November 29, 2012

98 Career Tips

Tip #1 = Create your own methodology, a system entirely unique to you, and make your company money by using it.  Better to have your own system than to compete with others.

Tip #2 = Don't mock your Executive team if you want to eventually become an Executive.

Tip #3 = Understand that Executives get fired, regardless of performance.  This will happen to you, too, if you become an Executive.

Tip #4 = Executives earn bonuses for sales increases and profit increases.  Focus analytics on sales and profit, not engagement.

Tip #5 = If you want people to adopt your ideas, ask questions that require the person across the table from you to say "yes".

Tip #6 = Take a class that teaches you how to sell.  Directors and Vice Presidents spend most of the day selling ideas or strategies.

Tip #7 = Listen to people.

Tip #8 = Understand that the worst job in the Analyst / Manager / Director / Vice President ladder is "Director". If you can survive that, being a Vice President is easy.

Tip #9 = Have three goals for your team for the year.  Make sure two of the goals are tied to profit and customer file development.

Tip #10 = Those who can predict what is likely to happen next year tend to be listened to.

Tip #11 = Those who are listened to tend to be promoted.

Tip #12 = Do what your boss asks you to do.

Tip #13 = In your spare time, do research that proves you should do the exact opposite of what your boss asks you to do.

Tip #14 = Get enough sleep.

Tip #15 = Don't fall asleep in meetings.

Tip #16 = Start all of your meetings on time, regardless who is not yet in the room.

Tip #17 = End all of your meetings five minutes early.

Tip #18 = Team chemistry is possibly the most important component of getting things done.  Foster team chemistry.  Hint - there are no best practices for doing this.

Tip #19 = Those who do not buy into your plan are a cancer.  Get them on your side, or get them out of the company, or you will be fired.

Tip #20 = Assess whether somebody who is not meeting objectives is not meeting them because of a skills deficiency.  If so, give the person the benefit of the doubt.

Tip #21 = Find a mentor outside of your company, and bounce ideas off of this person.

Tip #22 = Learn to say "NO" to most of what comes across your desk, once you become a Manager, Director, or Vice President.

Tip #23 = Say "YES" with a smile if you are an Analyst ... it's a fast path to becoming a Manager.

Tip #23 = Do not let small distractions divert attention from achieving long-term goals.  Long-term goals yield business success that advances your career.

Tip #24 = Being Respected > Being Large and Intimidating.

Tip #25 = Cause co-workers to laugh.

Tip #26 = Feed people.  Many employees are pleasantly surprised when you bring cupcakes to work.  Some employees are truly hungry, too.

Tip #27 = Most people are really, really good people who sometimes act badly.  Separate a bad action from the overall essence of the person.

Tip #28 = Not everybody thinks the way you think.  In fact, almost nobody thinks the way you think.  This will make it hard for you to implement your ideas.

Tip #29 = Set goals and objectives for next year in November.  Share your goals and objectives. You'll find that you will shape other people's goals/objectives by doing this.

Tip #30 = Set up a grease board in your office.  Tally sales and profit, on an annual basis, generated by you and your team.  Point to the board when people are in your office.

Tip #31 = Understand that if customers don't like your merchandise, nothing else matters. Make sure your efforts are aligned with merchandising excellence.

Tip #32 = Sparingly yell and scream.

Tip #33 = If you are an Analyst / Manager, understand that your co-workers hate being measured by your metrics. Find other ways to convince these folks to change.

Tip #34 = You're more likely to get partnership from co-workers by doing something for them instead of telling them what to do.

Tip #35 = If you are a Director or Vice President, be present. It's tempting to "hang out" with Executives. It's important to "hang out" with your Analysts / Managers.

Tip #36 = Do not tolerate errors that can be avoided by simple audits of information.

Tip #37 = If your company won't do what you want your company to do, either double down on your efforts, or find a company that will do exactly what you want to do.

Tip #38 = Know when to roll over, to stop fighting over a topic you're not making progress on.

Tip #39 = Realize that a third of your employees won't be on your side when you become a Manager, Director, or Vice President.  Neutralize their negative energy, immediately.

Tip #40 = Avoid projects that involve inventing "the next big thing". By the time you invent it, the rest of the world is on to "the next big thing". You can't win this battle.

Tip #41 = Set deadlines.  Not much gets done without deadlines.

Tip #42 = If you are an Analyst, complete work prior to assigned deadlines.  If you are a Manager / Director / Vice President, demand project completion prior to a deadline.

Tip #43 = Create incentive structures that don't require money.

Tip #44 = Send employees home early in the afternoon of a day prior to a major Holiday.

Tip #45 = Resist the temptation to have favorite employees.

Tip #46 = Realize that everybody else has a favorite employee, causing considerable tension between employees.

Tip #47 = Send employees to conferences.

Tip #48 = Require employees who go to conferences to perform a thirty-minute presentation on what the employee learned at the conference.

Tip #49 = If you are an Analyst or Manager, demand the opportunity to present your work in department meetings.

Tip #50 = Practice. In sports, people practice more than they play. In business, practice is not part of the culture.  Practice new skills, even if you have to do it on your own time.

Tip #51 = Become good at speaking in public.

Tip #52 = Take your findings "on the road". Create a 30 minute presentation about customer behavior that you can share with other departments.

Tip #53 = Get to know your Chief Financial Officer.

Tip #54 = Learn how to calculate profit.

