September 19, 2017

More Money Must Come In Than Go Out

Allow me to tell you a brief story.

Last summer (2016), my family drove US-2 across Northern Montana. This is a part of the country that has largely been abandoned by the modern world. That being said, there were two industries that were thriving.
  1. Hospitals and Urgent Care Centers.
  2. Drive-Ins

But overall, it was clear what was happening. As industry left the small towns along US-2, good paying jobs were hard to come by. And without good paying jobs, there wasn't a lot of money to spread around ... and this caused local businesses to close ... and this drove the small towns into even more trouble. 

Now throw Amazon into the mix - they'll deliver anything in a couple of days to Cut Bank ... so money that would have been spent locally instead goes to Amazon, causing Downtown Seattle to thrive.

Who has a plan to revive a small town along US-2 in Northern Montana?
  • The plan would require more money to come into the town than leaves the town.
This brings us to Modern Catalog Marketing ... a situation not fundamentally different than the small towns dotting US-2 in Northern Montana.
  • On average, a cataloger pays $25 - $35 of every $100 spent by a customer to various vendors ... with about two-thirds of that going to paper, printing, and postage.
  • The printing industry (in particular) uses the money to pay their onerous long-term debt load.
So the cataloger gets to keep $5 of every $100 the customer spends ... while the vendor community gets to keep $25 - $35 of every $100 that a catalog customer spends. More money is going out than is coming in (not really, but you get the point ... too much money is going out).

One of the reasons why Nordstrom has been successful over the past 15 years and has been able to hang in there when business is bad is because they spend very little money with marketing vendors. More money comes in than goes out.


How in the heck can you compete with Amazon when you spend an additional $20 of every $100 you take in with print-centric vendors ... while Amazon and other online marketers do not have to do that?

In other words, what could you do if you had an additional $20 of every $100 spent by customers available to you?

This is why I continually ask you to consider the low-cost / no-cost customer acquisition programs that I share on this blog ... programs that my online clients gladly leverage to grow.

Tomorrow, I will share with you scenarios of what business could look like if spending was different. You'll probably disagree with me ... that's fine ... send me an email message (kevinh@minethatdata.com) and I will print your rebuttal provided it is logical and fact-based. You can 100% disagree with me, and that's fine, the industry needs to hear your opinion.

September 18, 2017

The Structure of the Modern Catalog Industry

Remember yesterday's graph?

Well-run catalog companies possess ad-to-sales ratios around 10%. Common ratios are between 25%-35%. It's not uncommon to see a 40% ad-to-sales ratio. When the ratio climbs above 25%, the catalog brand is "owned" by the vendor community.

Here's a poorly conceived flow-chart of who has power in the catalog industry.


In the ecosystem, cash flows from bottom to top.
  • A customer pays a catalog brand $100.
  • The catalog brand keeps $5 cash (pre-tax profit) - and sends $33 cash up the food chain to vendors. More cash goes to vendors than is kept by the catalog brand.
  • Companies that own catalogers and/or catalog vendors harvest profit from catalog brands and/or catalog vendors.
When viewed this way, the catalog brand is nothing more than an intermediary - a tool used by catalog vendors and owners to harvest profit from customers without ever having to do the dirty work of having to deal with actual customers.

Catalog vendor partners are desperate to keep catalogers spending money ... think I'm wrong? Go look at the annual reports for Quad and RR Donnelley and the USPS.
If I combine Quad and RRD ... I see more than eleven billion in annual sales and combined I see losses in four out of five years. And the USPS has run a fifty-nine billion dollar deficit over the past forty-six years. 

Paper, printers and the USPS usually comprise about 65% - 75% of catalog marketing vendor expense. Quad/RRD/USPS data above show you that your vendor partners are teetering, aren't they?

So your paper-centric partners need you to keep executing what you've always executed. Mailing fewer pages or fewer contacts reduces their sales, and with the debt they're carrying, they're toast.


So that's how paper folks / printers / USPS have to manage the situation. They need you to spend more on paper and printing ... their livelihood depends upon it.

Now remember my pyramid above ... who owns Quad, and who owns their debt?
  • Wall Street.
  • Banks.
Who owns RRD, and who owns their debt?
  • Wall Street.
  • Banks
Who owns the USPS?
  • Government.
Those folks are at the top of the pyramid. Wall Street, Banking, Private Equity, Government.

Assorted vendors take a third of your operating cash on an annual basis and use it to generate enough cash to approximately break-even while paying down long-term debt.

Without you, the ecosystem goes bankrupt.

