The End of 2017

This is my final post of 2017.

As we speak (or as you read this), I am watching something called "The Pizza Show". In Season 1 / Episode 6, the host takes us to Silicon Valley, where a startup is trying to use robots to cook pizzas in a food truck as the truck delivers the pie to your home - making sure that the pie is piping hot and fresh when it arrives.

Early in the episode, the host speaks with other pizza gurus ... the "panel" of friends / co-workers sample mass-produced pizza and scoff at how awful it tasted compared to the stuff you get from a 60 year old pizzeria in New Jersey.

The episode, of course, outlines where the world is headed.

• Mass-Produced, Average, Fast, Convenient, Cheapest Option ... few winners, but if you hit the lottery, you dominate the world.
• Individualistic, Highly Above Average, Not Convenient, Pricier, Great Experience ... many winners, but you won't hit it big. You could make a fantastic living, however.

We get to pick which type of business we want to operate, don't we?

If our sales are flat or are declining, it means we're not picking either.

We are never going to compete against Amazon. That's the wrong game. We need to stop even talking about them. They won the battle 10-15 years ago while we ignored them, or they won it 18 years ago when we laughed at them. We messed up. It's time to move on.

If we want to choose the former, we won't get there by doing things the way we've always done them, will we?

If we want to choose the latter, we won't get there by doing things the way we've always done them, will we?

What's the common element?

• "We aren't going to get to the finish line doing things the way we've always done them."

Let's pretend we're an $80,000,000 business ... we're stuck directly between mass-produced and individualistic business models, aren't we? Not Macy's, not Absolute Socks. Do things the same way and get the same result. We'll have to pick who we want to be in the future ... hint ... we probably want to be more like Absolute Socks, and if we don't want to go down that route, we're probably going to sell the business in the next few years.

We'll have four choices in 2018.

• Buy.
• Sell.
• Scale.
• Unique.

Buying might make sense. Purchase a dozen catalogers, fold 'em up into one parent brand, milk 'em for all they are worth, then kill a brand when it is time and buy a new one. This is a huge trend in 2018 for old-school catalogers. 

You can prepare your business to be sold. There's a ton of profit to be made, and you'll sell for a higher price. Get all your metrics and tactics in order in 2018.

You can choose to "scale". If you want to compete against Amazon, have at it. Good luck! Pay Google and Facebook all of your hard-earned money. Make sure you have the lowest possible price. Make sure you have the best possible promotions. Make sure you are the most convenient choice on the planet, with the fastest delivery. Be the best. Or else you'll lose, right?

You can choose to be unique. Creating great experiences for individual customers. This is hard work. This is where "word-of-mouth" leads to low-cost / no-cost customer acquisition, which allows you to grow without paying Google/Facebook all of your hard earned money. The last thing you want to do is pay Google/Facebook all of your hard earned money.

NFL Playoffs

The regular season comes to a close this weekend.

32 teams competed in divisions of four. The winner of each division (8 teams) and four wild-cards survive the regular season, advancing to the playoffs. From there, 12 teams will be reduced to 8, then 4, then 2, and then there will be 1 Super Bowl Winner.

Once you get to the 12th or 13th game, you can see who is likely to make the playoffs and who is likely not to make the playoffs.

The buildup to the playoffs creates excitement.

The playoffs are exciting.

More than 100,000,000 people in the United States watch the Super Bowl.

Why not create your own merchandising tournament? If you don't like the football analogy, have a merchandise tournament that coincides with the NCAA basketball tournament. Pick your 64 best items, seed them 1-16 in one of four regions, and have the items compete head-to-head. The items that sells the most during "x" amount of time advances.

Publish the results on your website, on Facebook, on Twitter, on Instagram.

Let your customers fill out brackets. The ones that predict sales the best get some sort of discount - given how much y'all love discounts. Maybe the winner gets to be the honorary merchant for a day and gets to merchandise the website or an email campaign?

Old-School Marketers, Read This

Drop everything you are doing and read this, right now (click here).

Then ask yourself how a catalog competes with 75 data scientists and 3,400+ personal stylists.

