2,800 of 4,400 Employees Are Stylists

Back to the article from yesterday (click here).

This is one of the staffing differences I see between catalog clients & online brands ... online brands tend to trust people & give 'em more autonomy ... especially younger employees. Catalog brands (not all) tend to employ a top-down structure. I asked a 30ish employee at a "digital" company what her goals and objectives are ... she told me she doesn't have goals or objectives and her boss does not assign her work ... it's her job to grow the business as she sees fit.

It's not only the business models that are fundamentally different ... it's the style of work that is fundamentally different, too.

Chief Algorithms Officer

Catalogers - please read (click here):

Most catalogers aren't going to accept this approach to business. They'll read this and reject it ... "this approach won't work" ... and they'll move on a square inch analysis of the June Remail II Catalog.

During the second half of 2016, I will not be speaking to those with a "read and reject" mindset (#RAR). 

Instead, I will speak directly to you, the open-minded professional (#OMP).

As an open-minded professional (#OMP), you read about a Chief Algorithms Officer and you then consider what that means to your business. You don't run out and hire a CAO, but you pay close attention to what this company is saying by having an individual perform this task.

This company is telling you, the #OMP, that merchandise and math are critically important. What you sell matters, and then using math to align the audience with a subset of the merchandising assortment matters.

Remember - in 80% of my Merchandise Forensics projects, there is a clear product problem that can be articulated and solved.

A Chief Algorithms Officer is one solution to a merchandise/product problem. There are other solutions. But this solution at least recognizes that a fusion of merchandise and math can grow your business. An #OMP like you can easily recognize this fact.

Catalog Craig Paperman on #Brexit

Yes, this is business fiction, though you know there's truth in it ... if this stuff isn't your cup of tea, read this article (click here) about Chicago Cubs Guru Theo Epstein ... and think about what it means when a business puts a young person in a position of authority.

Kevin: Are you looking forward to Canada Day, Mr. Paperman?

Craig: What?

Kevin: Canada Day. July 1. Canada's independence.

Craig: I'm an American.

Kevin: #merica.

Craig: What?

Kevin: You love July 4, don't you?

Craig: Red. White. Blue. Parade at eleven. Hot dogs in the afternoon. Fireworks at night. I use a pristene 1920x1080 image of the American Flag as the wallpaper on my desktop computer. I get chills just thinking about it.

Kevin: You like to follow the script others write, don't you?

Craig: It's the straightest path to success.

Kevin: How do you feel about Brexit?

Craig: The last thing I need is a 20% sales hit in our UK business because of something out of my control, on top of a currency disaster.

Kevin: Nothing like scraping 30% right off of your revenue line.

Craig: Exactly!

Kevin: You followed the trade journal script of opening a division in the UK, and now look at what following the script earned you?

Craig: International expansion is a best practice. Ask anybody.

Kevin: Uh huh.

Craig: Oh come on, you have to believe that it is smart to launch a UK catalog division. They're at least seven years behind us over there in e-commerce, so catalogs are a great idea. Now we're getting killed over there.

Kevin: A best practice is causing you to lose money? Doesn't sound like a best practice to me.

Craig: It's not my fault, dude.

Kevin: Of course it is your fault!

Craig: How?

Kevin: It's your job to pick smart expansion opportunities. You need to protect your brand, hedge against risk. You placed a bet, and now that bet turned out to be really risky.

Craig: I didn't do anything wrong.

Kevin: When business was good in the UK two years ago, who was responsible?

Craig: I was!

Kevin: And in the past three days, when sales sunk 20% and the exchange rate worked against you, who is responsible?

Craig: Voters.

Kevin: So you are responsible when risks pay off, and you are not responsible when risks cost your brand money, is that right?

Craig: Trade journalists told me that international expansion was a best practice. They hosted a free webinar. I attended. Their ideas made sense to me.

Kevin: Did the trade journalist expand into the UK?

Craig: What?

Kevin: If you should be in the UK, why shouldn't the trade journalist expand her business into the UK?

Craig: Um.

Kevin: Yeah, um!

Craig: It's not the same business model. You shouldn't compare apples and oranges.

