November 06, 2017

Catalog Craig Paperman on Loyalty

Kevin: Craig, you look like you swallowed a goldfish.

"Catalog" Craig Paperman: One of my analysts told me I was an idiot.

Kevin: And you fired her?

Craig: No, no. Lambasted. Demeaned. But most certainly not fired. HR runs a tight ship.

Kevin: Right.

Craig: She said I was an idiot because I told her that our customer base is loyal.

Kevin: What is your annual twelve-month buyer repurchase rate?

Craig: That's a poor KPI.

Kevin: We all compare the metric against what everybody else publishes. What is it?

Craig: Thirty-seven percent.

Kevin: That's the average across my entire client base.

Craig: That's what my analyst said. I told her she was wrong, she tried to explain her logic to me, I told her she was wrong, she told me I was an idiot. Do you see what the problem is?

Kevin: I think I do.

Craig: Where does an analyst get off telling me I haven't cultivated a loyal customer base?

Kevin: It's her job to report honestly on what she sees.

Craig: That's not her job. That's never been her job. It's her job to support me.

Kevin: No.

Craig: If I'm in a meeting and the CFO says our customer base isn't loyal and I know that Gretchen ordered three times a year for the past ten years, then I need an analyst to prove that Gretchen purchased three times a year for the past ten years. That's what an analyst does.

Kevin: I thought an analyst was supposed to generate profit for a company?

Craig: If that were true then the Executive Team, nay, the "C-Suite" would be comprised of Analysts.

Kevin: So your analyst tells you that 37% of last year's customers purchased again this year and this is bad why?

Craig: Because my customer base is loyal. Customers love my brand.

Kevin: But they don't. Some customers love your brand. Most deal with your brand on a transactional basis.

Craig: My customers are loyal.

Kevin: You have a hundred customers buying in 2016 and only thirty-seven buy again next year. There's nothing wrong with that.

Craig: We hear from our loyal buyers all the time. Connie from Redgranite calls us all the time. She spends two hundred dollars a month. She talks to our call center employees for two hours at a time. They listen to her, and do you know why? Because she's a loyal customer.

Kevin: I bet she is.

Craig: So I don't need an honesty-based analyst telling me my customer base isn't loyal. I've got Connie on my side.

Kevin: You can have tens of thousands of loyal buyers and you can have a 37% annual repurchase rate. You can have loyal customers and yet be utterly dependent upon new customers. Both can happen.

Craig: The narrative stinks.

Kevin: Why?

Craig: I go to meeting after meeting. We all talk about how we can get the loyal buyer to spend more with us. We want a bigger share of her wallet.

Kevin: Why not get the wallets of two customers instead of a bigger share from one customer?

Craig: That's a lousy narrative. When customers are loyal and spend a lot of money, our work is validated!

Kevin: Validated?

Craig: It means the catalog we sent worked. It means the merchandise we offered worked. It means the discounts and promotions we applied to a purchase worked.

Kevin: If a customer is loyal, it means you did a good job?

Craig: Absolutely.

Kevin: And if you change your focus to customer acquisition ...

Craig (Interrupting): We're not changing our focus to customer acquisition.

Kevin: But your metrics suggest you kinda have to shift your focus to customer acquisition!

Craig: No.

Kevin: Yes.

Craig: Do you have glue in your ears?  It's fun to figure out how to get customers to purchase again. And your work is easily validated. Customer acquisition is imprecise and unfun.

Kevin: Unfun?

Craig: There's no reward.

Kevin: If you double the number of new customers this year, you'll have double the number of loyal buyers in a few years. Well, not quite, but you get the message.

Craig: But I wouldn't have done anything to earn the loyalty.

Kevin: Your customer acquisition efforts earned future loyalty.

Craig: I'd rather earn the loyalty by offering 40% off on a postcard. It's more fun.

Kevin: You're not in business to have fun.

Craig: Of course we are!

Kevin: Is that why you don't like online marketing?

Craig: It's no fun. It's mechanical. A 40% off postcard, now that's living!!

Kevin: So the reason you don't like customer loyalty and prefer customer loyalty is because customer loyalty is fun and customer acquisition is mechanical and you get credit for the work you do to cause customers to become more loyal?

Craig: That's why I get up at 5:30am.

Kevin: Shouldn't you get up to do what is best for your business?

Craig: Loyalty work via paper is exactly what is best for my business.

Kevin: I think I've heard enough.

Craig: Isn't this where you tie things up in a bow and give me a lesson that I'll never forget only that I'll immediately disregard the tidbit the minute I walk back into my office that is furnished with a heated leather floor?

Kevin: What kind of floor?

Craig: Never mind.

Kevin: Look, most of my client base possesses an annual repurchase rate between 30% and 40%. Most of 'em. Some are lower! Some are higher. But that's the average. That means you have a small number of loyal buyers, a large number of transactional buyers, and a dire need to find new customers. It's fine to manage this type of business model. The key, of course, is to allocate the majority of your marketing efforts around customer acquisition activities.

Craig: Can I go now?

Kevin: Are you going to retain anything I told you today?

Craig: Yeah. I'll remember that you said I'm not in business to have fun. It's a chip on my shoulder that will motivate me to cause my customer base to become even more loyal.

Kevin: And how are you going to accomplish that?

Craig: I'll add four pages to the Cyber Monday catalog.

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