Road Show

Next up on your rebuilding project is what I call a "road show".

Here's what you do. You craft a presentation, about thirty slides, that depict the tepid performance of the business over the past decade. Your business has done what every vendor wants your business to do, and guess what? Only the vendors won! You exchanged money for thought leadership resulting in utterly tepid results.

It is time to switch momentum ... from vendors ... to your business.

Over the next month, it is your job to visit every department at your company. Yes, every one. You will bring your Brand Response Marketing Team with you on this presentation. You will introduce your team as "the future of customer acquisition". Then you will make your case as to why every effort your company tried over the past decade resulted in utterly tepid results. You will share that your annual repurchase rate is just 37%. You will share the fact that without significant customer acquisition growth at a low cost, your business will continue to plod along with utterly tepid performance.

You will teach every employee in every department why customer acquisition is the most important thing they will work on in 2016, 2017, and 2018.

You will teach every employee why it will take until 2018 for their customer acquisition ideas to bear fruit.

You will tell every employee to work through your Brand Response Marketing Team ... if they have ideas, they go to this team.

You will tell every employee that you will hold a quarterly webcast, where you and the Brand Response Marketing Team will share results of offline/digital customer acquisition efforts. When your social media manager raises a hand and calls you a Luddite and suggests that the event should be on Periscope, go ahead and give the manager credit, and ask him to do the work to make it happen. Put people to work.

Yes, when somebody raises a hand and gets snotty and tells you why your ideas aren't going to work, put that person to work - if that person has solutions, make that person immediately accountable for his/her proposed solution. The person has just been drafted to your Brand Response Marketing Development System.

You will tell every employee that if their ideas are implemented and are successful, they will be paid a $2,500 bonus out of the marketing budget. You will clear this idea with your Human Resources team ahead of time, of course. But who would you rather pay ... your own employees ... or a printer / paper rep? 

You already know which answer is right.

Go out on the road.

Visit every single employee in your company.

Give every employee the opportunity to craft a credible offline/digital customer acquisition strategy.

Compensate every employee with spot bonuses, if necessary. It's worth it, when you measure performance on an ROI basis, right? If the idea pays for itself, shouldn't a share of the profit go to the person who had the idea?

If you truly want to rebuild the customer acquisition program at your company, reduce your catalog marketing budget by the exact amount required to pay employee bonuses for great customer acquisition ideas. Flip the narrative ... from paying vendors ... to paying your own employees.

Get out on the road, and do something positive for your business.

Content No Longer Relevant!!!!

The long-time catalog industry veteran, a person I personally know, was done ... the person clicked on the unsub link and gave the following reason for not participating any longer ...

"Content No Longer Relevant".

Every email unsub this week is from a catalog industry veteran. Every reason given is "Content No Longer Relevant".

Mind you, the online and mobile community are not unsubscribing ... and cataloging is truly not relevant to them!!!

Those who left are not reading this.

You are still reading this.

Thank you very much for sticking with this line of reasoning ... for at least considering the following topics.

1. Catalogers, as a whole, are not growing.
2. Customer retention rates are low ... around 37%.
3. Therefore, we need to acquire new customers.
4. Co-ops are dying ... look at your own response rates over time.
5. Therefore, we need to find new customers in creative ways.
6. Marketers are frequently not respected within their own company ... your mileage will vary, but we all know how marketers are stepped on by co-workers.
7. Therefore, marketers need to change the organizational structure and interpersonal dynamics within a company.

Do you agree or disagree with my thesis?

If you disagree ... here is your chance to respond ... leave a comment or send me an email message (kevinh@minethatdata.com) and offer your own thesis for how catalogers should proceed, going forward. If your thesis is sound and based in logic and data, I will publish your thesis next week ... I will publish every single reasonably written thesis. Use this opportunity to share why your industry needs to change ... or share why the industry does not need to change. If you are a vendor - this is a great opportunity to get free advertising, use it to your advantage.

I'll accept submissions through the end of day Friday.

Go. Write. Now!!

The Hard Work Begins

Ok, you've done the following ...

First, you told your Executive Team that Customer Acquisition is the focus of the marketing team, going forward. Worse, you told them that future Customer Acquisition efforts are going to be outside of the catalog. You made enemies. Folks feel that you are disrespecting the heritage of the business. 

This means you are doing your job.

Second, you told your marketing team that Customer Acquisition is the focus of their efforts, going forward. They immediately resented your comments, and are waiting patiently until you are fired in eighteen months. If they aren't careful, they will lose their job(s) within the next eighteen months.

