasonable!

Kevin:  Was this your idea?

Carly:  Heaven's no!

Kevin:  But it sounds a bit like a marketing idea.

Carly:  It's really an operations idea.

Kevin:  Who promoted the agenda at Feldman's?

Carly:  That came from the CEO and the COO.

Kevin:  Your Chief Operations Officer?

Carly:  He brought in the Management Consultants back in 2011. He called it the "Integrations Task Force".

Kevin:  The 'ole "ITF", eh?

Carly:  He ran the team. I was recruited to be part of the team, as well as McClancy Consulting, Woodside Research, and Augury.

Kevin:  Augury is a systems integration brand.

Carly:  Yes.

Kevin:  Why so many outsiders?

Carly:  Our COO wanted to obtain a "strategic" roadmap that illustrated where the industry was going.

Kevin:  How did that work out?

Carly:  We spent eighty-seven million dollars on consulting fees and systems integration.

Kevin:  Wow.

Carly:  And sales declined.

Kevin:  Wow.

Carly:  Here's the thing. Our ITF believed that e-commerce was the future, and we had to have a response to Amazon. We decided that store integration with our website was our response. We decided that the only thing Amazon didn't have were stores. So if we could leverage our stores as virtual distribution centers, we would increase sales.

Kevin:  Did you have any research that proved this was a good idea?

Carly:  We tortured our numbers until they screamed out that this was a good idea. Woodside Research repeatedly cited a study that Augury commissioned, suggesting that the customer wanted a seamless shopping experience. McClancy said their client base was also heading in this direction. We listened to Woodside, McClancy, and Augury. They had competitive data.

Kevin:  How many people were in the Woodside Research survey?

Carly:  Four hundred.

Kevin:  Out of more than one-hundred million households in the country?

Carly:  Correct.

Kevin:  How many customers purchased from your brand in the past year?

Carly:  Ten million.

Kevin:  So how do you end up trusting the voice of four hundred individuals who may or may not have purchased from your brand over ten million customers who truly purchase from your brand?

Carly:  You've been in the meetings.

Kevin:  Yes.

Carly:  A task force made up of Executives and External Partners wanted to pick a path that aligned with where the industry was headed.

Kevin:  Is it possible that Woodside Research, McClancy Consulting, and Augury were leading the industry down a path that benefited Woodside Research, McClancy Consulting, and Augury?

Carly:  Certainly. But this isn't on them. This is on our Executive Team.

Kevin:  Why?

Carly:  Because we couldn't think six steps ahead of ourselves.

Kevin:  What does that mean?

Carly:  This goes back to what I was saying earlier. We leveraged e-commerce when we should have leveraged digital. By leveraging e-commerce, we pulled customers out of our stores.

Kevin:  Ok.

Carly:  At the time we pulled customers out of the stores to interact via e-commerce, our competition did the same thing. As a result, we literally emptied out the mall.

Kevin:  You didn't empty out a mall.

Carly:  All it takes is a 20% traffic drop, across the board, to crush the ecosystem. All of us grew e-commerce. All of us purposely encouraged customers to not visit the store and to instead purchase online. And it worked! Today, our share of e-commerce has never been bigger, and our in-store traffic has never been worse. Now take a major competitor. If they execute the same strategy, then they drive less traffic into the store, and that means there is less traffic for us as well. It's a feedback loop that hurts all of us. We purposely limited our customer acquisition audience. It takes a few years for the feedback loop to accelerate.

Kevin:  Interesting.

Carly:  It's the dynamics of the feedback loop that nobody anticipated. Nobody could see that five steps down the road, we'd make e-commerce so appealing that customers would actually shop via e-commerce and not visit the store.

Kevin:  Did you see it coming?

Carly:  No.

Kevin:  When did you notice that something was wrong?

Carly:  2014. In-store traffic declined. Website traffic began to plateau. Comp store sales flattened, and if you subtracted out e-commerce sales, comp store sales were in decline. And yet, when we measured how our best customers were performing, we noticed that their spend was flat. 

Kevin:  What did that mean to you?

Carly:  It meant that infrequent customers and potential new customers had given up on us.

Kevin:  How did you know they had given up on you?

Carly:  Those customers would only purchase merchandise when we had sale periods. You could see counts of customers move up and down in proportion to the level of discounting we did. Our best customers purchased regardless of discounting strategy. And our best customers were the ones that leveraged our frictionless/seamless shopping strategy. Not the infrequent customers, that's for sure.

Kevin:  How did you respond to this information?

Carly:  I shared the data with our Executive Team, repeatedly.