Kevin: The trade journalist gets paid by vendors who want you to expand into the UK, you expand into the UK, and now your UK business is in chaos while the vendor keeps paying the trade journalist and you keep paying the vendor. Who's getting paid in this scenario?

Craig: Who?

Kevin: Everybody in the catalog ecosystem except you!!

Craig: I did what they told me to do.

Kevin: Just like the voters who support Trump or Sanders or Leave the EU ... they historically did what they were told to do ... and when their lives didn't improve, heck, they got worse, the used the only tool they had ... the vote ... to beg for a change, any change, even a change that may harm them more in the short-term or even long-term ... or maybe the change will help them. But anything has to be better than their current situation.

Craig: We don't get a vote in the world of catalog marketing. How should I vote my concerns?

Kevin: With your dollars and attention. Pick your partners carefully. Somebody is always getting paid, Craig. With your dollars.

Craig: But I attended the Online Shopper conference. One of the keynote speakers said we should be in the UK.

Kevin: And who got paid in that situation?

Craig: Online Shopper?

Kevin: By who?

Craig: Me!

Kevin: Did the speaker get paid?

Craig: The speaker paid a $20,000 sponsorship fee and earned a keynote as a consequence.

Kevin: That's messed up.

Craig: I know, that's a lot of value for $20,000, don't you think?

Kevin: Does Online Shopper have a UK conference where they share their brilliant lineup of thought leadership excellence with the UK audience?

Craig: No.

Kevin: So everybody telling you to expand into the UK is unwilling themselves to expand into the UK?

Craig: Oh oh.

Kevin: You listened to them. You did what they told you to do. And now your UK business is suffering due to resident angst.

Craig: It's not my fault.

Kevin: But those who told you to be in the UK did not expand into the UK themselves, so they are not exposed to the business issues that they told you were aligned with best practices that would make you rich.

Craig: It's not my fault.

Kevin: Of course it is your fault!!! You are accountable.

Craig: It's their fault! They sold me a bill of goods. Now I'm facing political and economic headwinds.

Kevin: Is it ever your fault?

Craig: And stop beating up our ecosystem partners. I love attending the Online Shopper conference. I paid $1,499 last year and got to see Sheryl Crow perform!!

Kevin: You could have seen her perform for $49 at the Coliseum last month.

Craig: There was a tower of prawns right next to the stage. You could literally go up to the stage and shake her hand while she belted out "Every Day Is A Winding Road" and then load up on a plastic bowl full of prawns. I made five trips to the prawn tower. That's what $1,499 buys you. Access. Access to thought leaders. Access to Sheryl Crow.

Kevin: Alright.

Craig: I got back to my hotel room at 2:00am after she sang "Are You Strong Enough To Be My Man" or whatever that song was. What an emotional moment. Great conference! Great time!

Kevin: Alright.

Craig: So the next time you want to criticize me for spending $1,499 to hear thought leaders tell me to expand into the UK, think about the tender moment I got to spend eating prawns while standing next to Sheryl Crow. Our industry is on the right path. Even if my business is suffering because of the choices they told me to make, I just need to stay the course and follow the script.

Kevin: #OhBoy.

A Reader Question About Average Order Value

One of our readers asked the following question:

• Would you be able to expand more on the importance of building high value orders and customers in the future and experience with numbers around that?

Average Order Value. 

I am not a fan of AOV. Building AOV is what so many folks do when they are out of ideas to attract customers. It is very hard to build a business by growing the number of orders by 10%. It is not terribly hard to grow the size of every order by 10%.

Most folks "cheat" when it comes to AOV. Instead of finding adjacent products that cause the customer to purchase four items instead of three items (hard work), marketers give 10% off or free shipping or any number of gimmicks. Cross-sells via a poor call center employee who earns $9 per hour and gets no credit for generating millions in additional sales. Pop ups and offers and endless customer interruptions. This stuff is easy to do, and who cares if the customer is annoyed, right?

