Change

Change is terribly hard to deal with, if you're on the losing end of change.

Give this ditty from the Direct Marketing Association a read (click here):

Notice the quote in the article:

• "The mailing industry as a whole has lost over one million jobs since 2007".

And this quote, from Kurt Salmon, referencing the DMA (click here):

• "... according to the Direct Marketing Association, the number of catalogs mailed in the United States fell again last year, to 11.8 billion, the lowest level since the DMA began collecting annual data in 2001 and down from a peak of 19.6 billion in 2007".

We are demanding that the USPS change. It's "their" fault. "A dysfunctional Congress" is the problem.

Nonsense.

We are the problem.

Pressure is coming from three areas.

1. Amazon. While the pundits told you that you had to keep your catalog, Amazon focused on everything else. There's a very real chance that Amazon will be a trillion dollar business in 2025. With lower prices and better service and drones dropping boxes from the sky an hour after the customer orders something. How does a catalog ever compete with that?
2. Retail. Retail has issues, no doubt. So they're going after low prices - when retailers discount, catalogers look expensive. Good luck with that. Good luck fighting that.
3. Demographics. Jasmine, age 29, would rather watch a video of a fashion blogger on YouTube than read a catalog that highlights the importance of fashion. Meanwhile, Judy is 61. As she retires, she spends less. Big, big problem.

We have to adapt and change. It's as simple as that. As Amazon and Retail and Demographics erode the business model, we respond by mailing fewer catalogs - and that costs the print industry jobs. Nobody wants to see that.

But we're to a point where there is no choice.

We have to change.

We fix nothing with Postal Reform - well, the USPS gets to keep going, but it fundamentally does nothing for us. It does nothing to address our three key problems.

1. Amazon.
2. Retail.
3. Demographics

We need to change.

Discuss.

Story: Omnichannel and Discounts

"In order to compete with Amazon, we've got to be omnichannel, we must digitize our business or die."

Simulated Quote From A Simulated Executive. January 15, 2014.

In the image, Yankee Candle is cleaning house! Up to 75% off, signed all across the front of the store. In fact, I count twelve (12) signs that I can see - and you have to admit, 40% of the store has been blocked by two of the giant 75% off signs, so who knows how many signs are back there?

Omnichannel advocates generally love this - especially when we visit the website, and see 75% off as well.

And, no need to go to a mobile screen shot, but rest assured, you can save 75% there, too.

Integrated campaigns across channels, common creative, same product. You're communicating, across the board, that the customer shouldn't pay anything close to full price.

During the sale, Yankee Candle offered this item (which sold out) at 50% off.

Since the item is sold out, I checked out Amazon, where, yes, the item is available, at a much higher price.

It takes a lot of mental bandwidth to sell like this - to integrate campaigns and timing and vendors and creative and communications and signage, all to communicate deep discounts (or not to communicate discounts via Amazon but to do so on your own site). And we don't have a lot of evidence that profitability improves, do we? Go look at any publicly traded company, and compare gross margin rates to profit rates - do a longitudinal study over a decade, and you'll see that all of this integration is virtually pointless, from a profit standpoint.

Go look at this little ditty from Best Buy (click here). But read this one first (click here).

Wow.

Let's get this right. Best Buy, by all accounts, does everything the experts want them to do. E-commerce and Retail, linked together? Check. Social Media? Big Check!! Mobile experience? Absolutely. Price matching - low prices? You Bet!

You must discount - "table stakes", as it has been called. The experts (who get more page views the more they tell you what you have to do) tell you that you must discount - so we all do it. Then the strategy fails (click here). 

Now what the heck do you do?

Best Buy says they will grow e-commerce (not hard to do), it will work on personalization (harder to do), customer segment targeting (easy), and growing Geek Squad. Did you notice that the word "merchandise" is completely missing from the 2014 strategy? It's discounts and CRM from here on out. That's the story. 

That's the magic of omnichannel.

You almost never hear of the importance of merchandise from omnichannel experts.

