July 29, 2009

Gliebers Dresses: Monthly Dashboard

Welcome to another Gliebers Dresses Executive Meeting.

Chip Cayman (Independent Marketing Consultant): "... Glenn will be back next week, fully rested from his staycation. And I'm 100% convinced that Dorothy will be glad to have him out of the house! There are only so many things that can be fixed in a home, you know?! Roger, you probably know all about this topic!"

Meredith Thompson (Merchandising): "Kevin, is that you?"

Kevin: "Yup, it is me."

Chip Cayman: "I asked Kevin to join us today, so that we could go over customer reporting from the past thirty days. Kevin, the C-Suite awaits your commentary."

Kevin: "Ok, let's take a look at the data. The dashboard in front of you (click on the image above) illustrates a series of very simple metrics that outline why sales are increasing or decreasing. I usually look at a rolling twelve months of data, so that I can compare metrics without needing to consider any adjustments for seasonality."

Roger Morgan (Operations and IT): "That is one way to look at the information. Anytime I run metrics for finance, I like to create five year views of the data as well."

Kevin: "The top half of the table illustrates how well we're doing at retaining existing customers. The bottom half of the table illustrates our effectiveness at reactivating older customers and acquiring new customers.

Pepper Morgan (Interim Chief Marketing Officer): "This report suggests that we did a worse job of retaining customers over the past thirty days, is that correct?"

Kevin: "Just barely. The annual retention rate dropped from 53.20% to 53.15%, not a significant decrease. There are two problems right now. A third of our problem happens because the business has been in decline for awhile, so we simply have fewer existing customers to generate sales. Two-thirds of our problem happens because customers are actually purchasing fewer items per order, at a slightly lower price point."

Lois Gladstone (Finance): "Shouldn't our loyalty program cause the opposite outcome? For the past month, we've been heavily promoting the fact that if a customer buys four dresses, then the customer gets free shipping for the rest of the year. We should see an increase in retention, and an increase in items purchased per order, right? But so far, we aren't seeing an increase."

Kevin: "If the program is working, then theoretically, yes, you will see an increase in those metrics."

Lois Gladstone: "We've been promoting this for the past thirty days, have we been speaking with the right audience?"

Chip Cayman: "We have to give this loyalty program time, folks. We simply cannot expect the customer to see the obvious value in this program and respond immediately."

Pepper Morgan: "What is happening with new and reactivated customers, Kevin?"

Kevin: "The vast majority of decline in demand among new and reactivated customers is happening because there are simply fewer new and reactivated customers. We have fewer customers, in large part, because of the cuts in customer acquisition marketing."

Lois Gladstone: "And those cuts were in unprofitable areas, so our profit and loss statement is going to look better because we made those cuts."

Kevin: "As you can see, this creates a 'circular logic problem', if you will. We begin next month with 3,410 fewer twelve month buyers than we began last month with. Assuming that the loyalty program will work, we'll have fewer customers to feed into the loyalty program."

Candi Layton (HR & Chief Customer Officer): "If we have fewer customers, does this mean we'll have fewer orders in the call center in the future?"

Kevin: "Most likely, yes."

Candi Layton: "Does this mean that, if we're losing 2% of our demand per month, we might lose as much as 24% of our demand over the next year?

Kevin: "If every month replicated the results of the past thirty days, then yes."

Candi Layton: "And that means we'd have to ultimately reduce hours in our call center and distribution center again, given that the business is shrinking this much."

Lois Gladstone: "That's why we're really promoting this loyalty program. We absolutely need to increase the number of loyal buyers, to prevent that from happening."

Candi Layton: "But we started the new program a month ago, and already, the metrics are pointing in the opposite direction."

Roger Morgan: "Fortunately, our website conversion rate has increased over the past thirty days."

Pepper Morgan: "That's because we're doing less customer acquisition, so we're driving better traffic to the website, traffic that converts at a higher rate."

Roger Morgan: "Maybe the loyalty program is making a difference, causing customers to be more motivated to order when they visit the website?"

Pepper Morgan: "Then wouldn't the customer metrics illustrate improvements?"

Roger Morgan: "From what you've shown us, open rates and click-through rates in the e-mail campaigns where we've communicated our loyalty program are up, and website conversion rates are up. So at some level, the loyalty program has to be working, or those metrics wouldn't all show increases. Maybe this is a merchandising issue, maybe the business would be down even more than this if we hadn't started the loyalty program?"

Chip Cayman: "Let's not get into pointing fingers, here. We need to give the program a chance to succeed. Meredith, you have a lot of merchandising metrics that suggest we're making big improvements, right?"

Meredith Thompson: "Our back-to-school strategy is really doing well, it is up 24% compared with last year. And we have a new line of professional dresses that are up 39% compared with last year. So we have plenty of successes."

Roger Morgan: "Maybe the economy isn't doing us any favors. If conversion rates are up, if e-mail metrics are up, if many of the merchandising metrics are up, if our loyalty program is kicking-in now, then our business should be improving, right?"

Kevin: "There are a few challenges, here. Customer metrics are the aggregate of marketing strategy, merchandising effectiveness, and economic conditions. Some metrics are pointing up, some are not doing so well, and so the net impact is a negative. By and large, there is a file momentum issue, fueled by a decrease in customer acquisition. No matter how many metrics improve, the business will continue to struggle as long as there are fewer and fewer customers available to purchase again from Gliebers Dresses."

Pepper Morgan: "Good thing we're using Kevin's Zip Code Forensics tool to find new customers more efficiently, that should help us."

Chip Cayman: "How much does that cost us?"

Pepper Morgan: "It's free to any business that sells via e-commerce, right Kevin?"

Chip Cayman: "Free? Kevin, you're a dufus. I could sell that tool into packaged goods companies at $100,000 a pop. Good consultants know how to monetize their activities. Look at me, for instance. I don't do these Executive Meetings for free, you know."

Kevin: "We'll do a revenue share, we'll split incremental profit based on a percentage that you determine, how's that?"

Chip Cayman: "I'd need Glenn's approval for that, and you know that he loves free marketing, so that won't happen. Anyway, once this loyalty program really takes hold, we should see improvements in retention rate, orders per buyer, and especially items per order. Improvements in those metrics should hopefully offset any customer file momentum issues. Now on to the next topic, before we wrap up. Glenn wants me to remind all of you to explain to all of your employees that, for the second consecutive year, there will not be a contribution to the profit sharing plan. Glenn did decide, however, that he will bring back the 'lottery' system for a second year, whereby three lucky employees will be drawn at random to receive a $10,000 contribution to their profit sharing plan. Executives will once again not be eligible for this lottery."