Merry Christmas!

We'll keep things lite over the next eleven days ... diving into 2018 soon, ok?

Merry Christmas!!

An Example

Here are the six brand attributes I outlined.

I worked at Lands' End in the early 1990s.

• Omnichannel Zombie = Low.
• Diversified Portfolio = Average.
• Lucky Duck = High.
• All Seeing Eye = Low.
• Merchant Prince = High.
• 3-D Chess = Low.

I worked at Eddie Bauer, way back in the late 1990s.

• Omnichannel Zombie = High.
• Diversified Portfolio = Low.
• Lucky Duck = Low.
• All Seeing Eye = Average.
• Merchant Prince = Average.
• 3-D Chess = High.

And I worked at Nordstrom in the early 2000s.

• Omnichannel Zombie = Average.
• Diversified Portfolio = Low.
• Lucky Duck = High.
• All Seeing Eye = Average.
• Merchant Prince = High.
• 3-D Chess = Average.

Look at the Lands' End profile. Merchant Prince and minimal red tape and few people playing 3-D Chess. Just don't screw up the merchandise and don't give up the Lucky Duck attribute of a folksy call center team coupled with whimsical copy. The company was bought by and absorbed by Sears, which has a different profile. Oh oh.

Eddie Bauer was the definition of an Omnichannel Zombie ... red-tape and inability to get things done. 3-D Chess was "high" ... everybody had a strategy and nobody agreed on the strategy of a co-worker. Obsessed with history. Utterly stuck. Went bankrupt (twice) in the next decade.

Nordstrom had the Lucky Duck attribute of paying employees 7% of each sale and a customer service culture (people still don't replicate the commissions even though we all know they work wonders). A merchant-dominated brand. A strategy team, but not a strategy team that stepped on anybody imposing their will. Still successful.

Profile the company you work for.

What did you learn?

How do you make a difference knowing the pros/cons of your company culture?

Brand Attribute #6: 3-D Chess

We've all run across this, haven't we?

There are cultures that love to talk, to think, to debate. The only thing they don't want to do is change. Or they can't change because they get caught in an infinite loop of strategic roadblocks.

I was in a meeting that came to an absolute standstill because the CFO wanted to have a meeting-wide debate about Paid Search vs. Organic Results. This wasn't the purpose of the meeting, but it was what the CFO wanted to talk about. Hint - the CFO believed that Paid Search was a waste of money and that the CMO (Chief Marketing Officer) was bleeding the company of cash that could be allocated elsewhere. The talk veered in and out of company tactics, diving into what Google does with the data and how a theoretical customer would behave if the keyword didn't result in the brand being placed in second position - followed by arguments about whether you can trust the bidding process or not.

Twenty minutes later, nothing changed ... but as the CFO said ... "I love talking about strategy!"

That wasn't even strategy we were talking about. Imagine if somebody actually wanted to talk about strategy?

I recently had a conversation with a Professional. He asked why I never talk about strategies for battling with Amazon? When I suggested that any discussion about Amazon represented pointless drivel and was anything but strategic, the Professional bristled. "It's what everybody is talking about!" was the response.

If everybody is talking about something, then it falls into the 3-D Chess Category. It's stuff that is fun to talk about. You tie yourself into pretzels thinking about the complexity. There's no right or wrong answer, just opinions that allow people to argue ... and those arguments lead to vendor consensus that is ultimately monetized via solutions they sell us ... and since we all "agree" to a large extent, the solutions are sold.

Pay attention in the meetings you are in ... some people just get things done ... they have a simple plan, they align people behind their simple plan, they execute the simple plan, and they get results.

Others play 3-D chess. Complicated. External issues. Weather. Competition. Strategies that require 30,000 employees to agree. Lots of research. Surveys. Focus groups. Data overlays. These folks get 15% of the way into the 3-D chess game, make no progress, and then pick a new 3-D chess game.

Work with people who get things done via uncomplicated plans that do not depend upon "the competition".

Brand Attribute #5: The Merchant Prince

Retail Dive breathlessly revealed ... in their opinion of course ... that the fall of J .Crew meant that the "... era of the Merchant Prince is over."

