A CMO In Over His Head

Buy the Kindle version for just $0.99!!

I worked with a new Chief Marketing Officer. This poor dude was in OVER HIS HEAD!

He had no reporting to tell him what was really happening with his company.

He had one (1) analyst, and the analyst was not qualified to help the CMO. The analyst had pre-conceived ideas for how to "target" customers, and spent all day experimenting with different targeting equations. When I sat down with the analyst, I could easily see that the analyst new nothing about marketing other than targeting equations. He sounded a lot like me in my first year at Lands' End. However, he had a job one or two levels higher than my first job at Lands' End.

The CMO had an adversarial relationship with the merchandising team. I sat in a meeting where the merchandising team absolutely mulched the CMO. "You're the reason sales are down, you have no idea how to attract the right audience for what we sell!" was a direct quote ... and interestingly, the CMO had been in the job for maybe three or four months and was not working at the company when the sales downturn happened.

My time with the company ended a few months later when the CMO and the Analyst lit me up on the phone about the fact that merchandise productivity was poor. "You should fix this problem, this isn't our fault" was the quote I remember the CMO issuing, with the Analyst piling on for effect. Clearly, the two of them were transferring the assault they received from their marketing team on to me.

My work was done on that day.

The CMO was fired a few months later.

The Analyst kept working at the company.

It has been my experience that too many new Marketing Leaders have no idea what they are in for. They don't do the proper research before taking the job, they don't have the proper analytics when they begin working (i.e. Google Analytics gives you the wrong metrics to diagnose the true problem), and they don't know what levers to pull to move the business forward after they've been employed for a few months.

Hillstrom's Total Package teaches a process for the new Marketing Leader to implement on Day One of her tenure. Give the booklet a read (again, the Kindle version is just $0.99), and then start your tenure as a new Marketing Leader the right way ... be informed before you make decisions, ok?

What Is The Problem, Exactly?

Get your own copy for just $0.99!

When I became Vice President of Direct Marketing at Nordstrom, I was fortunate. I was given a bunch of data in the week before I started working there - after signing an agreement of course. I was able to discern that Merchandise Productivity was down about 25%.

Have you ever tried to turn around a profit-and-loss statement ($300 million sales, $30 million loss) on flat productivity? That's hard work! Now try doing that when Merchandise Productivity is down 25%!!!!

By having access to the data before Day One, I was able to craft a plan to generate $9,000,000 in profit on Day One ... the first year would be about fixing lots of marketing problems while the merchandising team fixed their issues.

The problems were three-fold.

• Merchandise Productivity.
• Sloppy Marketing Profitability Analysis.
• Incomplete View of Customer Behavior (Catalog, Online, Retail).

Knowing that Merchandise Productivity was a huge issue, my team and I authored an annual marketing plan that allowed us to keep the wheels on the bus and actually increase profitability on a reduction in Merchandise Productivity. The merchandising team did a fabulous job of digging out of a huge hole. The online team did a great job of transitioning customers from catalogs to online shopping. The inventory team didn't buy too much merchandise, and as a result, unprofitable liquidation activity evaporated. And a new customer database was installed twenty-one months later.

Our Executive Team fixed the problems.

It took two years to get to break-even, and nearly four years to post healthy profit.

But ten months into the turnaround, the Chief Merchant and I were struggling to keep our job(s). When business isn't great, the Marketer or the Merchant are on the chopping block.

I'm trying to prevent you from being on the chopping block.

I had a process, a process based on my experiences at Lands' End and Eddie Bauer. The process allowed my marketing team to know what was truly wrong with the business from Day One, and to make profitable changes that protected the Marketing Team.

There's a reason that Marketing Leaders frequently flame out after two years ... they don't know what, exactly, the true problem is.

In this booklet, I share analytics and a process. The combination of analytics/process allow the new Marketing Leader to know what the problem is, exactly, enabling the new Marketing Leader to get a head start on fixing the business while protecting his/her job.

