July 08, 2009

Gliebers Dresses: Paying For Loyalty

It's time for another Executive Meeting.

Glenn Glieber (Owner): "... and I swear, if I ever have to sit in the same room with Tanita Walker of 'Wake Up New Hampshire!' again, I'll punch her right in the mouth. She had the nerve to invite me on the third-highest ranked morning television show in all of New Hampshire to talk about weathering the economic storm, and then she rips me about fair labor practices in China. Fair labor practices. Show me a plant in Nashua that can produce a dress at the cost of goods I need to stay in business and pay a Nashua resident a living wage, and I'll move everything there."

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

Kevin: "Yup, it's me."

Glenn Glieber: "Kevin, we need a few of your Multichannel Forensics tidbits today."

Lois Gladstone (Finance): "Yes. As you know, our entire team believes that loyalty is the key to returning our business to profitability. We implemented our 'buy four dresses, get free shipping for the rest of the year' program on July 1. Soon, we'll need to pay for free shipping."

Sarah Wheldon (Marketing): "The belief is that there are wasteful marketing dollars out there that can be trimmed without hurting the business, that marketing is somehow clueless about managing a marketing budget."

Roger Morgan (Operations): "You sure can't trim our Information Technology department, our Call Center, or our Distribution Center budget, I can tell you that. And you all know the old joke, 'I know that half of my marketing dollars are wasted, I just don't know which half!'"

Lois Gladstone: "So Kevin, here's what we're thinking. We want to reduce the page count of every catalog we mail by eight pages, across the board, in 2010."

Meredith Thompson: "I hate the idea. HATE IT! If the customer doesn't see my merchandise, she can't buy my merchandise."

Roger Morgan: "You know, we could create some sort of e-mail pdf document, like we could scan all the pages of the catalog, and then send it as an e-mail to the customer. You could have 644 pages if you wanted to, because e-mail is free. Why wouldn't we do something like that? I got a flyer in the mail last week from a company that does digital catalogs, they sounded reputable, we could work with them."

Lois Gladstone: "So Kevin, what would be the impact of eliminating eight pages per catalog? We're talking about saving $600,000 in expense, but we don't want to lose any top-line sales. In fact, I'd like to see us cut expense and grow sales."

Kevin: "Here's what our Multichannel Forensics project told us about page counts:
  • Telephone demand is reduced by 5% each time we cut catalog pages by 10%.
  • Online demand is not impacted at all when we cut catalog pages by 10%.
  • Total demand is reduced by 1.7% when we cut catalog pages by 10%.
  • It would be more profitable for Gliebers Dresses to mail smaller page counts than larger page counts, because customers are driven online by the mailing of the catalog, where more than a thousand pages of merchandise technically exist.
  • The more sales a customer generates online, the more pages you can cut to that specific customer.
  • Our frequency test also indicated that we can cut contacts, and be more profitable.
  • However, with telephone shoppers, cutting pages or frequency is a bit risky.
Sarah Wheldon: "We've always known this, Glenn. You ask me to run these scenarios all of the time, and this is what we always see. Why do we need Kevin to analyze this now, no offense, Kevin?"

Meredith Thompson: "I'm not sure I'm on board. If you take the results at face value, you could make the argument that we should do 108 pages instead of 116. And then you'll argue that we should do 96 pages instead of 108. And then you'll argue that we should do 64 pages instead of 96. Where does it end? 0 pages? Then we're not even a cataloger anymore. What are we, at that point?"

Pepper Morgan: "At that point, if we did free overnight shipping, we'd be the Endless.com of dresses. And we'd have a lot of money to fund free overnight shipping without catalogs."

Meredith Thompson: "There are days when you scare me, Pepper."

Lois Gladstone: "If I do a back-of-the-envelope profit and loss statement, we can cut pages, lose up to 2% of top-line demand, be more profitable, and then fund free shipping with the $600,000 we save by cutting pages. No downside here. Good. It is decided, then. We'll cut eight pages from all catalogs, starting in January."

Sarah Wheldon: "Doesn't marketing make these decisions?"

Meredith Thompson: "Nobody decided anything. I already have orders for Spring 2009 merchandise. We have minimums to meet. If I don't feature the merchandise in a catalog, how am I going to sell it? I need the pages so that I can move the merchandise I've already ordered."

Roger Morgan: "I read on Twitter where Dell sold $3 million in merchandise using social media. Couldn't we move merchandise on Twitter? I mean, of course, we'd have to blow out the number of Twitter followers we have, but once we did that, we could probably sell anything on Twitter. Isn't that what Chip Cayman has been saying."

Lois Gladstone: "That's exactly the kind of fresh thinking that Chip Cayman brings to the table."

Sarah Wheldon: "We've tried Twitter and blogs and all that social media stuff. It doesn't work. Social media works if you're an individual trying to build a personal brand. Some people apparently want to know that Chip Cayman has a toe cramp, they re-tweet it, and his unending pain goes viral. Unfortunately, you cannot sell dresses 140 characters at a time without context."

Meredith Thompson: "EXACTLY!"

Roger Morgan: "Toe cramps really suck."

Pepper Morgan: "We sell dresses 140 characters at a time via pay-per-click, right? And that is without context, it's just a blue link."

Sarah Wheldon: "The customer is already shopping for dresses, that's why search works."

Lois Gladstone: "And that is why we can cut eight pages from each catalog. The customer is already shopping for dresses. Eventually, we'll have a robust e-commerce platform that enables us to do natural search so well that we won't even have to do paid search. Good 'ole free natural search will be our meal ticket!"

Roger Morgan: "Huh?"

Glenn Glieber: "I like free marketing!"

Pepper Morgan: "Put it on the book of work!"

Sarah Wheldon: "Yeah, great idea, we'll trust the future of our business on some dweeby algorithm that always changes, an algorithm that nobody ever gets to know about."

Pepper Morgan: "That's what Snoozur does. They don't have a catalog. They sell dresses online, and basically use natural search and paid search to drive their business. I heard they're already up to $10,000,000 in sales."

Meredith Thompson: "Impossible. And why does every online startup have some stupid name like Snoozur?"

Pepper Morgan: "They're Snoozur: The Laid Back, Low Stress Dress Company. I think they're based out of San Jose. They do free ground shipping on all orders, they build the cost of shipping into the margin of their merchandise."

Meredith Thompson: "Customers trust real companies with real names. You trust Glenn Glieber because you know he stands behind my product, you know there's a real person behind the curtain. I'd never trust a name brand like Snoozur."

Glenn Glieber: "Well, I haven't heard anything that dissuades me from cutting pages, so we're taking the hatchet out and we're cutting pages. It feels like 1981, 1987, 1991, 1995, 1999, and 2002 all over again. Ok, on to the next topic. Somebody is parking a motorcycle in the Employee of the Month parking spot. Now granted, our performance was so bad last month that I chose not to pick an Employee of the Month, but that doesn't mean you get to park your motorcycle there just because the spot is vacant. I want that motorcycle out of there. Roger, tow that cycle by 2:00pm."