Kevin:  And how did that go over?

Carly:  Not so well. Our CEO said that the industry was moving in this direction, and that McClancy / Woodside Research / Augury all agreed, so it had to be a marketing problem.

Kevin:  The seeds of your demise were sewn two years ago?

Carly:  Absolutely. Our COO said I had no idea how to communicate benefits, our CEO said I had no idea how to communicate aspiration. Our Chief Merchandising Officer said that I was attracting the wrong customer to her merchandising strategies. Our Creative Director said that I needed to advertise more. I actually agreed with her on that one. Our Human Resources Executive said employees could not understand why we were integrating e-commerce with stores when we should be employing a digital strategy. Our own employees said they shopped differently than the path we were executing.

Kevin:  You've mentioned this e-commerce vs. digital topic a few times. What does this mean?

Carly:  Look at what the fast fashion folks do. They don't care about e-commerce like we do. They care about selling.

Kevin:  Isn't e-commerce about selling?

Carly:  E-commerce selling is about safety, about knowing you are going to get something. Digital selling in fast fashion is all about getting you into a store to buy something that may not be available if you do not visit the store right now.

Kevin:  Those are two very different marketing propositions.

Carly:  And that's what happens when you let outsiders fuse marketing strategy with operations. It is terribly hard to convince a customer to buy a boring product online because the product will be available. It is easy to demand a customer visit a store because an item may not be available by the end of the day. That is what I mean by drawing a distinction between e-commerce and digital. A digital strategy creates urgency, and allows the customer to spread the word for you at minimal cost. Merchandise and Operations are critical, no doubt about it, and in fast fashion Merchandise and Operations are the same thing. Both are needed to achieve 50x inventory turns.

Kevin: Interesting.

Carly:  So we have two competing marketing strategies. An e-commerce strategy requires integration of products and channels, and it requires safe merchandise that the customer knows will be available online. A digital strategy puts merchandise at the center of the ecosystem. The product may not be available, and that urgency sets off a frenzy of digital communications that cost the brand nothing but fuel customer acquisition growth. The e-commerce strategy is all about safety.

Kevin:  But you were the Marketing Executive. Wasn't it your job to make sure that your strategy was digital and exciting? Is it not your job to convince stubborn Executives to do what is right for the business?

Carly:  I was one voice. The ITF had the COO, myself, and three vendor reps. I should have done better, yes, but I was one voice out of five, and the other four voices aligned with each other.

Kevin:  But you clearly communicated your point of view, right

Carly:  Over and over.  I really wasn't allowed to market my brand to my customer. I was asked to market a strategic direction to a subset of customers who aligned with the strategic direction. As a result, new customers fell off of a cliff, store sales declined, and the rest of the industry followed us because it sounded like we were doing the right things. We all lost customers as a result.

Kevin:  Did anybody notice that the customer wanted safety in 2011 and scarcity in 2016?

Carly:  Not really. But that is an interesting insight. By the time we spent nearly one-hundred million dollars building an infrastructure that supported the same item in every channel, a safe plan, the customer demanded scarcity. We couldn't have anticipated that the customer wanted items to be sold out. We couldn't have anticipated that the customer wanted unique experiences that other customers couldn't achieve. We built the exact opposite platform, it took us five years, and by the time we built the platform, the world changed. What a mistake.

Kevin:  You got that right.

Carly:  Nobody will talk about this stuff, you know.

Kevin:  Your CEO and CFO routinely touted your integrated strategies in your annual reports and investor conference calls.

Carly:  Wall St. loved what we were doing. They said our strategy made sense, and as long as we didn't pay down debt and instead took the proceeds of our strategy to buy back stock, they'd help prop up our stock price.

Kevin:  How does Wall St. view your results today?

Carly:  They said we missed the fast fashion movement. They said we couldn't see the future because of a wall of discounts and promotions stacked up between us and the customer.

Kevin:  Why so many discounts and promotions?

Carly:  We weren't meeting our sales plans across channels, so we had to liquidate, we had no choice. You cannot have inventory sitting there, rotting. But eventually, we built a customer file that would only respond when we had discounts and promotions.

Kevin:  So your integrated strategy across channels became fused with discounts and promotions?

Carly:  Correct. The whole thing was essentially the same strategy. Have the same boring products in all channels, make it easy for the customer to buy the same boring products in all channels, encourage the customer to never visit the store, and then make sure that the discounts and promotions were appealing to the discount/promo customer who would only buy when discounts and promotions were available. By never meeting our sales plans, we always had to increase discounts and promotions. The feedback loop just accelerated and accelerated.

