March 30, 2012

Bricks 'n Clicks: Best Buy

Today, we learn that Best Buy, the king of "Bricks 'n Clicks", is shuttering stores and laying off staff (click here please).


Here's what is amazing. We somehow could envision a world where a customer would sit at home, view product on a laptop, then do the hard work to get in a car, drive fifteen miles to a store, and purchase the product with sales tax.  Yet we could not envision a world where a customer would do the hard work to get in a car, drive fifteen miles to a store, view a product and price it with sales tax, then order it online sans sales tax.


How did we miss that one?  It makes perfect sense.


We could argue that Wal-Mart and/or Costco are mulching Best Buy as well, that may or may not be true.  We could argue that some Best Buy employees feel less-than-enthusiastic about their jobs (click here).  Both may or may not be the cause of struggles at Best Buy.


We do know this:
  1. Experts claim that a Multichannel Bricks 'n Clicks strategy is the secret to success.
  2. Experts claim that a sound Social Media strategy is key to success (i.e. Best Buy Twelpforce).
  3. Best Buy, employing a Multichannel Bricks 'n Clicks strategy paired with a sound Social Media strategy, a previously successful business, is now trimming stores and laying off employees and is routinely posting negative comp store sales.
Maybe this matters.
  • Product > Service > Pricing > Multi-Channel > Social Media
Think for a moment about what Best Buy sells.
  • Could I buy the same item on Amazon and save $$$ on sales tax?
  • Could I buy the same item anywhere on the internet and save time and not pay sales tax?
  • Could I buy a Verizon phone at a Verizon store and maybe get better service?
  • Could I buy an Apple iPad at an Apple Store and have a better experience?
Now, I'm not saying this to beat up on Best Buy, that wouldn't be fair.  You'd have to run a large company to understand how hard it is to navigate a giant brand through an ever-changing world ... it isn't easy, and the people who work at Best Buy are undoubtedly "not stupid".  If you disagree, go find an Executive position at a large retail brand, and report back to me in five years with your experiences!!

But I will be critical of online pundits, folks who don't have skin in the game, folks who have never had the opportunity to work in retail for a decade or more, folks who tell "brands" what to do without having data to prove a hypothesis.

Multichannel and Social Media are lower on the food chain than are unique product, customer service, and pricing concerns.  Apple has unique product and a stunning in-store customer experience.  Nordstrom sells the same stuff everybody else sells, but offers legendary customer service.  Amazon has low prices and no sales tax.  Best Buy sells what everybody else sells with competent customer service and competitive pricing.

Which leads one to the following question:
  • "Why would you buy something at Best Buy?"
I ask the question because every business should ask this question.  If we consider it through the eyes of Best Buy, maybe the question is less threatening than if asked directly of each of us for the businesses we work for.

March 29, 2012

Beautylish

Twitter user @mattgratt forwards us this Techcrunch video with Nils Johnson of Beautylish (click here for the video).  Via Quantcast, Beautylish had somewhere around 50,000 visitors last month.

For catalogers, there are themes that will resonate, and themes that are contrary to what is known in the catalog world.
  • Importance of a brand (catalogers would agree).
  • Importance of proprietary products over curated assortments (catalogers would agree).
  • Offering great quality at a low price (many catalogers offer great quality at a fair price ... this is a fundamental difference that is not yet well understood).
  • Low-cost customer acquisition of Jasmine-like customers via Social Media (completely opposite of how catalogers view the world ... catalogers = high-cost customer acquisition via co-ops).
I continue to observe stark contrasts between e-commerce startups, traditional catalog brands, and the first generation of e-commerce businesses when it comes to customer acquisition.
  • Catalogers = High-Cost Co-Ops (finding 55+ rural customers ... Judy).
  • 1st Generation E-Commerce = High-Cost Paid Search (finding Jennifer) coupled with %-off / discounts.
  • Current E-Commerce Startups = Low-Cost Social Media to find Jasmine.
Each strategy requires a very different mindset.

For catalogers, we struggle with Jennifer/Jasmine when we try to integrate all channels around the catalog ... yielding an unprofitable Jennifer/Jasmine experience that results in a file disproportionately skewed toward Judy.

Pay attention to how startups approach the "Jasmine Problem".  I'm not saying they are going to succeed, but the chance of success is greater than it is for catalogers to try to train Jasmine to embrace classic direct marketing.

March 28, 2012

Lululemon

Please spend three minutes reading this article about Lululemon (click here for the article).


Study questions:
  1. Name at least three best practices that Lululemon violates.
  2. Describe the reasons why your business could not replicate the success of Lululemon.
  3. For each reason in #2 above, label the reason as an excuse, a hypothesis, or fact.  If the reason is a fact, supply data that proves the reason to be a fact.
  4. This business could not possibly be aligned more closely with Jennifer than any other business.  Do you think there are dynamics at play at Lululemon that only work with Jennifer, or could the concepts be applied to brands appealing to Judy or Jasmine?
  5. Management places a disproportionate emphasis on merchandise, scarcity, and in-person listening.  How do these concepts apply to your business?

NYTimes Article: Knowing Cost, the Customer Sets the Price

Ok, give this article from the NYTimes a read, if you are a pricing maven (click here for the article), thanks to @caseycarey for mentioning it.


Again, pay attention to the individual featured in the article.

  • P.T. Vineburgh, male, age 33.
This is a Jennifer/Jasmine aged person, closer to Jasmine ... and the game is played differently in this psychographic range.

When you hear people say that they miss coupons ... well, that's Judy.

The issue isn't pricing ... the issue is stimulating response within the Judy / Jennifer / Jasmine framework.  Judy likes sales and coupons.  Jennifer likes doing her own research for finding the best deal.  Jasmine demands the lowest price, period, she can't afford higher prices.