In terms of customer value, I learned a valuable lesson when I worked at Eddie Bauer, some twenty-odd years ago. Our SVP always said "items = customers". In other words, he wanted a $100 order comprised of three items instead of a $110 order comprised of one item. When I modeled this dynamic, I found out he was right. Long-term value is maximized by 3 items yielding $100 ... that's a better outcome that one item at $110. Merchants too often jack-up the price of new items in an effort to boost AOV, then yield an undesirable long-term outcome when the number of items purchased per order declines.

You always want to manage a business with 1,000,000 twelve-month buyers spending $200 than a business with 500,000 twelve-month buyers spending $400. Why? Well, customer spend and/or average order value has a tendency to regress to the mean. In other words, a customer with a $500 AOV will regress back toward $100 ... similarly, the customer with a $50 AOV will regress toward $100 as well.

So go get yourself customers. Do not waste time chasing average order value. Yes, you can grow your business in the short-term via AOV, and potentially dilute profitability via discounts/promotions in the process. But regression to the mean will hurt you in the long-term. Go find more customers who purchase more units. That's where all of the long-term profit resides.

Multiple Points of View

Here's where we are.

1. Vote For "A" = 50% Think You Are An Idiot.
2. Vote For "B" = The Other 50% Think You Are An Idiot.

You are not an idiot, regardless how you vote.

I was in a meeting. The Leader asked an employee for his opinion. The person gave his opinion. Then the Leader ... she says, "well, you are wrong".  And that was the last time we heard from the employee in the meeting.

If anything, we probably need more ideas, even if the ideas are wrong. We need to look out for folks who are under-represented, be it in life, or in marketing.

"A" is seldom right, and "B" is seldom right. Both "A" and "B" have valid points.

Now if "A" or "B" outright lie to gain an advantage, by all means, expose the lie for what it is. With accurate and honest un-manipulated data, of course.

But, geez, in marketing and life, things are more complicated than "A" or "B". Real Leaders figure out where in the A/B continuum we should be ... or figure out that we need "C" and sell it and then Lead us toward it.

Something to think about, when reading your next Thought Leadership white paper about the future of whatever.

Work Together

I spent this week outlining a thesis that catalogers no longer compete with each other.

Instead, catalogers are part of a loose federation within a Catalog Brand Ecosystem. When Brand X performs well, then Brand D performs well, and when Brand D performs well, then Brand M performs well. So if we want Brand M to perform well, it doesn't hurt to have Brand X and Brand D perform well, does it?

You depend on the companies you believe you compete with. But how can you compete with these brands when you openly share your most valuable asset ... your customer list ... with each other?

The truth is that you are not competing. You are collaborating within a large Catalog Brand Ecosystem.

When co-op performance fails, it is not the fault of your co-op partners. At all. It is your fault. It is because you are not collaborating with the leaders at the companies you share your most valuable asset with .. your customer list.

So you can fix this problem in two ways.

1. Instead of competing, please work together. Partner with your co-ops to facilitate the discussions. And if your co-ops won't help you, then send me a message (kevinh@minethatdata.com) and let's figure this challenge out together.
2. Improve merchandise productivity. The Online Brand Ecosystem does not want your customer. The Mobile Brand Ecosystem does not want your customer. Therefore, when you improve merchandise productivity by focusing on a 55+ year old customer, you actually help all other catalogers in the Catalog Brand Ecosystem. And once momentum takes over, every cataloger benefits.

You can fix this problem by working directly with the leaders you perceive you are competing with. Find ways to collaborate.

In other words, I'm asking you to stand up and be a leader. Put this industry on your back and move it forward. No more complaining about co-ops. No more complaining about Amazon. No more complaining about online brands. No more complaining about elections. No more complaining about weather. No more complaining about economic headwinds. Too many companies are succeeding. It's time to collaborate with other catalogers, work together, improve merchandise productivity, find ways to grow new customers, and essentially grow the industry.

What is so bad about that message? Who among you and/or vendors could be offended by the hope that you become a leader and grow merchandise productivity and collaborate with other catalogers?

Discuss.

Go Recruit Some Help

When I analyze Catalog Holding Company data, I can clearly see how various brands align with each other. Brand A performs well when Brand Q performs well ... and Brand Q performs well when Brand Z performs well. There are a ton of linkages, and the best Catalog Holding Companies feed their ecosystem so that the customer moves from Brand Z to Brand Q to Brand A.