Third, you built a Brand Response Marketing Team, comprised of 30-39 year olds from each functional area in your company. This angered your Executive Team, because you offered to pay bonuses for these individuals out of your budget. Worse, your plan limits the ability of each Executive to squelch your efforts.

Congrats! You are on an island, isolated and unloved. All because you want to do what is right for your business.

This is where the hard work begins.

Do not let up.

Do not relent.

Do not give in when people say that your strategy "isn't working".

Do not get down when your Executive co-workers take pot shots at you during weekly team meetings ("gee, business was down 3% last week, I guess our focus on customer acquisition is actually hurting business, hmmm, I wonder who is taking us down this dead-end path?")

Do not let your own marketing team sabotage your efforts by falling back upon "what we've always done".

Continually remind every employee that ten years of "business as is" resulted in tepid performance. Always use a portfolio of tepid metrics to your advantage. At every meeting you attend, remind every single employee what the tepid metrics look like. Remind them that their efforts, when followed to their logical destination, yield tepid results. This is why you are changing how the company manages the customer base.

Questions?

Cross Functional Team

By the time you finish your first day of work promoting a customer acquisition agenda, you will have already generated a healthy community of "haters".

Several Executives have already gone out for drinks, noting that you aren't the first person to have a plan. They've already crafted a plan to defeat you. IT will sandbag your requests with nonsense like "we don't have resources at this critical time of the year." Creative will suggest that a customer acquisition strategy is "not brand appropriate" and will instead focus on completely ignoring everything you say. A merchant will grumble that by ignoring best customers, you are actively ruining the performance of products loved by best customers, and the merchant isn't going to stand for that. Your operations Executive already reached out to your Woodside Research rep, who reassured the operations Exec that you are nuts and that the operations Executive should keep buying omnichannel loyalty reports at $795 each.

Worse, a paper rep already heard that you are going to de-emphasize loyalty efforts via the catalog and will eventually de-emphasize co-op customer acquisition ... this person is meeting with catalog operations as we speak, and is locking them into a long-term program of discounts that kick-in only if circulation increases. And you were wondering why your printer called you at 4:00pm to schedule a meeting to talk about "the future"?

In other words, the forces that will work against you aligned and acted quickly, and have set in motion a set of activities that will make your job difficult. Nobody is on your side. 

Nobody. 

Is it any wonder almost nobody has chosen your path?

But you are a leader, aren't you? It's your job to save your company from itself.

And you're going to need help doing that.

This is where your Brand Response Marketing Team comes into play.

Ask each Executive to volunteer one star employee, preferably age 30-39, to participate on a team that will craft and implement customer acquisition strategies outside of the catalog.

This is where people get even more angry with you.

• "Outside of the catalog? The catalog is our heritage. It is who we are. What the heck are you talking about? Go work for an online startup if you want to implement nonsense."
• "My team is already overwhelmed after four rounds of downsizing in eight years. You get nobody from me, got it."
• "Age 30-39? You are discriminating against experienced people age 55-64 who could fix this problem if you just gave them a chance."

This is where you tell the Executive Team that you have budgeted money for 40% bonuses for each member of the team, should the team sufficiently increase new customer counts.

This is where the Executive Team turns to the Human Resources Executive, and reminds everybody that there are salary bands, and that only Executives earn bonuses. This is where you remind the team that the company has a ten year history of not paying bonuses and not generating good business results.

Why do you need a cross-functional Brand Response Marketing Team, especially of folks age 30-39?

Well, your IT team is going to be less likely to embargo your projects if a member of the IT team does not earn her bonus if the project is nuked, right? Your merchandising team will be more likely to help you if somebody has a vested interest in helping you. Your creative team will be more likely to help you if they feel like they are contributing to your marketing strategy instead of being told what to do.

Your chances of success have to be higher if you have a cross-functional team that aligns with your goals but are part of the teams that potentially halt your progress, right?

Right?

Of course, you are going to pre-wire all of this with Human Resources. By doing that, when the room turns on you about bonuses, you will have the support of HR and/or your Compensation Team.

You now have two teams working on customer acquisition strategy.

1. Your Marketing Team.
2. Your Brand Response Marketing Team, a cross-functional team across departments.

Undoubtedly, you are going to have successes when you have two teams literally competing against each other, right?

It will be your job to manage the competition.

You'll do fine.

