Scott Galloway / Code Commerce Presentation

You've probably already viewed this, but if you haven't, view it and think about it (click here if you are viewing this via email).

Waffle House

When a hurricane hits, you can bet on two things.

(1) Waffle House will be open if they can be open (click here).

(2) Waffle House earns a ton of free advertising because they are open if they can be open.

Now yes, there's a safety issue and somebody somebody will get hurt and there will be a liability issue.

Assuming that never happens, Waffle House has a low-cost / no-cost customer acquisition program that never fails to get attention during trying times.

Yes, there is a parallel for your business. There is something you can do as well, something that gets you free attention. If you don't have anything that comes to mind, you aren't trying hard enough.

We're missing two key components in the "strategies" we employ.

• Not enough Awareness (Waffle House is brilliant at generating awareness).
• Not enough New Customers.

Why not get started with an Awareness program? Do something!!!

The MineThatData Elite Program!!

It's time for the third-and-final run of 2018 for The MineThatData Elite Program!!

As usual, you'll get our array of rolling twelve-month file metrics and comp segment metrics ... both designed to help you understand and diagnose what is going right/wrong with your business.

In this run, you'll also receive a life table analysis designed to illustrate whether your business needs a Welcome Program and/or an Anniversary Program (hint - you might just learn you need both). I will explore how new customers behave immediately after they are acquired. I will explore whether seasonal buying trends are a big deal or not ... and not just Christmas, but any seasonality (i.e. October outerwear buyers, Spring seed buyers, etc).

Cost? It's practically free.

• $1,800 for first-time buyers.
• $1,000 for anybody who participated in one of the eight prior runs.

Contact me (kevinh@minethatdata.com) for file formats and data requirements.

The Great Eight

1 - You must know who your AUDIENCE is. Your customer is different from your audience. Your audience represents the pool of prospects who might someday buy from you as well as your current and lapsed customer base.

2 - You must have an AWARENESS program. End of story. Among the 40% of my client base that is catalog-centric, less than 20% have a credible awareness program. Without a credible awareness program, customer acquisition becomes very expensive.

3 - You must have a credible ACQUISITION program. Online brands grow via Google + Facebook + Instagram. Retail brands historically grew via malls ... and we all know how effective malls are today at helping retailers grow via acquisition. Catalogers leverage co-ops, and they're running out of 65 year old customers to prospect against.

4 - Now that the customer has been acquired, you need a solid WELCOME program. Most companies have 4-12 weeks to convert the newly acquired customer to a second purchase before the customer begins the painful process of lapsing.

5 - The ANNIVERSARY program is used to market milestones to your customer, so that you can push the customer into higher frequency brackets. Did the customer buy outerwear last October? Guess what? Your anniversary program must be ready to re-introduce outerwear to that customer next month. It's here that merchandise personalization plays a key role.

6 - Your OPTIMIZATION program is responsible for most of the marketing profit. E-commerce brands focus on email, catalogers focus on catalogs, retailers frequently focus on loyalty programs and credit.

7 - NEW MERCHANDISE is the lifeblood of a company. Without new merchandise, a company has no future. This is one of the demons haunting traditional retail. The marketer plays a key role here, featuring new merchandise to best customers in optimization programs.

8 - WINNING MERCHANDISE. In modern commerce, the number of winning items shrinks each year, due in part to poor new merchandise programs, due to the fact that everybody sells the same stuff which means that ultimately Amazon and Wal-Mart win (among others). The marketer plays a role here as well, getting winning items in front of prospects, turning prospects into customers.

Excellence in The Great Eight is required.

1. Audience.
2. Awareness.
3. Acquisition.
4. Welcome.
5. Anniversary.
6. Optimization.
7. New Merchandise.
8. Winning Merchandise.

Life Table Explains Lack of Customer Loyalty

I frequently run life tables for 1x buyers, 2x buyers, 3x buyers, and 4x buyers. The trend is fascinating.