The same logic holds with your co-op partners, just on a much larger scale.

Here's what needs to happen.

1. You need to have a heart-to-heart with your co-op partners.
2. Ask your co-op partners to share the linkages that allow your business to thrive. If In The Company of Dogs thrives when Williams Sonoma thrives, you need to know this. You are paying the co-ops a lot of cheddar. They should tell you and all of your fellow Catalog Brand Ecosystem partners what the linkages are.
3. Now that you know the seven brands that align with your brand, it is time to sit down with the leaders of each of the seven brands, and figure out how all seven of you can work together to benefit each other.

Remember, catalogers are no longer competing with each other. At all. 

Catalogers are a loose federation of brands within a Catalog Brand Ecosystem. When some brands within the ecosystem succeed, all other brands succeed because of the success of others. I don't care that you perceive that you sell the same merchandise as another catalog brand - who cares? You are sharing names, so that means you are already sharing trade secrets - what could be a bigger trade secret than your customer list?

The co-ops can facilitate the partnerships, the linkages. The co-ops can perform the analysis, and then go to each brand and share the linkages. The co-ops can bring leadership from each brand together for conversations. The co-ops have the data, and they have the relationships to make this happen. The only thing stopping this from happening is adherence to 1980s thinking ... from you ... and from the co-ops.

Go recruit some help from your co-op partners.

If you run into a brick wall, contact me (kevinh@minethatdata.com). We'll try to figure something out.

Remember - you are not competing with each other anymore. You won! You own the 55+ year old customer. The Online Brand Ecosystem doesn't want your customer. The Mobile Brand Ecosystem doesn't want your customer. You won the competitive battle. Now please work together to help each other succeed.

All In The Same Boat

I want to show you something that came out of recent research I performed.

Here's an equation for customers who have yet to purchase from Brand A.

• Brand A Next Year Demand = 0.920 + 0.05*(Weighted Brand B Dollars) + 0.04*(Weighted Brand C Dollars) + 0.08*(Weighted Brand D Dollars).

Weighted dollars are based on recency (send me an email and I will show you how I calculate the weights).

• Orders 1 Month Ago = Demand * 1.000.
• Orders 2 Months Ago = Demand * 0.886.
• Orders 3 Months Ago = Demand * 0.784.
• Orders 4 Months Ago = Demand * 0.695.
• Orders 5 Months Ago = Demand * 0.615.
• Orders 6 Months Ago = Demand * 0.545.
• Orders 7 Months Ago = Demand * 0.483.
• Orders 8 Months Ago = Demand * 0.427.
• Orders 9 Months Ago = Demand * 0.378.
• Orders 10 Months Ago = Demand * 0.335.
• Orders 11 Months Ago = Demand * 0.297.
• Orders 12 Months Ago = Demand * 0.263.
• Orders 13-24 Months Ago = Demand * 0.127.
• Orders 25-36 Months Ago = Demand * 0.030.
• Orders 37-48 Months Ago = Demand * 0.007.

Let's say that a customer purchased from Brand B one month ago, spending $100, and has no other purchases.

• Brand A Next Year Demand = 0.920 + 0.05*(100*1.000) + 0.04*(0) + 0.08*(0).
• Brand A Next Year Demand = $5.92.

Ok, now let's assume that the customer lapses, and has not purchased in two months from Brand B.

• Brand A Next Year Demand = 0.920 + 0.05*(100*0.886) + 0.04*(0) + 0.08*(0).
• Brand A Next Year Demand = $5.35.

In other words, if Brand B fails to keep this customer highly recent, then this customer is less likely to buy from Brand A - about 10% less in this example.

Now, let's pretend that the customer buys from Brand C, spending $100 in the past month, and spent $100 three months ago from Brand B.

• Brand A Next Year Demand = 0.920 + 0.05*(100*0.784) + 0.04*(100*1) + 0.08*(0).
• Brand A Next Year Demand = $8.84.

This is what the co-ops are dealing with. Because many catalogers have had considerable merchandise productivity problems in the past year, the co-ops are dealing with a bunch of customers worth $5.35 each. If all catalogers had merchandise productivity gains, the co-ops would be feeding you $8.84 value names.