The New Marketing Leader

Looking across e-commerce, there's something interesting and fun going on. A new generation of Marketing Leaders are being put in charge of marketing. Nine years of reasonable business performance coupled with a large generation of newly minted marketers learning mobile techniques yielded a cohort of smart people who have worked their way up to the Director / Vice President level.

These folks deserve a better outcome than the generations that came before them.

It's been 21 years since I became Director of Circulation/Analytics at Eddie Bauer - my first marketing job where I allegedly had responsibility for a budget (about $150,000,000). I lasted two years in the job before I tried something different. At first, my problem was the team I inherited. They weren't thrilled that I was their boss. As one individual said, "you don't know anything about this stuff, so I guess we'll have to teach you so that you can look good." Zing.

Fortunately I had run many of the analytics outlined in Hillstrom's Total Package (Click here to purchase on Amazon). I knew what I was up against. I inherited a complete mess, one that took two full years to rebuild. The analytics in the booklet helped a few of us put the business on the right path. The analytics surfaced key merchandising issues that we (well, not me) were able to solve. Two years later we were posting record profit.

Now, if I didn't have the analytics and processes outlined in this booklet, I'd have gone down a different path and I'm not confident the business would have been fixed. Business would have been better, but not fixed.

New Marketing Leaders are put in bad places. They're typically asked to fix a situation that needs to be fixed by the merchandising team and/or creative team, and when the problem isn't fixed by the merchants / creative team, the marketer gets blamed. Worse, the marketer is typically fired, and another inexperienced and unprepared Professional is thrust into a no-win situation.

I do not want to see that happen to a new generation of Marketing Leaders. We have highly bright individuals with endless e-commerce and mobile skills moving into situations where they have to fix problems that are not their doing nor are anything that the new Marketing Leader has control over.

This booklet outlines a process I developed during my tenure at Lands' End and Eddie Bauer ... the process was used far less at Nordstrom for obvious reasons (discussed in the booklet). In the past three years, I increasingly see Marketers who are put in bad situations, and are then blamed for problems that aren't of their own doing. By reading this booklet, the new Marketing Leader can set the organization down a "path of accountability".

More on the topic tomorrow.

Hillstrom's Total Package

Yup, it's time for another booklet, this time including 80+ pages of goodies for the New Marketing Leader ... it's called Hillstrom's Total Package.

Click here to purchase on Amazon.

Let's talk for a brief second about pricing before the complaints begin, ok?

The print version is $14.99. This means that I make $2.26 and Amazon makes $12.73. The most common complaint I get about these booklets is that they are "too expensive". Well, if I lower the price to $12.99 I make $1.00 and Amazon makes $11.99. Go any lower and I make no money and Amazon gets everything. So the price is $14.99, and if you don't like that fact then I have good news for you.

The Kindle version of the booklet is $0.99.

Yes, you heard that right ... $0.99!!!

On the Kindle platform, there are two different pricing options. The first option is to price the booklet at $2.99 or higher and earn a 70% commission. If I charged $14.99 for the booklet I'd make $10.49. The second option is to price the book at an extremely inexpensive price point and earn a 35% commission.

So I'm conducting an experiment. I'm pricing the Kindle version at $0.99 and I get a whopping $0.34 while Amazon gets $0.65. And yes, I get it, some of you will say that this is dumb and I should just give the pdf away. Readers always have opinions ... and Amazon will always get the money.

Now it is time for you to act. If you have a spare dollar, use it, buy the Kindle version and tell every person you know to buy the Kindle version and let's see if the reader hypothesis of "Low Prices on Booklets" can be verified or proven wrong.

Tomorrow, I'll begin sharing what is in the booklet and will describe why you, the New Marketing Leader, should buy it.

Using Discounts To Influence Customer Behavior

The biggest marketing challenge I get to see is this ...