The competition keeps each team motivated. If you only have one team, then one team can decide to sandbag and ruin your efforts to push your company forward. But by having two teams, well, the competition alone will improve the chances that your company acquires new customers outside of the catalog.

Questions?

Your Team

It's one thing to tell a group of Executives who already think they know more about marketing than you know that you are going to focus all your efforts on Customer Acquisition.

It's quite another thing to get your own team to focus on Customer Acquisition - especially if you are new to your marketing team, and especially if your team likes trying to trick existing customers into spending more.

This is why you get paid a salary that most envy.

Do your homework.

If your Human Resources team will allow it, take a look at the performance reviews of each staff member. Who is considered a "high performer"? Who needs to be fired? Why does the person need to be fired? I took over a marketing team, and on day one, a Director and a Manager entered my office (together) and asked me to fire a fellow Manager. Ten minutes later, the Manager in question entered my office, and asked me to fix the department. Who do you think survived the next twelve months?

On your first day, hold a department meeting ... preferably early ... say 9:30am. Make sure somebody from Human Resources is in the room with you. At that meeting, clearly communicate that the focus of the department is changing, immediately. Share the ten year trajectory of the business, the tepid business you are now responsible for. Inform your team that what has been done in the past is not working. 

It is not working.

Tell your team that Customer Acquisition is what it is all about, going forward.

Tell your team that if they do not support your direction, they can leave. Stand up, walk over to the conference room door, open it, and encourage anybody who is not fully supportive of a Customer Acquisition program to leave right now. Stand at the door for fifteen seconds, for effect. While you do this, read the room. Who is frightened? Who is excited? Who is already texting somebody? Who is sleeping?

Then ask if there are any questions?

There should be questions.

Somebody who has been responsible for loyalty programs or mailing catalogs to housefile customers is going to raise a hand, and with a snotty attitude, inform you of the importance of maintaining customer loyalty. This person is going to ask "what is in it for me?" This person is potentially frightened, which is just fine, or this person is the first person to raise a hand and say "I don't agree with you".

Does your strategy apply to those who work hard to maximize sales from loyal buyers?

Absolutely.

It is the job of the loyalty or housefile staffer to greatly increase profit per customer. Why? When profit per customer increases, then you can spend more to acquire a new customer, allowing you to ... wait for it ... wait for it ... acquire more new customers!

In other words, you may not be able to get customers to become more loyal, but you can most certainly find ways to generate more profit from existing customers. Go hire Clario and have them optimize housefile contacts ... that alone will increase lifetime value, allowing you to spend more money acquiring new customers, allowing you to acquire more new customers, allowing your initiatives to look successful.

Another staffer is going to raise a hand ... "does this mean we get to spend more with the co-ops?" Short-term, the answer is probably "yes". Long-term, the answer is absolutely not - you are going to use offline/digital low-cost tactics to find new customers. In the short-term, you are going to take the cost savings generated by your loyalty staffers, and you are going to spend it acquiring new customers, growing new customer counts. You need to have early wins in your program, or people will quickly lose focus and/or faith in you.

Put slides up on the screen, thirty or forty examples of how other companies find new customers at a low cost. Clearly communicate that this is the kind of thing your team is responsible for, going forward.

Pro-Tip:  You are going to pay your staff healthy bonuses when they exceed customer acquisition goals. The bonuses motivate staff to do what you are asking them to do. Without the bonuses, you're just another marketing leader they are trained to ignore.

• Analysts = 15% Annual Bonus.
• Managers = 25% Annual Bonus.
• Directors = 40% Annual Bonus.

Make this announcement at the end of the meeting. You want the room to play their cards, you want everybody to share what they are upset about, before you get to the good news.

Summarize your points, and end the meeting with a clear message that, going forward, customer acquisition is the focus of the marketing department. End the meeting.

This is where the fun starts.

Watch who heads out into the hallways or lunch room or parking lot to gossip. These are the people that are likely to not support you.

From this point forward, do not waver. Your department is in charge of finding new customers. Never let them forget it. Measure results, and share results at every single staff meeting. Give out $500 spot bonuses when people try new tactics, regardless whether they succeed or not.

I know, I know, your company does not pay bonuses, much less spot bonuses. Tough. Find a way to make this happen. Your team is going to generate a ton of profit for your business over time. Your team deserves to be rewarded for generating profit.