Kevin:  But again, you were the Marketing Executive. It was your job to prevent this from happening, wasn't it?

Carly:  I don't think you stop an industry-wide movement. Movements garner momentum. Ask Bernie Sanders or Donald Trump. Ask Macy's. Or Nordstrom, JCP, or Kohl's. A plethora of specialty retailers. We all followed the same playbook. Now we're all struggling.

Kevin:  But other companies, retailers for goodness sake, are not struggling.

Carly:  Those who fused limited product availability with weekly inventory turns and digital evangelism of the brand did pretty well. That's the lesson of the past five years. Retail has to be exciting, and risky, and entertaining, and scarce. We chose safe and boring. All the money we spent aligning e-commerce with stores could have been spent on merchandising brilliance. We simply cannot conceive a world where inventory turns are 50x per year. We were thrilled to move up from 6x to 7x, it took a herculean effort just to make that happen.

Kevin:  Some say this is an issue where traditional retail failed to adapt to customers under the age of thirty-five. Do you agree?

Carly:  Not really. This is a customer acquisition issue and a traffic issue. We didn't appeal to customers who were not core customers, be it those under thirty-five years old or Baby Boomers. And by shifting traffic out of stores to e-commerce, we took excitement out of the mall. Both issues are our fault. Our choice of strategy locked-out younger customers. Now it's easy to see what happened. But when the decisions were being made, nobody said, "let's ignore customers under the age of thirty-five". It just turned out that customers under the age of thirty-five hated our strategy, further fueling the feedback loop.

Kevin:  So that's what happened. What does a traditional retailer like Feldman's do next?

Carly:  I don't care. I don't work there anymore.

Kevin:  But they didn't fire the Merchandising Executive?

Carly:  No.

Kevin:  And they didn't fire the Operations Executive?

Carly:  No.

Kevin:  And McClancy and Augury and Woodside Research are all still on retainer, correct?

Carly:  They're coming in next week for a strategic session, called "Reimagination 2021".

Kevin:  And the CEO who endorsed the strategy is still in place, correct?

Carly:  Correct.

Kevin:  So how does a retail brand fix a problem that is perceived to be a marketing problem, but is quite honestly a merchandising and operations and digital and entertainment problem?

Carly:  All problems are solved when sales decline enough to create an emergency or the brand goes bankrupt. Look at JCP - it took a 30% sales drop for somebody to say "enough". Then they went back to what they always did, and are surprised that sales are now in decline once again? Things obviously are not yet bad enough for them.

Kevin:  You don't think things will change?

Carly:  Things will change when things get bad enough.

Kevin:  And you don't think things are bad enough?

Carly:  Not even close.

Kevin:  Unless you are a Marketing Executive.

Carly:  It's easy to fire the Marketing Executive. It's hard to acknowledge that you picked an integrated channels path when the customer picked a fast fashion path fueled by low prices and product scarcity and a thrilling experience. Nobody wants to be wrong.

Kevin:  But sales are truth.

Carly:  They sure are.

Kevin:  Do you think the industry has the capacity to listen to the customer and change accordingly?

Carly:  Absolutely. Department stores were declared dead in the late 1990s. Ten years later, department stores were booming. Department stores will figure out how to stay alive, and of course, some won't and they'll be gone. This is the way retail works. But if there is one thing I'd like readers to take from this discussion, it is this ... e-commerce is not the solution ... getting customers into a store for an exciting experience, an experience that is so positive that existing customers help spread the word and then draw in new customers, that's the solution. Marketing professionals are well equipped to capitalize on this trend.

Kevin:  What is next for Carly Hirsch?

Carly:  Marketers always land on their feet. We're like cats, we have nine lives. Each life lasts a few years, and we move on.

Kevin:  Carly, thanks for taking time to have a discussion about retail. My readers appreciate your feedback.

May 16, 2016

Harold

Lemme tell you a story - at the end of the story, see if you can recognize who "Amazon" is, ok?

Alright.

It's the mid-1980s. In summer, between college semesters, I worked as a playground supervisor. 

There were about forty kids who frequently attended the playground ... from tiny five year olds to a sixteen year old ... let's call the sixteen year old "John". John probably didn't have many sixteen year old friends, so he'd come to the playground and basically bully half the youngsters and befriend the terrified half that remained. He was an inherently good kid, but his stress oozed all over my youngsters.

I'm tired of having to deal with John. One evening we're playing a game I made up ... Russian Tag ... a version of Dodgeball with bowling pins and human targets and a veritable plethora of playground balls flying in all directions. And there's John, on one half of the court, terrorizing the kids on my side of the court. So when a playground ball bounced my way, I decided it was time to launch the ball toward John.