It's a lot harder to have a one-pricing-fits-all strategy when you have three different customer psychographics with three very different needs.

Your thoughts?

March 27, 2012

Catalog Browsing on a Tablet: Article from WSJ Reporter Katherine Boehret

Well known Wall St. Journal reporter Katherine Boehret discusses three catalog apps for tablet devices in this article (please click here for the article from AllThingsD).


Maybe more important than the review of catalog apps is the tone of the discourse in the first paragraph.
  • "Unsolicited catalogs take up a frustratingly large amount of space in my snail mail, and I can't remember the last time I ordered from one".
Ms. Boehret is most likely Jasmine.


We talked at NEMOA (email me for slides) that there are three customer personas, each relate to catalogs in a different way.
  • Judy (59 years old) "is" catalog marketing, her behavior is not likely to change, and our behavior in marketing to her doesn't have to change, either.
  • Jennifer (43 years old) is in search of a deal, if a catalog helps facilitate that search, fine, otherwise, 45% of the demand attributed to catalogs is incorrectly attributed, causing us to dramatically over-circulate to Jennifer.  There's a ton of profit to be had, here, folks (contact me for your customized project).
  • Jasmine (27 years old) is not likely to be a catalog shopper ... that being said, there is no reason she can't be a loyal fan of your brand ... just don't expect her to shop via physical catalogs.
Now, I keep getting feedback ... folks who find instances where a person in her 20s purchases via the telephone after receiving a catalog.  I don't for a minute doubt this happens.  But it is a 10 in 100 event, not a 90 in 100 event like it is with Judy.  


We need to start thinking about the future, thinking about the different ways we will have a future relationship with Judy, Jennifer, and Jasmine.

What Happens When We Stop Mailing Jennifer?

Yesterday, we decided to mail 70% fewer catalogs, per year, to Jasmine.  This money could easily be reinvested in a way that would be positive to the business, though if you don't want to reinvest it, fine, pocket a 13% increase in profit over five years.


But what about Jennifer, our 43 year old Google-loving online advocate?


Jennifer is influenced by catalogs, she'll go online and buy something after completing her research on Google.


Here's the base case, again.




From testing, we surmise that Jennifer will still generate 45% of demand if she is no longer mailed catalogs.  Let's see what happens when we cut back catalog mailings by 50%:





That doesn't look like a good decision, does it?


In fact, in the business I'm analyzing here, I could not find a single case where reducing catalogs to Jennifer represented a good idea, on any level.


In our example:

  • Continue to Mail Jennifer a Full Diet of Catalogs.
  • Reduce Catalogs to Jasmine by 70% per Year.

Now, honestly, in most of my Catalog PhD projects, the results are more significant than this.  We're looking at significant cuts to both Jennifer and Jasmine.  But that's not what matters, folks.  What matters is that we run a five year simulation, estimating what might happen to the business if we make key business decisions like this.


Contact me if you'd like for me to create a five year simulation like this for your business!

March 26, 2012

What Happens When We Stop Mailing Jasmine?

You probably have five year forecasts for your business, down to an Earnings Before Taxes level, right?


And you are able to run scenarios that allow you to see what happens if you change your business strategy, right?


If not, give me a holler, and I'll set something up for you ... click here please!


Let's run through an example.  Here's where our current business is headed.




Clearly, this business is stuck, highly profitable no less, but stuck.


Assume you have test results, and you know that Jasmine generates 70% of her demand without the aid of catalog marketing.  What would happen if you stopped mailing Jasmine altogether?




Well, this is interesting, isn't it?  The simulation (contact me for your own, customized simulation tool) actually suggests that, in the short term, profit increases ... but over time, there is housefile weakness associated with not having as many customers like Jasmine, resulting in an overall sales decline and slightly less profit in the fourth and fifth year.  Overall, the best decision, from a profit standpoint, is to not mail Jasmine.


Of course, some will say that this strategy is extreme.  Let's try a compromise, then.  Let's mail this customer 30% of the annual diet of catalogs.  Here's the outcome of the simulation:




Oh my!


After the first year, you lose, on average, 10% of top-line demand.


You are, however, more profitable every single year, to the tune of 13% more profitable over a five year time frame.


Go take the ad cost you save, and reinvest it somewhere, reinvest it in a way that grows the business.  Heck, you're better off finding another Judy from a co-op at a loss than mailing Jasmine a relentless stream of media she's not interested in.


In this simulation, we learn that we should mail Jasmine 30% of the annual diet of catalogs she's currently getting.  This advertising plan results in optimal profit for the company.


You probably have somebody in your company already running five year sales forecasts, simulating different outcomes.  Plug this level of business intelligence into your forecasting strategy, and see what happens!

March 25, 2012

Dear Catalog CEOs: In The Workplace

Dear Catalog CEOs:


I talk about Judy, Jennifer, and Jasmine as being separate and distinct customers.


Similarly, you have Judy, Jennifer, and Jasmine in the workplace.  Or in the vendor community.


A few weeks ago, I observed this phenomenon in person.  Jasmine was trying to explain a new technology to Judy.  Judy dismissed the technology, saying "nobody" would use it.  Judy had a good reason for saying this.  You see, Judy has seen just about everything in a career that began in the 1970s.  She remembers the transition from checks to credit cards, she knows how that fundamentally changed the world.  She was also jaded by those who tried to "monetize eyeballs" in the late 1990s.  She lived through the "social media revolution" in the first decade of the 2000s, she knows that almost nobody monetized a process that promised to "change everything".  


Judy is skeptical.