P.S.:  I get it ... you're not the kind of person who stands at the door, silent, for effect, encouraging folks to leave if they don't like something. That's ok. What is your solution for creating impact? Do something congruent with your personality style. But please, DO SOMETHING!! What we've been doing for a decade is not working. You have to find a way to reach employees, many of which have become complacent, some are waiting for retirement, others are buying time before a good job appears. If you have to, tell your team that you are a developmental organization that prepares people (well) for their next job ... ask for excellence so that you can give a great review when your employee wants to go work for Snapchat.

Setting Expectations

The vast majority of businesses we work for have low annual repurchase rates. The average across my client base is 37% ... if you had 100 customers who purchased in 2015, only 37 will purchase again in 2016.

As long as annual repurchase rates are under 60%, the number one goal of any credible marketer must center around finding as many new customers as humanly possible ... and at as low a cost as is humanly possible.

This is an expectation that the new VP/Marketing (or you) must set on DAY ONE.

ON DAY ONE.

I know, I know, your CEO is in year five of trying to grow customer loyalty and has demonstrated that the net promoter score is 10% better than five years ago. Show the CEO that annual repurchase rates are not improving. You have to do this on DAY ONE. You don't want to be ripped in a meeting six months from now because your co-workers were not aware of your strategic plan. If your co-workers hate your plan, they should hate it from DAY ONE. And in two years, when business improves, they'll take credit. That's how the world works.

In other words, once you know the annual repurchase rate, and once you see that it is below 60%, and once you see that it is likely to be closer to +/- 37%, you tell every single person you meet that your "program" is all about CUSTOMER ACQUISITION. It has to be. It's the only way you are going to grow.

When you are told by the CFO that omnichannel customers are worth 9x as much as single-channel customers and you should be focused on finding omnichannel buyers, ask your CFO how (over the past ten years) that strategy has worked? Wall St. loved the idea until sales didn't grow - now they think Nordstrom lost their way (click here). Go back to the metrics you asked for, and show every single employee who questions your direction how the prevailing industry deck of "best practices" failed your company. You only get one chance to set the pace ... do it from the get go.

When the new General Manager of the Milwaukee Brewers (age = 30) took the job, he immediately communicated to anybody who would listen that this was the start of a rebuilding project, and that his job was all about finding A/AA/AAA talent that will, in the future, fuel the major league club. Now, fans don't like hearing this .... at all ... it means there is going to be a lot of losing in the short term. But the GM put his program in place, and he communicated what the program is, so expectations are being met from DAY ONE. Nobody should be surprised.

Sit down with your CEO. Tell her your plan, from DAY ONE. Make sure that nobody is surprised.

Sit down with your CFO. Tell him that your plan might be a bit expensive in the short-term, until you find ways to acquire new customers cheaply. Tell him that the glut of new customers you are going to add to the business will generate profit in years three, four, and five. Tell him that you are rebuilding your marketing program, from the ground up.

Sit down with your Merchandising Executive. Tell her that you are going to exploit her best-selling existing items to find new customers. Tell her that you are going to exploit her best-selling new items to find new customers. Tell her you need her partnership to quickly identify trends and best sellers, so that you can change strategies on the fly. Tell her that you are going to make her look good by causing her to sell more stuff. Do this from day one.

Sit down with your Operations Executive and Information Technology Executive. Tell them both to stay the heck out of your way! They are not marketers, you are a marketer! Put them to work finding new customers - then at least they are doing what you want them to do as opposed to the all-too-frequent strategy of these folks working behind your back as pretend-marketers. At too many companies, the operations and information technology folks think they are marketers. They are not marketers. So either put them to work on your mission, or tell them to get out of the way. Then get ready to duck, because they're going to challenge you anyway.

Sit down with your Human Resources Executive. Tell him that you will be in the market for customer acquisition talent. Tell him to start harvesting competing companies for talent, especially in the e-commerce, social, and mobile world. You don't want to be caught off-guard when somebody quits. You want to be prepared to change the structure of your organization when you find somebody with skills that your company does not possess.

Sit down with your Creative Director. Ask her to show you the creative that sells best. Beg her for assistance helping you find new customers. Creative people are stepped on every day, just like you are. Build a partnership. You need all of the adjacent marketing help you can get (except for operations & IT, who already feel like they are marketing experts).

Set expectations with your Executive Team from DAY ONE.

Then remind your Executive Team how you are performing vs. expectations. Communicate clearly, and communicate constantly. At EVERY MEETING.

