March 29, 2018

What Was The Point Of The Last Two Weeks?

Sure, I shared a few thoughts and you may have disagreed with them, but what was the point?

The point was to demonstrate that most of us are ultimately in the "SELL" quadrant. We don't have the creative chops of a Duluth Trading Company, we don't have the financial resources to "BUY", and we are never going to "SCALE" and play with the big brands.

So if we're in the SELL quadrant, we have two choices when we are ready to sell in 2019 or in 2029 or in 2059.
  1. We can sell for pennies on the dollar.
  2. We can sell to top dollar.
Which would you rather sell for?

If you had to honestly look at your business today, are you closer to selling for pennies on the dollar or are you closer to selling for top dollar?

Too often, I'm contacted by companies who could only sell for pennies on the dollar, or by companies looking to purchase brands for pennies on the dollar. The companies who are worth pennies on the dollar tend to have something in common.
  • They hold on to the past while publicly acting like they are a modern brand.
In other words, these companies exhibit the characteristics of a company stuck in 1993.
  • Meetings are about catalogs, not about merchandise.
  • The lobby is littered with catalogs and does not have a digital presence in any way other than the LED television which is showing images of catalogs being created.
  • People care passionately about how the April catalog is performing during the first four hours of the in-home window and do not care about how paid search is performing at all ... "that's what our paid search vendor is paid to do."
  • More than half of new customers are acquired via catalog co-ops, Google, and/or Facebook.
  • The ad-to-sales ratio is > 25%, mostly comprised of paper, printing, and postage.
  • Orders are still being mailed with an order form and a check.
  • Merchandise doesn't sell online unless a catalog is in the mail at the same time.
  • An Executive is obsessed about "competing with Amazon", as if that were something that a < $500,000,000 brand can actually do.
  • There are actual discussions about whether a catalog should be 64 pages or 68 pages, and those discussions last longer than 5 seconds.
  • Employees < age 35 are not trusted.
  • Customers are generally age 60-75, but list vendors say that your target audience is a 35-55 year old suburban woman.
  • Somebody (or Everybody) at an Executive or Director level is constantly telling employees that the brand is an "omnichannel" or "multichannel" brand and left catalog marketing long ago and then holds meetings to talk about how digital marketing channels must support the catalog.
The last bullet point is probably most important. I run into it all the time. An Executive will tell you that because there is an email program in place and because the Twitter feed is followed by 2,194 people (only half are bots) that the brand is no longer a catalog brand but instead is a modern omnichannel brand that supports a middle-aged consumer.

This is what the past two weeks have been about. If your brand routinely falls into the bullet points above, you are in the SELL quadrant and you are skewing toward getting pennies on the dollar when you finally decide to SELL.

You can improve the profit-and-loss statement by being tactically better, no doubt about it.

You can improve the profit-and-loss statement by changing your culture, by recognizing that it is 2018 and it is time to put some of the legacy of 1993 to rest.

It's really hard to be tactically better if your culture won't accept the tactics that make you tactically better. That's the point of the past two weeks.

March 28, 2018

Selling Is A Time-Honored Strategy

I know, I know, you read my stuff about where catalog brands and e-commerce brands are headed, and you repeatedly see me suggesting that you are in a "SELL" quadrant and you get upset with my line of reasoning.

You've been in business for forty years ... you just need to figure out a path to the future. Every company has rocky stretches. You made it through the Great Recession. You are a success story.

Selling doesn't mean you are selling today.

Selling means that the end-game is to be sold.

Look at HelloFresh (click here). They appear (my opinion only) to be employing the time-honored three-step process.
  1. Go from 0 to 60 in 1.8 seconds.
  2. Pay initial investors via an IPO.
  3. Pay IPO investors by selling to Kroger or Albertsons (or Target or Wal-Mart or Amazon).
Companies are sold for many reasons.
  • They are dying and can be purchased for pennies on the dollar.
  • They serve a purpose in the future of competitive commerce.
  • They are incredibly healthy and somebody "has to have the brand" and is willing to pay top dollar.
Why can't you be in the third category?

I'm trying to help you avoid being in the first category.

Make sense?