Jasmine is hopeful.  She knows how her generation uses technology.  She hasn't experienced three decades of technology hyped to save the world but ultimately resulting in failure, sprinkled with intermittent success.  


Jasmine sees potential.  Judy sees potential failure.


Then you have Jennifer.  Her career started in the 1990s.  For better or worse, her career is linked to the dot.com movement.  Instead of earning promotions into leadership positions at companies, Jennifer was asked to solve small problems ... like search or email or affiliate marketing or retargeting ... Jennifer was asked to wait for Director/VP level jobs until Judy retired.  Often, Jennifer had to move into the vendor community if she desired career advancement ... a vendor community where she has to sell solutions to Judy, the very person jaded by unrealized solutions!


We have three generations, each with important skills that cannot be matched by other generations.

  • Judy = Career Experience, Management Experience, Profit and Loss Accountability, Traditional Advertising Knowledge, Seasoned.
  • Jennifer = Practical Online Experience, Entrepreneur, Individualism, Technology.
  • Jasmine = Social / Mobile Knowledge, Energy, Enthusiasm, Hope, Collaboration, Technology.
Of course, each generation possesses qualities exhibited by other generations ... but I'm generalizing here to make a point.


The point is, "in the workplace", we have three generations of employees, each bringing interesting and valuable skills to the table.  As a CEO, you have a responsibility to harness the unique qualities of each generation.  Too often, this isn't happening, we default to the preferences of one generation, and sales suffer.


Maybe it is time to see how we can better leverage Judy, Jennifer, and Jasmine in the workplace?

March 22, 2012

Fixing The Jasmine Problem: A Five Year View

Every catalog business has a "Jasmine Problem".


You know this is true, you just don't know how to deal with it.  You have customers who order online, who you can't attribute to any form of traditional advertising.  You throw 2-3 catalogs in the outgoing package, you throw them a hotline catalog or two, and then you pummel her with 18 catalogs in the next year.  At the end of the year, your segmentation scheme suggests that "online customers aren't profitable", assuming your segmentation strategy accounts for channel preference.


For so many catalogers, this is the end of the road.  The online customer isn't profitable, so we stop trying to grow the e-commerce side of the business.


Here's the thing, folks.  There's no law on the books, as best I can tell, that says you ever have to mail a customer a single catalog.


I've analyzed a lot of tests in my life.  In a typical catalog mailing, it's not surprising to observe the following:
  • If you don't mail Judy, 20% of the demand remains, with 80% disappearing.
  • If you don't mail Jennifer, 45% of the demand remains, with 55% disappearing.
  • If you don't mail Jasmine, 70% of the demand remains, with 30% disappearing.
And in the case of Jasmine, the amount of demand generated is frequently small, as her interests and loyalty are different than observed with Judy or Jennifer.

So, why do we even bother to mail Jasmine anything?

Next week, we'll explore what happens to a business, long-term, that changes strategy with folks like Jasmine.

March 21, 2012

Staffing Perspective, Five Year Projections

Maybe you remember 2001.  I sure do.


There's a reason catalog brand put all their chips in the middle of the table, betting on "multichannel".  Coming off of the internet bubble, companies were faced with a series of decisions regarding the online channel.  In many companies, online staffers worked in different buildings, or on different floors of the same building.  They operated a different promotional calendar, one chocked full of 20% off plus free shipping offers that tempted existing customers to shop the emerging channel.


I was hired in 2001 at Nordstrom as Vice President of Direct Marketing.  Our Executive Team inherited a $300,000,000+ catalog/online business that was losing more than $30,000,000 profit per year.  


Just let that fact sink in for a moment, will you?  


An established and profitable company being taking on those kind of losses, with an existing infrastructure in place?


So, back in 2001, you had a group of business leaders who had one job, and one job only ... fit the existing business model and the new business model together, NOW, and make it profitable.


This was happening all across our industry.  The old-school folks, by and large, won that battle, simply on the basis of profit ... existing channels were considerably more profitable, at that time, than emerging channels.


Now, as long as business leaders evolve and change as market conditions change, an "integrated" or "multichannel" approach may make sense.  By and large, we didn't do that.


Eleven years later, we're at an interesting crossroads.


In so many ways, the tables have turned.


Some folks will tell you that without the catalog, they'd be out of business.


Other folks will tell you that they've run the numbers, and it shows that the catalog is simply generating break-even demand, that without the catalog, the business would be half as big and just as profitable.


In the latter situation, which you see as much as a third of the time, what do you do?  You have a significant staffing dilemma here, don't you?  Tons of bright, highly qualified people, bursting with skills, skills that will need to find a place in a future business model dominated by Jennifer and Jasmine.


I run five year business plans for folks (contact me for your own, customized five year forecast).  We simulate what might happen if the catalog didn't exist, or if it only existed for the "Judy" portion of the file.


You might want to think about this topic ... a five year business plan ... one that considers what happens if you expand catalog marketing or drop catalog marketing or modify your catalog marketing plan in some way ... one that factors in search and email marketing ... one that explores the potential of newer marketing channels.


Who in your organization is responsible for crafting a five year sales plan?  What tools does that person use?  Do you have scenarios ready to share with your CEO/President/Owner?

March 20, 2012

The 1%

No, not the stuff the press talks about.


In marketing/analytics, "the 1%" represents the tiny number of industry-based employees who ultimately determine whether our businesses succeed or not.  You know who these people are.
  • Your search vendor.
  • Google.
  • Retargeting partners.
  • Catalog co-ops.
  • Your marketing analysts.
  • Your email vendor.
  • Customer-facing social media managers.
Sure, there are others, but I point these out so that you have a loose understanding of what comprises "the 1%".

These folks decide who receive your catalogs.

