Borrowing From Others

In football, pro teams liberally borrow from colleges, and colleges happily borrow from high schools. Read this article for details (click here).

I arrived at Eddie Bauer in the mid-1990s. The marketing team had a group that performed competitive analytics. An analyst straight out of college waltzed into Gap and documented everything Gap at Bellevue Square did, in plain sight. Promotions. Floorset changes. Pricing of key competitive items. I recall the times the Store Manager saw our analyst coming and banned him (and his camera) from the store.

I also remember the times when the young analyst lined up a conference room with the promotional strategies used by all of our competitors. He had the blueprint, the DNA of every company on the wall. We borrowed the stuff that fit with our way of doing things.

I frequently talk about the Great Eight.

A key element of a credible Optimization Program includes borrowing from others. If Stitch Fix uses regression and neural networks to determine what a customer is likely to purchase next, and you compete against Stitch Fix, then you have every opportunity to liberally borrow their ideas and import 'em into your Marketing Management System. It doesn't guarantee that the ideas will work, but it most certainly guarantees that you'll come up with a Marketing Management System that is unique and fully your own. As a new Marketing Leader, the last thing you want to do is fail because you clung to the failures of your predecessor.

Borrow from others. Combine what they do with what you do best. Allow your own Marketing Management System to evolve and thrive. Teach your ideas to everybody who will listen.

It's Your Fault, Part 2

A few days ago I told you a story from my time at Eddie Bauer. As the new Circulation Director, it didn't take long for the problems of the prior Leadership group to be pinned on me. That's the way the world works.

By mid-September the Green Bay Packers might get off to an 0-2 start. Even though the new coach will largely coach players from the failed regime, the 0-2 record will be his fault. If you are going to be blamed for an 0-2 start, at least be blamed for doing things your way, right?

The same logic works for you, the New Marketing Leader. Why should you be blamed for things that your company did a year ago, things that were so lousy that it caused you to earn your new job as a Leader?

And yet, we see this happen all the time. In catalog marketing, the New Leader comes in and keeps mailing the darn catalogs ... same in-home dates, same circulation levels, same vendors, same geeky math. In e-commerce, it's the same boring five emails per week, not personalized, blasted to the same customers expecting 40% off plus free shipping because you've sent the customer more than a thousand of these over the past four years.

Do that and you'll start off with an 0-2 record ... and then the problems are your fault.

Do you want the problems of the old regime to be your fault?

Absolutely not.

You are a New Marketing Leader. Chart a new course. Your course. Don't continue doing the same darn stuff that got your predecessor fired. Have a Marketing Management System in place on Day One, a system fully unique to you. If you are going to fail, fail your way. If you are going to succeed, get the credit you deserve.

A New Start

My football team is the Green Bay Packers. They have to be my team ... I grew up 35 miles from Lambeau Field.

My team completed back-to-back 7-9 and 6-9-1 seasons. The former head coach was fired in December ... Super Bowl winning head coaches are seldom fired, but then again, the last time the team was this bad e-commerce didn't exist (1990-1991).

The new head coach isn't even 40 years old. He comes from a coaching tree that produced the past two NFC Champions. He's never been a head coach, he only called plays for one season, and yet he's been given the keys to Aaron Rodger's car.

When a new coach is hired, the new coach brings in a new style ... in this case, a new offense. Articles are written, research is done, and we end up having a "feel" for what the new coach is likely to do. You look at how the Redskins played in 2012, how Atlanta played in 2016, how the Rams played in 2017, and how the Titans played in 2018. Elements of those offenses are likely to become the new Packers offense.

The new coach hired his staff. In April, the team will draft new players, and come July the pieces all fit together. In early September, we'll begin to see what the new team looks like.

This Spring is filled with New Marketing Leaders. You folks are giving your brands a new start. Your co-workers are looking at you, trying to figure out what "system" you bring to the table. Are you going to do things they way they've always been done? What "newness" are you bringing to the table? What is your secret to increase sales and improve profitability? Are you going to employ the old, stale "omnichannel" strategy that doomed so many retailers? Will your focus be digital, and if so, how will you employ mobile and social and Google and Facebook (yes, social and paid ads on Facebook are fundamentally different)?

You better darn well have a marketing system in place, right?

Right??

I advocate a system that focuses on what I call the "Great Eight":

• Audience.
• Awareness.
• Acquisition.
• Welcome Program.
• Anniversary Program.
• Optimization Program.
• New Merchandise.
• Winning Merchandise.