Story is increasingly important. If you sell the same stuff as everybody else, and you discount like everybody else, and you're tech team wants to digitize everything into a CRM database that delivers a 25% off coupon to the right customer at the right time, then it's all you have left.

Do you want the story of your brand to be large, percentage off signs?

Or do you want the story of your brand to be something else?

Discuss.

And It You Are Discounting, Fewer Emails Become Necessary

Yesterday, I shared the concept of diminishing returns in email marketing. We predict how much a customer will spend in email marketing, annually, and then we apply costs and profitability estimates.

Here's the fundamental problem with email marketing.

Email marketing is synonymous with discounts and promotions. Email marketers ruined the discipline between 1997 - 2001, when, in a mad dash for monetized eyeballs, email marketers gave away the farm to get orders. 20% off, 30% off, free shipping, gift with purchase, 70% off clearance items, you name it, email marketers have done it.

When I analyze client data, it is terribly common to observe profit factors that are seven or eight points lower for email than for other channels. This happens, of course, because email orders are disproportionately skewed to discounts/promos, and therefore, convert less demand to profit.

In the example above, 40% of demand flows-through to profit. Let's assume that is the company average.

Now, let's assume that the email average is 30% - because of heavy discounting and promotions, only 30% of demand flows-through to profit. What happens to the profit and loss statement?

Optimal profit now happens at 50 contacts a year, not at 100 contacts a year.

Once again, discounting and promoting yields a bunch of unanticipated side effects.

Are you performing this style of analysis?

Do you use this style of analysis to determine how many emails to send to a customer, annually?

If not - contact me now (kevinh@minethatdata.com). Profit is laying on the ground, waiting to be picked up!

Or buy the book (print click here, Kindle version click here).

Marginal Email Subscribers - Less Is More!

There's a secret to email marketing that most folks don't know.

I'm here to tell you this secret.

Step 1: Create a model that predicts how much a customer will spend, on an annual basis, on your email marketing campaigns.

Step 2: Using a law of diminishing returns equation, predict what happens when you go from no email contacts to one per week, to two per week, to three per week, all the way up to six per week. Now, granted, these aren't cart abandonment programs, these are your typical mass-blast-style campaigns. Still, run through the exercise.

Step 3: Calculate the incremental cost to deliver an email message to a customer, on a variable basis. For many folks, this averages to about $0.003 per contact. That sounds like nothing ... until you extrapolate it to an annual basis. If you send an email message per weekday, then you're spending $0.75 per customer per year to send email campaigns ... and at that point, email marketing becomes identical to catalog marketing ... all of a sudden, you are required to make smart circulation decisions ... something the vast majority of email marketers have not been trained to do.

Step 4: Create the profit table illustrated above. The customer above is predicted to spend $4.00, on an annual basis, via email marketing. The customer is currently forecasted to receive 250 campaigns per year, 5 per week. At that level of contact, the customer will generate $0.78 profit on an annual basis. However, the most profitable strategy is to mail the customer 100 campaigns per year, generating $0.92 profit on an annual basis.

Step 5: Run the table in Step 4 for each customer in your database. Calculate the optimal number of email contacts to send to the customer, annually.

Step 6: Repeat / Rescore the file weekly.

You will find that email prospects and those with recency > 12 months are typically over-contacted. You can be more profitable by not contacting these customers as often.

Contact me (kevinh@minethatdata.com) for your own, customized, contact strategy analysis.

Or buy the booklet - $29 via Amazon (Print - Click Here) - or $10 via Kindle (Click Here).

Monday Mailbag

It's time for our new Monday tradition - real and imagined questions from real and imagined readers. Send me your questions (kevinh@minethatdata.com) and I'll answer them!

Our first question comes from Cynthia: "How do I take care of customers who return a lot of merchandise? Can I convince these customers to stop returning merchandise?"

