May 25, 2009

Case Study: A Visit With The Owner

When you make the long walk from the reception area to Glenn Glieber's office, you are immediately struck by the history of the company. The walls of the hallway are lined with images of the merchandise that made Gliebers the leading dress purveyor in all of New England.

I arrive at Mr. Glieber's office with visitor badge #159 clipped to my dress shirt pocket. Mr. Glieber met me at the door with a warm, but tired smile.

Mr. Glieber's office reflected the history of the company. He sits in an old executive leather chair behind a solid oak desk that may have been brought over on the Mayflower.
.

"What's the mood out there, Kevin?" boomed Mr. Glieber.
Many of my visits start this way. It's always easier to discuss the misery of others.

Mr. Glieber points to a copy of DMNews on his des
k ... "They say that Anna Carter is struggling, that she's thinking of shutting down the catalog division altogether. Who would have ever thought that Anna Carter would eliminate the catalog division?"

Anna Carter is a key competitor of Gliebers, selling dresses to largely the same audience.


Mr. Glieber doesn't waste much time with small talk. He pulls out a profit and loss statement, showing the trajectory of the business over the past four years, illustrating the plight of 2009.

There are the obvious metrics you look at when reviewing a profit and loss statement. Profit peaked at $6.5 million (all numbers are in thousands above) in 2006. You can see the impact of the postage increase in 2007, circulation had to be cut in order to meet the catalog budget, hurting demand. In 2008, the bottom fell out.

2009 is not trending well, though severe labor and capital cuts brought the expense structure in line with sales.
This was a $58 million dollar business that generated an 11.7% pre-tax profit in 2006. This is forecast to be a $45 million dollar business that will probably break-even in 2009.

I also like to review the mix of demand that comes in by physical channel. The "catalog" channel represents orders that are taken via the telephone. The "online" channel represents orders that are placed online, regardless of the marketing vehicle that drove the order. Notice that catalog demand is in rapid decline, while online demand has stalled.

This doesn't mean that the catalog is "failing", necessarily. But it certainly opens the door to a lot of reporting, analysis, testing, strategy, and disagreement! Clearly, advertising is becoming less effective as a whole, take a look at the ad-to-sales ratio at the bottom of the profit and loss statement. When this percentage is increasing, it suggests that the productivity of the advertising is getting worse.

This is where Mr. Glieber and I begin our chat.

"You know, I think the world just changed. I wanted to retire with the business on healthy ground, and I cannot do that now".

How did the world change?

"I don't know. I do know that it used to be more fun. My leadership team and I used to sit in a room and just think how we wanted to creatively present the brand to the customer. We rented names, we went on photo shoots, we went to Milan to see the latest in fashion dresses. It was a blast!"

I ask Mr. Glieber to give an example of how things changed.

"You know, yesterday, I met with our search marketing vendor. They tell me they're tracking the performance of 8,400 keywords. What's up with that? When we were selling mini-skirts to customers in the early 70s, we didn't have to think about all of the combinations of ways that the customer might think about shopping for a mini-skirt, we just had to present it in an appealing way, and she bought the darn mini-skirt."

"Here's another problem. I met with our e-mail marketing vendor a few weeks ago. They fought me tooth and nail about adding a second e-mail campaign per week. Since when did it become a crime to want to increase sales? She kept telling me about opt-out rates and how we'll anger the customer. Back in the 90s, we doubled the number of catalog mailings from 12 per year to 24 per year, and nobody got upset about that. Now all of a sudden, I want to double the number of e-mail campaigns to a customer who asked to receive e-mail campaigns, and I'm told we must not do that. You don't stay in business very long by reducing marketing and by shrinking sales. An entire generation of marketers seemed to have not learned that. That's how the world changed."

I asked Mr. Glieber what the essence of his "brand" was.

"Our brand is a combination of fashion and catalog artistry. Every part of our multichannel experience starts with creating demand via the catalog --- the merchandise we offer, the way we paginate the catalog with a story about our target customer, it is all designed to inspire the customer to purchase whatever she wants, via any advertising channel she wishes to purchase from."

I noticed that catalog spreads and catalog covers were on all the walls in the building. I ask Mr. Glieber where his staff presented online home pages and landing pages. I ask which wall the e-mail marketing campaigns are posted on?

"Why would we do that? I just told you that our multichannel experience starts with the catalog. The homepage and landing pages are merchandised to support the creative presentation in our catalogs."

I asked Mr. Glieber what he thought about new companies, companies like Zappos?

"Sometimes I'd like to throw a shoe at Zappos! Seriously, they've done a great job of customer service, haven't they? It takes a lot of positive interactions to capture a billion dollars of gross sales. I just don't understand how they, or any online business for that matter, creates demand. FootSmart sends a customer a catalog. The customer is interested in something and goes online to search for competing brands offering that product. The customer finds Zappos. Zappos closes the sale. I simply don't understand how Zappos create interest in products, how they create demand, how they romance the customer. I don't get it."

I keep writing.

"You asked earlier what changed, Kevin. I think the world changed in 2003. CAN-SPAM and Do-Not-Call legislation gave the customer power, and the customer is never going to let an old-school guy like me take the power back. The post office ruined us in 2007, but the real end of the game came in 2003 with CAN-SPAM and Do-Not-Call legislation.

I asked if the internet made things worse?

"The internet took all of the fun out of marketing. We used to obsess about the right model and the right dress and the right presentation. We obsessed about the optimal page count needed to stimulate demand. We obsessed about getting access to the Anna Carter mailing list, then we obsessed that we were on the right side of the exchange balance. We used to obsess over the way the printer brought that image to life. That whole process required passion and discipline, Kevin."

"It's so different now. Not only do we have to create a beautiful image that inspires the customer to shop, but we have to figure out the 296 ways a customer might inquire about the keyword "sundress", and then write the correct copy so that the Google-inspired fashion consumer chooses us over 27 competitors. We're selling to an algorithm, not to a customer. I just don't believe that you can win, long-term, by selling to an algorithm. And then we have to replicate our marketing strategy across every advertising channel, each with strengths and weaknesses. My buyers fight for e-mail real estate, homepage and landing page real estate, mentions on blogs or Twitter. The worst part is that the harder we work, the more response declines."

I asked Mr. Glieber what he thought it would take to turn his business around?

"We're going to need to get back to the basics. We're going to have to use this internet thing to somehow inspire and romance the customer. Maybe we could get Oprah to Tweet about our merchandise, what do you think about that idea? Honestly, I don't know the answer. That's the frustrating part of this. That's why we're hiring people like you."

Given this feedback, I need to gain insight from the Executive team, and the marketing team. I need to learn more about how each individual views customer relationships. These views will be incorporated into the Multichannel Forensics analysis.

6 comments:

  1. derek.newman4:27 PM

    Kevin,

    this is great. Thanks

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  2. There's more coming, so hopefully it will be useful!

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  3. Kevin -

    I feel like I'm living in the experience. Can't wait to read more...

    Great stuff

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  4. A lot of us "live the experience"!

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  5. I was surprised to see the part about Zappos. Zappos has widely shared its story on how they achieve success. I would think the CEO would want to learn from them.

    http://money.cnn.com/magazines/business2/business2_archive/2006/12/01/8394993/index.htm

    http://www.inc.com/magazine/20090501/the-zappos-way-of-managing.html

    http://www.christine.net/2008/02/zappos-shares-s.html

    http://www.startup-review.com/blog/zapposcom-case-study-why-shoes-are-great-for-e-commerce-%E2%80%A6-yes-really.php

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  6. Business leaders have interesting habits, Ben!

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