These folks decide who receives each personalized version of an email campaign.

These folks decide what gets seen in search, and these folks direct traffic to your website as they see fit.

By directing the traffic, these folks determine the merchandise that gets purchased ... your merchants are ultimately responding to the traffic that the 1% send to the merchant.

If there was one thing that I was able to synthesize from discussions with more than 200 individuals at NEMOA, it was this ... there is an evolution in the thought process ... one where the 99% are beginning to think about how they wrestle control of a business back from the 1%.


Your thoughts?  Can control be taken back from the 1%?

March 19, 2012

NEMOA: Think About The 5-10 Year Cliff For Judy-Based Businesses

We've talked about the cliff facing catalog brands that market to Judy, the 59 year old, catalog-loving Baby Boomer.

I know, I know, we don't want to talk about this.  Who would want to talk about this?

Let's use an example outside of catalog marketing, since we won't take this one personally.  Go to Quantcast, and take a look at the folks who read DMNews, the trade journal that historically represented the catalog industry ... click on this link for details.

Clearly, and I mean CLEARLY, this is a trade journal read by Judy, and to a much lesser extent, by Jennifer.

Twitter verifies this ... under 7,000 followers ... remember, Judy isn't a big fan of Twitter, and is on Facebook to see her children and grandchildren.

If you were the editor of DMNews, and you knew your audience was largely 59 years old and was going to be retiring in the next five years, how would you respond?  Be honest, what strategy would you employ to make sure your long-term success was protected?

Now that you've thought about that, think about the catalog brand you represent ... is your customer Judy?  And if your customer is Judy, what do you do in 5-10 years when Judy retires and stops spending money?

We had a lot of good, spirited discussions about this at NEMOA ... a great place for the industry to consider what the future looks like.  Some of the conversations were about the cliff that Judy-based businesses are about to drive off of.  It's time to take these conversations to our Executive Board Rooms.

March 18, 2012

Dear Catalog CEOs: NEMOA Direct X-Change

Dear Catalog CEOs:


Hopefully, you attended NEMOA this past week.  You see, no other conferences covers what catalog marketing has become, none.  Many conferences are on the bleeding edge now, covering topics that are sexy and interesting, but not yet generating sales volume.  NEMOA covers reality.


That's not to say that the content is out-dated, nope, the content is very practical.  I attended a session hosted by Carliss Million (Lorel Marketing Group) and Bret Moore about rebranding efforts at Suregrip ... this session was sensational, illustrating the ROI improvement as well as the creative/digital efforts required to move a brand into the future.  I heard rave reviews about a session from Jennifer Kwiatkowski of Plow and Hearth about modern contact strategies.  I attended a good session from Kent Phillips of SmartPak, and Phyliss Mosca of Ulla Popken did a very credible job of explaining "Jennifer-based strategies" as I'd call them (video, blogs, forums, brand-building, relating to the customer).


Conference attendance was spectacular, FYI.


My talk was all about Judy, Jennifer, and Jasmine ... email me and I'll get you the slides.


If there's one thing that the audience told me about Judy, Jennifer, and Jasmine, it was this:
  • "Judy, Jennifer, and Jasmine make more sense to us than channels do."
In other words, the audience could understand why Jennifer would use search, that made more sense to them than "the search customer" made to them.  This is important.  We spent the past decade babbling about channels like they mean everything.  If anything, the theme of this conference wasn't about "channel", but instead, it was about "customers".

And that, my friends, is a huge change of pace.  We all know how those who support us tried to offer channel-based products and solutions for a decade or more.  At this conference, business leaders appear to have made the leap, talking about customers instead of channels.  Later in this article, I'll explain why I think this is happening.

It is interesting to note the generational differences at this conference.

I had members of the "Judy Generation" tell me that tablet-based content doesn't work, or tell me that social media doesn't work, or tell me that mobile isn't the way they shop.  These folks adored their catalogs, heck, they adored catalogs in general.  There's nothing wrong with that.

I met bright people, like Courtney English at CoffeeTable.  Go check out the company she works for.  Yes, I realize that tablet-based commerce will only account for a few percentage points of your annual net sales, but come on, isn't it time to experiment and learn?  Like many in the "Jasmine Generation", Ms. English spoke fondly of Pinterest, of fashion blogs that curate assortments for her ... these are concepts that are foreign to Judy ... but these are concepts that are critical if you want sales from Jasmine.  It is my opinion that every catalog exec should spend a few hours each week learning from employees who are part of the Jasmine Generation.  Form a committee of a dozen employees under the age of 30, and mine their shopping brains for tips and hints about the future of commerce ... you're going to be amazed by what you learn ... I know I am amazed by what I keep hearing!

One of the smartest comments came from Rod Ford of Cognitive Data.  He spoke of the technological capability of the vendor community to execute one-to-one communications to "segments of one".  He mentioned that we, as business leaders, are unable to execute business strategies at a level that technology is able to execute for us.

Folks, this is an important point.  We have an analytics community that is driving us to, what one individual called "Connected CRM, or CCRM".  There is no doubt that this style of business management is more profitable, and will generate more sales than business as usual.  And there is no doubt that 99% or more of the employees in a company lose significant control over the customer experience as we go down this path.  This isn't fun for the 99%, it creates a 1% vs. 99% argument ... and I think you're probably familiar with that one.  I think this is why I continue to hear executives talk about "the customer", relating to the customer via social media or through brand-based strategies, strategies where the executive takes control back from technology.  I spoke with maybe two-hundred attendees at NEMOA last week, most of the executives I spoke with indirectly referenced a desire to relate to customers outside of technology.