Tip #55 = Promote ideas that increase company profitability. Most Executives have bonus structures that, in part, pay out $$ when company profitability increases significantly.

Tip #56 = Fight for bonus structures for all employees.  A 10% cash bonus payout on December 23 feels very different than a 10% salary increase.

Tip #57 = Fight for a compensation structure that rewards non-management employees for technical excellence, as long as technical excellence increases company profit.

Tip #58 = Realize that new customer acquisition is much more important to long-term company health than anything other than having great merchandise.

Tip #59 = Realize that nearly all employees and outsiders have been trained to believe that customer retention is the most important component of long-term company health.

Tip #60 = Set goals that allow employees to achieve success while you secretly fuel the health of the business via low-cost customer acquisition programs.

Tip #61 = Instead of constantly battling a co-worker who disagrees with you, learn to work around that person.

Tip #62 = Always have facts about the way your customers behave. Keep the argument on actual customer behavior.  Avoid theories, hypotheses, and buzzwords.

Tip #63 = Executives are not HiPPOs (highest paid person's opinion). Too often, Execs are avoiding your strategy for a very good reason that they cannot tell you about.

Tip #64 = All magic comes with a price.

Tip #65 = Make your employees do the work of hourly wage earners at least one day a year.

Tip #66 = Most employees would rather do something familiar and comfortable instead of something new and challenging. Make a bridge to connect the two concepts.

Tip #67 = Point out the future before anybody sees it.  If you have analytical skills, you should be able to project what things will look like 1 year from now.  Do it.

Tip #68 = Forecast.  Those who forecast sales have the ear of the Executive team.

Tip #69 = Appreciate art.  Too many of us (hint - me) are too scientific, requiring proof for everything.  Art and merchandise fuel customer demand.  Science simply measures art.

Tip #70 = Foster structure.  You can allow for great amounts of creativity while having a solid weekly structure that employees know and trust.

Tip #71 = Prevent having more than 5 hours of meetings a day.  Start declining meetings if your calendar fills up.

Tip #72 = Friday Afternoon Freedom.  Clearly communicate that you and your staff will only work on personal projects on Friday afternoon. Work longer hours if necessary.

Tip #73 = Document.  When you have problems with employees, document the problems, so you have a solid argument when it comes time to make decisions about employees.

Tip #74 = Equipment. Make sure your employees have great equipment and good software, and they will produce better work, which makes you look better.

Tip #75 = Give Credit.  When you are a Manager / Director / Vice President, evangelize the work of your employees. Other Executives will notice your selflessness.

Tip #76 = Let Others Take Credit.  When an Executive takes credit for your work, let 'em! At least your work is being utilized, and that's better than having folks ignore your work.

Tip #77 = Be Public.  Have a Twitter or LinkedIn presence, where you grow your professional brand without giving away company secrets.

Tip #78 = Don't Lie.  When you aren't truthful, co-workers will lose trust, quickly.

Tip #79 = Don't Gossip.  When you talk about other employees (outside of factual work-related situations), word gets around, and co-workers lose trust, quickly.

Tip #80 = Have Compassion.  Your co-workers go through crap in their professional and personal life.  

Tip #81 = Have a 3 Year Plan.  Each year, publish a three year plan for where you want to take your department in the future.  Measure performance, and adjust the plan each year.

Tip #82 = Know When To Leave.  Most of us reach a point where we've taken a company as far as we can take it.  Leave before you get to that point.

Tip #83 = Capitalize on Strengths.  You can't make an employee do what s/he isn't good at doing.  Put the employee in spots where s/he will succeed, de-emphasize weaknesses.

Tip #84 = Set up New Employees. Assign a project where the new employee is guaranteed to have success, it gets everybody off to a good start.

Tip #85 = Create a Hiring Quiz.  Make all who interview for a job complete a quiz, and allow the answers to the quiz to be open-ended and essay-based.  It's quite revealing!

Tip #86 = Be Probabalistically Accurate.  You're always going to be wrong ... but be wrong on the high end 50% of the time, and be wrong on the low end 50% of the time.

Tip #87 = Don't Beat a Dead Horse.  Even if your idea is right, your company will probably move in a different direction.  Let your idea go.

Tip #88 = Create Teams.  Five people on a team generate more value than five individuals working alone.  But be smart about who you put on the team.

Tip #89 = Deal With Success Publicly, Deal With Problems Privately.

Tip #90 = What works for other companies may not be what works for your company.  Listen to those on the outside, execute based on internal customer knowledge.

Tip #91 = Communicate to your boss what you want your next job to look like.  It can be very revealing to hear how your boss responds.

Tip #92 = When taking over a new department, immediately find people you believe you can trust, or hire folks you can trust.

Tip #93 = Pay attention, and read the tea leaves.  Listen for the hidden words and for words not said by Executives.

Tip #94 = If your company is publicly traded, read every press release, 10-K, and 10-Q statement issued by your company.  Prepare to be surprised.

Tip #95 = Know monthly sales performance vs. plan and vs. last year, regardless of job title.

Tip #96 = Know your top ten best selling items, regardless of job title.

Tip #97 = Know how many customers purchased in the past year, and know how many new customers purchased last year, regardless of job title.

Tip #98 = Do not overwork or burn out your team.

Bonus Tip #99 = Do not be too far out in front of the curve.  It may not good to advocate for a new channel before you know where the trends are headed.