• Maybe.
• Some items are pre-destined to have systemic returns issues, while other items will seldom be returned, if ever. Use the Merchandise Forensics framework to identify high-returns items, and work with your merchandising team to understand if high-returns items are still profitable.
• Just as interesting, however, is how we manage high-returns customers. Once customers get in the habit of returning merchandise, customers will continue to return merchandise. This greatly lowers overall profitability. You can minimize how these customers ruin profitability by not emailing them. Seriously. Stop emailing these customers. Stop mailing catalogs to these customers. Stop retargeting to these customers. Just stop. There are millions of dollars of profit to be had (for larger-sized businesses) by not marketing to high-returns customers.

Our second question comes from Andy: "I work for a large brand. Our CFO told us that our social media efforts are meaningless - she said this in a large meeting, in front of my co-workers. My CFO is wrong. How do I prove she is wrong?"

• This doesn't have to be a long, complicated, difficult analysis, Andy.
• Social media, for 97% of the companies I work with, contributes +/- 1% of total volume, on an annual basis. To your CFO, that sounds like a tiny number, no doubt.
• Let's say that you work for a billion dollar, mall-based retail brand. 1% of a billion dollars is a whopping $10,000,000 of annual sales. 
• Sit down with your CFO, and ask your CFO to tell you how much of annual net sales flows-through to profit. For most businesses, this percentage is somewhere between 20% and 50% - I find that the average is +/- 40% for most businesses, depending on what the business sells. If it is 40%, then calculate 40% of the annual sales total generated by social media ... 40% of $10,000,000 is $4,000,000 profit.
• Do you think your CFO will ignore $4,000,000 of annual profit?
• Stop communicating via "engagement". Communicate using metrics that resonate with Senior Management. Profit resonates with Senior Management.

Our final question comes from Larry: "My email vendor told me to mail fewer emails to customers who don't care about email marketing. My CFO told me that my email vendor is crazy, and should be fired. Who is right?"

• In most cases, your email vendor is right.
• I never would have answered that way, until I worked on catalog + email contact strategy projects that proved that the email vendor is "right".
• Tomorrow, I will demonstrate why your email vendor is right, in a separate blog post.

Story: Dimensions of Warmth

The great sadness of the #omnichannel movement involves a complete lack of what I call "Dimensions of Warmth".

Look at this image. This was one of five revolving images from the home page of Patagonia. This has elements of what I call "Dimensions of Warmth". There's a story here, don't you think?

We might grade that a "B" on the "Dimensions of Warmth" scale.

Here's Gap's home page.

This isn't a warm message. What is the story that Gap is communicating to you? Patagonia is encouraging women to participate in fly fishing. Gap is encouraging customers to take up to 50% off and to earn GapCash. I'm not saying this presentation won't work, in fact, it might work great. But it isn't warm.

How about Macy's, the self-proclaimed "America's Omnichannel Store"?

The story goes off the rails here, doesn't it? This is #omnichannel perfection, no doubt about it. Low prices, sale, clearance, free shipping, extra savings, buy one get another at 60% off, aligned across all channels. Cold, sterile, lifeless. Again, I'm not saying this stuff doesn't work. It does work. Macy's posted positive comps last quarter.

But there's nothing warm about Macy's. Or Gap. Amazon has never been accused of being a warm brand, now has it?

So maybe there's a competitive advantage out there, waiting to be snared, by somebody willing to add "Dimensions of Warmth" to their business (or maybe it's best to be "cold", what do I know?).

As you know, I used to work at Nordstrom. Cosmetics was always on the 1st floor of the store. It smelled good on the 1st floor! That's a "Dimension of Warmth". Best Buy's "Geek Squad" represents a "Dimension of Warmth" - a human interjected into a cold, sterile experience. Or the "Genius Bar" at Apple - again, a human being interjected into a cold, sterile experience.

I'm suggesting that there's a hole in the marketing world - the rush to create a perfect #omnichannel experience seems to have sterilized retail and e-commerce ... and that only helps Amazon and the lowest priced "brands". Somebody, please, go fill that hole!

It's Here! Hillstrom's Contact Strategy

Here's your chance to see how I determine the optimal number of catalogs and email campaigns.