P.S.: Regarding setting expectations ... make it clear that in the short-term you will hound the living daylights out of the co-ops for better performance (if you are a cataloger ... Google /Facebook and associated vendors if not). But in the long-term, you are going to find low-customer customer acquisition tactics that work digitally or offline. Make it clear that you do not know what these tactics are (but have 10-20 tactics from other companies available to show your co-workers, so that they know what you are talking about), but you and your team will learn over the next 2-3 years and what you learn will help you walk away from expensive co-op names. Yes, this means that you will begin walking away from the catalog. Yes, this means that your co-workers are going to be mad at you before you complete your first day of work. But that's what is required of a leader who clearly communicates his/her program to co-workers on DAY ONE.

P.P.S:  Yes, your co-workers and Executive partners are going to be angry with you. They aren't used to a marketer putting his/her foot down. Always go back to the metrics for the past ten years, and ask each grumbling co-worker if they embrace tepid performance? If the answer is no, then tell them to get on board or they should get the heck out of your way. If you are not comfortable doing this, you shouldn't attempt a marketing rebuild. I am not asking you to be mean. I am asking you to be firm. I am also asking you to be humble. Your plan has a better than 50/50 chance of not working. Make it clear to everybody that your plan may not work, and if it does not work, it is your fault. Communicate clearly. Communicate often.

Rebuild = Key Metrics

Ok, here's what I am going to do.

I am going to assume that you have just taken over as the Vice President of Marketing at your favorite catalog brand. Now, I get it. You work for an e-commerce brand, so you don't think this is relevant to you. Or you are already the Vice President of Marketing, so you've got things under control as long as the co-ops improve performance or Amazon goes out of business or hopefully both. Or you are an analyst who is simply looking for a way to communicate to an Executive so that you can finally make some semblance of progress.

We ask that you please bear with us.

I am going to outline a framework that you will most likely disagree with. That's fine. But if you disagree, then please ask yourself what following industry-encouraged best practices has gotten you over the past decade.

Let's start today with a handful of key metrics.

And let's pretend that I am the Vice President of Marketing.

My first step is to request the following metrics for the past ten years (annual basis).

• Company Net Sales.
• Company Earnings Before Taxes.
• Company Ad-To-Sales Ratio.
• Annual 12 Month Buyer Repurchase Rate.
• Annual Spend per 12 Month Repurchaser.
• Number of Reactivated Buyers (prior buyers > 12 months who repurchase).
• Number of First Time Buyers.
• Annual Number of Email Subscribers Who Click On 2+ Campaigns Per Year.
• Customer Lifetime Value.
• Percentage of Sales that Flow-Through to Profit.
• Merchandise Productivity by Year.
• Number of Winning New Items by Year.
• Number of Winning Existing Items by Year.

There is a specific reason for making this request.

First, you want somebody to look at you with crazy eyes and say "what is merchandise productivity?" Then, when you explain what merchandise productivity is, you are looking for a "oh, we don't track that, you have to understand, we are unique, we are different, our product speaks for itself" response. In other words, the metrics aren't so much about the metrics as the response you get from those who are asked to fill your request.

In fact, pay attention to who is asked to fill your request. If the request goes to the IT department, then you know that the marketing team you are inheriting is fundamentally broken. If a marketing staffer says "we don't measure the number of customers who click on 2+ campaigns per year because we measure opens and clicks and conversions within campaigns, and campaigns are all that matters", then you have learned that your email marketing team is being run by the vendor community, and lacks sophistication.

If you learn that it will take a month to get the results, then you know that the data environment is poor.

Also be wary of companies that turn your request around in thirty-eight seconds. Too often, these companies are metric-centric and are not merchandise-centric. We've all worked with companies that can answer any question but can't do a single thing with the answers provided.

If your company is posting < 5% earnings before taxes, then you have a great opportunity to make a case for building long-term profit via customer acquisition.

If your ad-to-sales ratio is > 20%, then you have a huge problem, as your company is dependent upon advertising and is not dependent upon merchandise brilliance.

If the twelve-month buyer repurchase rate is < 40% (and it frequently is), then all of your success is going to come from new customer acquisition programs.

If the twelve-month buyer repurchase rate is > 60% (and it seldom is), then you are blessed beyond belief, because loyalty efforts actually have a chance to work.

Look at the ten-year trend in twelve-month buyer repurchase rates. If the trend includes lower and lower rates (and it frequently does), then you have a merchandising / value proposition problem that you are not going to be able to fix in the short-term, or maybe ever. If this is the case, then customer acquisition programs are even MORE important to your brand.