Use the comments section to add your tips!

November 28, 2012

Email Marketing and Jasmine: Curate! And Low Prices, Too

Jasmine is customer who likes email marketing. Sure, she's younger (average age = 19 - 35), and is "engaged" with social media.

But email marketing represents a way for the marketer to push information to Jasmine.  And Jasmine wants, in some ways, to be told what to do.  This concept, of course, is called "curation".

In my projects, I routinely notice several things about Jasmine.

  1. She's less loyal than Jennifer, and much less loyal than Jasmine.
  2. She isn't a huge catalog fan, and as a result, email marketing represents one of the few (inexpensive) ways for you, the marketer, to share information with Jasmine.
  3. She can't afford high prices.  She wants a $400 handbag, but she can afford $100.  Oh, and, she wants the $100 handbag to be 95% as good as the $400 handbag.
  4. Newness isn't that important to Jasmine --- presenting a compelling assortment is important to Jasmine.
Therefore, make life simple for Jasmine.  Your email marketing program can speak to her needs.
  1. Judy wants a $400 handbag on sale.  Jennifer wants a $400 handbag with 30% off and free shipping, and wants the $400 handbag to be the cheapest price online.  Jasmine wants a $100 handbag.  Give it to her!!
  2. Tell Jasmine a story.  It's not about the product, it's about how the product fits in with Jasmine's life and your assortment.
  3. Make everything shareable for Jasmine ... she's willing to be your customer acquisition partner (whereas Judy isn't going to go to the effort to help you, digitally).

November 27, 2012

Email Marketing and Jennifer: It Was All About The Hunt!

When I present Jennifer at catalog-related conferences, I hear groans!  Catalog folks tend to not like Jennifer.

Email marketers, however, love Jennifer, and for good reason.

  1. In email marketing, Jennifer tends to have the best conversion rates of the three personas.
  2. Jennifer demands free shipping.  Email marketers love to offer free shipping!
  3. Jennifer likes getting 20% or 30% off.  Email marketers love to give discounts to email subscribers, as verified by email subject line testing.
  4. Jennifer loves to hunt.  She wants to make sure that whatever is offered in an email marketing campaign is offered at the best price.  Jennifer will go to great lengths (Google, affiliates, comparison shopping engines) to hunt for the best products at the best prices.
  5. Jennifer loves newness.
The email marketer is aligned with Jennifer.  In fact, email marketers have largely trained Jennifer how to behave.  Email marketers have, in so many cases, trained Jennifer to not trust the discounts/promotions offered to her ... Jennifer knows the email marketer will offer 10% off plus free shipping this week, then 30% off next week.

From a tactical standpoint, the email marketer can serve Jennifer well, and rebuilt trust.
  1. Product assortments should feature new products ... Jennifer gets bored easily.
  2. If you must have promotions, always give Jennifer the best promotions, so that she trusts you in the future.
  3. Eliminate hunting.  By giving Jennifer the best prices and best promotions, Jennifer doesn't have to hunt.  She hunts because she doesn't trust.  Change her behavior, via trust.

November 26, 2012

Email Marketing, Judy, and Sale Events

Remember Judy?

On average, she is between 51 and 67 years old.  She is, literally, a catalog marketing professional, having spent the past 30 years purchasing via paper.

When I analyze Judy, I notice that she likes consistency.

  1. She likes "winners", products that have always performed well, products she knows and trusts.
  2. She likes sale events.  Whereas some customers respond to personalized promotions, Judy seems to trust the fact that you always have a sale event from January 3 - January 10, and that you offer her 20% off during that promotion.  In this way, Judy can plan her life, she can prepare for this event.
When you code personas (like Judy, Jennifer, and Jasmine), pay close attention to the merchandise each persona purchases.

Then, within your email marketing campaigns, you can have various events, but you feature winning product for customers in Judy's persona.  You're likely to experience increases in opens/clicks/conversions if you do this!


November 25, 2012

Dear Catalog CEOs: Optimizing The Performance Of Your Website

Dear Catalog CEOs:

No, I am not writing about Cyber Monday.  That's a topic that keeps trade journalists and the mainstream media in business, not you.  Why even worry about making changes to discount/promo levels that impacts +/- 20% of 1.2% of annual sales?  Seriously.  Think about it for a moment.  You give away gross margin dollars so that the press has something to talk about, earning them advertising dollars.  Fun!


Here's a true story about retail brand.  This brand decided to completely revamp their website, top to bottom.  A totally different look and feel.  Social plug-ins.  User comments.  A big deal.  Months of in-house labor.

The new site rolls out on a Monday morning.  Sales are a catastrophe (i.e. -20%).  Users are commenting, but they're saying negative things!  "Best customers" are complaining that they can't find anything.

What would a conversion optimization expert / digital marketing expert do?

They'd run an A/B test, wait until statistical significance was achieved, and then they'd inform all of the employees who spent all of this energy that their efforts were fruitless.  They'd recommend going go back to the old design ... "you've got to listen to the customer".  They'd demand that the company adhere to a data driven approach to managing the business.

What did Management do?

Management stayed the course, not making any changes.

At this point, folks would say that Management were big, dumb "HiPPOs" (Highest Paid Person's Opinion).  We'd hear the digital marketing community complain that a "data driven" approach, coupled with facts acquired in actual A/B tests, clearly paint the right path to profitability, but Management "went with gut feel".  Twitter would be filled with both anguish and laughter over this story of feckless Management ineptitude.  Somebody would produce an infographic, outlining the "right" way to manage a business.