In "Hillstrom's Contact Strategy", I explain, soup-to-nuts, how I optimize the annual number of catalog mailings, and the optimal number of email contacts (both at a customer level), given the interaction between catalogs, emails, and paid search.

Yup - you train your customers to use paid search, and you pay your search vendor $$$. Worse, you add ad-cost to your catalogs - and your email campaigns. Yes, your email campaigns! They're no longer free - they now require the same circulation discipline as your catalog campaigns require. You pay $ to send a catalog, you pay $ to send an email, both send your customer to a search engine, where you pay $ to re-acquire the customer you spent $ to mail catalogs/emails to in the first place.

This dynamic must be factored into your circulation decisions. Must be.

Hillstrom's Contact Strategy addresses this key problem - at a customer level. I don't know of a vendor/modeler in our industry who does this elegantly.

The booklet (50 pages) is now available:

• $29 via Print (click here).
• $10 via Kindle (click here).

The digital version is clumsy to read, of course, given that the figures in the tables are small. The print version is color, and much easier to read. 

Either read the free content on this blog, get the Kindle version, or really dig into the numbers with the $29 print version. Best of all, for a tiny little investment, you'll generate between $1,000,000 and $5,000,000 in annual profit, if you apply the principles in the booklet to a $100,000,000 business. Not bad!

Most of you don't have the resources to do the work - so here I am - at your disposal! My project workload really ramps-up in mid-March, so get your project request in early. Email me today (kevinh@minethatdata.com) to get your project in the hopper!

Or, if you work with Clario, but wish they were conducting this level of sophistication, lobby them to license my algorithm!

Reminder - London February 20-21

I am speaking in London, February 20-21. Talking about Social Media. Join me (click here)!

This is a good time (if you are in the UK, or anywhere for that matter), for those of you looking to initiate a Merchandise Forensics or Contact Strategy project, to start a project. We can get the data going right now, so that we can talk about results in four weeks!

Send me an email (kevinh@minethatdata.com) if you're in London, and we'll get your project started!

Microsoft

Microsoft doesn't get a lot of love these days, does it?

One of the fascinating aspects of Microsoft is their #omnichannel approach to integrating operating systems.

Desktop. Laptop. Tablet. Mobile. All running a common operating system. Nice integration, don't you think? They have retail stores, e-commerce, they sell through third parties, they sell via an endless number of parties, don't they?

So why, do you think, that this integrated system, this #omnichannel approach, has not resulted in Windows dominating tablets and mobile? Doesn't the customer want an integrated experience? That's what we're told, right? We're told that all of our creative and offer strategy and merchandise strategy must be 100% unified across all channels.

Honestly, I don't have the slightest idea why their approach works or does not work. Nor do I care. I'm not here to defend them or to criticize them.

I am here to ask you to focus on what matters, using Microsoft as an example.

What matters is merchandise (or product or content, depending upon your business model). This operating system, across devices, IS the product at Microsoft. So if customers don't like it, they don't buy it.

These days, merchandise is largely ignored. Go read a trade journal or advice from the experts on Twitter. You won't find a discussion about merchandise.

Talk to customers, however, and you'll learn a lot about what customers think about the merchandise we sell.

So please, focus your efforts there. Focus on merchandise.

Monday Mailbag

Remember, each Monday in 2014 I answer your questions, both real and imagined. If you have a question, please send it to me (kevinh@minethatdata.com).

Our first question is from Tracy: "What do you think about the Target and Neiman Marcus credit card theft situations?"

• First, that stuff is going to happen. But it should happen less often.
• Second, and much more importantly, we've completely lost focus on what matters. We'll happily spend hundreds of millions of dollars on #omnichannel solutions that will be implemented over a half-decade (click here), but we don't invest the same organizational zeal protecting credit information? We have everything backwards. If we can't protect credit card information, we don't have a business. Instead, we're focusing on how to make up for inventory errors in one story by wiring systems so we can ship items from other stores. Protect customer information first!
• Third, we have information technology folks who are frequently paid more within the same job grades than garden variety employees - these folks need to do a better job of protecting information, and they need to say NO when marketing folks or consultants want them to prioritize big data nonsense over customer protection. And my goodness, try being an IT professional at a major "brand". Not enough resources, not enough respect, and everybody telling you what you must do. Not easy to protect customer information. We'll need to re-allocate resources to do a better job.