Again, this is not longer the fault of the co-ops. The co-ops are a mirror of all catalogers and shared cataloger merchandise productivity. Because cataloger merchandise productivity has not been great, the co-ops select names for you that are worth less.

Catalogers no longer compete with each other.

Catalogers are all part of a Shared Catalog Brand Ecosystem.

When one cataloger improves merchandise productivity, all other catalogers in the Shared Catalog Brand Ecosystem benefit. This means we are all waiting for the first catalog leader to stand up and improve merchandise productivity significantly and lift the industry on her shoulders.

You (the reader) are capable of fixing the sluggish performance that some/many of you are experiencing. When you improve merchandise productivity, everybody else benefits. When your peers at other companies improve merchandise productivity, you benefit.

And best of all ... the Online Brand Ecosystem does not want your customer base. That ecosystem (except for Amazon) has largely shut out the 55+ year old customer.

The Mobile Brand Ecosystem completely ignores your customer base. They do not want a customer who purchases merchandise while wearing tri-focals.

So the average catalog customer is 55+, and is all yours!! (and yes, I get it, some catalogers cater to a 47 year old customer ... but the vast majority don't, so let's please be realistic here).

This means you are responsible for fixing the problem.

And you can fix the problem - I have faith in you!!

The solution is to find merchandise that the 55+ year old customer loves, merchandise that the Online Brand Ecosystem and the Mobile Brand Ecosystem doesn't want to sell. Then, you use the skills you've acquired over a career to market to your 55+ year old customer.

You are all in the same boat.

And you can solve the challenges yourself.

Time to get busy collaborating with each other, don't you think?

Business Stinks / Employee Orders

Yup - you are the marketing/analytics expert, and you are sitting in a meeting with this guy, and he says "it's your fault business is so bad".

It is not your fault that business is so bad.

I've told this story a half-dozen times, but the story is particularly relevant at a time when pundits utter nonsense about "economic headwinds" or the impact of "the election".

It was 1998 at Eddie Bauer ... the online division was running -15% ... stores were running -20%. Bad, bad business. And eventually, it became time to assign blame ... it was "marketing's fault".

So, I ask my team to run a query.

• Sum all demand from the 30 employees who have a Vice President title for Spring 1998.
• Sum all demand from the same 30 employees with a Vice President title for Spring 1997.
• Index the change, year-over-year.

The results?

The 30 employees with a VP title spent 20% less in Spring 1998 than in Spring 1997.

I could hardly wait for the meeting to start!

It only took ten or fifteen minutes for one of the merchandising wizards to openly suggest to the room of VPs that marketing had once again "damaged the brand".

I pulled out the results of the query.

I shared with everybody in the room that everybody in the room was spending 20% less this year than last year.

I reminded everybody in the room that "the economy" couldn't impact their spend, because they were all being paid the same or more than the prior year.

I reminded everybody in the room that marketing could not impact their spend ... they all received every catalog as part of a seed program ... they all received every email campaign as part of a seed program.

I informed the room that the only reason an employee would choose to spend less is because each employee, Executive employees mind you, found the merchandise less compelling this year vs. last year.

Well, you've never heard a room go so quiet.

Then the meeting resumed. But from that point forward, marketing was not blamed for bad performance in an Executive meeting that I attended.

Maybe you've had a bad spring, and you want to blame Trump v Clinton or you want to blame your marketing team for mucking things up. Do yourself a favor. Find out how much your salaried employees spent this year vs. last year. If spend is down 15%, then the answer to your woes resides in the building ... go ask your co-workers why they are spending less.

Run the query.

A Shared Catalog Brand Ecosystem

Once all catalogers joined all co-ops, catalogers stopped competing against each other.

Instead, catalogers became a loose federation of brands, all working together.

So when co-op performance falls off of a cliff (as we've seen in the past year), it isn't because the co-ops are performing poorly. It is because catalogers are performing poorly. Nobody wants to say this publicly, of course, but we all know this to be true. 

The good thing is that we can fix this problem!

