I Don't Have Control Over New Customers Anymore

We dig into the findings of a Marketing Budget Experiment. The CEO is anxious, because 72% of Paid Social customers are new, while 28% are existing buyers.

"It's like I don't have control over new customers anymore. In this case, I advertise but a quarter of my money is going to housefile customers."

E-commerce Executives would analyze that comment with a sense of bewilderment unmatched in modern marketing.

When I made the rounds in 2016, speaking all across the country about the importance of customer acquisition programs, folks would sit in the audience with laptops and phones, evaluating the companies I discussed. "That brand is at 30% off today. I guess their program doesn't work!" Well, no, that means their marketing staff don't know how to convert customers to purchase so they have to create a game. It does not mean they don't know how to bring traffic in to a website.

In 2016, print-based brands could still generate new customers via "control" ... tell the bulk name center (co-ops) they wanted 800,000 de-duped names, send a catalog, and six weeks later there were 10,00 new customers.

In 2020, people were quarantined in their homes - customer acquisition surged.

In 2022, the paper folks nuked the industry. It became horribly hard to even find paper to maintain the 40 year tradition of buying prospects in bulk.

So here in 2023, an old industry speaking to old prospects doesn't have the old tools necessary to control customers anymore. The laughable customer acquisition program discussed in 2016 becomes essential in 2023 if you want to have any chance of controlling anything.

The Customer Has No Value

Back in the days when clients paid money to have you on campus, there were times when a CEO or Marketing Executive just wanted to "touch base". I learned early in my consulting work that "touch base" sessions needed to be expensive. You don't charge $900/day to have somebody yell at you for eight hours. The key was to charge just enough to encourage a handful of "touch base" sessions but to dissuade the large number of sessions where somebody wanted to yell and was "frugal". Yelling/Frugal is a bad combination. If you want to yell and are frugal, I'll let you do that via Zoom for free.

"Frugal" is a bad word when it comes to customer acquisition.

One such CEO ... a catalog CEO ... wanted to discuss "customer acquisition theory". Theory is also a bad word, as it implies that the CEO can never be wrong because s/he is simply discussing theory. In this case, the CEO was frustrated that paid search customers had no value.

Here's what the math looked like:

• New Catalog Customer = 35% Rebuy Rate, $170 Spend per Repurchaser, 40% Profit Factor, $12.00 Annual Marketing Expense, $11.80 Variable Profit in Year One.
• New Paid Search Customer = 25% Rebuy Rate, $160 Spend per Repurchaser, 40% Profit Factor, $10.00 Annual Marketing Expense, $6.00 Variable Profit in Year One.

He presents this data-driven argument, tells me that the Paid Search customer has "no value", and wants to abandon paid search.

He is wrong, of course.

Just because a customer is less valuable doesn't mean that a customer is not valuable. The customer is simply different.

The CEO became frustrated. "Why would I acquire a customer worth half as much as my catalog customers?" I answered "Because the customer generates enough variable profit to offset fixed costs." This was apparently the wrong answer to offer during a "touch base" ... the CEO became more upset. "This customer won't even buy from my catalogs." I told the CEO that "You don't care if the customer purchases from your catalogs, you only care that the customer purchases." Visibly angry now, the CEO says "What am I supposed to do, acquire two lousy customers to make up for one catalog customer?" I replied "yes".

Here we are, in 2023. A fusion of low co-op response and a paper industry charged with destroying the expense structure of a catalog that resonates among customers age 60+ mean that it is terribly hard to acquire new customers via print.

The choice is to now acquire two customers at $6.00 each instead of one customer at $11.80. The customer that has no value is now "the" customer. On Maslow's Hierarchy of Needs, we're moving toward Acceptance.

Picklemall

Many of you have forwarded articles to me outlining how your local mall is considering taking empty space and turning it into pickleball courts.

Here is one of the concepts, with a key investor being Steve Kuhn from Major League Pickleball. This concept is coming to Arizona Mills in Tempe (click here).

Name one omnichannel expert prescient enough to forecast that adhering to the omnichannel thesis would result in closure of stores, with the square footage being replaced by (checks notes) pickleball?

I mean, in the image, it looks like an entire dead anchor store is being replaced by pickleball.

By the way, if you've never watched pickleball online, watch the Major League Pickleball matchup headed to Southern Cali in two weeks. Crazy good play and energy (#jessieirvine).

Oh Look, Email Marketing Works

Here's a scenario I ran through our Marketing Budget Experiment framework. I simply ended email marketing for the next five years ... none of it whatsoever. What happened?

Oh my goodness.

The impact is multiplicative over time.

Top-Line Demand drops from $229 million to $191 million to $173 million to $149 million to $141 million ... the brand loses $272 million over five years. Woo-boy!

The profit hit is nasty ... dropping $11 million in year one, then $12 million, $14 million, $15 million, and $16 million.

Almost all of the buyers impacted are existing buyers ... down 218,000 five years from now (vs. just 8,000 newbies per year). Take away a key purchasing channel and these customers buy less often ... and they buy less often across all channels because of the dramatic loss of file power.

Rebuy rates? They fall from 49.7% to 37.0% five years from now. There are fewer buyers, and it's a weaker file of buyers.

Next time somebody grumbles about what you're doing with email marketing, put this scenario in front of them ... run it for your brand. Show the critic that s/he doesn't have the slightest idea what s/he is talking about.

And if you don't have the scenario readily available, contact me right now (kevinh@minethatdata.com ... https://blog.minethatdata.com/p/hire-kevin.html) and we'll get busy, ok?

Automation

This tweet (click here) reminded me of a call I received in 2016. 

The call was from a Chief Marketing Officer. He discussed his vision for marketing.

• "I envision being the only marketing employee. I'll sit behind a dashboard, clicking requests to computer systems and vendors who carry out my wishes. No employees. Just me. I can sell anything, and I don't need anybody to sell it."

This day is coming ... not in 2023, but it is coming. Digital marketing can be commoditized. Has been happening for 25 years.

Summer Schedule

As usual, my summer schedule will dial back just a bit ... maybe three posts per week instead of five, sometimes four, sometimes more.

And yes, we'll be focusing on Marketing Budget Experiments ... by the time we get to Fall, you'll need to run 'em to understand how to plan for 2024.

It's Time!

Four months goes by in the blink of an eye.

It's time for the next run of the MineThatData Elite Program. For just $1,000 ($1,800 for new clients) you get my standard suite of metrics plus analysis.

Our October run was the most popular run in program history (eight years), and from what many of you are telling me this run is going to be popular as well, given the difficulty of overcoming price increases over the past two years.

Contact me now (kevinh@minethatdata.com) and we'll get started.