Our second question comes from Jessica: "What impact does company culture play in merchandising success?"

• It means pretty much everything!
• When I worked at Lands' End, more than twenty years ago, marketing folks were invited to inventory/merchandise/creative reviews. All data was shared. Here, in 2014, I seldom attend a meeting where a marketing person can clearly articulate merchandising success.
• At Eddie Bauer, sixteen years ago, the culture adored process. Process! Few cared how merchandise performed. Everybody cared that the inventory team would get the marketing forecast on Friday, January 10, for the fall season. Not surprisingly, the business lost 20% of merchandise productivity during my time there, ending in early 2000. Also, not surprisingly, the business had a lust for discounts / promotions to move merchandise. You've never seen marketers so passionate about getting the right offer to the right customer at the right time. This logic, of course, is backwards, but that's what happens when the focus strays from merchandise, as it did fifteen years ago at Eddie Bauer.
• Nordstrom was all about customer service, which, interestingly, results in a lot of merchandise knowledge. The organization didn't have the merchandising passion that Lands' End had, but customer service passion required employees to please customers, and you please customers by selling them something they want, and customers want merchandise.
• In other words, if the company culture cares about customers or merchandise, then you tend to see better-than-average merchandise productivity.

The final question comes from Roger: "Why are you so against omnichannel? It's the painfully obvious future. Would you rather see retail businesses close their doors?"

• Give this a read, Roger (click here). Nook sales were down 60%, year-over-year, in Q4-2013. Barnes and Noble did everything the omnichannel advocates demanded. They invested in the online channel, they have the stores that omnichannel advocates demand, and they had the Nook to protect their digital future. Shouldn't all of that, then, lead to riches? Wouldn't stores, online, and digital tablets trump Amazon?
• It turns out that Amazon has a merchandise plus pricing plus assortment advantage that trumps an obvious omnichannel solution.
• Here's another question - if omnichannel is destined for greatness, then wouldn't Microsoft, with in-store / e-commerce / mobile / tablets / integrated operating system across devices easily trump any other alternative?

Hillstrom's Contact Strategy Management

All right. All right!!

You've spent the entire week learning how I approach four key elements of contact strategy management.

• Catalog Contacts.
• Email Contacts.
• Interaction Between Catalogs and Email Contacts.
• Impact of Catalogs and Email Contacts on Paid Search.

Now, it's time to get busy.

I'm calling this product "Hillstrom's Contact Strategy Management". I'll price it the same as the old-fashioned Catalog PhD.

• Businesses under $10,000,000 in annual sales = $10,000 one-time fee.
• $10,000,000 to $29,999,999 in annual sales = $20,000 one-time fee.
• $30,000,000 to $59,999,999 in annual sales = $27,500 one-time fee.
• $60,000,000 to $99,999,999 in annual sales = $35,000 one-time fee.
• $100,000,000 to $999,999,999 in annual sales = $45,000 one-time fee.
• $1,000,000,000 or greater annual sales = $55,000 one-time fee.

Go compare the fees to what you're paying Clario - and then look at what you're getting here (optimal number of catalogs and emails given their interaction and impact on the paid search budget). You get so much more, and you pay so much less.

Contact me now (kevinh@minethatdata.com) for your own, customized Hillstrom's Contact Strategy Management project. Hurry, slots are going to fill up fast!!

And if you want to keep working with Clario, then why not encourage them to license my methodology, so that you get the best of both worlds? Think about it.

Service: Looping Through The Contact Strategy Algorithm

Ok, now you're interested!

You want to know what, exactly, I'm doing.

Say I have a customer who is forecast to spend $20 of catalog demand on 12 contacts. Also assume that this customer will spend $10 on 250 email contacts.