When you analyze what I call a "catalog holding company" ... a company that owns 2+ catalog brands, you learn something fascinating.

• When one brand experiences a merchandising breakthrough, all other brands benefit from the gains enjoyed by one brand. A 10% gain within one brand yields a 1%+ gain across other brands.

If this is the case within a catalog holding company, imagine what happens across thousands of catalog brands within the co-ops?

Why does this happen? You all know about RFM concepts from the 1980s/1990s, right? If a customer is more recent, the customer spends more. If the customer buys more often, the customer spends more. If the customer spends more in the past, the customer spends more in the future. Well, these ideas translate across the Catalog Brand Ecosystem. If a customer is recent with one brand, it helps response with your brand.

The solution to catalog struggles in Spring 2016 lies within each and every one of you.

When one of you increases merchandise productivity by 10%, then companies aligned with you have a bigger pool of recent buyers to select from, and their business grows as a result, because the names they take are of better-than-average quality.

When one of you finds a way to improve customer acquisition by 10%, then companies aligned with you have a bigger pool of recent buyers to select from, and their business grows as a result because the names they take are of better-than-average quality.

It is time to stop blaming the co-ops for weak performance. The co-ops are simply a reflection of your merchandising strength. The reason the co-ops are dying is because your merchandise is slowly dying.

This means that the solution to catalog struggles in Spring 2016 lie within each and every one of you, within the merchandise you sell.

Yes - you!! You can fix this!

You are the solution.

More on the topic tomorrow.

A Strange Year For Catalogers

Lots of information in the past few months.

• For many, terrible business results, especially in customer acquisition.
• For some, very good business results - so you can't blame "the election" or "economic headwinds" for any downturn in business. At all. Don't even try. Why would other companies experience so much success if external factors were to blame?
• A significant number of leaders preparing to sell catalog brands. Got a LinkedIn request last week signaling yet another case where this is going to happen.
• Catalog brands being shuttered.
• Retail brands shuttering catalogs.
• Online brands firing-up catalogs. Remember, just because Wayfair has a catalog doesn't mean catalogs are rallying ... it is far more likely that Wayfair (and other online brands) are running out of new customers or ways to monetize existing buyers. Talk to folks at online brands, they'll tell you what's up.
• Catalog brands being reorganized (some of you have been peppering me with thoughts about Orchard Brands as an example).
• Across-the-board downturn in co-op performance ... something that is routinely talked about privately but almost nobody will say anything about publicly.
• Employee fear. This is pretty common, and I understand the fear.

Here's the interesting thing, folks. Catalogers don't really compete with each other anymore. That ended back in 2005ish when all catalogers participated in all co-ops, openly sharing all names with each other. You cannot compete with each other when your success depends upon the success of somebody else. Vermont Country Store needs Blair, Blair needs Oriental Trading Company, Oriental Trading Company needs In The Company of Dogs. Nobody will talk about this fact, but the fact is 100% true.

For the rest of this week, I am going to discuss a new thesis ... the shared Catalog Brand Ecosystem you all participate in. You are not competing with each other. If anything, you are a loose federation of brands that compete against the Online Brand Ecosystem and the Mobile Ecosystem. And here's the good part ... you've already won the battle. The Online Brand Ecosystem doesn't want your customer base (#tooold). The Mobile Ecosystem doesn't want your customer base (#grandparents). You own your customer base (customers > age 55). It's all yours!!! What a huge advantage you have.

So if you own your customer base, then your success / failure is fully dependent upon you ... you and the other brands in the Catalog Brand Ecosystem. As a result, co-op performance has nothing to do with co-ops anymore ... it has everything to do with you. If co-ops don't work well anymore, it's because of a core issue with the Catalog Brand Ecosystem you participate in - your business dynamics are driving down co-op performance.

The problems can be fixed. You can do this!!

We'll address this topic tomorrow.

And The Results Of The Test Are ...

Like a bald eagle, one can see the results from a mile away!

I performed an experiment on Friday ... the blog post, titled "Ralph Lauren - And Five Tips For Success" is, according to my email service provider, the most clicked-through and most "engaging" article of the month ... and it has only been active for a couple of days whereas other articles have had more than two weeks to percolate.