The relationships go outside of your print-centric vendors.
  • Garnet Hill might pay Wiland money for co-op names.
  • This allows Printer / Paper / USPS to get paid, which pays down their debt and can generate profit which gets Wall Street and Private Equity paid.
  • Wiland's parent company is Brentwood Associates (Private Equity), who owns Soft Surroundings.
  • Therefore, Garnet Hill is paying to fund future investment at Soft Surroundings, a competitor. Cash flows out of Garnet Hill and into the ecosystem benefiting Soft Surroundings. In the future, your catalog brand will have to be part of an ecosystem where dollars flow in. In this example, dollars flow out.
  • Future investments at Soft Surroundings allow the USPS, Paper Folks, and Printers to get paid (again), flowing money up the pyramid.
  • Any profit earned by Garnet Hill is captured by their parent company (Cornerstone Brands).
  • Cornerstone Brands then funnels profit into Home Shopping Network (Cornerstone's parent company).
  • HSN then funnels profit into QVC (HSN's parent company). Who owns QVC? Wall Street!
  • Meanwhile, Soft Surroundings might take their cash and invest it with Abacus to purchase co-op names.
  • Abacus earns profit from this transaction.
  • To mail the catalogs, the USPS, Paper Folks and Printers all get paid (again - notice how these folks always get paid on a variable cost basis?).
  • Abacus is owned by Epsilon. Data and Profit pass from Abacus to Epsilon.
  • Epsilon uses the data to partner with Facebook - meaning that Soft Surroundings is indirectly paying Facebook to better target Soft Surroundings customers all across the internet for products likely to compete against Soft Surroundings.
  • Who owns Facebook? Wall Street.
  • Epsilon is owned by Alliance Data, a publicly traded company generating $6.4 billion in sales and 20% profit (yup, that's a lot). You are ultimately an intermediary who pays Abacus to pass data up the pyramid so Alliance Data can do a better job of targeting outside of the catalog industry and generate revenue. Think about that for a moment
  • Who owns Alliance Data? Wall Street! 
  • Soft Surroundings finds that their investment ends up benefiting Alliance Data and companies like Facebook. Any profit earned by Soft Surroundings filters up to Brentwood Associates. Who is Brentwood Associates? Private Equity!!
  • Did you notice that Wiland presented at NEMOA - paired with a sister brand via their Private Equity parent? Undoubtedly they paid a sponsorship fee to get an opportunity to get you to spend money (with Wiland), money flows up to Private Equity and can then be reinvested across catalog brands they own (or wish to own).
  • Your money goes out and is repurposed within the ecosystem. In the future, you will have no choice but to belong to an ecosystem where more money comes in than goes out. If more money goes out than comes in, then you have to increase merchandise productivity to overcome what is going out - and that is HARD work!
Here again is the pyramid.


Now, what do you think the response will be if I come along and demonstrate that low-cost / no-cost customer acquisition programs are something you should pursue?
  • Do the tactics use paper? No? Then the tactics don't fit within the ecosystem.
Our industry has been sold a message ... for more than twenty years now ... a message that leaves the catalog brand as nothing more than an intermediary ... passing money up the pyramid.
  • Most interesting (to me) is that as the ecosystem took control over the catalog industry, catalog professionals left the industry to work online. Many left in the catalog industry have only known this ecosystem, and enjoy obtaining guidance from those in the top half of the pyramid. This makes change very difficult - and the ecosystem requires this, because without cash from catalog intermediaries, vendors go out of business.
That's a lot to think about, isn't it?

To me, this explains why it is so darn hard to get a catalog brand to do anything innovative ... the ecosystem that passes money up the pyramid dissuades it from happening.

It's likely that you disagree with me. How about sending me an email message (kevinh@minethatdata.com), sharing your thoughts? If your thoughts are logically composed, I'll be happy to publish them on this blog - even if your thoughts defend the pyramid structure outlined here.

September 17, 2017

They Think It Is A Bad Idea

Here's something I hear often.

  • "We floated the idea of an improved contact strategy by our vendor partners. They weren't excited about it".
Duh!

Of course your vendor partners think it's a bad idea to improve your contact strategy. Your contact strategy is the reason they are in business!

Have you ever spent a few minutes thinking about who gets paid by the operations of your business? Here's an example:


Product vendors deserve to be paid, of course, or YOU aren't in business!! So they earn (in our example) $45 of every $100 you sell.

Marketing vendors need to EARN the right to be paid. When I worked at Nordstrom, we spent less than 2% of net sales on marketing. Let that sink in for a moment. Meanwhile, it is common for catalogers to spend more than 30% of sales on marketing ... in our case here, the fraction is 33%. And if you break the numbers down, you learn something interesting.
  • $8 of every $100 sold are paid to your Paper Rep (your rates will vary).
  • $8 of every $100 sold are paid to your Printer (your rates will vary).
  • $8 of every $100 sold are paid to the USPS for Postage (your rates will vary).
  • $6 of every $100 sold are paid to online marketers (Google + Facebook + Retargeters + Affiliates + Assorted Middlemen & Middlewomen).
  • $2 of every $100 sold are paid to catalog co-ops and assorted catalog vendors.
  • $1 or less of every $100 sold are paid to your email vendor.
In our example, the cataloger earns a typical 5% pre-tax profit rate off of the operations of the business.