Every "brand" has varying levels of "Merchant Prince DNA". Every single one. At a trade journal, that job goes to the "Editor", for instance. That person uses gut instinct and data to decide what to publish. If that person didn't leverage gut instinct, the internet would be a toilet of pretend articles designed to inflame people coupled with lowest-common-denominator content that yields clicks and ad dollars.

Oh. 

Wait.

I had a phone conversation with a Executive - this person loved credit - absolutely adored credit. The purpose of merchandise was to sell credit. This person became giddy when a customer paid via credit and would be charged 21% interest. This person is not a Merchant Prince.

And then there's the person who makes ornaments - I ordered one for a gift and the person wrote me that he makes each ornament by hand so that the person buying it knew that the ornament came from him. That's a modern day Merchant Prince.

If half of the DNA of the company you work for/with is filled with the Merchandise Prince gene, then everything you do has to support making merchants look good. That was the case at Nordstrom. Nobody cared that I had an algorithm that figured out who would buy something from an email campaign. Everybody cared that the Accessories Division was +9%. So you positioned everything in terms of growing Accessories Comps, not in terms of an algorithm. All of a sudden, people let you do what you wanted to do.

Want to innovate at a merchant-led organization? Demonstrate how innovation makes the merchant look good.

We're in a world right now where we are told that data and digital trump merchandise. Those who tell us this, of course, have a vested interest in data and digital.

In most of my projects, merchandise matters. A lot! If you have a Merchant Prince who is making great decisions, you can accelerate his/her growth by adding data and digital. But data and digital is dependent up merchandise. Take the merchandise away, and you have nothing. Absolutely nothing.

So value the Professional who is a Merchant Prince. This person needs your help, but you need her as well.

Brand Attribute #4: All Seeing Eye

You probably possess this attribute.

Do you pay Google for new customers?

Do you pay Facebook for new customers?

If you are a catalog brand, do you pay the Co-Ops for new customers?

If half or more of your new customers come from these sources, then you have a strong "All Seeing Eye" component of your brand identity. You strongly believe that the purpose of "digital" is to stalk a customer around every nook and cranny of the internet and then let algorithms determine when that specific customer is ready to purchase a widget. You contribute data to the ecosystem, and the ecosystem sends you a predictable stream of new customers ... at a cost that makes the ecosystem happy.

Do you use Google Analytics? Yes? Well, you're smarter than the non-user, but you played right into the hands of the All Seeing Eye. You perceive you are optimizing ROI ... but the software makes sure you continue feeding the All Seeing Eye (with data) ... and when you optimize ROI using All Seeing Eye Software, you make sure you keep spending money with the All Seeing Eye.

Retargeting? All Seeing Eye. Stalk the customer all over the internet.

Affiliates? All Seeing Eye.

Amazon Marketplaces? All Seeing Eye.

Native Ads? All Seeing Eye.

Have you ever wondered why vendors breathlessly promote the failed omnichannel agenda by demanding that you have a 360 degree view of the customer?  All Seeing Eye.

Social CRM? All Seeing Eye.

All of it is about a small number of organizations earning money from your customers ... money earned by watching every single thing your customers/prospects do online.

If you have the All Seeing Eye embedded in your company DNA, you're not likely to change. And at some point, Google + Amazon + Facebook + The Digital Ecosystem (and catalog co-ops if you are a cataloger) own you. They determine who your customers are. They determine your success.

The last thing I'd ever want is for a small number of companies to absorb my data and my money and toss me crumbs in return.

But that's where we are headed.

Brand Attribute #3: Lucky Duck

When I tell folks that Cards Against Humanity is leveraging all sorts of unusual ideas, the heads start shaking.

"That won't work."

"They're crazy!"

"That's in bad taste."

The reactions aren't much different when you bring up Patagonia or REI.

These companies posses an unusual brand attribute ... they are "Lucky Ducks". They tried something very unique and very different and they experienced success. Eventually, creativity and brand belief became part of the DNA, to the point where they have success because they possess the DNA to have success.

Many of us have ideas. 

