The Life Spiral: New Channels

Businesses in the "Life Spiral" frequently exhibit a nice diversity of old and new channels.


Take social, for instance.  The average catalog brand creates a Twitter presence, then offers thirty-five or forty tweets encouraging the customer to take 20% off plus free shipping.  Predictably, the channel doesn't work, it is determined that "social doesn't work", and that's the end of the story.  Over time, a preferred channel takes hold, and the customer ages along with the channel.


Businesses climbing the "Life Spiral" experiment with new channels.  They simply don't focus on the "core business".  They earn merchandise productivity after seeding the business with new products and new customers, using improved profitability to experiment, to not rest on laurels.


Businesses climbing the "Life Spiral" prioritize experimentation.  A mobile initiative is not buried on the information technology "Book of Work" ... folks happily choose to build the mobile website, Management gladly prioritizes the new opportunity over the re-write of the COBOL-based order-entry system.


Businesses climbing the "Life Spiral" do not over-think attribution.  These businesses simply don't care if the mobile site fully cannibalizes e-commerce (see eBay), instead, these businesses seek to learn as much as possible, not necessarily trying to be industry leaders but instead quantifying how customers respond to new opportunities.


Businesses climbing the "Life Spiral" assign a purpose to a channel, choosing to not expand into new channels because a blogger or a trade journalist write an article.  A mobile initiative surrounds solving a real customer need.  Social Media is often assigned to customer service, not marketing, in order to take care of genuine customer problems.  Affiliate marketing programs yield customers that are assigned to outlet/clearance contact strategies, given the propensity of the customer to look for a deal.


When a business climbs the "Life Spiral", clarity of channels becomes obvious.  Every new channel is assigned a strategic place in the company ecosystem.  Employees are not demonized if a channel fails.  Sales attribution is secondary to the knowledge gained in new channels.

The Life Spiral: Merchandise Productivity

The most successful businesses I work with make merchandise productivity their number one initiative.


You'll know that marketing has bought in to merchandise productivity by their actions.

1. Does your Chief Marketing Officer babble endlessly about his love of merchandise on Twitter?
2. Does your E-Mail marketing team use your subject lines to promote promotions, or to promote merchandise?
3. Does your Analytics Expert spend a disproportionate amount of time moonlighting on projects to support the Merchandising Team?
4. Company chatter shifts from sales events to new product arrivals.

Successful businesses possess merchants who crave knowledge of how their products perform.

1. They demand reporting that illustrates item profitability by search term.
2. They demand reporting that illustrates sales volume within email campaigns, especially by customer segment within the campaign.
3. They need to understand how much of annual sales volume, by item, is not driven by marketing efforts ... in other words, they want to know how much of annual item sales is generated only because the customer craves the products sold by the merchant.

These days, we read all about the "data driven culture".  That's not a bad thing.  But I'd rather be associated with a "merchant driven culture".


Businesses ascending the "Life Spiral" fuse merchandise reporting and customer reporting.  Vendors would say that this is all about "breaking down silos", but that's not the case.  Instead, it's an output of a culture where marketing and merchandising are uniquely focused on measuring merchandise productivity.  These businesses endlessly care about identifying ways to encourage each and every item to generate more sales.


Businesses ascending the "Life Spiral" evaluate item profitability, without prejudice.  Merchandising, Marketing, Inventory, Operations, E-Comnmerce, Finance, Human Resources ... all departments meet monthly, thoroughly evaluating the performance of every item sold.  Everybody talks about everything.  These aren't meetings where everybody produces canned reports and offers canned speeches.  Instead, these are genuine meetings where the employees are passionate about merchandise.


When a business ascends the "Life Spiral", all employees become passionate about merchandise productivity ... all employees cannot help but exude love for the products sold by the business.

The Life Spiral: Low Cost Customer Acquisition

When I look at the most successful companies I work with, I notice similar trends.