Your paper rep makes more off of the operation of your business than you make.

Your printer makes more off of the operation of your business than you make.

The USPS makes more off of the operation of your business than you make.

A myriad of assorted online marketers make more off of the operation of your business than you make.

This is why your vendor partners dissuade catalogers from moving into the future.
  • Significantly more money is made off of the operation of a catalog brand by vendors than by the catalog brand.
When you read stuff like this (click here) and then you look at the breakdown of payments above, you begin to understand why your vendor partners think it is a bad idea to make catalog contact strategy changes that move you closer to the future.

Tomorrow, I'll share some thoughts about what the catalog industry has become.

September 14, 2017

The Next Run Of The MineThatData Elite Program!!

Every four months, we celebrate a new run of The MineThatData Elite Program! It's time to do that again.

The #subscription based program continues to evolve. With this run, I am going to shift focus just a bit.

Here's what you will get:
  • Your standard comp segment analysis.
  • Your standard comp new + reactivated analysis.
  • A continuation of a handful of rolling twelve month metrics.
  • Your annual repurchase and file composition table.
Here's two new things added for this run:
  • A "grid" that illustrates where changes in your customer file generate the most "leverage" ... similar to stuff we've been talking about over the past two weeks.
  • Rolling Price Point Information ... one of the biggest problems I've observed in 2017 projects is that changes in price point strategy (i.e. making items more / less expensive) is generally hurting businesses. We'll explore how price point changes are impacting your business.
Cost?
  • First-Time Participants = $1,800.
  • Existing Participants = $1,000.
Contact me right now (kevinh@minethatdata.com) to join the program and for file requirements.

Key Dates:
  • Payment is due by October 10, 2017.
  • Data is due by October 15, 2017.
  • Analysis will be received by October 31, 2017.


P.S.: Ok, it's time for what is becoming a tradition ... the links at the end of the blog post. Have you read this interpretation of the new iPhone (click here)? There's a quote that all catalogers should read ... so I'll print the quote here ... we begin with the introduction of the iPhone a decade ago.
  • The iPhone represented a fresh start for the company — and Steve Jobs, had learned his lessons well. Don’t depend on a third party to be enabler of your key innovations and capabilities. I have written about the critical need for vertical integration for today’s giants in the past.
    Just imagine Apple having to depend on Qualcomm to supply its chips — it will be tied into Qualcomm’s ability to come up with new technology — and thus will be working on a timeline defined by the San Diego chip giant. Mind you, this doesn’t factor the harsh reality of paying Qualcomm premiums and having to worry about losing chip supplies to someone with bigger orders and desire to work on razor thin margins.
This brings us to the catalog industry. Let's replace the second paragraph, removing "Apple" and plugging in "Catalogers" ... then removing "Qualcomm" and plugging in "Co-Ops" ... and removing "chips" and replacing it with "customers" ... now we have the following:
  • "Just imagine Catalogers having to depend on Co-Ops to supply its customers - it will be tied into the Co-Ops ability to come up with new technology - and thus will be working on a timeline defined by the Co-Ops. Mind you, this doesn't factor the harsh reality of paying the Co-Ops premiums ..."
Sobering, quite honestly.

The MineThatData Forecasting Challenge!!

Ok, time for some fun, if you are an analytics guru!

I have a dataset for you ... it contains annual sales on a rolling twelve month basis for the past 83 months (month = 00 through month = 79). You can click here to download the Excel Spreadsheet.

Here are the variables in the dataset.
  • Month = 00 to Month = 79.
  • Annual Sales:  Total.
  • Annual Sales:  Call Center.
  • Annual Sales:  Website.
  • Annual Sales:  Email Marketing.
  • Annual Sales:  Search (Paid and Natural).
  • Annual Sales:  From Items New In The Past Year.
  • Annual Sales:  From Existing Items.
  • Annual Sales:  From The Primary Merchandise Category This Company Sells.
  • Annual Sales:  From All Other Merchandise Categories.
  • Annual Sales:  From Items $0.01 - $9.99.
  • Annual Sales:  From Items $10.00 - $19.99.
  • Annual Sales:  From Items $20.00 - $29.99.
  • Annual Sales:  From Items $30.00 - $49.99.
  • Annual Sales:  From Items $50.00 - $99.99.
  • Annual Sales:  From Items $100.00 - $249.99.
  • Annual Sales:  From Items $250.00+.
A few key tidbits:
  • Total = Call Center + Website + Email Marketing + Search.
  • Total = New Items + Existing Items.
  • Total = Primary Merchandise Category + All Other Merchandise Categories.
  • Total = Items $0.01 - $9.99 + Items $10.00 - $19.99 + Items $20.00 - $29.99 + Items $30.00 - $49.99 + Items $50.00 - $99.99 + Items $100.00 - $249.99 + Items $250.00+.
Here's the Forecasting Challenge:
  • Given the data in the dataset, predict Annual Sales in Month = 80, Month = 81, and Month = 82.
Forecasting Challenge Extra Credit:
  • Given the data in the dataset, predict Annual Sales for each variable in the dataset for Month = 80.
  • Then, use the data in the dataset and the prediction for Month = 80 to predict Annual Sales for each variable in the dataset for Month = 81.
  • Then, use the data in the dataset and the predictions for Month = 80 and Month = 81 to predict Annual Sales for each variable in the dataset for Month = 82.
The person / team / company that minimizes squared error for Annual Sales - Total in the Forecasting Challenge will be deemed the winner. Yes, I have the actual values for months 80/81/82.