Look at the correlation between annual net sales, annual repurchase rates, number of reactivated buyers, and number of new buyers. Look for specific instances where the number of new buyers declines but the number of reactivated buyers holds flat or increases. These are cases where your predecessor got cute and thought s/he could control expenses and fix the business. Now look to the net sales line. Did net sales increase? No? Congratulations! You just proved how critical new customer acquisition performance is. You will repeatedly share this fact with your Executive Team, reminding them to give you the latitude to fix real problems with real solutions.

Are new customer counts on the decline? Do net sales decline 1-2 years after new customer declines? Keep this fact in your back pocket, you are going to need it when somebody wants the business to grow and does not trust your strategic approach. When repurchase rates are around fifty percent, it is common to see a lack of customer acquisition investment reap rewards in year one and then cost the business dearly in years two and three.

If nobody can tell you customer lifetime value, then you know that the whole company is working off of guesses and magic - nobody has a clue whether anybody is making the right choices when it comes to investing in existing customers or new customers.

If nobody in marketing can tell you the percentage of sales that flow-through to profit, then you know that nobody has a fundamental grasp of profitability, and as a result, are probably making horrible investment decisions. Worse, if somebody tells you that only the Executive Team gets to know about company profit, then you know you have a huge cultural challenge facing you. I can't tell you how often I hear analyst/manager staff tell me that their company won't let them know about company profitability. My goodness. And then we wonder why our industry is broken?

Is the merchandising team willing to tell you the number of winning new/existing items? No? Then you know you are going to have problems working with these folks. Why do you have to share customer information but they don't have to share information about the merchandise that customers purchase?

How does the merchandising team define a "winning item"? This is valuable information to have, because you are going to promote items that are close to becoming winning items. You need to compare their definition of a winning item to your definition of a winning item.

Is merchandise productivity in a long-term period of erosion? Does this trend correlate with declines in number of winning items, or number of new items that are winners? It should correlate with a lack of new winning items. If it does, then you know that merchandising, not marketing, is the reason the business is not meeting expectations, and you'll need to teach your co-workers about this fact, and then you'll need to wear protective armor when you meet with the Chief Merchandising Officer.

Are you provided with two years of data, or ten years of data (per your request)? This tells you something about company discipline.

You're asking for thirteen metrics across ten years. Look at what you will learn by asking for a small number of metrics!! Before you make any judgments about your new job as VP/Marketing, wait to see what response you get from your request.

Rebuild

See the car below? That's what a 1971 Dodge Demon looks like when it is rebuilt, from scratch.

You may have run across those TV car auction shows, where a car like this might sell for $20,000 or $25,000 or $30,000. People have to have it ... it's like a brand new car, loaded full of nostalgia instead of airbags.

Now, this is what a 1971 Dodge Demon looks like when it is old, tired, and neglected.

Do you see the difference?

For some of us, especially those who followed the vendor / consultant / pundit / trade journalist playbook, we are like the rusted out vehicle above. Any cataloger / retailer with total sales growth under 10% over the past three years falls into this category.

Catalog marketing could look just like this ... and for some, it does.

With a car, you invest a lot of time, effort, and money ... and in time, the car is rebuilt. You have to invest in new parts (just like you have to invest in new customers and new merchandise). And for most of us, we have to hand the job of doing the rebuild over to somebody else.

In baseball, the process is similar. My Milwaukee Brewers were in first place in August 2014. Then they won a third of their remaining games, and missed the playoffs. Standing pat, the Brewers largely treated their team like the worn out Dodge Demon above ... and began the 2015 campaign with a record of five wins and eighteen losses. Since then, a rebuilding process was initiated. The manager was fired. The general manager "retired", and was replaced with a thirty-year old. Let that one sink in for a moment. More than half of the major league roster turned over. Star players were traded for prospects, prospects who will not play at the major league level for a few years, if ever.

The Cubs, Royals, and Astros followed this playbook. For a period of time, each team was HORRIBLE. Then, the young players made their way through the system, arrived at the big league team, learned the ropes, and some of them eventually performed at a high level.

What have we learned? 

• If you don't rebuild a car, the car rusts out and is junked.
• If you don't rebuild your baseball team, performance declines, and it takes longer to return to winning.

Back to catalog marketing.

Catalog marketing is fundamentally broken. Nobody will tell you this, because those who could tell you earn $$$ by having you do the same things the same way. They stay in business if you don't change.

