January 26, 2014

Monday Mailbag

It's time for our new Monday tradition - real and imagined questions from real and imagined readers. Send me your questions (kevinh@minethatdata.com) and I'll answer them!

Our first question comes from Cynthia: "How do I take care of customers who return a lot of merchandise? Can I convince these customers to stop returning merchandise?"
  • Maybe.
  • Some items are pre-destined to have systemic returns issues, while other items will seldom be returned, if ever. Use the Merchandise Forensics framework to identify high-returns items, and work with your merchandising team to understand if high-returns items are still profitable.
  • Just as interesting, however, is how we manage high-returns customers. Once customers get in the habit of returning merchandise, customers will continue to return merchandise. This greatly lowers overall profitability. You can minimize how these customers ruin profitability by not emailing them. Seriously. Stop emailing these customers. Stop mailing catalogs to these customers. Stop retargeting to these customers. Just stop. There are millions of dollars of profit to be had (for larger-sized businesses) by not marketing to high-returns customers.
Our second question comes from Andy: "I work for a large brand. Our CFO told us that our social media efforts are meaningless - she said this in a large meeting, in front of my co-workers. My CFO is wrong. How do I prove she is wrong?"
  • This doesn't have to be a long, complicated, difficult analysis, Andy.
  • Social media, for 97% of the companies I work with, contributes +/- 1% of total volume, on an annual basis. To your CFO, that sounds like a tiny number, no doubt.
  • Let's say that you work for a billion dollar, mall-based retail brand. 1% of a billion dollars is a whopping $10,000,000 of annual sales. 
  • Sit down with your CFO, and ask your CFO to tell you how much of annual net sales flows-through to profit. For most businesses, this percentage is somewhere between 20% and 50% - I find that the average is +/- 40% for most businesses, depending on what the business sells. If it is 40%, then calculate 40% of the annual sales total generated by social media ... 40% of $10,000,000 is $4,000,000 profit.
  • Do you think your CFO will ignore $4,000,000 of annual profit?
  • Stop communicating via "engagement". Communicate using metrics that resonate with Senior Management. Profit resonates with Senior Management.
Our final question comes from Larry: "My email vendor told me to mail fewer emails to customers who don't care about email marketing. My CFO told me that my email vendor is crazy, and should be fired. Who is right?"
  • In most cases, your email vendor is right.
  • I never would have answered that way, until I worked on catalog + email contact strategy projects that proved that the email vendor is "right".
  • Tomorrow, I will demonstrate why your email vendor is right, in a separate blog post.