March 27, 2018

Everything Else Is Fine: Buyers Would Love To Have Us In Their Portfolio

There are two types of phone calls.

The first call comes from an Owner / CEO. She has a 40 year old business that partially navigated the transition to e-commerce but missed the mobile/social boat and is now dependent upon the catalog co-ops for new names and catalog co-op performance is -15% this year and -40% over the past decade. "Everything else is fine, Buyers would love to have us in their portfolio."

The second call comes from one of +/- 20 potential buyers:
  • "We're not buying this brand unless there is a future business without catalogs and a fully-developed customer acquisition plan that does not rely upon catalog co-ops, Google, and Facebook."

Do you see the disconnect?

Most of us aren't going to "SCALE" and compete against Wal-Mart and Amazon (and indirectly with Apple / Facebook / Google).

Most of us aren't going to "BUY" ... we're not going to become a holding company.

Most of us, deep down, don't want to be UNIQUE. Mention Duluth Trading Company to a New England cataloger and the groans will be heard all the way in Southern Wisconsin. Mention Supreme (click here) and you'll hear every excuse in the book why that business model can't work (though it does). So deep down, we don't want to be UNIQUE.

Which puts us in the only box left ... "SELL". The end game is to sell. It might not happen in 2018 or 2019, but it is coming. Especially for the lone-standing catalog brand without a UNIQUE strategy. And if the end game is to sell, then it is really important to do the following:
  • Tidy up retention efforts.
  • Generate quality ROI via customer acquisition.
  • Polish up the profit and loss statement.
  • Prove that Lifetime Value is fantastic (you know LTV down to the penny, right?).
  • Show a path to the future that does not include old-school marketing.
In other words, you've got to fix everything. The two biggest problems?
  • New merchandise.
  • New customers.
Buyers don't want old-school brands in the portfolio unless two things are possible.
  1. There is a path to the future (new merchandise, new customers).
  2. If there isn't a path to the future, the purchase price needs to be severely discounted to account for the fact that there isn't a path to the future.

It's time to pick up a broom and get busy sweeping the dust off the tile.

March 26, 2018

Tough Decisions on the Horizon

Last week we held our breath as tens of thousand of tweets from Shoptalk touted how technology will save retail.

Five years ago, we were told that technology would save retail. How did that work for everybody?

We're really good at cause-and-effect at a first-level. We can see how augmented reality might help Macy's sell something, and we then imagine a world where every retail brand used augmented reality to sell something.

What we're not good at is simulating cause-and-effect six levels away.

We can go back to 2013 when the tech vendors demanded that we embrace digital marketing to foster one-to-one relationships with customers in an omnichannel world. We were told to capitalize on the e-commerce gold mine. At a first-level, yup, that makes sense.

But then a whole bunch of things happened that we didn't anticipate.
  1. Attribution vendors mistakenly took credit for orders that would have happened anyway, giving digital channels disproportionate credit.
  2. This caused us to spend even more on digital channels than we otherwise would have.
  3. All of our digital focus caused in-store orders that would have happened without digital advertising to shift online.
  4. Once orders shifted online, store traffic decreased.
  5. When store traffic decreased across numerous brands, all stores were hurt.
  6. This caused CFOs to close stores.
  7. When stores closed, sales disappeared (though profit potentially increased). E-commerce did not pick up the slack.
  8. The brand is left weaker and smaller.
You can't blame this on Amazon. (1) - (8) above are our fault. We did it to ourselves. And we couldn't see (8) happening because we didn't simulate potential outcomes. We just remained at a first-level (digital is good and digital sales increase when you perform more digital marketing).

There are tough decisions on the horizon.

Tough decisions require us to think eight steps (or more) ahead.

March 25, 2018

But We Cannot Afford To Pay Our Employees

A company generates $50,000,000 in annual sales. This company pays marketing vendors a whopping $15,000,000 to generate sales.

The Executive Team is frustrated. They have a hard time keeping talent in-house. "We cannot compete on salary."

I offer the company an option ... how about a bonus structure that rewards employees when the company has a good year. A Director earning $120,000 a year could make a 40% bonus, earning an additional $48,000 if the company has a good year.