The person / team / company that minimizes squared error for Annual Sales - Total in the Forecasting Challenge Extra Credit will also be deemed a winner. Yes, I have the actual values for all variables for months 80/81/82.

The person / team / company that wins either challenge will have their results published on this Blog (2,500 subscribers), on Twitter (6,600 followers), and on my Podcast (71,000 downloads). So yes, your answer will receive some exposure!  I will also send a free copy of Hillstrom's Fix It to the winning person / team / company.

Your solution must be written up in white paper format - fully explaining the methodology you use, and fully sharing the equations or math used to make the prediction. If you don't provide a white paper publicly outlining/sharing your methodology/results/predictions, you will not be eligible to win.

Cost to Enter = Free!

Cost to Submit a Potentially Winning Solution = Free!

Due Date:  Your solution is due no later than 11:59pm PDT on October 31. Late submissions will not be accepted.

Ok, who is ready to accept The MineThatData Forecasting Challenge??!!

September 13, 2017

MineThatData Academy!!

I've worked with many of you to get the bugs out of the simulation algorithm. There's been many different versions, and many different tests. And now, finally, the bugs have been worked out and we have a simulation that gives participants a fighting chance to test their chops ... and most important ... a fighting chance to come from behind if year one doesn't go very well.

The simulation is called "MineThatData Academy":


This is a ten-team example ... the simulation is designed to handle up to twenty individuals/teams.

You get to determine your strategy across many dimensions.
  • Online Advertising.
  • Offline Advertising.
  • % off Strategy.
  • Shipping Revenue (or Free) Strategy.
  • Price of Widgets.
  • Price of Bidgets.
  • Price of Tidgets.
  • % of Your Merchandise Assortment = New.
  • Mix of Brand Marketing Strategy and Technology/Personalization.
You will be provided with limited metrics ... not enough data to "perceive" you can do a good job ... but you'll be able to do a good job because you are smart.

Alright, here's what you get.
  • Option #1 = On-Site Visit. 9-12 = Simulation. 12-1 = Lunch. 1-5 = Business Discussion With Your Team, Can Go In Any Direction You Want.
  • Option #2 = Virtual Academy. 1-4 = Simulation, 4-5 = Business Discussion With Your Team.
Contact me for additional details (kevinh@minethatdata.com).

These "Academy" sessions work really well at Vendors as well as E-Commerce / Retail / Catalog Clients ... and the structure is perfect for conferences.

Soooooo ... who's ready to set the HIGH SCORE at the MineThatData Academy? Who has the business chops to succeed? Email me and let's have some fun! (kevinh@minethatdata.com).


P.S.: Here's a medium-cost customer acquisition strategy discussion in fashion, should you be interested. Read what Ralph Lauren did with 300 "influencers" ... what would stop you from doing something comparable with your best customers?

P.P.S.:  Read the link in Issue #61 in this missive from MailChimp (Click Here). Do you travel the world to find stories worthy of sharing? That's a form of low-cost customer acquisition - certainly cheaper than paying Facebook a million dollars, #amirite?

P.P.P.S.:  Since this industry loves paper, here's Shopcodes from Shopify (Click Here).

P.P.P.P.S.:  Two days ago, this link got 319 clicks ... that's as many as any link I've put up here (Click Here). Put Facebook and Catalogs in the same sentence and you swarm the link like wasps attacking a rotting orange!



September 12, 2017

Pages / Contacts

There's a small audience out here that encourages you to mail fewer pages and fewer contacts.

There's a larger audience that encourages you to mail more contacts and pages because sales increase. It's good that sales increase.

Actual test results and actual math and actual profit calculations (especially profit calculations) that yield more profit is much, much better.

I've spent 30 years measuring this stuff. Developing equations. Performing actual math. Testing. Thirty-flippin'-years, folks. It's why I get frustrated. I've executed the tests and done the math and calculated profit and share the advice freely with you ... and you pick Thought Leaders who ask you to mail more pages and more contacts.