Most of us share the ideas and get shot down.

If a company is largely an Omnichannel Zombie, for instance, the Lucky Duck gene is dormant. You can't tell Macy's to do something crazy, because the culture is designed to not absorb a 20% shock to sales if the idea doesn't work. Ask JCP what happens when somebody goes "all in" on a different idea.

And yet, other retailers execute the ideas/tactics that JCP or Macy's would find abhorrent. Other retailers have the Lucky Duck gene.

Duluth Trading Company ... seemingly loathed by many New England centric catalogers ... they have the Lucky Duck trait ... odd ads that many find distasteful but appeal to the audience that they pursue. A catalog Omnichannel Zombie simply won't take the risk, and quite honestly cannot take the risk because the Lucky Duck gene isn't in their DNA.

If you have ideas, share your ideas with companies that have the Lucky Duck gene. Or go work for that type of company. You can't tell K-Mart to do something if the Lucky Duck gene is dormant at K-Mart.

Brand Attribute #2: Diversified Portfolio

You either pursue this attribute as part of your strategy, or you don't. Simple as that.

Think about Macy's ... one company. Either the company wins, or the company loses. If it wins, it wins big! If it loses ... it sells off real estate to stay afloat.

Think about J. Crew. While J. Crew stumbles, Madewell appears to thrive. They have a portfolio of two brands, don't they? It's bad when J. Crew suffers ... but it isn't the end of the world.

Think about Gap. While Gap and Banana Republic struggle, Old Navy does ok. They have other brands as well. Their portfolio is more diversified.

Think about Williams Sonoma. They have a larger portfolio of brands, many of which are successful.

Sears / K-Mart? That's a portfolio that isn't doing so well.

I once spoke with a Professional at a conference - he built companies from search - up to about $3,000,000 in sales and $300,000 in annual profit. He sold the companies that worked, he shuttered the concepts that didn't work. He viewed his business as a "diversified portfolio".

Companies either possess this attribute, or they don't ... Wal-Mart is headed in this direction with Jet and ModCloth and others. Catalog Holding Companies exemplify this dynamic ... individual brands have minimal value as a "brand" ... they're part of a diversified portfolio that allows the cataloger to survive tough times and minimize customer acquisition expense by encouraging customers to cross-shop while sharing corporate expenses across brands.

Diversified Portfolio brands incubate ideas ... what might work at Pottery Barn might not work at Williams Sonoma ... but you have places to try ideas without tanking the "overall brand" ... because there really isn't an overall brand.

There's no better example of a Diversified Portfolio than Amazon ... thousands/millions of sellers competing, with Amazon winning. So what if 10,000 sellers fail, as long as Amazon wins (from an Amazon perspective)?

We're going to see more consolidation going forward ... consolidation leads to a diversified portfolio. A diversified portfolio minimizes risk. If you are Vermont Teddy Bear, you run a risky strategy in a modern world - if your merchants fail, you fail. If West Elm merchants fail, Williams Sonoma is still in good shape.


P.S.: One last point about Wal-Mart ... one could make a strong argument that they are an Omnichannel Zombie. So if that's a brand attribute that is negative, the attribute can be offset by offering a Diversified Portfolio.

P.P.S.: A follower on Twitter elected to criticize me (#shocker) - pointing out a handful of diversified portfolios that failed. Duh. I'm not saying this is the path to success ... I'm saying this is a path that minimizes risk. The best companies leverage the positive aspects of each attribute I will describe while minimizing the negative aspects of each attribute.

Brand Attribute #1: Omnichannel Zombie

I once sat in a meeting at a decidedly omnichannel brand ... one that the pundits would stand up and heartily applaud.

We got to the point in the meeting where the marketing department had to make a presentation.

The presentation could have taken all of five minutes.

The presentation took more than an hour.

As the Executive Team listened to the presentation, components of the marketing team were brought in and out of the meeting. The email team came in to talk about their part of a promotional strategy. The social team came in and talked about #engagement, not mentioning profitability (which caused the CFO to writhe uncomfortably). Creative entered the room to speak about visual merchandising in stores, a presentation style that would "inspire our heritage".