A decade ago, leading brands in the catalog industry took a different path. They personalized their websites, they greatly cut back on catalog circulation, they reinvested the money in a diversified customer acquisition portfolio, and they made e-commerce the centerpiece of their business, coupled with outstanding merchandise. They used outstanding merchandise to attract new customers.

In retail, "fast fashion" is essentially a practice of using outstanding merchandise and newness and low price points to attract new customers.

The rest of the industry followed the preferred path of the vendor community. Customer acquisition became an algorithmic game that lacked thought or strategy (it's this way in e-commerce too, with Google and Facebook generating algorithmic names). Today, the co-ops that mastered the algorithmic game are dying, though nobody in the industry will tell you so because acknowledgement of the issue would send the entire industry into an outright panic ... look at your own co-op response over the past five years ... it is obvious that the co-ops are dying ... it is obvious every one of us must have a new strategy in place to find new customers before co-op declines overwhelm us. 

Then Victoria's Secret pulled $100,000,000 of catalog advertising out of the ecosystem. Notice that your vendor partners aren't publishing a lot of thought leadership pieces about that decision, but when JCP mails one (1) catalog, your inbox is populated with reasons why this is a "good" decision.

We are at the end of an era.

Nobody will acknowledge that we are at the end of an era, because it scares all of us to acknowledge it. How do we acquire customers if our preferred source of algorithmic names is drying up?

Catalog new customers have dried up.

Retail new customers are drying up ... that's why those folks are closing stores and are downsizing staff.

In time, e-commerce new customers via Google/Facebook will dry up as mobile, bots, and virtual reality consume e-commerce ... it will happen, we have history on our side.

We are pointing toward a complete rebuild of our marketing organization. We are going to undertake a rebuilding project, not unlike a sports team or a car enthusiast. You aren't going to like what I am going to say over the next several weeks. You will find every reason to tell me that I am wrong. Your vendor partners will tell you that I am wrong ("don't listen to him, he's against our industry, trust us."). But you are a professional, and you know that something needs to change. So let's get busy focusing on change.

Why Is Allowing The Customer To Shop However The Customer Likes Terrible Advice?

I received a comment from a reader named "Claire" ... here is the comment, a comment that deserves a standalone blog post:

• Can you expand on your comment? Doesn't "omnichannel" allow customers to shop however they like? What was the terrible advice?

Here, then, is my reply.

On the surface, it sounds like the best advice one could ever receive. It sounds like simple common sense.

You probably know about the history of the term "omnichannel", right?  It goes back to Forrester Research, back in the 2009-2010 timeframe. A researcher wrote a blog post saying that "multi-channel was dead". The author said that the advent of digital channels would change how customers shopped, requiring retailers to expand the multi-channel thesis from online/stores/catalogs to include all digital channels. The author recommended that the retail organization be everywhere, because the customer is everywhere. There would be no such thing, in the eyes of the customer, as a store or website or mobile experience or social ... there was the brand, and there was the customer. Period.

That was the genesis of the movement. It wasn't a movement created by actual retail brands. It was a movement astroturfed by a research brand. If you are a Forrester subscriber, go find the article from the 2009-2010 timeframe.

The thesis was carried forward, then, by vendors. Not by retailers, mind you. Vendors. Vendors who figured out they could make money off of an omnichannel thesis. Database providers profited by linking data across all channels. Retargeters, search vendors, affiliates, social vendors, email vendors, mobile advocates, they all benefit by telling a story that the customer is doing "everything". So they told the story. Over and over and over again, until retailers believed the story. They used highly misleading tactics like suggesting that an omnichannel buyer was nine times more valuable than a single-channel buyer, and therefore, all retailers will get rich by building a database full of omnichannel buyers. The queries were highly biased and highly inaccurate (segment five year buyers by number of channels purchased from and then count number of purchases ... well, to get to nine purchases, you by default will touch six channels ... this does not mean that omnichannel caused the customer to be more valuable ... instead, the customer is simply valuable and therefore touches all channels. Our industry simply cannot understand the bias in the query, and therefore, made terrible decisions based on a bad query and a misunderstanding of customer behavior).

Macy's was the first to publicly embrace the story ... going so far as to call themselves "America's Omnichannel Store" three years ago ... they claimed the title in their 10-K annual report. Nordstrom, while far more humble, followed elements of the playbook as well.