Why?

Back in August, I conducted a 10-part series on the topic and shared three decades of math/findings ... for free ... (click here). Please - go revisit the links and look at the math.

Then do what is right for your business.
  • Test a 50% page count reduction with the same assortment/creative. Does the "rule of thumb" hold? (hint - it probably does).
  • Test a 50% page count reduction stuffed with best products and best creative. Does the "rule of thumb" hold? (hint - it can't hold, it won't hold - you'll get amazing results on fewer pages).
  • Measure page count reduction tests across best customers, marginal customers, lapsed customers, and prospects. Are your results different (hint, they are).
  • Test 4 catalogs a year vs. 8 vs. 12 vs. 42. Execute the test among best customers, marginal customers, lapsed customers, and prospects. I keep getting calls from catalogers who are getting 80%+ of the demand on 20% of the contacts. Hint - that's a lot of profit! Double Hint - you won't hear any of these discussions from Thought Leaders or at Conferences, and for good reason - they don't want you to know about 'em ... but you keep telling me that's what you are seeing, so enjoy!
  • Develop a strategy for Best Customers, Marginal Customers, Lapsed Customers, and Prospects. Contact me (kevinh@minethatdata.com) and I'll perform the math for you for your unique situation.
Follow the math outlined in this 10 part series.

If you don't execute actual math, actual tests, and calculate actual profit ... then you stuck dealing with lizard logic. Don't get trapped in the lizard logic of mailing more pages and more contacts, ok?



September 11, 2017

Butterflies on a Reptile

Long-time reader Robby sends us this one (click here for the article):

Now look at the image here.

The image is what we do in our industry. The reptile is the core business ... the butterflies are the fun new channels we bolt on to the core business. We think we are integrating the customer experience, creating omnichannel magic.

Instead, we created this image.

There's nothing wrong with generating as much profit as possible from the reptile, and then reinvest that profit in a new online brand.

Heck, people love to criticize J. Crew these days - but think about what they're doing ... as the core brand suffers the new brand (Madewell) performs better. It's good to have multiple brands ... it's like having a diversified portfolio of stocks, right?

Think about what Gap is doing these days ... they're closing Gap stores while opening Old Navy stores. Instead of bolting butterflies on the reptile, they're shutting down reptiles and growing their assortment of butterflies.

Don't fall for omnichannel lizard logic.



Consider hiring online experts - let them start an online brand using the fraction of your merchandise assortment that appeals to a younger audience. Let them use techniques and tactics (butterflies) that do not work when bolted on to the core business (the reptile). As success happens, let the new merchandise assortment evolve and shift as the customer base evolves.

Explain why this is a bad idea?

P.S.: Speaking of online marketing experts, read this story about Alto's Adventure.

P.P.S.:  Speaking of bolting butterflies on a reptile, look at what large retailers and Facebook are doing with catalogs (click here). There's no saving traditional folks who won't at least try something like this (though we've been here for 15 years or more with "digital" catalogs). Try Something!!


September 10, 2017

High Cost Customer Acquisition Example

I submitted my MineThatData Academy Business Simulation to the DMA (and Shop.org and Internet Retailer) ... they turned the opportunity down (all three did) ... and here's why ... take a look at the email I received from Ascendant Network:


Yes - you can spend $75,000 to achieve "High Level Brand Engagement" at the EMP Lounge. Or just $40,000 at the VIP Party.

A Track Speaking Session is just $60,000 - only 1 available!

Or you can spend $15,000 to host cocktails. Who hasn't dreamed of doing that?

Do you think Kobe Bryant and Tyra Banks paid $60,000 for their speaking opportunity?

It's easy to spend money.

It's hard to be creative. Really, really hard.

This is an example of low-cost customer acquisition (which also applies to best customers). Look at what Teespring sent me on Saturday:


See - there's a little bit of creativity there. Did you know that you can find pizza socks in the laundry 37% faster? I didn't know that.

So you can do the hard work and be creative ... or you can pay $15,000 to host cocktails.

Your choice.

September 07, 2017

Leverage

You have a solid marketing program in place to convert buyers within three months of a first purchase, right?

RIGHT?

Why is this so important?

This data is from a company that has a 50% annual repurchase rate - far greater than the repurchase rate most of you possess. Look at the probability of a second purchase by months since first purchase.
  • Recency = 01, Rebuy = 17.3%.
  • Recency = 02, Rebuy = 9.1%.
  • Recency = 03, Rebuy = 5.7%.
  • Recency = 04, Rebuy = 4.0%.
  • Recency = 05, Rebuy = 3.5%.
  • Recency = 06, Rebuy = 2.8%.
  • Recency = 07, Rebuy = 2.3%.
  • Recency = 08, Rebuy = 2.0%.
  • Recency = 09, Rebuy = 1.9%.
  • Recency = 10, Rebuy = 1.6%.
  • Recency = 11, Rebuy = 1.5%.
  • Recency = 12, Rebuy = 2.0%.
  • Recency = 13, Rebuy = 1.3%.
  • Recency = 14, Rebuy = 1.0%.
  • Recency = 15, Rebuy = 0.9%.
  • Recency = 16, Rebuy = 0.7%.
After three months, the customer is virtually lost.