1. Merchandise Productivity isn't acceptable.
2. Marketing is blamed for the decline in productivity.
3. Marketing does not have the proper tools in the toolbox to fix a merchandising problem.
4. Therefore, marketing enacts all methods of discounting ... including free shipping, 10% off, 20% off, 30% off, 40% off, 40% off plus free shipping, and the classic ... loyalty program points.
5. The customer attracted to discounts, promotions, and loyalty points becomes "the customer" ... in other words, a self-selection occurs where the customers who love various marketing programs are more likely to respond to the programs, and/or prior full-price customers become discount-centric buyers, and once that happens, the customer is less likely to go back to full-price purchasing activity.
6. The brand is paralyzed ... locked into discounts/promotions without a solution for the merchandise productivity problem.

You'll tell me that discounts are unavoidable - they're a competitive tool you are forced to use. Ok.

So if we assume you cannot get out from under 30% off plus free shipping, and you cannot improve merchandise productivity, then we have to realize that "something" needs to be done.

So look at the table above. Do you see the color bands? The color bands represent customers with comparable monthly response levels. The color bands demonstrate customers with comparable behavior. Look at the purple band. These are customers with monthly response rates between 5% and 10%. That's a pretty good level of responsiveness!

When a customer becomes loyal, the customer is responsive, and the customer can be moved somewhat. 

When a customer is a first-time buyer, the customer is responsive for a brief period of time.

We owe it to our businesses to do something about this short timeframe. There are more customers in these three segments (first three month after a purchase) than there are in any other segment. We can use discounts to influence these customers, sure. But maybe we need to have a Welcome Program that helps grow our customer base before the customers lapse and we have no choice but to use discounts/promotions as our only lever.

Improvements Among 13+ Month Buyers

Ok, I ran a scenario where I improved the response of every 13-24 month buyer by 15% each and every month. This is different than increasing response by 15% for first-time buyers. We can probably agree that this is a much more aggressive strategy than something that impacts first-time buyers for just three months, right?

Fortunately, the outcome is about similar to a Welcome Program that increases response by 15% for months 1/2/3. Darn near identical, in fact!

That's good news, because an awful lot of energy is spent trying to convert lapsed buyers.

That's good news, because it demonstrates that Welcome Programs can be at least as effective as lapsed buyer programs.

Most important - the simulations demonstrate that our businesses have a "set process" in place in terms of customer relationships. The customer is going to do what the customer is going to do.

Allow me to repeat that statement.

• "The customer is going to do what the customer is going to do."

This is why I strongly encourage all of us to work on acquiring new customers. If we want more loyal customers in the future, we need more new customers today.

Would Influencing Buyers Make A Difference?

In this simulation, I look at 10,000 first-time buyers, and instead of simply following the customers on their path for twenty-four months, I instead give first-time buyers a 15% bump in response during each of the first three months on the customer file.

The results are not striking ... they are subtle.

In our "base case", the following quantities of customers migrated to 5x status (at least a 5th purchase):

• 5x = 264.
• 6x = 114.
• 7x = 46.
• 8x = 17.
• 9x = 6.
• 10x = 2.
• 11x = 1.

If we bump response by 15% in months 1/2/3, migration is modestly changed.

• 5x = 279.
• 6x = 121.
• 7x = 49.
• 8x = 18.
• 9x = 7.
• 10x = 2.
• 11x = 1.

That's not much of a difference, is it?

Total non-repurchasers after twenty-four months?

• Base Case = 5,474.
• 15% Gain (Months 1/2/3) = 5,335.

Repurchasers change from 4,526 to 4,635.

We are able to modestly re-direct customer behavior.

Now, you might not think this makes much difference, and you are largely correct.

There is an impact on demand from this cohort over twenty-four months.

• Base Case = $437,200.
• 15% Gain (Months 1/2/3) = $454,900.
• Gain = +4%.

So we are able to increase demand by 4% by implementing a Welcome Program for months 1/2/3. 

Tomorrow, we'll look at a case where we don't execute a Welcome Program and instead to try reactivate lapsed buyers outside of 12 months.