1. A twelve-month buyer file that is growing.
2. Annual retention rates that are not necessarily increasing or decreasing.
3. New customer counts that increase at healthy rates, year-over-year.
4. A diversity of sources for new customers, no one source accounts for a disproportionate number of new customers.
5. Profit per New Customer, on average, tends to improve over time, enabling the business to expand new customer acquisition activities.
6. Catalog Marketers offer Prospect Catalogs, smaller page counts with best-selling merchandise, enabling the business to significantly improve productivity and increase profit per new customer.
7. Focus is on customers, not channels.  The goal is to find inexpensive ways to acquire new customers.  If newspaper ads work best, the business doesn't care, it simply expands into newspaper ads.  Magazines, radio, television, billboards, search, whatever the channel, the business doesn't care, it simply seeks to find new customers.
8. A "variable budget".  In other words, the Finance Department allows the marketing team to spend infinite dollars, as long as profit per new customer meets a pre-established threshold.
9. Twelve Month Payback:  Most successful businesses are willing to lose money on customer acquisition, at an incremental level, as long as the customer pays back over a twelve-month period of time.
10. Customer Age:  Successful businesses tend to acquire younger customers, so that the average age of the customer does not age near the rate of time (i.e. each year that passes is matched with a customer file that is one year older).
11. Full Price Purchases:  Successful businesses, unless discounts/promotions/pricing are part of the company ethos, tend to acquire customers who purchase at full price. Purchases at full price guarantee that profit will be generated on the transaction.

Businesses that are set up for success tend to exhibit many of these characteristics.  For 2012, set up a series of objectives based on these traits.  Inspire your organization to significantly increase the overall productivity and performance of customer acquisition activities.  After you experience success in 2012, get ready to enjoy sales increases that happen in 2013 because of the hard work you execute during 2012.

The Life Spiral: New Items

By now, you feel depressed.


You spent a full month reading about all of the ways that your business may be in decline.  Heck, you probably asked somebody to run a few queries for you, and you realized that your business has a few attributes associated with the death spiral.


So this week, we're going to talk about some of the things that successful businesses do.  Do some of these things, and you may be climbing the "Life Spiral" in no time.




Topic = New Items


New items are the life blood of any company.


Successful companies view new items like a baseball team views a farm system.  In baseball, you have maybe two hundred players performing at different levels in a farm system.  The players who exhibit the best performance move up, from Rookie Ball to Class A to AA to AAA.  Eventually, if the player is really, really talented, the player makes it to the Major League team.


New items act in a similar manner.  I frequently do work where a business will introduce 200 new items ... and five years later, only 10 of the items are what I would call "Grade A" items, items that are responsible for a disproportionate share of total company net sales.


If you want to put your company on a path toward the "Life Spiral" (i.e. unfettered sales and profit success), focus on measuring the success of new items.  Are new customers using search to find these items?  Do certain new products outperform best products in email campaigns?


Companies experiencing success have new items that follow one of two trajectories.

1. The business experiences new product success at greater rates over time (hard to do).
2. The business generated new products at a faster rate, allowing more new items to become best sellers.

You can look back to 2008, and see how businesses responded to new merchandise initiatives.  Many companies cut back on customer acquisition when the economy collapsed.  Many companies also cut back on product development.


Products developed in 2008 - 2009 are the ones that are paying the bills today.


And products developed in 2011 - 2012 will be the ones that pay the bills in 2014 - 2015.


A laser-like focus on new products is critical to the long-term success of a business.  If you are a CEO, create an initiative to increase new item development by 15% in 2012.  If you are a marketer, find every example in your catalog marketing efforts, email marketing, search marketing, retargeting, mobile, social and e-commerce activities where new items are successful.  There is a formula for success, here, waiting to be discovered.  If you are an analyst, generate reporting that helps every employee in your company understand the critical importance of new items in the long-term health of your business.


New items are as important as new customers in the "Life Spiral" ... invest time and energy today, and your business may well ascend the "Life Spiral" in a few years!