Case Study: Entry Points Into A Brand And Subsequent Migration

It's so much fun to study categories ... you learn how your business actually works in ways that Spotify reporting just can't replicate.

Let's look at Category = Entertainment. I selected all first-time buyers who purchased from Entertainment in the first order, measuring how their merchandise preferences evolve as the customer advances down the customer life cycle.

Tidbit #1:  If the customer purchased Entertainment in a first order, the customer only spend 33.6% of first order AOV on Entertainment. In other words, the Entertainment item was likely an add-on (Apparel Tops and Home comprised 31.3% of first order AOV).

Tidbit #2:  As the customer evolves, the customer leaves Entertainment, shifting into Apparel Tops. There's not much sense to keep hounding this customer to buy Entertainment when the customer has a natural gravity toward Apparel Tops.

Every brand has gravity. If we see more examples of new buyers ultimately gravitating to Apparel Tops, we know something valuable about how to market to customers in email marketing (for instance) moving forward.

Case Study: Off-Season Purchases

We've learned that "Beans: The Internet's Only Variety Store" is heavily skewed to the November/December timeframe.

I've learned across nearly twenty years of consulting project that it's not healthy for a business to skew so heavily to Christmas. You want to offer products that customers purchase all-year. If there's a reason that subscription-centric brands are coveted by investors, there's the opposite reason that Nov/Dec businesses aren't coveted.

When I see a skewed business, I run a regression model to test the dollar contribution of Oct/Nov/Dec orders vs. orders generated during the rest of the year. For twelve-month buyers, spanning four years of purchase history and one year of "prediction", here's the simple regression equation.

• 1.257 + 0.079*($ Spent in Oct/Nov/Dec) + 0.095*($ Spent Jan-Sep).

In other words, dollars spent in "off months" are 20.2% more valuable than are dollars spent in Oct/Nov/Dec.

This fact supports encouraging the Merchandising Team to invest more effort into January - September.

Case Study: Simple Forecasts

If we're going to analyze the intersection of category performance and customer performance (which - FYI - is really what our businesses all come down to), we should also be able to forecast how a category is likely to evolve next year based on current customer trends.

Here's a simple forecast I put together for Apparel Tops ... the largest category that Beans manages.

I know, small numbers ... click on it for details, ok?

Categories yield Teachable Moments. Look down the "PctDmd" column. This is the percentage of annual demand likely to be derived by four customer segments.

• 9.4% from last year's Apparel Tops AND Other Category buyers.
• 6.4% from last year's Apparel Tops only customers.
• 4.7% from last year's Other Category buyers.
• 79.5% from New/Reactivated buyers this year.

In essence, the Merchant responsible for Apparel Tops is generating 80% of his/her revenue from customers who haven't purchased in the past year.

If you know that fact, how would you work with a Marketing Professional to grow Apparel Tops? Yes, you know the answer. Hint - the answer applies to most of you.

We can see the performance difference for three twelve-month buyer segments.

• Category Yes, Other Yes = $5.98 in the next year.
• Category Yes, Other No = $4.58 in the next year.
• Category No, Other Yes = $1.44 in the next year.

If the customer didn't buy Apparel Tops last year but bought something else, the customer is worth 1/3 as much to 1/4 as much as a customer who did buy Apparel Tops last year.

Look at the demand forecast on the far right - if everything is similar to last year, the category will contract by 4.4%. No bueno.

Your Chief Merchandising Officer and Chief Financial Officer need to know what is coming ... by category. If categories are forecast to contract, inventory buys need to be adjusted accordingly.

These category analysis are darn important.

Case Study: When The Crabby Merchant Is Right ... And Horribly Wrong At The Same Time

In the email dialogue shared yesterday, the Chief Merchandising Officer suggested that her customers had long repurchase cycles, therefore, it's not fair to measure future value across only twelve months.

For "Beans: The Internet's Only Variety Store", she is both correct and horribly wrong at the same time.

Her customers have long repurchase cycles. I use my Life Table Methodology to measure repurchase activity/cycles. Here is what the data looks like.

The green table shows incremental repurchase probabilities by month, as well as cumulative repurchase probabilities by month, for 1x buyers, 2x buyers, 3x buyers, and 4x buyers. The graph next to the green table maps out incremental repurchase probabilities for first time (1x) buyers. Look at that stupid-high spike at month = 12. What do you think that is?