This is going to be a tug of war, on two fronts.
  1. For business leaders, there will be a war between technology leading the customer, and brand/social/merchants/content/curation leading the customer.
  2. For customers, there will be a war between technology telling the customer what the customer wants (the "Jennifer Generation") and human beings curating for others (the "Jasmine Generation").
If your company caters to Judy, it's business as usual, with the noticeable caveat that Judy is going to retire in the next five years, and then what the heck do we do?

If your company caters to Jennifer, technology is facilitating Jennifer's ability to get the best deal at the best price.  Amazon and classic e-mail marketing (20% off plus free shipping all day every day) already won this battle.  We are going to have to adapt to the world that Amazon (and our zeal to make email marketing "work") helped create for Jennifer.

If your company caters to Jasmine, you make a subtle pivot into having smart social media folks curate every-day low prices and style for Jasmine, combining technology with a humanity that is missing from the Jennifer experience.  Curation is not included in the catalog marketer's vocabulary, is it?

That's the general theme I took from Direct Xchange by NEMOA.  What did you take from the conference?  And if you are a Catalog CEO / Executive, what caused you to not attend, or what would have to happen to cause you to attend in the future?

P.S.:  Speaking of technology, I mentioned Ulla Popken one time in this post ... and before even publishing the post, the first article I read on the internet contained a display ad from Ulla Popken.  This is exactly what I am talking about ... the 1% (math folks) continue to take control over the customer experience ... I'm not saying this is good or bad, but I am saying that my image of Ulla Popken is now fused with remarketing via Mashable.  We don't yet know if this is good, bad, or meaningless, but we should be thinking of the significant importance the 1% play in impacting a business.

March 14, 2012

Setting Up Accountability For Judy, Jennifer, and Jasmine

Let's pretend you assign a merchant/creative/marketing expert to each persona.

Here's Judy, Jennifer, and Jasmine.








Three customers, somewhere around 59, 43, and 27 years old.  Each customer requires a different marketing approach, don't you think?


Each customer is coded in the database (that's what I do, email me for details).  Think about each customer as a separate line of business.  You assign a merchant/creative/marketer to each team (preferably at the Manager/Director level, to give folks a practical leadership opportunity), and you give them authority to grow their customer audience.


What might work with Judy?

  • A possible increase in the catalog mailing strategy.
  • Targeted catalog mailings with unique merchandise offerings.
What might work with Jennifer?
  • Smaller catalogs that drive Jennifer to the web.
  • A strong search marketing program.
  • Significant experimentation with the email marketing program to identify the best creative strategies to inspire online purchases.
  • A zeal for creating landing pages that are "to die for".
  • Experimentation with iPad-based commerce.
What might work with Jasmine?
  • Elimination of most/all catalog mailings.
  • Viral-based email marketing strategies that focus on time-based deals and bargains.
  • Mobile strategies that integrate social and flash sales.
  • Social shopping ... think Pinterest / E-commerce integration.
  • Integration of friend-based events with current e-commerce business.
Anyway, you have better thoughts about this than I have, so have at 'em!!

Is there a way to focus on customer personas, managing the business via customers instead of via channels?

Thoughts?

March 13, 2012

More on the Future of Cataloging

On Monday, we talked about the future of cataloging.  Here's my thoughts, once again, positioned via the "Judy / Jennifer / Jasmine" persona framework:

  • In 2001, we made a decision.  Instead of allowing the online channel to grow and thrive as an independent entity, we elected to integrate it with our core business, and by doing so, we homogenized the experience, causing the online channel to reflect the core buyer we already possessed.
  • Since 2001, we decided to embrace co-ops as our primary method for acquiring new customers.  The models employed by co-ops selected 55+ rural customers, as they should, given their job is to optimize response within catalogs, catalogs preferred by 55+ rural customers.
  • This dynamic (catalog + website appeals to a 55+ rural customer ... co-ops deliver 55+ rural customers that will shop online after receiving a catalog) fueled a feedback loop that, eleven years later, resulted in a customer file that is fundamentally disconnected from the average consumer in America (a person in her early 40s).
  • Now that we are disconnected from the average customer, anything new and trendy we try, stuff appealing to a customer age 18-49, simply doesn't work when marketed to a 55+ rural customer.  This fuels the feedback loop.
  • Long-term, this feedback loop is unsustainable.
  • Toss in USPS challenges, and short-term sustainability is questioned.
  • The secret to sustainability, over the next decade, is for the catalog brand to follow an age band (50-59 year old customers) instead of following a cohort (59 year old customers that will become 69 year old customers).  This means that the catalog brand must become proficient at speaking to "Jennifer", the current 43ish year old e-commerce / Google maven.
  • As the catalog brand switches from Judy to Jennifer, there will be a consistent reduction in catalog advertising dollars, as Jennifer buys from you for reasons largely independent of catalog marketing.
  • The catalog brand that tries to jump the bridge from Judy to Jasmine is likely to struggle.
  • The catalog brand that sets up a separate, unique brand tailored to Jasmine might experience success.
  • The catalog brand that rides Judy into the sunset may experience nice levels of profitability for a period of time, prior to an erosion of all business metrics.
  • The transition from Judy to Jennifer won't be without struggle.  Jennifer demands free shipping, and likes discounts.  In order to fund these activities, catalogers will have to cut back on catalog housefile marketing activities to Jennifer.
  • It may be possible that the catalog brand can mail more catalogs to Judy.
The wisdom of this pivot is mentioned in this article about L.L. Bean.  I recall working at Eddie Bauer in the late 1990s.  There was a groundswell of momentum to appeal to a "younger" customer.  So, we attempted to do just that!  We swapped out images of durable forty-eight year old men standing in streams wearing jeans with shirt-less twenty-five year old men holding a canoe over their heads.  Well, that got us "younger" from a creative standpoint, but it hurt sales, significantly.  We pulled back.