How did the story turn out?  Well, within a few weeks, the performance of the new website was equal to the performance of the old website.  And the new website had improved functionality.  Had Management not exhibited patience, the company would never have found out that the new website would perform as well as the old website.

If you combine art, analytics, business experience, customer development, and fantastic merchandise, you've got something!  The secret, of course, is identifying the right combination of art, analytics, business experience, customer development, and fantastic merchandise.  

That's what we're all trying to figure out.

November 20, 2012

Gross Margin and Repurchase Rates

We seldom talk about Gross Margin.

We should talk about Gross Margin.

Gross Margin is what is left after subtracting the cost of goods sold.  If you sell an A/V Receiver for $300 and it cost you $240 to purchase the item from a vendor, then you earned $60 Gross Margin (60/300 = 20% Gross Margin).

Conversely, if you create your own products, you have an opportunity to earn more Gross Margin dollars.  Companies that create their own products frequently enjoy high Gross Margin rates.  For instance, if you sell a handbag for $300, you might earn $180 in Gross Margin after subtracting the cost of creating the item.

To achieve the same amount of Gross Margin dollars, the first company has to sell three A/V Receivers ($60 * 3 = $180).  The first company has to sell one handbag ($180 * 1 = $180).

Needless to say, the second company has an advantage.

If you have a low Gross Margin, you can generate a lot of profit via a high annual repurchase rate.  If 70% of last year's customers purchase again, you obtain downstream Gross Margin dollars that compensate for marketing expenses.

If you have a high Gross Margin, you can generate more profit via infrequent buyers.  Catalog brands have been around forever, managing 60% Gross Margins with 40% Annual Repurchase Rates.

If you have a low Gross Margin and a low Annual Repurchase Rate, you must achieve, as the online pundits like to say, "scale".  In other words, you need a highly viral product that causes numerous customers to purchase.

Now think about the Kindle.  Amazon states that they make no profit on the sale of a Kindle, zero Gross Margin dollars.  Amazon, however, has a high Annual Repurchase Rate (i.e. you're going to have to buy books to use your Kindle), and Amazon has "scale".  This causes the numbers to work out, over time.

Notice that all of the excitement starts with merchandise ... opposite of where most discussions start these days (social, mobile, omnichannel).  

Merchandise and Gross Margin, however, dictate everything that follows.

November 19, 2012

Email Marketing Conversion Rates

Folks like to tout the importance of "engagement", don't they?

The hypothesis offered to us is that if we can get a customer to pay attention to us, the customer will spend more money with us.

Might be true.

Might not be true.

Of course, we have the data available to measure engagement, don't we?

This image shows the average conversion rate for customers who click on email campaigns "x" times per year.  The image illustrates an interesting finding ... those who clicked on an email campaign the most have decreasing conversion rates.

Interesting, huh?  Those who are most engage have lower conversion rates than those who are moderately engaged.

If we multiply the clicks by conversion rates, we find that those who clicked the most actually purchased the most.

So, in one graph, we are able to both prove that engagement matters, and prove that engagement is highly overrated!

Most important, I want for you to start looking at your marketing channels on an annual basis, not on a campaign basis.  You can't learn the information in this chart by analyzing campaign metrics, can you?

Click here to purchase Hillstrom's Email Marketing Excellence!


November 18, 2012

Dear Catalog CEOs: Two Opportunities We Should Pursue

Dear Catalog CEOs:

When I work on a Catalog PhD Project (click here to contact me for your own, customized, highly profitable project or buy the booklet here), there are two opportunities.

  1. Mail more catalogs to catalog-loving customers.  This usually accounts for 35% of the profit opportunity in a Catalog PhD project.
  2. Mail far fewer catalogs to online/retail customers.  This usually accounts for 65% of the profit opportunity in a Catalog PhD project.
I continue to be amazed by the responses to each outcome.

Most catalogers do not want to mail more catalogs to catalog-loving customers.  Can you believe this?  You are catalogers, right?!  Among customers with characteristics like Judy (i.e. phone/mail shoppers), you can go from 17 contacts a year to 19 contacts a year and generate more demand and more profit.  You just have to add two contacts.
  • "But we like our current contact strategy.  It has an every-third-week rhythm that allows our staff to manage the workload easily."
  • "We don't have the staff to do that."
Every Catalog PhD project I've executed demands that best catalog-loving customers be mailed more often.  Most of the time, this opportunity is not capitalized on.

The second opportunity is to mail fewer catalogs to online/retail customers.  Often, I can save a cataloger 20% to 35% in housefile mailing expense.  This recommendation is sometimes met with resistance.
  • "If we cut here, we can't make online marketing scale to replace the sales, so we're not likely to take advantage of the profit opportunity without a sales opportunity to offset what we lose when we cut catalogs."
  • "Our matchback analytics suggest that your analysis is wrong."
  • "We'll never do mail/holdout tests, because we can't afford to lose sales."
  • "The co-ops tell us they can build models that increase circulation, increase sales, and increase profit.  That sounds good to us."
These, of course, are fairy tales.

There is no reason to generate sales at a loss (after factoring in short-term / long-term payback).  Would you voluntarily work an additional 10 hours a week and voluntarily take a 10% paycut?  Never!  But you'll gladly mail online/retail customers at a loss.