There's an interesting response to this proposition.
  • "We can't let the employees earn a disproportionate amount of pay if the company does well."
Of course you can!!

You do this with your vendor partners all the time. 
  • What happens when Search performs well? You invest more in Search, and your Search vendor gets paid more.
  • What happens when Catalogs perform well? You invest more in Paper, Print, and Postage. A veritable plethora of vendors get paid more.
  • What happens when Merchandise performs well? The vendors you bought the merchandise from get paid more.
  • What happens when the Employees who hired the vendors to perform well cause the Company to perform well? They don't get paid more than maybe a cost of living increase.
How you pay your employees says a lot about who you are. A traditional company that rewards vendors for doing well but does not reward employees for hiring the vendors who do well will have perpetual talent challenges.

March 22, 2018

The Lobby

You enter the lobby of a catalog brand. There are tables surrounded by leather chairs. On top of each table is a veritable plethora of recent mailings. The February catalogs is there, and the February remail is there as well, just in case the 80 pages in the February catalog didn't resonate with you.

Mabel is at the lobby desk. After you sign in, she gives you a name tag. Your contact (the Chief Merchandising Officer) arrives five minutes later. She asks you if you had a pleasant trip? She asks you if you enjoyed thumbing through the February Catalog? Then she hands you a copy of the March Catalog.

You ask how the mobile channel is performing? She stares at you like you have lice crawling through your hair.
  • "There's not enough acreage on an iPhone screen to share the assortment my team curated via our March Catalog."
Later, when you ask why the core customer is 66 years old, you are told that the Marketing team "doesn't know what they're doing".

Your lobby says a lot about the channels that you prioritize. Do you make sure that every visitor downloads your app, or do you hand the visitor a copy of your catalog? How you answer the question says a lot about who you are as a brand.

March 21, 2018

Meeting Structure

I sit down for a meeting to review quarterly results. The Executive Team get ready to dissect a hundred pages of results. The meeting organizer begins the meeting with a review of the three main catalogs and two remail catalogs that comprised the quarter.

Sales for the quarter were on-plan, but the catalogs were down about 5%. Folks begin to argue with the Chief Marketing Officer ... "you're measuring this stuff wrong, the catalog drives all of our channels".

The Chief Merchandising Officer commences a beat-down of the Chief Creative Officer. She shows the room how the spread on pages 6-7 of the February Catalog was not "trend-right". An in-depth analysis of the profitability of each item, measured via a square inch analysis, indicates that a handful of items performed poorly. The CFO begins a spirited discussion whether next year's February catalog should be 80 pages or 76 pages?

After two hours of back-and-forth comments, five minutes are spent on the email campaigns. One minute is given to a discussion about imagery on Instagram. Nobody talks about the fact that Search performance was up 20% on the same budget as a year ago (#optimization). The Chief Operations Officer mentions that she's tired of the retargeting ads that hound her across the internet. Nobody discusses the fact that a personalization vendor improved online conversion rates by 20%, which helped offset sluggish catalog performance.

At the end of the meeting, a task force is created to determine optimal page counts for 2019. 

What is the meeting structure like at your company?

If the catalog is the primary focus of any business review ... well, if it is, it says a lot about who you are as a company, doesn't it?

March 20, 2018

But It Won't Sell!!

It's 2005. I'm sitting with the Inventory VP, and she's angry. We're about to kill our catalog at Nordstrom, and she has a bone to pick with me.
  • "If we don't feature the item in a catalog, the item won't sell. And if we don't have a catalog, we won't sell anything!" 
I pulled out my mail/holdout test reporting. When we did not mail a catalog, customers still bought stuff - at robust levels. Different stuff, of course, but still spending plenty of cheddar.

The Inventory VP then pulled out her reports. She showed me how "internet-only" items only pulled 1/10th the volume of a catalog-featured item. I'll paraphrase her next comment.
  • "You're going to kill this business, and you don't know how to measure anything."
We killed the catalog in the middle of 2005.

Most of the catalog items, per the VP's thesis, died on the vine.

The other half of the assortment, now supported by a robust search campaign, sold like hot cakes.

Sales hemorrhaged for three months.

Then sales exploded.

Profit had never been better.