That was 1998.  You didn't have much choice back then, you were a "brand" that spoke to everybody pretty much the same way.

Today, it's 2012.  You have a nearly infinite number of channels to play with.

The key, of course, is to not stuff a channel that Jasmine likes down Judy's throat.

In the old CRM days, there would be a customer manager responsible for each persona.
  1. A Manager/Director responsible for growing sales among people like "Judy".
  2. A Manager/Director responsible for growing sales among people like "Jennifer".
  3. A Manager/Director responsible for growing sales among people like "Jasmine".
Maybe that's not such a bad idea today.  Put a merchant/creative/marketer in charge of each persona.  Develop independent strategies for each persona, based on the channels each persona utilizes.

It's worth a thought, isn't it?

March 12, 2012

Mobile Phone Number

It isn't hard to do, and it make "business intelligence" sense.

Next time a customer orders, online, via a call center, or in-store, ask the customer if s/he is willing to provide a mobile phone number.

From a modeling standpoint, the attribute tells you that the customer is probably "less interested" in old-school marketing (print, catalogs).  Instead of the customer being pelted with eighteen catalogs a year, you tone it down to five or six, saving a ton of money in the process.

Customers who volunteer a mobile phone number are more likely to generate demand "organically", i.e. without the aid of catalog marketing.  The customer is more likely to fall into "Jennifer" or "Jasmine" categorizations.

March 11, 2012

Dear Catalog CEOs: The Future

Dear Catalog CEOs:


This week, I am presenting at NEMOA ... a session about how Traditionals, Transitionals, and Transformationals (i.e. Judy, Jennifer, Jasmine) will impact the future of marketing.  Or, in simpler terms ... I am presenting the future of catalog marketing.


If you've been with me for the past six years, then you already understand my point of view:
  • In 2001, we made a decision.  Instead of allowing the online channel to grow and thrive as an independent entity, we elected to integrate it with our core business, and by doing so, we homogenized the experience, causing the online channel to reflect the core catalog buyer we already possessed, eschewing a younger online shopper.
  • Since 2001, we decided to embrace co-ops as our primary method for acquiring new customers.  The models employed by co-ops selected 55+ rural customers, as they should, given their job is to optimize response within catalogs, catalogs that are preferred by 55+ rural customers.
  • This dynamic (catalog + website appeals to a 55+ rural customer ... co-ops deliver 55+ rural customers that will shop online after receiving a catalog) fueled a feedback loop that, eleven years later, results in a customer file that is fundamentally disconnected from the average consumer in America (a shopper in her early 40s).
  • Now that we are disconnected from the average customer, anything new and trendy we try, stuff appealing to a customer age 18-49, simply doesn't work when marketed to a 55+ rural customer.  This fuels the feedback loop.
  • Long-term, this feedback loop is unsustainable.
  • Toss in USPS challenges, and short-term sustainability is questioned.
  • The secret to sustainability, over the next decade, is for the catalog brand to follow an age band (50-59 year old customers) instead of following a cohort (59 year old customers that will become 69 year old customers).  This means that the catalog brand must become proficient at speaking to "Jennifer", the current 43ish year old e-commerce / Google maven.
  • As the catalog brand switches from Judy to Jennifer, there will be a consistent reduction in catalog advertising dollars, because we will need to fund free shipping to encourage Jennifer to purchase.
  • The catalog brand that tries to jump the bridge from Judy to Jasmine is likely to struggle.
  • The catalog brand that sets up a separate, unique brand tailored to Jasmine might experience success.
  • The catalog brand that rides Judy into the sunset may experience nice levels of profitability for a period of time, prior to an erosion of all business metrics.
  • The transition from Judy to Jennifer won't be without struggle.  Jennifer demands free shipping, and likes discounts.  In order to fund these activities, catalogers will have to cut back on catalog housefile marketing activities to Jennifer.  This will be acceptable, because Jennifer spends 50% of her dollars outside of catalog marketing anyway.
  • It may be possible that the catalog brand can mail more catalogs to Judy.
Some will argue that this story is congruent with the consulting business I have, that I am selling a message that benefits me directly.  I'd argue the exact opposite.  70 projects in five years clearly demonstrate that all of these trends are accelerating, so I must position myself in a place where I can be of the most help to you.

Now, allow me to be positive for a moment.  This transition (from Judy to Jennifer) is achievable.  But the transition will require a change in mindset.  It will require a shift in thought, from the catalog as the center of the solar system to a more "personalized" strategy (catalogs to Judy, a fantastic online experience for Jennifer, and something very different for Jasmine).

Any talk of the future (iPad apps, social media, mobile, hologram marketing) should consider the linkage between your audience, and the media your audience is likely to use.  Judy is not going to be part of the tablet commerce generation, in fact, she's not going to pull out her Blackberry and buy something from your snazzy mobile site.

Anyway, this is what we're going to be talking about this week at NEMOA.  I look forward to seeing you there!

March 07, 2012

Compare and Contrast

Think about marketing channels, think about our three customers, and things become much more clear, don't they?