The plus-side of the experiment is that an audience can be motivated to act.

The minus-side of the experiment is that an audience can be easily motivated to act on the least important and unactionable content imaginable.

If this happens to you - a smart audience - imagine what happens on a daily basis ... even in your business?

In other words, when you seek to optimize / maximize, say, email productivity, are you doing what is best for your business, or are you following the lowest-common-denominator (#discounts #promotions #engagement) so that your metrics look good?

Ralph Lauren - And 5 Tips For Success

A great example of Merchandise Forensics in the real world at Ralph Lauren ... click here.

I'm doing a test today ... I never succumb to the noxious pap known as "subject lines". But I'll do this test today, because I want to see how you, the studio audience, respond ... do you increase opens and clicks? Because if you do, well, that's something to think about, don't you think?

Ok, here are the FIVE TIPS FOR SUCCESS, stuff that works across my client base.

• Have a Marketing Point of View.
• Proper Demographic Alignment.
• Increase Merchandise Productivity.
• Have a Robust and Diverse Customer Acquisition Program.
• Thoroughly Understand Your Brand Ecosystem.

The Catalog Brand Ecosystem

When you buy from Absolute Socks, your transactions don't go into the catalog co-op database ... but when you buy from In The Company Of Dogs, your transactions likely make it into the database.

So in this way, the catalog Brand Ecosystem at a co-op scale is largely functioning properly. You don't care that Absolute Socks transactions don't appear, because the customer buying from Absolute Socks isn't the customer buying from Blair. You don't want 100,000,000 households with detergent purchases ... you want 8,000,000 households modeled properly.

So when we hear from catalogers (constantly) that co-op performance is dying, we're left with a handful of conclusions.

1. The 8,000,000 best catalog names are constant, but are performing worse over time.
2. The 8,000,000 best catalog names are slowing churning into 6,000,000 catalog names, and the co-ops fill the remainder with unproductive buyers from online categories or grocery stores or wherever/whatever. Best have been reduced because the catalog ecosystem is dying.

Nobody in this industry wants to admit that (2) is a possibility. Careers are on the line. I get it. It isn't fun to talk about, so instead we fantasize about how some new allegiance model will deliver breakthrough results.

One CEO told me that a large co-op told him that only 45% of the names he gets have ever purchased from his category ... and hint, everybody has to have what this person sells. This cannot happen unless the co-op is incompetent (they aren't) or the universe is dwindling rapidly.

Catalog names are like salmon to orca whales ... if there aren't enough salmon, orca whales up here in the Pacific Northwest struggle to survive.

Your co-ops have all of your data. They could describe the catalog ecosystem to you in an hour. Heck, they could all band together, host their own conference, allow you to attend for free with all the money you've paid them, and they could give you a thorough description of the overall Catalog Brand Ecosystem. They could tell you that what used to be 14,000,000 great names was 8,000,000 three years ago and is now just 6,000,000. They could fully describe what is happening, in easy-to-understand terms. They could describe what is happening to the Catalog Brand Ecosystem. Then, they could get busy helping you move into the future.

Contact your favorite co-op immediately. Ask them to perform a Catalog Brand Ecosystem analysis for you. Ask them to explain just what the heck is causing such lousy performance. These are good people, they should respond to your request, right?

Marketing Tactics Feed The Brand Ecosystem

Take a look at this little beauty from the Direct Marketing Association.

You pay the DMA $30,000 a year ... $300,000 over a ten year span. They take your money, and they create ads with potentially inappropriate word play.

Maybe you think it is funny.

Maybe you don't think it is funny.

Either way, this form of advertising feeds their ecosystem with the kind of individuals who like this form of advertising.

I have a client that is exhausted with constantly having to find new and better promotions. When I asked the client how they acquired new customers, they mentioned that %-off and free shipping promotions "work best".

Well, what kind of customer do you think this brand acquires?

What kind of customer do you think the DMA acquires, using your money?

Your marketing team makes decisions today that impact what your brand ecosystem looks like tomorrow. Make sure your marketing team is making decisions that align with an ecosystem you'd be proud of.