• It is customers coming back and repurchasing at high rates exactly one year following a first purchase.

In other words, there are a metric ton of customers who buy in November/December, are responsive in Dec/Jan/Feb, then are inactive for most of the year ... then they magically reappear 11-12 months following a purchase to buy again. The customer then disappears for nearly a year before reappearing in months 23-24.

It's a hugely seasonal business ... the Chief Merchandising Officer is CORRECT in suggesting that her customers have a long purchase cycle and measuring things over time is more appropriate.

The Chief Merchandising Officer is also HORRIBLY WRONG at the same time. Her customers are simply not generating reasonable amounts of future demand no matter the timeframe looked at. Remember what I shared yesterday?

• New customers spend maybe $11 in year one, $7 in year two, and $4 in year three. In total, that's $22 of future demand ... it's nothing.

It is terribly difficult to run a business when customers have virtually no future value! The secret to a successful business is to manage acquisition costs while maximizing future profit yielding a wildly profitable relationship. If you cannot maximize future profit? No bueno.

The job of a great merchant is not to smoosh all sales into November/December. A great merchant creates reasons for customers to buy products all year long. The Nordstrom Anniversary Sale proves this is possible. Amazon Prime Days (where do you think they got that idea from) prove it is possible. The merchandising team at Beans should also know it is possible ... and chiding an analyst for not viewing customer response on an appropriate time horizon does not absolve the merchant for failing to create a thriving business in, say, June.

Does that make sense to you?

Case Study: An Email Correspondence

Maybe the most important finding in the past week is that "virtually nobody" is repurchasing when acquired by "Beans: The Internet's Only Variety Store!", regardless of merchandise category. Discovering the fact is one thing. Communicating the fact is quite another thing. And sometimes, the communication results in a reshaping of the message I convey.

This is why I send "tidbits" in my projects ... the back-and-forth interaction is useful and helps shape the outcome of the project.

From: Kevin Hillstrom <kevinh@minethatdata.com>
Sent: Monday, May 11, 2026 3:22 PM
To: Kevin Hillstrom <kevinh@minethatdata.com>
Subject: RE: FW: RE: FW: Repurchase Activity

Does Sloane have a point? Sort of. But the point doesn't change the fact that your customers have minimal future value.

If I measure repurchase activity over three years instead of one year, repurchase rates improve from maybe 18% to 33%. In that manner, Sloane is right.

Let's look at annual spend for customers acquired four years ago. Year1 = $10.68 in sales. Year2 = $6.92 in sales. Year3 = $4.08 in sales.

The story doesn't change ... the customers you acquire have virtually no future value when converting sales to profit. You have to generate a lot of profit on a first order to stay in business.

______________________________________________________

From: Paisley Ingram <paisley.ingram@beans.com>
Sent: Monday, May 11, 2026 2:56 PM
To: Kevin Hillstrom <kevinh@minethatdata.com>
Subject: FW: RE: FW: Repurchase Activity

Does Sloane have a point regarding a longer repurchase cycle?

______________________________________________________

From: sloane.montgomery@beans.com
Sent: Monday, May 11, 2026 10:39 AM
To: Paisley Ingram <paisley.ingram@beans.com>
Subject: RE: FW: Repurchase Activity

His experience is limited - those companies are too big to matter. $20,000? Highway robbery. I'll get you better answers from AI for minimal cost. Let's focus on the future, not an antiquated business model where some dweeb is paid a premium for something software can easily generate for free.

Ask Goober if customers have a longer repurchase cycle? I think he's looking at the issue the wrong way. Marketers are marketers for a reason, they're simpletons who are too narrow-minded to have the world-view you and I have to have to run a business.

______________________________________________________

From: paisley.ingram@beans.com
Sent: Monday, May 11, 2026 10:33 AM
To: Sloane Montgomery <sloane.montgomery@beans.com>
Subject: RE: FW: Repurchase Activity

He was part of the Management Teams at both Eddie Bauer and Nordstrom back in the day. We're paying him $20,000 for his work.

Also, we're breaking too many eggs. Sales are down 20% since your arrival. We can't survive if we go below $16 million in annual sales.

______________________________________________________

From: sloane.montgomery@beans.com
Sent: Monday, May 11, 2026 9:56 AM
To: Paisley Ingram <paisley.imgram@beans.com>
Subject: RE: FW: Repurchase Activity

First of all, who is this propeller-head you are working with? You can tell this Goober never worked for a real business, he's just out there wandering aimlessly in the Land of the Theoretical. How much are you paying for his "insights"?