Catalog Marketing:

  • Judy = 30+ years of practice shopping via catalogs.  This is her domain.
  • Jennifer = Inspiration, but she's going to combine inspiration with the internet in order to get exactly what she wants at a price she's willing to pay.
  • Jasmine = Wait, I own a mailbox?
Facebook:
  • Judy = On Facebook to see pictures of her grandchildren.
  • Jennifer = Likes brands because she gets special discounts and promotions.
  • Jasmine = Views Facebook as a utility, an extension of who she is, but would switch if something better came along.
Mobile Phones:
  • Judy = Owns a tracfone, or a Blackberry device if professionally employed.
  • Jennifer = Owns an iPhone or Android device, browser-centric.
  • Jasmine = Owns an iPhone or Android device, app-centric.
Email Marketing:
  • Judy = Prefers to not receive email marketing messages.
  • Jennifer = Thrives on email marketing, loves discounts/promotions, an avid subscriber.
  • Jasmine = Finds email marketing to be "old school".
Affiliate Marketing:
  • Judy = Has no idea what they are.
  • Jennifer = Loves getting coupons for free shipping.
  • Jasmine = Indifferent.
Free Shipping:
  • Judy = Used to paying for shipping, appreciates free shipping but doesn't expect it.
  • Jennifer = Won't buy unless she's offered free shipping.
  • Jasmine = Post-free-shipping, values a $399 handbag for $99 and demands free shipping.
Loyalty:
  • Judy = Loves a subset of brands that she has history with.
  • Jennifer = Loyal to Google, Amazon, Apple, Verizon.
  • Jasmine = Gamification leads to loyalty.
Now, every character crosses over into other categories in many ways, so these are not iron-clad rules by any stretch of the imagination.  That being said, my goal is to get you to imagine different customers.  A cataloger should not expect core customers to embrace an iPad app.  A cataloger should not expect mobile devices to replace e-commerce, or to even expect e-commerce to replace the catalog among customers like Judy.  A cataloger should not expect to generate five million dollars of net sales on Twitter when Judy isn't ever going to get her own Twitter account.

Too often, we fail to account for what I call "audience disconnect".  Data I analyze strongly suggests that different audiences use channels differently.  We have a responsibility to link audiences to the channels we manage.

March 06, 2012

Five Year Anniversary

Today marks the five year anniversary of starting my own consulting business.


(quiet applause)


Thank you!


There's a few things worth considering, as we look back over the past five years.  I recall telling my "network" of business colleagues what I was doing.  I recall the tepid response ... most often documented with the following statement ... "you'll be a Vice President at a company within a year, that's what happens to everybody who says they're going to become a consultant, they don't make it, no offense."


The original business model was simple, and has not fundamentally changed.

  1. Publish at least 4x a week on the blog (folks said this level of posting was too often).
  2. Write textbooks that outline details about each methodology (folks said these books were way too expensive).
  3. Give away nearly every idea for free, attract an audience, then have a small fraction of the audience pay for specific, customized projects.
This last point really chapped people's lips.  I recall speaking at a conference, back in the early days.  About fifteen minutes into my talk, after giving away a whole bunch of information, the consultants in the room (my competition) hijacked the presentation, loudly criticizing my business model ... "you can't just give away everything you know for free, that's plain stupid, it is bad for business, why would anybody ever hire you!" was one of the most interesting responses that drew laughter and derision from the attendees who agreed with the comment.

Since 2007, my business has grown by an annual compound rate of 19% ... in other words, it is double today what it was at the end of 2007.  Apparently you decided it was still worth it to hire me, for that, I am very grateful.

Times changed, so my approach had to change as well.  Twitter probably had fewer than 3,700 users in 2007, today, I have more than 3,700 followers on Twitter.  In 2007, I dreamed of having a book in a Barnes & Noble or Borders store.  Today, I only self-publish booklets on Amazon, 40-60 pages of content.  In 2007, Google + My Blog = 70% of my business.  In 2012, My Blog + Booklets = 70% of my business.  In 2007, I had maybe 250 blog subscribers.  In 2012, I have about 2,600 blog subscribers.

In 2007, I thought that my math "sold itself".  My math did not "sell itself".  Nobody wants to buy math, people want to buy "stories".

In 2009, I introduced "Gliebers Dresses" as a parable designed to communicate business issues that were not readily absorbed via "my math".  This turned out to be the most popular series I had written to-date, but it did not result in an increase in business ... people liked the characters more than the business concepts the characters talked about.  Engagement was high, sales were low ... the classic story of social media failure that so many have experienced.  You learn to never chase engagement if you want to pay the bills.

In 2012, I changed course.  I introduced Judy, Jennifer, and Jasmine.  Suddenly, math and fiction merged, and you "got it" ... you decided to buy Judy, Jennifer, and Jasmine.  Under the covers, the same math I've always used is fueling the description of our three ladies.  But now you are buying a story, you understand what I'm trying to accomplish, and you are more likely to purchase a "Judy, Jennifer, and Jasmine" project than a "Multichannel Forensics" project.  Strategically, you can easily infer what a business that caters to Judy will face, you understand why you must always have free shipping and discounts and promotions for Jennifer, and you are building for the future by trying to understand what Jasmine needs.

It is likely that Judy, Jennifer, and Jasmine will overtake my "Catalog PhD" projects as most requested in 2012.  Both projects yield a very similar result ... clients utilizing the Catalog PhD methodology since 2010 have increased profit by more than $24,000,000 on an annualized basis.  Clearly, the methodology works ... we identify customers who will shop regardless whether we mail catalogs or not, and we mail them fewer catalogs.  Simple!

These days, the pundits tell consultants that they have to base their practice on "so-lo-mo" ... social, mobile, and local ... pundits suggest you'll be out of business if you don't modernize what you're doing, you're sunk if you don't somehow tie Twitter engagement or Facebook likes to purchase transactions.

There might be another approach, folks.  Many CEOs, EVPs, VPs, and Directors tell me they are looking for a "bridge", one that connects the past and the future.  Judy, Jennifer, and Jasmine are a step in that direction.  When you know that 68% of your file is comprised of people like Judy, you realize that "so-lo-mo" is irrelevant to you.  When you know that 68% of your file is comprised of people like Jennifer, you realize you are going to have to find a way to fund free shipping.