By 2013-2014, many retailers were looking for growth opportunities, so the thesis that allowing customers to shop however they like sounded very seductive. Customer wants to shop online? Great! Customer wants to browse online then buy in a store? Fantastic! Item is sold out in a store so the store ships the item to the customer? Wow! Customer touches Facebook and various websites where retargeting tactics are applied and then searches on Google and receives email marketing campaigns and visits an affiliate for a discount? Perfect - pay everybody for the right to earn that order, everybody wins!

One problem.

What is the customer going to purchase when the customer shops however they like?

Let's compare Macy's / Nordstrom to, say, Zara.

At a time when traditional retailers followed the omnichannel playbook, focusing on product shipping operational tactics and marketing tactics, Zara focused on Merchandise. A  brand like Nordstrom might turn inventory 6-20 times a year, which is quite good. Zara might turn inventory 40-100 times a year. Nordstrom is largely beholden to merchandise vendors with traditional merchandise lead times. Zara knocks off what is popular today, and gets it in front of the customer in three weeks ... and sells through the merchandise in a couple of days. This causes the Zara customer to interact with the brand multiple times a week, to see what is new. This causes the Zara customer to have to ACT NOW because the merchandise may never be available again. The customer is literally competing with other customers to obtain scarce resources. What is scarce about buying branded merchandise at Nordstrom or Macy's?

In other words, a Nordstrom or Macy's focused on the thesis that the merchandise strategy was good enough, and it was simply the availability of the merchandise across channels that was the problem.

A Zara or H&M or Forever 21 focused on the fact that the merchandise is never good enough, and instead of investing in omnichannel theory ... these brands invested in merchandise brilliance.

So over a half-decade, the investment in merchandise brilliance defeated the investment in making sure that the existing merchandise assortment is made available across all channels so that the existing customer could shop however the existing customer liked.

We learned that New Merchandise Brilliance trumps Omnichannel Brilliance. I mean, you can almost make the argument that retailers using the word "omnichannel" in their Wall Street reporting experience negative comp store sales (not quite, but we're getting closer).

The byproduct of the failure of the omnichannel thesis occurs in new customer acquisition. Because the 24 year old shopper preferred Zara's new merchandise assortment (twice a week, mind you), the 24 year old abandoned Nordstrom / Macy's in favor of Zara / H&M / Forever 21 and others. This put pressure on Nordstrom / Macy's to find new customers ... and we all know that the reason that most businesses thrive over time is because of customer acquisition brilliance.

How did Nordstrom / Macy's address the new customer acquisition problem? Nordstrom leveraged Nordstrom Rack, acquiring lower-price consumers that can ultimately be up-sold into the full-line store channel. Macy's is going to copy this thesis. So kudos to Nordstrom for having a card to play here ... but it is a "different" card. Zara, which calls advertising a "pointless distraction", finds stuff that the customer finds "cute" at a low price and built a supply chain to respond immediately. Nordstrom / Macy's apply a "low price channel" strategy. It's a fundamentally different approach than the fast fashion folks use, and we will find out which strategy wins over time.

In other words, traditional retailers took their eye off of what matters when traditional retailers decided to focus on allowing the customer to shop however they like. Traditional retailers missed the trend that younger customers didn't want to shop however they like. Instead, younger customers wanted to buy something cute right NOW!! As a consequence, merchandise productivity suffered at traditional retailers, and today, customer acquisition among younger customers is suffering. The proof is in the comp sales metrics that Macy's publish and that Nordstrom could publish if they separated out online sales and Rack sales from published totals - undoubtedly, Full-Line sales would not be great, right?

In conclusion, the omnichannel thesis, an astroturfed concept coined by a research brand, led traditional retailers down the wrong path. While focusing on how to sell existing merchandise however the existing customer wanted, younger customers chose to shop however they wanted ... at Zara or H&M or Forever 21 ... buying cute stuff at low prices, cute stuff that can be turned 40-100 times per year.  Traditional Retailers choose omnichannel.

That's why allowing customers to shop however they like is such a bad idea. The thesis allowed traditional retailers to focus on omnichannel technology instead of supply chain  / merchandise reinvention based on scarcity of cute product. We learned, the hard way, that what the customer wants is cute merchandise. We learned, the hard way, that retailers need to offer cute merchandise in order to acquire customers in order to be successful in the long-term. Channel alignment with existing customers and existing merchandise strategies did not win.

Thanks,

Kevin

Update 4/22:  A reader tells me that the phrase "omnichannel" was coined by Leslie Hand of IDC. No links were provided to verify this is true, but I thought you should at least know that a reader believes differently. If you conduct a search, you will find at least a half-dozen different originators of the term. Which tells you something.