60 Data Scientists?

A VC I've previously worked with mentioned on Twitter that StitchFix has sixty (60) data scientists on staff ... he stated that StitchFix is going to do to retail what Moneyball did to Major League Baseball.

Now, I've managed Data Scientists ... back when they were just Statisticians with Masters or PhDs to their credit. And like anything else, I can tell you that just because you have sixty numbers oriented people doesn't mean you have a 60x increase in insights into why your business does / does not work.

But it is also possible that 60 data scientists give you a 120x increase in insights.

If you want to understand how your Brand Ecosystem works, you have to invest in people. No, not invest in your favorite vendor, because your favorite vendor cares more about how their ecosystem works than how your ecosystem works ... and they should care more, because they cannot survive without understanding how their ecosystem works (do you think that vendors measure their own ecosystem based on client repurchase rates and spend and product affinities and the like ... a good question, don't you think?)

You cannot learn how your Brand Ecosystem works if all you ever do is figure out how to "target" a customer. You have to actually map the system, from newbie to loyalist. You have to know how much of your email sales are incremental, and how much is cannibalized from other channels. You have to understand the role of every single merchandise category. You have to understand the role of new merchandise, existing merchandise, winning items, contending items, low price points, average price points, high price points.

You have to do some work.

Show of hands ... how many of you have a thorough understanding of your brand ecosystem?

Hiring 60 data scientists for a $200,000,000ish business is one way to get a head start.

Fertilizing The Field

In any ecosystem, you need food. Food makes the whole thing go. Remove one step in the food chain, and the top end falls apart.

Your business is no different - new customers are like food to the profit and loss statement. Without new customers, who are you going to spend all of your beloved energy targeting? How can you have a loyalty program if you don't have enough customers being acquired to eventually graduate to the loyalty program?

See the green sticker on the car window? That's for evo (click here). It's right next to the Apple logo.

When is the last time you saw a Macy's sticker on a car?

The stickers represent the marketer, busy fertilizing the field ... for big (Apple) and small (evo).

It's not hard to create a takeaway like this. Tell me what stops you from doing it? It's not cost, is it? What stops you from paying attention to small details?

Misunderstanding The Brand Ecosystem

We just went through a nightmarish five years.

No, this isn't about making marketing great again.

Here's what Amazon did. They installed the Fear of God in Us. Think about when you are fearful. Do you make the best decisions? Have you ever watched that commercial where the youngsters are being stalked by a serial killer and they hide in a garage and one of them is breathing on the other person and then they could escape in a running car but they don't? The commercial makes for a nice story about the dilly of a pickle we got ourselves into by trying to "Respond to the Amazon Threat".

In retail, we embraced "omnichannel" ... thinking that we could "win" the customer by aligning all of our channels. We though that was what the customer wanted. But we didn't evaluate our own brand ecosystem, did we? For if we did, we would have asked ourselves a valuable question ... where is the next new customer coming from? If our existing customers wanted an integrated experience, what did new customers / prospects want?

We didn't bother to evaluate that question. New customers dried up - and they dried up in the retail channel, sending comps into the tank. Then, existing customers slowly migrated online (given that we invested in that channel the most), further depleting the in-store experience.

Had we understood the retail brand ecosystem, we would have made very different choices.

Same thing in catalog marketing. Look at where catalogs fall within the brand ecosystem above ... they are the only place where half-way loyal customers buy high-priced items. The rest of the ecosystem focuses on low prices or average prices or discounts/promotions or sales. Heck, one could say (in this case) that the business and/or the customer pushed the catalog right out of the brand ecosystem. It's clear that nobody is studying the role of the catalog in this brand ecosystem, for if somebody were studying the role, they'd question why it is becoming an outline within the entire ecosystem?

Or, somebody would question why the catalog is the only place where high-margin, profitable transactions take place, right?

Either way, somebody would be asking questions.

That's why we map out the brand ecosystem. We have to learn what role each customer-facing element of the brand plays in the overall brand ecosystem. Once we understand the brand ecosystem, we can begin implementing customer acquisition strategies that help grow the business most effectively. And, we can improve merchandise productivity, because we understand the customers and channels where various merchandise categories perform best.