And we've proven, over and over and over again via mail/holdout tests that matchback results are terribly wrong.  Terribly wrong!  Matchbacks are a fairy tale that allow us to think that marketing "works", causing us to spend more on marketing (often, spending more with the vendors who coincidentally provide matchback reporting for us).  As an example, take a customer who will only purchase online, who hates catalogs, and will never shop from a catalog.  If you mail this customer 12 times a year, your matchback analytics will tell you that every order placed by this customer was caused by a catalog.  Every one.  Even though the customer hates catalogs.

All of the magic in a Catalog PhD project comes from prior mail/holdout tests.  I've executed and analyzed (or my teams have done so) somewhere close to a thousand mail/holdout tests in my career.  Mail/holdout tests represent truth.  When we don't want to execute a mail/holdout test, we're saying that we don't want to know the truth.

Finally, vendors have been telling us for two decades that they can "mine" better performing names ... they've been telling us we can increase circulation, increase sales, and increase profit.  When is the last time a vendor caused your catalog to generate 10% more sales on the same circulation level?  Be honest!

My projects uncover two opportunities.
  1. Mail more catalogs to catalog-loving customers.
  2. Mail fewer catalogs to online/retail focused customers.
When you read the statements, it's a no-brainer, don't you think?  You earn more profit.  

How is that a bad thing?

November 15, 2012

CEOs Don't Trust Marketers?

From a study in the UK:  70% of CEOs have lost trust in marketers (click here).

Is the percentage right?  Who knows.  Who cares?

There are three ways to prove that marketing works.


  1. Be excellent.  Just a guess - I'll be that fewer than 10% of marketers are excellent (just like fewer than 10% of anybody in any profession is excellent), so you're probably not going to be able to prove that marketing works in this fashion.  You're just not going to ever find a person who can deliver breakthrough results via marketing.  So this is the hardest thing to do (and yet, on Twitter, you'll read a lot of content that tells you just how easy it is to be excellent ... maybe that's why CEOs don't trust marketers).
  2. Stop marketing altogether.  This works really well.  In catalogs, you execute holdout tests.  In email, you execute holdout tests.  In search, you shrink the budget to nothing for a few months, measuring what happens.  In display, you execute holdout tests.  In offline marketing, you execute matched markets.  In social media, you stop doing all outbound efforts for three months (yes, you do this).  Do all of this at the same time, and you'll see sales drop by 50%.  You just proved that marketing works.  You just proved that your tiny little department is accountable for half of the business.  Now somebody will trust you.
  3. Screw things up.
Let's talk about #3.

When I became a VP at Nordstrom, way back in 2001 (think hanging chads and the dot.com bust), we mailed clearance catalogs.  The inventory executive at the time thought he was way smarter than the team I was inheriting (he might have been right).  So he told my team (the week before I arrived) that he would select the names/addresses of individuals who would receive "his" catalog.  

The performance of "his" catalog was 20% below the baseline for all other catalogs at that time.  His lack of marketing talent (compared with a team that, quite honestly, wasn't all that talented), was painfully obvious in the final result of that catalog.

I never forgot to mention that metric, when folks criticized my team for "not picking the right names".

In other words, you're trusted more when you demonstrate what happens to the business when you don't perform well.

Here's another story.  Nordstrom - 2004.  We have our Anniversary Sale in July.  We mail a 124 page catalog to best customers, and a 64 page catalog to average customers.  In spite of a myriad of audits, my team makes a big mistake, sending the 64 page catalog to best customers, and the 124 page catalog to average customers.
  • Sales impact = $1,000,000.
  • Profit impact = $350,000.
If I remember correctly, the E-commerce VP at that time said to our President, and I quote ... "I want blood".

We learned that about 8% of e-commerce sales in that time frame happened solely because of an additional 60 pages in a catalog.

I volunteered to send an email to 1,500 employees, saying that I was accountable for a mistake of this magnitude.

But more important, we learned a valuable lesson.  The simple act of getting the exact number of pages to offer to the customer right could sway total e-commerce sales results by +/- 8%.

All mistakes need to be documented.  Mistakes clearly illustrate the difference between incompetence and competence.  Testing illustrates the difference between competence and excellence.  Combined, your CEO might just learn to trust you, the marketer reading this essay.

November 14, 2012

Email Relevance: Weighting Transactions

When I work on email marketing projects, I like to assign weights to historical transactions.

I will create monthly or quarterly variables (i.e. demand spent 1 month ago as a variable, demand spent 2 months ago as a variable).  A dependent variable (next month spend or next quarter spend) is also created.

I run a regression analysis.  I document the coefficients for each variable.

In the graph above, I build a curve as a function of the coefficients for each recency variable.

Then, I compare the fitted function against the most recent variable I have in the analysis.  The most recent variable is assigned a weight of 100%, then each subsequent variable is assigned lesser weights (49%, 39%, 35%, 31%, etc.).

This yields the weighting scheme I use when deciding which version of an email marketing campaign to send to a customer.  If a customer spent $100 on Womens merchandise last month, and $250 on Mens merchandise 36 months ago, I have to make a decision whether the customer should receive a Womens message or a Mens message.
  • Womens Weight = $100 * 100% = $100.00.
  • Mens Weight = $250 * 20% = $50.00.
In this example, the customer spent more on Mens merchandise, historically, but the purchase is 36 months ago, and therefore, less relevant to future activity.  The customer should receive a Womens message.