Think about this ... you could take a 14 month customer and apply some "win-back" program and increase repurchase rates that month from 1.0% to 1.1% (that 10% gain is hard work, by the way). But you haven't accomplished anything.

What happens if you improve the repurchase rate in the first month after a first purchase by 10%? You go from 17.3% to 19.0%. THAT'S MEANINGFUL! Not only is it meaningful, but you gain 1.7 points of repurchase vs. the 0.1 point you gain on the 14 month buyer ... that's 17 times more impact!!

17 times more impact!!

We call this "leverage" ... a first time buyer with 0-3 month recency designation is at a "high" leverage point. The customer who last purchased 39 months ago is at a "low" leverage point.

  • High Leverage = Many Customers, High Likelihood of Change.
  • Low Leverage = Few Customers, Low Likelihood of Change.
So why do we spend so much effort trying to reactivate lapsed buyers when you could have a marketing program in place to get the first-time buyer to purchase again 0-3 months following a first purchase?

Show of hands, how many of you have a marketing program in place to convert the first-time buyer to a second purchase within 0-3 months of a first order? I'm not talking about your mass email marketing campaigns and your mass catalog mailings, those don't count. I'm talking about a specific program only for 0-3 month first-time buyers:
  • A Welcome Package.
  • A Call 10 Days After Package Arrives, Asking If Everything Is OK With The Order?
  • If You Love Offering Discounts, How About A 2nd Purchase Discount?
  • Offer To Join Your Loyalty Program?
  • Offer To Join Your Subscription Program?
  • Cross-Shop Personalized Email Campaigns Based On Items Purchased In A First Order?
  • Free Expedited Shipping For Christmas For 1st-Time Buyers In Oct/Nov.
  • Membership In A Customer Council To Improve Products/Service.
  • Invites To First-Time Customer Events In-Store.
  • First Opportunity To Purchase From New Merchandise Assortment.
  • Credit Offers With Low APR.
  • Request To Follow Your In-House Employee Influencers On Instagram.
Again, a show of hands ... how many of you have a marketing program in place to convert the first-time buyer to a second purchase within 0-3 months of a first order?

If you didn't raise your hand, what is stopping you from implementing a program? Discuss.

Gliebers Dresses: A Potential Buyer

Yes, this is a fictional story about a catalog company in New England. If this isn't your cup of tea, then feel free to browse the most popular article I wrote in August (click here) or take a look below at L.L. Bean getting tons of low-cost customer acquisition exposure courtesy of non-stop hurricane coverage.



Setting: The Gliebers Dresses Executive Conference Room. A potential buyer, Santa Ana Equities, surfaced in recent weeks. They sent a representative, Gerri Stapleton, to visit with the Gliebers Dresses Executive Team.


Glenn Glieber (Owner / CEO):  Well, on this beautiful fall day we consider a potential spring for our business. Gerri Stapleton is here to talk to us about our business. Let's grant her every possible courtesy as we begin our discussion.

Gerri Stapleton:  Let's get right to it. Tell me about your strategy for 2018.

Meredith Thompson (Chief Merchandising Officer): That's an easy one. We're going to leverage catalog mailings to deliver a trend-right assortment to a price-sensitive shopper trying to navigate today's competitive environment.

Gerri Stapleton: That's not a strategy. That's a paragraph from a Woodside Research report.

Roger Morgan (Chief Operating Officer): She's right!!

Gerri Stapleton: Be specific. What are the five strategies you are employing for 2018 to grow the top-line?

Meredith Thompson: We've done a lot of testing on our in-home dates in January. We think we should go with January 6. It's far enough away from New Year's Day but it allows us enough spacing to get the February catalog in on February 2, giving the customer time to buy before Valentine's Day.

Gerri Stapleton: That's not a strategy, that's a tactic, and an elementary one at that.

Lois Gladstone (Chief Financial Officer): Somebody woke up on the wrong side of the bed this morning.

Gerri Stapleton: Excuse me?

Lois Gladstone: Look, we're not Instagram. We're not trying to own the world. We mail catalogs.

Gerri Stapleton: Then you probably have a comprehensive strategy for mailing catalogs.

Lois Gladstone: We do! It's called the mail plan.

Gerri Stapleton: What?

Lois Gladstone: Pepper maintains the mail plan. It's the bible that fuels our business. Well, it's more like a spreadsheet, to be honest.

Gerri Stapleton: Who is Pepper?