Look at the twelve-month repurchase rates by purchase frequency:

• 1x Buyers = 33%.
• 2x Buyers = 48%.
• 3x Buyers = 57%.
• 4x Buyers = 62%.

This is a very typical dynamic.

When a customer has a 60% chance of buying again in the next year, I determine that the customer is "loyal". When a customer has a 60% chance of buying again in the next year, things change. The customer starts generating profit at disproportionate rates ... and that's the key fact we all need to understand ... we want customers who achieve this lofty level of success.

Now think about this differently ... think about how hard it is to get a customer to a fourth purchase?? Let's look at 24 month repurchase rates, and let's do an exercise after looking at the data.

• 1x Buyers = 41%.
• 2x Buyers = 59%.
• 3x Buyers = 66%.
• 4x Buyers = 70%.

Ok, let's multiply the rates together, just as an exercise.

• 0.41 * 0.59 * 0.66 * 0.70 = 0.11.

Now, more customers will become loyal because customers will reactivate after 24 months, but for illustrative purposes this is really important. Just 11% of customers will become "loyal" after being acquired, and it might take between 4 and 8 years for loyalty to happen.

In other words, your loyalty efforts are not going to pay off over the next two years, are they?

This is why Welcome Programs and Anniversary Programs are so darn important ... you have to take advantage of every single opportunity you have, at the times when the customer is responsive.

This is why loyalty programs seldom work for businesses that don't have high-purchase-frequency customers. The odds are simply against loyalty. You have to take advantage of high-response periods, generate as much profit as possible, and then move on to the next new customer.

Credible Marketing Management Systems embed these dynamics into their programs.

Life Tables and Dormant Customer Programs

Look at what happens after the customer has been inactive for thirteen months. 

• Probability of buying in month 14 = 0.8%.
• It gets worse, a lot worse, from there.

When the incremental monthly rebuy rate dips below 1.0%, I determine that the customer is "dormant".

Any credible marketer has a "Dormant Customer Program", heck, you have one, right?

Right?

I know you have one. You offer 40% off plus free shipping and you call it good. So yes, that's a Dormant Customer Program.

Vendors might call 'em "Reactivation Programs". Whatever. What matters is what you do with the program. Hint - the program should be so much more than slapping a discount or promo in an email marketing campaign.

Figure out what the customer previously purchased, and market adjacent products to the customer. Test different creative treatments and messaging. Do anything but be boring.

Turns out this life table methodology is pretty important, huh?

Life Tables and Anniversary Programs

We ended last week by talking about Welcome Programs.

Another important program is your Anniversary Program.

You have an Anniversary Program, right?

Right?

For the past twenty years, my website hosting provider employed their version of an Anniversary Program. Once 10 months have elapsed since my annual purchase, they send me an email and offer me 12 months of service for the price of 10. Done! For twenty consecutive year we've played this dance.

Look at the two "red" rows in the table ... labeled "12" and "24". These are at twelve months and twenty-four months after a first purchase. Notice that the incremental rebuy rates in those specific months are much higher than in surrounding months. This means that the customer is exhibiting "seasonal buying habits".

Seasonal buying habits happen all the time.

• Christmas.
• Spring (for gardening companies).
• Nordstrom Anniversary Sale.
• Web Hosting Companies (as mentioned above).

Way back in the day at Lands' End, we had swimsuit buyers ... they'd buy in February (for spring break), then in March - April (south), then in May - June (north). Well, that's part of your Anniversary Program, right? You use email marketing to speak to the customer as the anniversary of a prior purchase happens, marketing the family of products that the customer likes to buy during an anniversary period, right?

When I worked at Eddie Bauer, we had big anniversary periods in Outerwear in October. Once again, when you know that is the case, you use email marketing to take full advantage.

The life table clearly illustrates the need for Welcome Programs and Anniversary Programs. Please take advantage of what you learned here.

1. Run life tables for first-time buyers.
2. Use email marketing to take full advantage of your Welcome Program and Anniversary Program. It costs you nothing ... and the data strongly suggests that the stakes are high. Again, the cost is virtually nothing ... and the rewards are "something".

Do something!