Clearly, these strategies should be tested, because your mileage will vary.  Regardless, in email marketing, it is important to come up with a weighting scheme, so that the most relevant messages are sent to a customer.  I've yet to run across an instance, in twenty-four years, where we make a mistake by weighting older transactions as being less important than recent transactions.

Want to learn more about email marketing excellence?

November 13, 2012

Gliebers Dresses: Cyber Monday

As you already know, Gliebers Dresses is a fictional serial about an Executive Team dealing with a changing marketplace.  If business fiction is not your thing, then there is nothing to see here, please move on.  If you enjoy a diversion from your regularly scheduled work-based events, then give this a read.

Glenn Glieber (CEO, Owner):  Welcome everybody!  Wow, that was quite an election last week, don't you think?

Roger Morgan (Chief Operating Officer):  You know, I just read a Woodside Research report that says that Nate Silver was the real winner of the election.

Glenn Glieber:  Who?

Pepper Morgan Pressley (Chief Marketing Officer):  Ignore him, Glenn.  That's what the rest of us do.

Meredith Thompson (Chief Merchandising Officer):  Sales are up fifteen percent since the election ended.  It's fun to come to work these days!

Lois Gladstone (Chief Financial Officer):  Yes, we're on our way to the best month against plan we've had since early 2007.

Roger Morgan:  I guess my omni-channel strategies are finally paying off.

Meredith Thompson:  Since business is good, we don't have to discount during Christmas.  The last time we didn't have to discount during Christmas was 2005, right?

Roger Morgan:  You mean the Holiday season?

Meredith Thompson:  Christmas.

Roger Morgan:  Holiday.

Meredith Thompson:  Christmas.

Roger Morgan:  Woodside Research tells us that we have to call it "Holiday".  They say, and I quote, (thumbing through a series of documents) "... in these volatile times, why provoke time-pressed consumers who can easily amplify anger via the social graph, potentially destroying a brand in a heartbeat over something as meaningless as the naming convention of a holiday?"

Meredith Thompson:  I don't want to offend God.

Pepper Morgan Pressley:  Shouldn't somebody from HR be here to tell us what we can and cannot talk about?

Roger Morgan:  Woodside Research has a report on HR excellence, too.

Lois Gladstone:  Can we talk about the next holiday on the calendar?

Meredith Thompson:  Thanksgiving?

Lois Gladstone:  No, Cyber Monday.

Roger Morgan:  I've got this one.  I heard that most of our competitors will offer at least 25% off plus free shipping on Cyber Monday.  I think we need to make a splash.  Why don't we offer 35% off plus free shipping?

Meredith Thompson:  We can't do that.  Lois just said we're having the most profitable month in years.

Roger Morgan:  Of course we can do it, everybody else is doing it.

Meredith Thompson:  My bonus depends on gross margin dollars.  Discounts, like 25% off, count against gross margin.  By running 25% off on Cyber Monday, I cost myself bonus dollars.  I won't be able to buy myself a new Lexus in January.

Roger Morgan:  I said 35% off.  We need to make a statement.

Pepper Morgan Pressley:  Maybe we should offer 100% off.  That would make a statement.

Roger Morgan:  Look, Woodside Research recently issued a statement.  They said, ... wait ... I'll find it (thumbing through a pile of documents) ... here it is, they said that "... brands must remain competitive on Cyber Monday, if they want to pursue relevance and increase engagement in today's highly volatile marketplace".

Meredith Thompson:  What does your report say about brands that want to remain profitable?

Pepper Morgan Pressley:  Roger, does Woodside Research ever offer you research reports at 35% off?

Roger Morgan:  Oh, heavens no.  They don't want to cheapen their brand.

Meredith Thompson:  Pepper, what percentage of annual sales happen on Cyber Monday?

Pepper Morgan Pressley:  1.6%.

Meredith Thompson:  That's what we are arguing about?

Roger Morgan:  Think what we could do at 35% off, or even 40% off?

Meredith Thompson:  Let me get this straight.  Say that we don't discount, and our sales are cut in half because we aren't competing on Cyber Monday.  We'd lose 0.8% of annual sales, is that right?  I'd lose out on a new Lexus over 0.8% of annual net sales?

Roger Morgan:  I don't care about a new Lexus, I only care about Gliebers Dresses.

Pepper Morgan:  Meredith wants to do the right thing to get a new car, Roger wants to do the wrong thing for the right reasons.


Roger Morgan:  I'm thinking that we offer graduated discounts, based on customer loyalty. We'll put 30% off plus free shipping on the website, then we'll offer 35% off plus free shipping to all prior customers, and 40% off plus free shipping to best customers.  Then we'll make this go viral via Twitter and Facebook.  Maybe we'll give an extra 5% if you pin a dress on Pinterest.  Yes!.  This is going to be HUUUUUUUUUUUUUGE.  This is where Cyber Monday meets Social CRM! I'll talk to your team, Pepper, and get this started.  I'll reserve the CYBER30, CYBER35, and CYBER40 discount codes.

Pepper Morgan Pressley:  I'm in charge of marketing, Roger.

Roger Morgan:  That's what every person who ever held your job told me, Pepper.

Lois Gladstone:  I don't see any reason to participate in this nonsense, Glenn.

Roger Morgan:  Word of these discounts will spread like wildfire.  We'd be known as the place to go to celebrate Cyber Monday.  It would be a lot like free marketing.