After an hour of disconnected presentations offered under the guise of an "integrated omnichannel approach" ... the CFO turned to me and said this:

• "Anybody can do that job."

Every company - even those that are not "omnichannel brands" - every company possesses elements of the "Omnichannel Zombie" brand attribute. Some call this "red tape" or "bureaucracy". 

But in modern retailing and e-commerce, this brand attribute became toxic.

For the past decade, too many of us wanted to move into the future by holding on to the past. Catalogers were first - demanding that print be used to drive customers online. Retailers were next - demanding that the online channel first serve stores and then when that didn't work terribly well we abandoned stores to grow online resulting in store closures which ultimately hurt online traffic. We tried to protect old-school channels by demanding that new channels caused old-school channels to succeed.

This strategy appealed to loyal buyers.

This strategy didn't bring on new customers ... younger customers.

This strategy caused the merchandise assortment to skew much older, which also drove away younger customers.

Worst of all - this strategy slowed down decision making ... to a crawl. You can barely put out an email campaign this Thursday without making sure that 129 employees are happy that the campaign serves nine different masters. It must drive sales in a store. It must have a "viral component". It must convert customers online. When it drives a customer to a cart and then the cart is abandoned, we have to chase the customer all across the internet with an integrated omnichannel message ... which is of course impossible so we do the only thing we know how to do ... offer 40% off plus free shipping ... which pulls the customer further away from a store.

Those of use who have too much of this attribute in 2018 will have to nurture one of the remaining five attributes going forward, in order to compensate for the problems caused by being an Omichannel Zombie.

6 Brand Attributes

As we run up to Christmas and attention spans change, I'm going to share with you six brand attributes that define how we approach problems.

Here's a preview of the six ... each of the next six posts will cover one of the six slides.

Another Partnership

Here's one for you ... from General Knot & Co.

Click on the image ... you'll see an interesting link across the top of the page ... it says "Men in Blazers".

So they have a partnership with the duo from the soccer podcast ... a limited edition tie. Look at the cost of the tie, dear readers (click here).

That's their whole deal ... vintage and rare fabrics in limited runs.

So when they execute a partnership, they go "all in" ... featured on their home page. No half-way here.

The omnichannel agenda of a bottomless assortment with best pricing across all channels has been blown to pieces ... by special merchandise appealing to a niche audience at fat gross margins with limited runs that assure the product will run out and not be available causing the customer to act now.

We've been taught a lot about how to be "omnichannel marketers".

So much of what we've been taught is wrong.

It's time to act like it is 2018.


P.S.:  Want another partnership? Here's one with a sock company and Crayola ... yes, Crayola.

Entertainment

As you know, conferences have gone in two wholly different directions.

There's the entertainment route - designed to appeal to thousands by watering down the content a bit.

Then there's the small / niche / information structure, with highly targeted information designed to appeal to a very small audience.

This is an industry that picked a path ... entertainment tailored to Middle Managers and Directors ... or niche-specific topics for a small audience.

2018 is a year of choice. We're all going to have to make a choice. Who do we want to be when we grow up?

Elizabeth Suzann

A long-time reader forwarded this company along yesterday ... Elizabeth Suzann (click here). The reader mentioned that after a recent product launch, it would take 8-10 weeks to receive merchandise. Omnichannel Zombies would have a fit if they heard that! The reader also points out that there is a "staff of one" to write individual hand-written thank you notes to customers (which is in stark contrast to the Hallmark rep who once tried to sell me mass-produced print-driven thank you notes that looked like they were hand-written).

64,000 followers on Instagram.

Here are profiles of individual customers (click here) ... look ... the customers are famous!

Free Worldwide Shipping on All Orders.

Here is a link to the company vision. Here is a link to their diversity campaign.

The reader told me that she sees a shift in business to "Winner Take All" Marketplaces. She may be right. If there's one thing that has been evident about twenty years of "the internet", it is the concept of "Winner Take All". There's room for one winner ... a smaller competitor, and not much else. iOS vs. Android. Four large mobile phone carriers. Facebook vs. everybody else. Amazon vs. everybody else. Spotify.