Pepper Morgan-Pressley (Chief Marketing Officer): I am.

Gerri Stapleton: And you maintain the mail plan, is that correct?

Pepper Morgan-Pressley: I enter numbers into it. It's a living, breathing document that everybody owns, to be honest.

Gerri Stapleton: What does that mean?

Pepper Morgan-Pressley: A living breathing document?

Gerri Stapleton: No, a document that everybody owns. What does that mean?

Pepper Morgan-Pressley: I'll give you an example. Last Friday Meredith went into the document and unilaterally determined that the January catalog should be mailed on January 6 instead of January 2. This spurred a series of cross-functional meetings. Creative said we could meet the January 2 in-home date, but the merchants were compelled to mail the catalog later. We compromised and now the January catalog is in-home on January 6. I took the demand plan down by a quarter million dollars as a consequence.

Gerri Stapleton: So you made a decision that will result in less demand, less sales, and less profit? And everybody is ok with that?

Pepper Morgan-Pressley: Our printer wants us to co-mail the catalog with other brands on that date, so our vendor ecosystem gave us a handful of discounts to make it happen - the net impact won't be that bad on the p&l.

Roger Morgan: Also remember, Pepper, that AfterNine told us to not do smaller page counts in catalogs because then sales decrease - so we added twenty-four pages to the January catalog and sales are forecast to increase. You have to look at this stuff in total.

Gerri Stapleton: Who is AfterNine?

Roger Morgan: They are a catalog agency. They have all sorts of great ideas that increase sales, like mailing more catalogs and adding pages to catalogs. When we do exactly what they tell us to do, the entire industry generates more revenue.


Gerri Stapleton: But do you generate more profit?

Roger Morgan: Listen, catalog vendors pay AfterNine tens of thousands of dollars to speak at the AfterNine conference in December. The vendor community offers Thought Leadership that integrates with the AfterNine product assortment. Then AfterNine tells us what to do. Then we do it. Then all of the vendors get paid. That's how the catalog industry works. How else would the entire industry stay in business? We have a paper rep, maybe you know him, Sal Tarton. Sal says if this system didn't exist, he'd have to find a new job.

Pepper Morgan-Pressley: Gerri, in a perfect world vendors would offer services that earn business organically, generating profit for us in the process.

Gerri Stapleton: Roger, are you telling me that you are stupid enough to let outside vendors determine the tactics you use, tactics that allow outside vendors to generate profit?

Roger Morgan: It's the right thing for the catalog industry. 

Gerri Stapleton: Is it the right thing for Gliebers Dresses?

Roger Morgan: Once your paper rep takes you to a fine steakhouse, you'll realize it's the right thing to do. And the AfterNine folks have a breakfast bar that is to die for. They have a Millennial Outreach program where they serve avocado toast. It's something to behold.

Gerri Stapleton: I've worked at companies where the entire Executive Team would be fired on the spot if they fell for this system of payola.

Meredith Thompson: Maybe you fire people on the West Coast or on a reality TV show, but here in New England a handshake and partnerships still means something.

Gerri Stapleton: What does that even mean?

Lois Gladstone: It means you are kind of mean to us.

Gerri Stapleton: You don't have a strategy and you let vendors run you in circles in exchange for avocado toast. Somebody needs to rattle your cage.

Roger Morgan: Gerri, people like you and I like to keep up on best practices, so you should appreciate this ...

Gerri Stapleton (interrupting Roger): I detest best practices.

Roger Morgan: Say what?

Gerri Stapleton: Best practices are for copy-cat companies who lack imagination and do not have the guts to take a risk.

Roger Morgan: Um, maybe you'll feel different after reading this document in my left hand from Woodside Research. At just $1,495, it's got everything you need to be successful. It's called "Best Practices for Modern Multi-Channel Retailers."

Gerri Stapleton: Let me ask you a question, Roger. What is the three-year sales trajectory at Woodside Research?

Roger Morgan: Uh, well, they're flat. Sales have not grown in three years at Woodside Research.

Gerri Stapleton: Let me get this straight. Woodside Research has access to all the research they sell to you, for free, and they cannot grow their own business using the very research they're telling you that you must adhere to in order to grow your business. It means what Woodside Research sells you has no value, or they'd be able to grow their business exponentially using their own advice.

Roger Morgan: Lois is right, you are mean.

Gerri Stapleton: If my firm is going to buy your business, my firm needs to feel one-hundred percent confident that we are purchasing a valuable asset that will grow in the future. So far, you've convinced me that you are good at entering dates into a spreadsheet and you love avocado toast.

Roger Morgan: I said Millennials love avocado toast.

Meredith Thompson: Maybe Gerri needs a history lesson on the catalog industry. Then she'll understand how we got here. You see, back in the early 1900s companies like Sears ...