Anybody with half a brain knows you don't measure lifetime value within twelve months. It's called Lifetime Value for a reason. You measure the Lifetime. That's what I'm working toward. And if we have to break a couple of eggs along the way, so be it.

______________________________________________________

From: Paisley Ingram <paisley.ingram@beans.com>
Sent: Monday, May 11, 2026 9:44 AM
To: Sloane.Montgomery@beans.com
Subject: FW: Repurchase Activity

 

FYI Sloane. 

Best,

Paisley

______________________________________________________

 

From: Kevin Hillstrom <kevinh@minethatdata.com>
Sent: Monday, May 11, 2026 9:12 AM
To: paisley.ingram@beans.com
Subject: Repurchase Activity

The analysis suggests that the future value of customers recently acquired is well below what I'd expect. Apparel Bottoms, Apparel Tops, and Outside are the three categories that do comparatively "well" ... even then, those categories deliver customers who spend just $11.00 on average in the next year (about $2.00 of profit after subtracting marketing costs). Fashion / Seasonal / Having Fun generate customers who spend about $8.00 or less on average in the next year (maybe $0.50 of profit after subtracting marketing costs).

This puts a lot of pressure on your p&l, because you have to generate a lot of profit when acquiring a new customer for your business to be profitable.

Thanks,

Kevin

Case Study: Which Categories Bring In Valuable Customers?

I ran an analysis, measuring how much future value (demand/sales over the next twelve months) a customer will generate after being acquired within each merchandise category. If a category does a great job of bringing in new customers and those customers don't spend money in the future, well, we've got a problem.

Here's a summary table of what I learned.

Apparel Tops is a high-volume category, and fortunately it is a top-three category in terms of future value (NY Value).

Notice that most categories generate customers that buy from nearly two categories in the next year if the customer repurchases.

However ...

However, there is a problem in this table.

When a customer is acquired, regardless of category, the customer spends very little in the next year. Seasonal is worst ($6.40) ... Outside is best ($11.33).

In other words, there is very little customer loyalty associated with this brand. Newly acquired customers have a low chance of buying in the first year with the brand (between 14% and 18%), and if they buy the don't spend much ($46.00 to $63.00).

This is one of those moments when the Consultant realizes s/he is about to anger people. Yes, you can run a profitable business with a customer base that simply doesn't spend much, but it means everything regarding the p&l is dependent upon generating profit off of a first purchase.

Tomorrow, I'll share what the conversation looked like regarding exceptionally low future value metrics.

Brief Case Study Break: What Your Media Might Look Like In The Future

I'm writing this back on Sunday night.

Here are the two shows I just watched on YouTube.

• AI Wasn't Built for You.
• English Football is Absolutely Ridiculous.

The former is the trendy stuff ... well produced, powerful people explaining powerful issues. It's easy to see how people are attracted to the content. Unfortunately, you'll never appear on this show. It's the evolution of a Ted Talk pushed 20 years into the future.

The latter is your future. That's Nieve. About 15 years ago, Rog and Davo brought the Premier League to me. Rog made it accessible to somebody who only saw a handful of televised Premier League fixtures each year. His storytelling was all audio back then, a completely different style of storytelling, but appropriate for his (my) generation.

Nieve is able to take the concepts of the Men in Blazers and apply them to the entire English Football Pyramid, via video ... I mean, in the clip above, she's at the final game of the National League season (5th tier), and she captured the pure madness and drama of the last ten minutes of that match. Poor Rochdale (hint - it would end up a fairy tale for them today at Wembley Stadium). 

She exudes raw, unadulterated humanity. There is no way AI is going to replace her, she's a force of nature, and if you have any empathy for the fans Exeter City FC, Nieve is going to help bring that empathy to you via humor and sadness in a way that modern "polished" / "scrubbed" activities cannot possibly achieve.

Nieve is your future. I realized you work for "Beans: The Internet's Only Variety Store". But every single one of you has a "Nieve" working for your brand ... a person uniquely qualified to bring storytelling to your customers. I am always amazed that almost none of you are willing to take that risk, and if you are willing to take the risk you shut it down long before anything positive could happen.

Instead of worrying about AI, why not apply stuff AI cannot possibly mimic (like a parrot) to your marketing efforts?