So why try to play 3D Chess when we could pick a smaller audience that truly cares about what we do, and vice versa?

Escalation

Have you ever done the math to determine what it takes to make as much money discounting as you make at full price? It's a fun exercise.

In this example, 10% off works if sales increase by at least 10.1% over full price.

Then 20% off works if sales increase by at least 14.3% over 10% off.

Then 30% off works if sales increase by at least 22.5% over 20% off.

As you approach the limits of your cost of goods, the percentage increase required to make as much money increase exponentially.

40% off works if sales increase by at least 42.9% over 30% off.

50% off works if sales increase by at least 150.3% over 40% off.

As 2017 winds to a close, we're learning that we've pushed % off as far as we can push it.

So if the tactic has been pushed as far as it can, one of four things must happen.

1. We have to lower cost of goods sold to allow us to discount more.
2. We have to increase list prices to allow us to make the customer think 50% off is an even bigger deal, or that 60% off is a good deal.
3. We have to increase merchandise productivity.
4. We have to find new customers at low-cost / no-cost.

We already know which tactic we'll pursue (1/2).

We already know which tactic provides prolonged success (3/4).

Little Miss BBQ

Can I tell you a brief story, followed by a Q&A?

A colleague says "If you have time, try Little Miss BBQ in Tempe ... they have a line out the door at all times."

Ok!

So we arrive at 11:15am, right after they open. We get the last spot in the parking lot.

And as predicted, the line is already well out the door ...

After being in line for 15 minutes, we realize we're halfway there.

Closer ...

We can see the smokers now.

They have chairs and "free water" for those in line ...

Look at that ... open until the food runs out.

And people are running out with food! Will there be enough for me?

We're getting closer now, and ooooooh boy!

By they way, they're always selling ... be it apparel or an idea for a Christmas meal. While they are selling at this spot in line, they also serve samples.

Finally, it's time for a big plate of brisket and pulled pork!!!!

Best I've ever had!!!

Ok, it's time for the FAQ section of this post. Here we go.

Question: It's awful that they make you stand in line for a half-hour. That's poor customer service. They could speed things up by having multiple cash stands and more staff.

Answer: The person who recommended the place had this to say ... "I've never been there, I don't have time to stand in line, but any place that has lines like that has to be good." Think about that statement for a moment. Word-of-Mouth and the person has never even been there. The line serves as a form of low-cost / no-cost customer acquisition. This is what I've been talking about for two years!! This is what you need to do. What is your version of a line out the door?

Question: It's awful that they serve people until the food runs out. They don't run out of food at Red Lobster. Omnichannel solutions demand that all items are available at all times in all channels ... because the customer demands this solution.

Answer: Why do you think there's a line out the door? At 11:15am? Because they might run out of food!! By running out of food, they create scarcity. Scarcity leads to a line out the door. The line serves as a form of low-cost / no-cost customer acquisition. How else did I end up eating there? If you want sameness, go to McDonalds.

Question: Kevin, this has nothing to do with my business, and you know it. We sell Widgets, and you only sell Widgets in August and September. What is your solution for our business, with our unique constraints?

Answer: This is a "trap" question. It's maybe the most frequently asked question from old-school catalogers. They'll tell us that their business is unique and special and therefore any ideas are invalid and not-applicable to their business model. Every idea is valid to every business model. If you are a cataloger and you sell Widgets only in August/September, why not let customers pre-order Widgets in June/July before you run out of them? And then cross-sell the customer something else in August/September? Now you've double-dipped ... it's like having a QB/WR on the same team in Fantasy Football. It's time we got creative, clever, it's time we started thinking.

Question: If the food was awful, there wouldn't be a line out of the door and the low-cost / no-cost customer acquisition strategy would be doomed to fail. So this has nothing to do with low-cost / no-cost customer acquisition strategies, does it?

Answer: Correct! It's all about merchandise, isn't it? Have great merchandise, then employ a low-cost / no-cost customer acquisition strategy, and you've got something. But you need both, with merchandise being most important.