I loaded the playground ball, cocked my right arm back as far as it could go, and unleashed an eighty-mile-per-hour missile with coordinates locked-in on John's tummy. 

John deftly dove to his left, so fast in fact that he was already out of the trajectory of the missile when the ball left my hand.

And right behind John, literally five feet behind John, stood a five year old named Harold (or Howard or Herman or Tyler or whatever - we'll go with Harold for fictional purposes).

Harold's head aligned perfectly with the GPS coordinates of John's tummy.

And unlike John, Harold did not possess the instinctual ability to remove himself from the path of a playground ball screaming through the air at nearly eighty-miles-per-hour.

It's amazing how high a playground ball will carom up into the atmosphere after careening off of the meaty forehead of a youngster daydreaming about butterflies. In the milliseconds after the ball compressed against Harold's forehead, a "PWANG" sound reverberated across the playground. But before anybody could turn around and say to themselves "what the heck made that sound?", Harold tumbled to the ground.

Then the whelping began. From me!!

"Harold, I'm so sorry".

Harold walked over to his bike, wiped the tears from his eyes, and rode his bike home.

I didn't see Harold, the future of my playground, again.

John showed up the next morning, ready to bully half of the kids anew.


Ok, after reading my moderately embellished story, please answer a series of questions.
  • Which playground leader represented your business in the story?
  • Is there a business that you are competing against that is like a bully, like John in the story? Do you call the bully "Amazon"?
  • Which spherical object represented a multi-channel / omnichannel response to a bully?
  • Who represented new customers (aka the future of the playground) in the story?
  • Is it possible that you had the best of intentions when fighting Amazon, and instead, years later, the bully exists, emboldened, while you pushed aside the future of your business - new, younger customers - by trying to fight the bully?
  • What steps would you take to get Harold back to playing at your playground?
  • What steps should you take to endear yourself to new customers, when thinking about your business?
  • Is it possible that we respond to a bully the exact wrong way, just like in the story above? Might there be a different way to compete against a bully?
Discuss.

How To Specifically Calculate Merchandise Productivity

The overwhelming theme from your feedback over the past day is this:

  • Please show me how to calculate Merchandise Productivity.
Here, then, are the specific instructions for how to calculate Merchandise Productivity for April 2016.


Step 1 = Select all customers who bought exactly two times between April 1, 2015 and March 31, 2016.

Step 2 = Calculate the average amount spent by this audience between April 1, 2016 and April 30, 2016 (include all of those who did not buy from 4/1 to 4/30 in your calculation). Pretend this amount is $11.00.

Step 3 = Select all customers who bought exactly two times between April 1, 2014 and March 31, 2015.

Step 4 = Calculate the average amount spent by this audience between April 1, 2015 and April 30, 2015 (include all of those who did not buy from 4/1 to 4/30 in your calculation). Pretend this amount is $10.00.

Step 5 = Your comp segment measure is ((Step 2 / Step 4) – 1) = ((11.00 / 10.00) – 1) = 10%. This means that in April 2016, your merchandise productivity is 10% better than in April 2015.

Step 6 = Repeat Step 1/2/3/4/5 for each month you wish to measure merchandise productivity, sliding the window back a month for March, then back another month for February, and continue back as far as you like.


I like to run these analyses with "numerous dependent variables". Instead of total sales, as outlined above, I will modify Step 2 and Step 4 (not Step 1 and Step 3) for the following:
  • Phone Transactions.
  • Paid Search.
  • Organic Search.
  • Affiliates.
  • Comparison Shopping Engines.
  • Mobile Phones.
  • Tablets.
  • Social Media.
  • Email Marketing.
  • Stores.
  • Specific Stores (i.e. Bellevue Square).
  • Outlets.
  • New Items.
  • Existing Items.
  • Each Product Category.
  • Low Priced Items.
  • Average Priced Items.
  • Expensive Items.
  • Items Purchased Via Free Shipping.
  • Items Purchased Via Discounts/Promotions.
  • Items Purchased Via Liquidations/Clearance.
  • Fashion Items.
  • Basic Items.

Ok, what questions do you have? About a third of my consulting projects surround the methodology above. 80% of the time, I am able to identify a merchandising issue that is holding the business back, so the methodology works well.

I also like to run the analysis, going back about four years, allowing me to create comp segment metrics for the past three years (on a year-over-year basis). The trends allow me to see when specific issues arise ... it is very common for issues to arise at the start of a new season when a new merchandise assortment is introduced.