Gerri Stapleton (interrupting): In 2017, companies have comprehensive digital marketing plans. Can you share your digital marketing strategy with me? How about your mobile strategy?

Lois Gladstone: Pepper, take it away!

Pepper Morgan Pressley:  If you go into our mail plan spreadsheet ...

Gerri Stapleton (interrupting): Are you telling me your digital strategy is in your mail plan spreadsheet?

Roger Morgan: That's called multi-channel integration. Read the report, lady.

Gerri Stapleton: Why is the digital strategy in the same spreadsheet as your mail plan?

Roger Morgan: Because if you had read the report, you'd know that Woodside Research told us that all marketing tactics need to be integrated. 

Gerri Stapleton: Are all of your marketing activities integrated?

Roger Morgan: All of our digital strategies support the catalog.

Gerri Stapleton: I was asking Pepper.

Roger Morgan: Please.

Gerri Stapleton: Pepper, are you the Chief Marketing Officer?

Pepper Morgan-Pressley: Yes.

Gerri Stapleton: Then why aren't you answering my question?

Roger Morgan: Pepper isn't answering the question because, as I am trying to explain to you, we are an integrated organization.

Gerri Stapleton: Roger, I don't need you mansplaining anything to me. I'm sure Pepper can speak for herself.

Glenn Glieber: What is mansplaining?

Roger Morgan: Let me take a moment to explain it ...

Lois Gladstone (interrupting): Roger, please.

Roger Morgan: Meredith is right, you don't understand the history of the catalog industry, and as a result you couldn't possibly understand how we got here and why we make the decisions we make. You don't understand the value a catalog business model generates.

Gerri Stapleton: I may not understand how you got here, but I'm pretty confident I can describe where y'all are going in the future.

Glenn Glieber: I'd like to hear Gerri's point of view on that topic.

Gerri Stapleton: Let me give you an example. ESPN. They leverage a traditional business model via cable. But customers are cutting the cord, especially younger customers. This means ESPN gets less and less revenue. However, ESPN's costs are fixed. They pay a hundred million dollars a game for Monday Night Football! So the math doesn't work, and you look into the future and you see a financial cliff on the horizon. Given the information I just shared with you, what should ESPN do?

Meredith Thompson: They're toast unless they embrace a digital future with younger customers!

Lois Gladstone: But that creates problems, because they have fixed costs that don't change, and they won't get as much revenue going digital with a younger audience. They need to get out of some of their contracts. And they've already fired talent to trim costs.

Roger Morgan: But if they do that, their programming won't be as compelling.

Lois Gladstone: They can produce more opinion-based programming. That doesn't cost them anything but they can keep viewers while they figure out how to get to the future.

Meredith Thompson: Opinion-based program is a vapid waste of time. It changes their brand. They optimize for the short-term but hurt the long-term.

Pepper Morgan-Pressley: Have you seen how hard they are promoting their mobile phone apps on college football games? They're trying to encourage their customers to shift to digital.

Lois Gladstone: They're going to have to increase carriage fees and ask for more advertising revenue.

Roger Morgan: But cable companies will balk at the carriage fees, and if they pass 'em along to customers then more customers will cut the cord, further accelerating their demise.

Gerri Stapleton: Good! Y'all understand the issues that a company in a different industry deals with.

Meredith Thompson: It's not rocket science.

Gerri Stapleton: Are there any parallels to your business?

Meredith Thompson: Yeah! Pepper tried to get our customers to use an app once and it didn't work. She even advertised the app on page 27 of the October catalog. If you can't get a customer to use an app after reading about it in the catalog, then mobile strategy is pointless.

Lois Gladstone: We conducted surveys. Our 64 year old customer told us she couldn't read the app on a small mobile device. That's why catalog marketing is so critical. We can use large fonts to engage the customer. Catalogs are a fantastic form of engagement. Did we tell you about the reading glasses promotion we ran in the November catalog last year? That was a home run!

Gerri Stapleton: Anybody else?

Pepper Morgan Pressley: You are saying that we are like ESPN, but it's easier for us to see problems in other industries than it is to see our own problems?

Roger Morgan: If I can speak for you for a moment, I'd suggest Pepper isn't saying that. Pepper is suggesting that ESPN employ the type of multi-channel and omni-channel solutions we've been employing. I think Pepper has been reading Woodside Research reports! Good girl, Pepper!

Gerri Stapleton: Oh my goodness.

Meredith Thompson: Roger always treats Pepper that way. He's a nice guy once you get past the obvious flaws in his personality.

Gerri Stapleton: Glenn, I've got everything I need. Thank you for your time.

Lois Gladstone: But you haven't even gotten to the financials yet!

Gerri Stapleton: I'm confident I can predict what the financials look like.

Roger Morgan: We made eight hundred and twenty-four dollars last year!

Glenn Glieber: Gerri might be mean spirited, but imagine what our future would look like under her leadership?