Glenn Glieber:  I love free marketing!

Lois Gladstone:  Pepper, what is the cafeteria making for our big Cyber Monday meal?  I mean, turkey is popular on Thanksgiving, ham is popular on Easter.  What are we going to eat on Cyber Monday?  Cyber Chicken?

Roger Morgan:  Leading brands are in the game, folks, they aren't sitting on the sidelines.

Lois Gladstone:  We shouldn't openly talk about the Cyber Monday holiday.  It's offensive to people who don't believe in it.

Meredith Thompson:  Gene, help us out.

Dr. Gene Feldman (Vice President of Global Brand Direction):  The year was 1999.  Bill Clinton was President, hobbled by impeachment.  TLC topped the charts with their smash hit "No Scrubs".  And Pets.com pursued a strategy called "monetized eyeballs".  The theory, as you all remember, was to rapidly gain market share.  In fact, it was considered a best practice to lose money on every single e-commerce transaction.  The theory was that if you were able to grow market share by selling merchandise at a dramatic discount, you'd acquire enough customers to drive out the competition.  Without competitors, you'd be able to harvest downstream profit.  Lose money now, gain market share, make money later.  Of course, if everybody does something stupid, then it accelerates the downfall for all.  We all know what happened, don't we?

Lois Gladstone:  Lisa "Left Eye" Lopes died in a car crash, ending what could have been a hall-of-fame career for the band?

Dr. Gene Feldman:  She'll never be forgotten.  But that's not my point.  Those who built a solid business model generated enough profit to outlast those who recklessly discounted their brands, thereby winning in the long term.  The winning strategy was nearly opposite of the best practice of the time.

Lois Gladstone:  Exactly.

Roger Morgan:  Clearly, there's no right or wrong answer here.

Pepper Morgan Pressley:  Nobody wants to discount except for you, Roger.

Glenn Glieber:  Well, wait a minute, folks.  Last year, we offered 25% off plus free shipping.  We heard that our competitors are offering 25% off plus free shipping.  I say we maintain the status quo, folks.  I don't want to discount too much, and I don't want us to not be able to compete.  Can't we thread the needle here and do something that appeases everybody?  Let's go with 25% off plus free shipping.  That's a reasonable compromise.

Lois Gladstone:  Didn't TLC have a number one song called "Unpretty" in 1999?

Dr. Gene Feldman:  Yes.


Lois Gladstone:  That's what this meeting was, unpretty.

Why Attribution Efforts Fail Miserably: A Basketball Example

I want to walk you through a series of images from a basketball game.  The images will explain why attribution efforts fail miserably.

Look at the first image (below).  The player in the middle of the court just secured the rebound of a missed shot (the number on his jersey is "4").  He is passing the ball to the point guard (the number on his jersey is "0").


Now, we move a few seconds ahead in the action.  I positioned two arrows on the two players we are following.  The player with the ball (number "0") dribbled to the top of the key.  Next, he will pass the ball to the right wing, where his teammate is wide open.  But more important, look at the left arrow.  This is player number "4".  He has hustled down court, passing all of his teammates.  Because of his hustle, he had drawn two defenders near him.  And because he drew two defenders near him, his teammate (number "12") is wide open on the right wing.
Ok, we'll look at one more image, at the end of the play.
Because player #4 drew a defender close to him, his teammate on the right wing (#12) was wide open, and received a pass from player #0.  A defender rushed to the teammate (#12), blowing right past a shot fake.  Now, the teammate (#12) has a wide open three point jump shot attempt, which he buried!  The crowd went crazy, because this player hit a wide open shot that counted for three points, he's credited with one more point than he would be credited for on easier shots taken inside the three point arc.

But look at our player, player #4 ... he is just above the black arrow on the image.  If the shot is missed, player #4 has hustled into position, and has blocked out the defender.  Most long shots rebound to the opposite side the ball is shot from.  In other words, player #4 is in good position to get the rebound if the shot is missed ... and if he doesn't get the rebound, he has a defender blocked out, so that his teammate (to his left, #35) will get the rebound.

In the box score (basketball's version of a KPI attribution dashboard), here is what is documented from this offensive series:
  • Player #0 = 1 assist.
  • Player #12 = 3 points.
  • Player #4 = No credit for anything.
This is exactly the same situation we observe in all of our attribution/matchback work.  We'd give player #12 credit for closing the deal (last touch attribution).  We'd give player #0 credit for an assist (multi-touch attribution).  We'd give player #4 no credit for anything other than a defensive rebound.

Player #4, who is truly the reason for the success of this offensive series, gets no credit.  In large part, he gets no credit because we don't have a measurement system to assign value to his efforts (hustle, positioning, basketball IQ, fundamentals).

Coaches, however, do assign value to his efforts.  They watch film, and can visually see his value to the team.  That's why he is playing in this game.

We, as a measurement community, will fail until we find a way to provide attribution to the activities that truly make a purchase happen (customer service, merchandise, creative).  Today, we give too much credit to channels, discounts, and promotions (i.e. player #12 and, to a lesser extent, player #4).  

We don't give credit to customer service, merchandise, and creative (i.e. player #4).

November 12, 2012

Email Frequency

You've heard the cries of some in the email vendor community.

On one hand, they want to prove that their craft isn't "dead" (hint, it's not).