If I want to bump up the catalog side of the strategy to 15 contacts from 12, I use a law of diminishing returns (based on prior test results -  not highly inaccurate matchback outcomes) to estimate annual catalog demand. In this example, annual catalog demand goes up from $20.00 to $22.36.

Next, let's say that I want to bump up the number of email contacts, from 250 to 300. Again, I use a law of diminishing returns (based on email mail/holdout test results, not opens/clicks/conversions). In our example, annual email demand goes up from $10.00 to $10.47.

Then, we have to account for the fact that additional catalog contacts will drive additional email demand, while additional email contacts will cannibalize catalog demand. I know these relationships from a ton of mail/holdout tests. In our example, catalogs will drive an extra $0.10 of email demand, while email will cannibalize $0.08 of catalog demand, yielding a net increase of $0.02 across channels.

Next, we calculate profitability. We factor in the additional cost of three more catalogs, we factor in the additional cost of 50 more email campaigns, and we factor in the additional cost of paid search clicks generated by additional catalog/email marketing activities. In our case, profit drops, from $2.43 per customer to $1.47 per customer. Clearly, we're moving in the wrong direction!

In fact, in our example, the most profit is generated by sending just 3 catalogs, and 250 email campaigns.

Why go to all this trouble?

Because 99% of B2C catalogers are GROSSLY OVERMAILING customers, even after working with Clario or another credible vendor who goes beyond simple models and RFM segments.

In fact, if you factor in the paid search costs, you'll find that you're over-mailing by 10%, right off the bat, +/-.

My contact strategy work now includes catalog contacts, email contacts, and the impact on the paid search budget. All three elements work together, interacting with each other. The result is beautiful. And you need to be doing all three elements, simultaneously. If not, you're over-mailing, badly in most cases.

Contact me (kevinh@minethatdata.com) for your own contact strategy model!

Service: Contact Strategy Management, With Paid Search

Here's the interesting thing about paid search. If you don't execute catalog marketing programs, and if you cut way back on your email marketing contacts, you stop driving traffic to Google. And when you stop driving traffic to Google, you stop paying Google. And when you stop driving traffic to Google (and Amazon), e-commerce-only businesses and retailers suffer.

In other words, if you are going to come up with the appropriate catalog + email contact strategy, at a customer level, you have to factor in the impact of catalogs and emails on paid search.

Take a look at the image above. This customer segment received 12 catalogs and 250 email campaigns last year. But we have to factor in the following:

• How catalogs drive volume to email.
• How email campaigns cannibalize catalogs.
• How catalogs drive traffic to Google, traffic you have to pay for a second time.
• How emails drive traffic to Google, traffic you have to pay for a second time.

After we account for each factor, we get the "Total Demand" grid outlined above. And after factoring in catalog costs, email costs, and paid search costs, we get the "Total Profit" grid.

Which strategy is most profitable?

• 3 catalogs, not 12.
• 250 email campaigns, same as last year.

This is the direction my projects are heading in, during 2014. A handful of lucky clients got to beta-test this technique at significantly reduced rates in late 2013. Now I'm diving in, head first, by assigning the optimal contact strategy, at a customer level, based on an evaluation of every combination of catalog contacts and email contacts, factoring in the impact of each contact strategy on the paid search budget.

Fun stuff, eh?!

Service: Contact Strategy Management

In the "Merchandise - Service - Story" (MSS) framework, optimizing the contact strategy is a perfect example of providing great service.

You see, these days, the classic e-commerce buyer doesn't need many catalogs. This isn't 2003 - catalogs don't drive online volume like they used to. Instead, we mis-attribute online demand to catalogs - often badly. I've been observing this since founding MineThatData in 2007.

We know from most mail/holdout tests that, for catalogers, +/- half of online demand will happen anyway, even if catalogs are discontinued.