There should be a plan for each of the eight areas of study. And you should know what your plan is as close to day one as is humanly possible.

There's no guarantee that you'll succeed ... or fail. You might be brilliant and fail, you might be a dimwit and luck into wild success. But if you have a plan, from day one, a system that is all your own, you'll have better odds than other new marketing leaders.

Have a plan. And for goodness sake, implement your own system ... something only you do, something that is fully unique to the skills only you possess. 

The New Marketing Leader

Yesterday I told the story of the birth of "Merchandise Productivity" and "Marketing Productivity". Those concepts evolved significantly, especially once I began doing consulting work and had to ferret-out the real reasons (merchandise and new customers) businesses were failing.

As a New Marketing Leader, you are typically being thrust into a bad situation. If your brand was "winning" it would not be making changes.

So you need to chart your own course ... you know what you should do, you know what is likely to work and not work ... and yet, you've got a ton of co-workers who have expectations of you ... their expectations. They don't know anything about marketing, but they have strong ideas about what you should do, nonetheless. And if you don't do what they expect you to do, you're a moron!!

So you need to set expectations from Day One.

There's nothing wrong with soliciting advice from your merchant, inventory, tech, and creative partners. Go ahead and let the Operations Director tell you what she heard about at a Woodside Research conference.

Then, after soliciting advice, craft your plan for your brand using The Great Eight above. Take their ideas, and repackage them based on what you know needs to happen. Communicate to all what you are going to do via each category above. Then get busy ... and when somebody has an idea to increase conversion rates by 30%, fit the idea into The Great Eight, where the idea likely falls into the "Acquisition" category or the "Optimization Program" or "Winning Merchandise". Turn the tables ... put the responsibility for the increase on your co-workers.

Set expectations from Day One. Use The Great Eight to structure plans and discussions.

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It's Your Fault!!

The transition from analytics to business can be a rather spicy endeavor.

Back in January 1998, I changed jobs. No longer was I an analytics dork with a greaseboard full of requested queries in prioritized order ("Please tell us how many customers who responded to our Family & Friends offer also purchased denim, priority is 9 of 10, k thx") ... nooooo ... I was now a dork who thought I could actually run something. And Management listened to me! Just like that, I was the Director of Circulation. Pay raise. A team of a dozen people.

We had quarterly meetings with the Leadership of our catalog (and budding online) division. Business was AWFUL. I spent the first three months in my job figuring out how to liquidate merchandise in any possible way without "damaging the brand". On the surface, you'd think that was possible. In reality, the reason you are trying to liquidate without damaging the brand is because the brand has been damaged by lousy merchandise.

Eddie Bauer loved planning. LOVED. IT. A month into my job and I'm planning Spring-Summer 1999 (it was February 1998). This means I had to use current-day performance to predict business performance fifteen months out.

Oh oh.

Current performance was awful. 

This meant I forecasted future performance would be ... wait for it ... wait for it ... awful!

Naive, I waltzed into this meeting and presented my catalog/online division plan for Spring/Summer 1999 (in February 1998). I expected this team of thirty business leaders to adore my vision, respect my precise forecasting ability, and embrace my immaculate spreadsheet calculations.

About five minutes later I peered up from under the table. The team ran out of bottles to throw at me, so things died down a bit. If there was a single three-word sentiment that encapsulated the barrage, it was this:

• "It's your fault."

Yes, blame for business that would not yet transpire for fifteen months was my fault!

The Chief Merchandising Officer was particularly offended with my wizardry. "Our assortment next Spring will be trend-right and brand-appropriate. How could you torpedo us like this?"

The next comment came from our CEO.

• "Kevin, what are YOU going to do to fix the business? What is the sales lift you are willing to sign up for??"

Strong hint - I was never going to sign up for a sales lift, given bad trends. But I might sign up for increases based off of improved merchandising, if somebody could demonstrate to me that the productivity of the merchandise had improved.

That's where the concept of Merchandise Productivity was born.

The reason my plan for Spring/Summer 1999 was so awful wasn't because I was sinking the business into oblivion (at least I don't think it was) ... it was because customers hated our merchandise and the last thing I was going to do was forecast a 15% sales rebound and then have inventory bought to my level of optimism and then have to liquidate all over again without "damaging the brand".