On the other hand, they want for you to send fewer campaigns, to reduce frequency.

You're all tested email frequency, right?  You set up tests where customers get 0 campaigns per week, 1 per week, ... , up to 10 per week.

You've executed and analyzed frequency tests, right?

Often, the results look something like the table at the start of this post.  One to two campaigns per week yield good results, but then, results tail off, significantly.

Let's pretend you are the CEO of this company.  You're currently sending out two campaigns per week.  Given the results of the frequency test above, why not send a third campaign per week?  Pretend you have an email marketing list of 100,000 subscribers.
  • 100,000 * $0.08 demand per message * 52 weeks = $416,000 demand.
  • 100,000 * $0.02 profit per message * 52 weeks = $104,000 profit.
Why would you not want to generate an incremental $104,000 profit?

Yes, I realize we're supposed to focus on relevant and engaging messages, most likely trigger-based ones.  And yes, we may have more customers opt-out of email marketing campaigns (you measure specifically who opts out ... best customers vs. inactives, and you measure what they spend in other channels, right?).  But that doesn't stop us from adding one contact per week, especially if we have email frequency tests that prove that the end result is more profitable.

Test email contact frequency.  You may be surprised by what you learn!

Want to learn more about email marketing excellence?

November 11, 2012

Dear Catalog CEOs: Finding New Customers

Dear Catalog CEOs:

Most of you tell me that you love Abacus because "it scales".  Maybe a more appropriate term might be "you can spend an unlimited amount of money with no human intervention whatsoever".

This is why the co-ops beat out list organizations, right?  Just spend $60,000 and you get access to a million names, with essentially zero effort.

Conversely, you tell me that online marketing "does not scale".  You hate the concept of managing 50,000 keyword phrases, and display ads simply don't work well enough to generate even a handful of names.  For customers age 51-67 (Judy), social media is meaningless, so you don't get the viral benefits that younger brands enjoy.

What to do?

MyHabit gives $20 credits if you invite friends.

DirecTV just gave me $100 for referring a new customer to them.
So there are other ways to manage new customer acquisition, aren't there?  These methods, of course, require customers to do the work, and require customers to love our businesses so much that they want to spread the word.  In other words, we have to do a lot of hard work (merchandising, customer service), ahead of time, in order to enjoy the downstream benefits of our work.

November 08, 2012

Simulations

This image tells us a lot, doesn't it?

The blue line is the prediction of a United States forecasting model, five days prior to Sandy making landfall.

The red line is the prediction of a European forecasting model, five days prior to Sandy making landfall.

The white line is what actually happened.

Both forecasts apply complex laws of physics.  Based on assumptions and initial conditions, the forecasts diverge, quickly.  Neither forecast was right, but the European forecast yielded the same outcome, and that's what matters.

You can hardly blame forecasters for trusting the "US GFS" model forecast above ... I mean, when does a hurricane abruptly turn left and head directly into the prevailing winds?

It almost makes you wonder how blind we are to "left turns" in marketing?

Speaking of marketing ... we read stuff like this on Twitter, nearly every day.
  • By 2017, Woodside Research predicts that 80% of e-commerce transactions will take place on mobile devices, with Facebook influencing 50% of all purchases.
The message is re-tweeted a couple thousand times, with appended comments like "WOW" or "WHOA" or "IS YOUR BUSINESS READY?" or "SAVVY LEADERS ARE ALREADY TAKING ADVANTAGE OF THIS BURGEONING OPPORTUNITY".

Wow!

You've observed how many marketing projections are generated, right?  I have.  We see a trend that looks something like this:
  • 2009 = 2%.
  • 2010 = 4%.
  • 2011 = 8%.
  • 2012 = 12%.
Based on this relationship, we moisten our right hand thumb, put it in the air, and derive an estimate of the future.
  • 2013 = 18%.
  • 2014 = 27%.
  • 2015 = 40%.
  • 2016 = 60%.
  • 2017 = 80%.
And then folks publish the forecast, making people pay $495 for access to the information.

Have you ever witnessed how e-commerce sales predictions are often made?  We take traffic, conversion, and average order as our key metrics.  They we start guessing.
  • 2012:  Traffic = 10,000,000 ... Conversion Rate = 5% ... AOV = $100 ... Demand = $50,000,000.
  • 2013:  We'll guess that traffic increases by 5% ... and our online marketing folks have all sorts of tricks up their sleeves to increase conversion, so we'll bump that up to 5.5%, and average order value will increase to $105 because of our cross-selling strategies ... so 10,500,000 * 0.055 * $105 = $60,637,500.
Then we buy merchandise for the year, and wonder why we are seriously overstocked three months into the new fiscal year, having to discount everything to "move inventory"?

In the real world, simulations play a huge role in shaping industries.  In weather, slightly different initial conditions are simulated, so that we can see how forecasts vary.  Pilots are challenged to unusual conditions in flight simulators, giving them practice that they can apply in actual situations.  Population Biologists simulate the impact of human factors and weather on animal populations (i.e. what happens to the insect population if bat populations are reduced by 50%).  Traffic analysts simulate what might happen if a major freeway is closed during rush hour.  Governments frequently execute "war games", simulating combustible situations without putting lives at risk.

One wonders why we accept such flimsy forecasting tools in marketing, when so many others in so many professions happily apply simulation tools to their daily jobs?

It might be time for us to focus on what simulations can do to help us see the future, don't you think?