Furthermore, there is interaction between catalogs and email campaigns. Catalogs typically push a modest amount of demand to email campaigns (i.e. the more you mail, the better email campaigns perform). Conversely, email campaigns typically cannibalize a small portion of catalog demand (i.e. the more emails you send, the more discount/promotional messages you offer, re-directing catalog demand to email promotions).

As a result, we have to evaluate email contacts and catalog contacts simultaneously. If we increase email contacts, we reduce catalog demand. In other words, we must run a profit and loss statement on every combination of annual catalogs and annual email campaigns, after accounting for the interaction between each channel. The combination that yields the most annual profit is the combination that should be assigned to a customer.

More on this topic tomorrow. And we'll throw paid search into the mix!

Monday Mailbag

Welcome to the third week of the "Monday Mailbag", featuring real and simulated questions from real and simulated readers. Email me (kevinh@minethatdata.com) with your questions.

Question #1 comes to us from "Anonymous":  We all sell merchandise, and we all care about merchandise. What do you want us to do, above and beyond what we're already doing, to care more about merchandise?

• Read this article about J. Crew (click here).
• Find one person at your company (this person already exists) who cares this much.
• Give him/her a chance to succeed.

Question #2 is from Chris: Don't you think that people like you are ruining society? You track and measure everything that customers are doing. You are like the NSA, aren't you?

• I've been through four stages of customer tracking.
• Stage 1 = Catalogers rented names from competitors, and traded names with competitors.
• Stage 2 = Catalogers gave customer data to co-ops, for free, then paid $0.06 a pop for re-assembled data.
• Stage 3 = E-commerce terrified customers, so businesses kept information "private" and "secure", which caused measurement folks to use cookies to track customers anonymously, which caused measurement folks to not like anonymous behavior, which caused measurement folks to find clever ways to link name/address and email address to a cookie, so that all data could be tracked all the time while telling the customer that their behavior was "private" and "secure".
• Stage 4 = Mobile. Want to download a chess game app? Congrats! The app wants to know where you are at all times - it wants to know your location. Why does a chess game need to know your location? Think about it. Mobile isn't mobile, mobile is data collection with context. The data is fed into a giant borg, where it is sliced and diced and re-sold. As I've mentioned previously, I met with the CEO of a mobile company - this individual told me that he didn't care about the product he was selling, he cared about the data generated by the product. Think about that sentence for a moment.
• Stage 5 is coming - wearable devices and the "internet of things".
• Ultimately, all of us are, in some way, like the NSA. We collect data about our friends (Facebook), we collect data about our favorite media companies (Twitter), and we use that data to monitor what our friends and our media outlets are doing. The path, from Stage 1 to State 4, is becoming more intrusive, and will continue to become more intrusive. Stage 9 looks really terrifying.

A Walk Through The Mall

Let's take a walk through the mall for a moment.

That's a pretty clear message, don't you think?

Or this one:

Lotta savings there, don't you think?

January is clearance month, you're getting rid of stuff. You tell me that you "can't sell anything at full price in January". Or December. Or November. Or June. Or July. Or August.

I know, I know ... it never ends ...

Taxes and apps and discounts at Sears.

Good time to get a candle! Better than before Christmas.

Good question! Why shop anywhere else?

Why shop anywhere else when everybody else is offering you the opportunity to pay less?

Well, not everybody.

J. Crew applies a different story.

Go inside J. Crew, and you still see discounting and clearance and all the stuff leaders love:

It's just that the story is different. Different. Not red, but black on white, congruent with all other signage. And the store front is clean. The story is about the merchandise, but business must happen.

Think about that, for a few moments.

Here's a couple of stories for you:

I know, I'm biased. I worked for Nordstrom. They don't count ... they generate more than a billion dollars of pre-tax profit at between 10% and 15% EBT as a % of sales. Doesn't count. It's fashion, they can get away with over-charging the customer (even though you buy their stuff elsewhere in the mall, from competitors, at the same price). Show me somebody else.

What is the story Lego is telling the customer?

85% of the mall is communicating a story.

A minority of retailers communicate a different story.

What story are you communicating to the customer?

Do you think the story you're communicating resonates with the customer?