I had three months before the next big meeting. In this time, I had to come up with a formula that allowed each team to "sign up" for the sales lift they promised. And I had to do this in a fair way without causing false gains that would result in more liquidation opportunities.

Step 1:  Our Inventory Director (not the merchants) would optimize the page count for each division within a catalog. If we had 48 pages of Mens, and Mens only deserved 40 pages, she authored 40 pages. I then calculated the productivity of 40 good pages vs. 40 good pages and 8 awful pages. Let's say this resulted in a 10% increase in demand per thousand pages circulated. The 10% increase was what the MERCHANDISING TEAM signed up for. Mind you - not one merchant did anything to cause this ... but we had to come up with a way to fix the business without expecting the merchandise to ever improve.

Step 2:  When the Inventory Director achieved a 10% increase in demand per thousand pages circulated, I was able to circulate deeper. So I'd do just that ... I'd mail more catalogs. The incremental gain in demand from the additional catalogs mailed was attributed to MARKETING PRODUCTIVITY ... even though we didn't change marketing strategy one bit!! This frequently caused a +/- 5% demand gain.

Step 3:  Going into the next meeting, we assigned the gains that each of us "signed up" for:

• Merchandising = +10%.
• Marketing = +5%.
• Creative = 0%.

Again, there's no change in merchandising strategy, there's no change in marketing strategy, there's no change in creative strategy. There's the Inventory Director manipulating pages to make catalogs more productive, and there's the Circulation Director mailing more catalogs because crappy merchandise isn't allowed in the catalog so I can mail deeper.

This made the thirty-ish Leaders in the room very, very happy. Marketing and Merchandising were doing something to fix the business.

The business was never fixed. True merchandise productivity was flat or even fell marginally in 1999. Sales barely grew.

But ... BUT ... we bought inventory to just shy of our plan ... and we didn't allow the customer (especially unproductive customers) to see the garbage that wasn't selling. In fact, we took 3,000,000 in 200 page circulation and 3,000,000 in 64 page prospect catalog circulation and converted it into 1,500,000 in 180 page circulation and 5,000,000 in 64 page prospect circulation (I don't remember the exact numbers, so don't hold me to this) ... and that change in "productivity mix" caused us to be a lot more profitable on comparable sales volume.

Tack on a $3 "handling fee" (which you could never get away with in 2019 ... but in 1999 that added a lot of pure profit) and we had a record year for profit in 1999 ... and the Merchants and Marketers were happy because the productivity gains they "signed up for" were realized.

That's business, folks. Business isn't "4 Tips For Success". It's identifying ways to navigate various factions while still doing what is right for the company. 

You have it in your to be clever as well. Use your creativity in a positive manner!

Existing Merchandise Links to New Merchandise

Here's a trend that keeps coming up:

• A new CEO is hired because a brand isn't performing well.
• The new CEO brings in a new Merchandising leader.
• The new Merchandising leader "hates" what has been sold the past few years.
• The new Merchandising leader discontinues or de-emphasizes the stuff sold the past few years.
• The new Merchandising leader introduces merch that is "brand appropriate" for the new direction prescribed by Leadership.
• Invariably, new merchandise doesn't perform to expectations.
• Because the existing assortment was largely discontinued, there is now a merchandising hole.
• New merchandise (weak) becomes Existing merchandise (which by definition is now weak because the new stuff didn't work well and better existing merchandise was discontinued).
• The brand suffers a multi-year hangover.

There's an art to transitioning your merchandising strategy. You must hang on to the old winners, even if you don't like 'em, until you have enough winning new merchandise that links to winning existing merchandise.

Linkages In Brand Portfolios

Say you have a brand portfolio like Potpourri Group (click here).

Each brand in the portfolio plays a key role. There are linkages between brands. A couple of brands do they heavy lifting ... they generate new customers via the co-ops, Google, and Facebook. Other brands are linked to the brands that do heavy lifting ... the brand that generates a new customer via a catalog co-op passes the customer along to the brand linked to it. Without the heavy lifting, the brand linked to the acquisition brand dries up.

With a brand portfolio it is critical to understand linkages. If Cuddledown is dependent upon Serengeti for new customers, then Management must make sure that Serengeti has a robust low-cost / no-cost customer acquisition program that generates enough new customers each year to cross over into Cuddledown.

It's not wise to starve downstream brands by cutting customer acquisition in other brands ... you end up starving the whole ecosystem.