January 22, 2012

Dear Catalog CEOs: A New Direction For MineThatData ... Judy, Jennifer, and Jasmine

Dear Catalog CEOs:

Allow me to share three discussions with you:

Discussion #1:

I recently enjoyed a discussion with the owner of a business.  This individual is uber-successful, a self-made member of the 1%, one who did it the hard way, one honest transaction at a time.

This person is unhappy.

His business evolved.  He did the right things, and as a result, his customer became much, much younger.  Younger customers, as it turns out, behave very different than the 55+ customer this owner generated 25 years of profit from.

At the end of the discussion, the owner turned to me, and issued this statement:
  • "I want for my business to be like it used to be.  Tell me how I can run a catalog business like I did ten or fifteen years ago.  What are the steps I can take to get customers to do what they used to do?  I loved my business fifteen years ago."
I told this person that he would never be able to get his business to look like it looked ten or fifteen years ago.  I told him that, because of the decisions he made, his customer base evolved and changed.  His business would never again look like the business he loved to manage.

This individual never communicated with me again.

Discussion #2:

An Executive tells me an interesting story:
  • "It's like I have two very different customers.  The first customer won't buy anything unless we send catalogs to her.  She's old.  She won't move into the future.  Our whole company, our way of doing things, is calibrated to this individual.  All of our meetings are set up around planning catalog mailings for this customer.  Then we have another customer.  She buys online, and there's a problem with this customer.  She only buys when we offer her 20% off plus free shipping.  She simply won't buy without a discount.  These discounts are killing us.  We can't cover our fixed costs with the discounts.  We can't cover our fixed costs without the discounts because she won't buy anything.  How did we end up with one business and two completely separate customers, and worse, how do we get out of this problem?"
That's a tale you should know, well.

Discussion #3:

I had a discussion with a 30 year old social commerce CEO.  Consider this:
  • "I read your content because I'm fascinated with the disconnect between how traditional companies market, and how I market.  This is my third company, I sold the first two for a significant profit.  I have yet to spend any real money on marketing.  That's right, I don't have to spend any money marketing to customers.  I build social and mobile and viral and game-based elements into everything I do.  When I do this, customer acquisition is free.  I built a list of hundreds of thousands of prospects, it only takes a few months if you do it right.  Then I create an environment that causes customers to want to share, to play with each other, to compete, to be recognized, to engage.  I don't know any other way to do this.  It works.  And it fascinates me to read what you write, to see how traditional companies almost take the opposite approach and then grumble about it."


Do you remember the Gliebers Dresses series?  I tried, hard, to explain what was happening to businesses through the series (download the most recent chapter of the story for your Kindle here).  Instead, folks embraced the characters, their strengths and their flaws.  I can't visit a client without a discussion about the characters and how the characters might deal with various business challenges.  People want to know if Roger Morgan and Pepper Morgan aren't getting along, they don't want to know why they may not be getting along!  In other words, the "what to do about our changing business environment" was lost in how I communicated the message.

Do you remember all of my discussions about the "organic percentage"?  This little concept made my clients $24,000,000 of profit opportunity, on an annual basis, spearheaded by Hillstrom's Catalog Marketing Phd (Click here for a copy).  $24,000,000.  That's a lot of cheese! The booklet caused me to have a 50% increase in project-based work in 2011.  The methodology flat-out works.  That being said, you don't see the methodology being embraced by the catalog vendor industry, do you?  Have you read any other individual talking in the marketing press about how they applied the topics to their business, or to their client base?

Time For A Change

It's become obvious that I need to change how I communicate to you, because what I have done is highly profitable for my clients and I, but it isn't helping change our industry.  Trust me, our industry needs to change.

I don't think our industry understand who the customer is anymore.

I think we dream about a customer that existed in 1995.  We market to a customer that we wanted to exist in 2003.  We're stuck in a discount-based profit spiral.  We don't have the slightest idea what motivates a modern, younger customer.  We have a veritable plethora of social and mobile tactics that "don't work" according to some, and "mean everything" to others.  It is my opinion that all of this confusion happens because we have no idea who the customer is.

In the past two years, I've conducted countless demographic analyses.  The catalog customer, by and large, has become very, very old, on a relative basis.  The average person in the United States is somewhere between 35 and 39 years old, the average consumer is somewhere between 43-45 years old.

This led me to spend the past six months conducting analytics research, defining who the modern customer is.  I've come to the conclusion that there are three high-level personas, personas that can be defined with the existing data you have in your database.  These three individuals dictate the meetings we have, the marketing strategies we employ, the profit we generate.

Most important, these three customers dictate our future.  I'll talk about this at NEMOA in March.

Tomorrow, I will begin the process of introducing three e-commerce personas to you.
  1. Judy, the 59 year old catalog loving woman that the industry generated three decades of profit off of.  This co-op sourced shopper reads catalogs in bed at night.  She adores an artfully spun story.  Think of her as somebody who loved the J. Peterman storyline on Seinfeld.  This "is" the catalog shopper.
  2. Jennifer, the 43 year old email subscribing, search-motivated, iPad-toting, affiliate/coupon loving 20% off plus free shipping e-commerce buyer.  She's influenced by catalogs, but in reality, she's the person your email marketing team measures, she's the person your attribution guru loses sleep trying to measure.  You can generate a TON of profit by cutting back on the number of catalogs you mail this customer ... 40-60% of what she spends is incorrectly matched back to catalogs mailed to her.
  3. Jasmine, the 27 year old iPhone-loving, social commerce shopper who can't wait for a deal from Shoemint.com to arrive on her mobile device.  This is the customer you read about in the marketing press, on blogs, in trade journals.  Catalog marketers do not understand this customer.  Making matters worse, Jasmine is largely "post-catalog" ... if you mail a catalog to her, you are likely to incorrectly attribute 70% of her spend to the catalog.  Stop mailing Jasmine!!  By the way when you rent names from a co-op, you are not renting Jasmine.
Tomorrow, we begin the process of understanding each customer.  It will take us awhile to get through this discussion, so you're going to hear about Judy, Jennifer, and Jasmine an awful lot through the remainder of winter.

Judy, Jennifer, and Jasmine will be built into all subsequent Catalog PhD projects I work on.  If you desire, you can easily overlay the attribute on your existing RFM segmentation, allowing you to greatly increase profitability without having to do a significant amount of work.  You will want to have your own, customized Catalog PhD project in order to gain access to this information!  Or, if you have the skills, I will share methods over the next month that allow you to code this yourself.

The journey begins tomorrow.

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