When I started the thing, back in 2007, all you read about were channels ... hearing lines like "multichannel customer are the most valuable customers".  That never panned out, and in so many ways, our industry did us a disservice by forcing us to "do everything" to serve a mythical multichannel customer that didn't actually exist.  

In 2012, it's all "social / mobile / local".  Not surprisingly, a half-decade of social media immersion hasn't yielded sales increases outside of the Jasmine demographic.  Be honest, if you cater to Judy or Jennifer, what percentage of your sales today are attributed to social media or mobile (excluding the iPad, which isn't mobile but is a much better laptop)?

My approach had to change with the times.  I never guessed it would evolve in a manner congruent with "personas".  That being said, we relate to personas easier than we relate to channels.  We know why Jennifer is looking for the best deal.  We don't know how to merchandise to a customer using long-tail keywords coupled with affiliate sites that publish our promotion codes.

It is obvious to me that there are major inflection points that we will all have to deal with.
  1. Judy will retire soon, and this will disrupt the catalog industry far more than the internet disrupted it.
  2. Jennifer will never go back to paying full price, and this will continue to disrupt e-commerce by putting intense pressure on gross margins, pressure that will cause there to be fewer mid-sized companies, pressure that will result in a small number of giant online brands and a ton of very small niche players.  Mid-sized companies are being killed by discounts/promotions.
  3. Jasmine won't relate to classic cataloging or traditional e-commerce, resulting in new business models that we are not likely to invent or easily understand.
My work, therefore, has to focus on helping you deal with the reality behind Judy, Jennifer, and Jasmine.  I will continue to find ways to greatly increase profitability, doing so by explaining customer behavior in an actionable manner.  I'll be blessed if you continue to follow me on this journey.

March 05, 2012

A Quiz

You remember the three customers that, if targeted appropriately, earn our business a boat load of profit?


There's Judy, the 59 year old, thirty year veteran of catalog shopping.
























There's Jennifer, the 43 year old, iPad toting online maven, who searches for the best deals, using the internet as her own little personal scavenger hunt.
























And there's Jasmine, the 29 year old mobile/social/local shopper who loves getting a $399 handbag for $99 on a flash sales site.
















Now that you've been reintroduced to the cast, it is time for you to take a quiz.  How well do you know our customers?


Question #1:  What would happen if you mailed a catalog to Jennifer?

  1. You may inspire a sale that would likely happen anyway online.
  2. The catalog would be ignored.
  3. The catalog would inspire a telephone order.
Question #2:  When you measure daily sales through your classic order entry system, which customer are you measuring?
  1. Judy.
  2. Jennifer.
  3. Jasmine.
Question #3:  Which customer is most likely to visit your website via Google?
  1. Judy.
  2. Jennifer.
  3. Jasmine.
Question #4:  Which customer is least likely to appear on the twelve-month buyer file of an average catalog brand?
  1. Judy.
  2. Jennifer.
  3. Jasmine.
Question #5:  Which customer is on Facebook only because it is the best way for her to see images of her grandchildren?
  1. Judy.
  2. Jennifer.
  3. Jasmine
Question #6:  Which customer is most likely to purchase via a coupon code found on an affiliate website?
  1. Judy.
  2. Jennifer.
  3. Jasmine.
Question #7:  Which customer will enter prime earning years from 2025 - 2035?
  1. Judy.
  2. Jennifer.
  3. Jasmine.
Question #8:  Which customer is most likely to hear about a new brand via word of mouth?
  1. Judy.
  2. Jennifer.
  3. Jasmine.
Question #9:  Which customer is most likely to be rented from a co-op?
  1. Judy.
  2. Jennifer.
  3. Jasmine.
Question #10:  Which customer is most likely to buy from an email campaign that features full price merchandise offered with free shipping?
  1. Judy.
  2. Jennifer.
  3. Jasmine.
Answers:  1=1, 2=1, 3=2, 4=3, 5=1, 6=2, 7=3, 8=3, 9=1, 10=2

March 04, 2012

Dear Catalog CEOs: What Would You Take?

Dear Catalog CEOs:


Recently, I polled folks on Twitter, asking them a simple question.
  • "If your analyst came to you with a $500,000 profit opportunity, or came to you with an opportunity to increase conversion rate by 12%, which would you prefer?"
You're the CEO ... what would you prefer?  One opportunity has no context around sales growth, one opportunity says nothing about how much it would cost to increase conversion rate.

On Twitter, not one person said "profit".


Everybody is a VC these days, trying to "scale", trying to dominate a world that is likely to be dominated, in the short-term, by Google, by Amazon, by Apple, and by Facebook.


I recently met an owner of a $3,000,000 online business.  He told me he made $300,000 profit last year.  Another individual said to him, "Wouldn't you rather be a ten million or twenty million dollar business, wouldn't it make sense to forego profit and try to scale?" ... as if earning $300,000 a year isn't desirable.


When it is somebody else's money, you want for that person to "scale".


What about when it is your money?


In the past decade, personal savings dropped to 0% (personal savings, of course, are the household version of profit).  Maybe we've forgotten how to even calculate profit?


Right now, many of us are losing the profit and loss game.  We're spending 25% of net sales on putting catalogs in the mail before we ever get paid back with a dollar of net sales.  This was a good strategy in 1990, because it was the only game in town.

Newer business models are mastering the "two-step" process ... generating an inexpensive list of prospects that can be mined for purchases.  We pay up-front in the co-op model, newer models pay bills at the time of a click or transaction.



It seems like there's an opportunity to watch what folks are doing right now.  Maybe we can improve conversion rate by 12% and increase profit by $500,000!