If your view of the world is catalog-centric, you'll have a hard time selling merchandise not featured in a catalog.

If your view of the world is merchandise-centric, you'll find ways to sell merchandise.

How you answer the question above says a lot about the marketing channel that you prioritize at your company.

March 19, 2018

Measurement Technique

Back in 2007 I was invited to speak at a roundtable discussion at NEMOA. The host asked panelists a simple question.
  • "How will you measure success in the future?"
When it was my turn to answer, I told the audience that holdout tests and spending experiments were the future. I also told the audience that what I just described happened long ago - in the "past" ... that leading companies conducted experiments and knew more than anybody else ... I described a year-long 2^7 factorial design used at Lands' End in 1993 (that's 25 years ago for crying out loud) to measure the incremental value of every business unit.

The audience, a room full of classic catalogers and the vendors who supported them, let out one of those audible groans that as a speaker you hope to achieve ... it means people are actively disagreeing with you and are actually thinking at the same time whether the speaker is right or the entire room is right.

Right after I said what I said, a vendor pointed out that Catalog Matchbacks were a "best practice". The room was soooooooo happy. Heads nodded. Professionals gleefully exchanged glances, knowing that forcing the catalog to "take credit" for the sales generated by an email marketing campaign was a best practice even if it was the wrong thing to do.

It's 2018.

How do you answer the question in the slide above? Do you answer with a "yes", gleefully holding your company to best practices from 2001, or do you conduct spending experiments and holdout tests (for all email campaigns and print campaigns)?

Your answer says a lot about how you prioritize channels at your company.

March 18, 2018


A Chief Marketing Officer mentioned that all marketing campaigns are integrated, creating a robust omnichannel marketing strategy that resonated with an engaged consumer.

After you parse through that word salad, you ask a simple question (or two).
  • Are all of these channels allowed to achieve their potential, or do they all have to work together in harmony?
  • If they all have to work together in harmony, which channel gets "priority"?
The CMO above said that the "Catalog" gets priority. In other words, if there is a catalog in-home on April 4, all other channels work in harmony to communicate the message of the catalog.

This is a key distinction ... if you have old-school channels and all newer channels work to support the old-school channel, you are still an old-school brand.

Every company prioritizes one channel above another. That's just the way the world works. The channel that gets priority represents "who you are".

March 15, 2018

Informal Bundling

There are many ways to create informal bundles.

This is one way.

Catalogers have an enormous advantage ... monthly circulation counts of hundreds of thousands or millions ... an informal broadcast channel of sorts.

Lots of companies would love to partner with the catalog brand ... getting access to the "broadcast audience" for a price ... no different than Duluth Trading Company advertising on NBCSN during Premier League Fixtures.

Think carefully about appropriate partnerships ... partnerships that create "informal bundles". You don't have to be a Private Equity maven to participate in the bundling that is coming.

March 14, 2018

Bundling and Unbundling

The story published here is a story of bundling.

"Qurate" bundles mature companies. If indivdiual brands die, new mature brands are acquired. The third paragraph is a buzzword salad of the highest order ... masking what the holding company is truly responsible for.

A company like Google/Alphabet bundles together companies on the way up, playing for long-term value.

A company like Amazon bundles together companies through a Marketplace, collecting cheddar on each transaction. It doesn't care (in theory) whether individual brands succeed or not as long as the marketplace continues to grow - it would be great fun to play a simulation where companies stop participating in the marketplace (i.e. unbundling begins).

General Growth Properties or Simon bundle retail brands via their malls, collecting cheddar via rent. Some of their brands are dying ... their method for bundling is failing, resulting in the unbundling of their business model.

Wal-Mart bundles via product categories and in-store brands and via e-commerce brands that have hit the customer acquisition wall.

Nordstrom bundles via brands (Coach, Dolce&Gabbana, now Anthropologie (click here)), and are then bundled within mall developers ... bundling and being bundled ... while selling via e-commerce (thereby unbundling with mall developers). Coach bundles with brands, with developers, and then facilitates unbundling via e-commerce. Oh, and then Nordstrom bundles with startups (click here).

VCs bundle startups, placing enough bets to thrive in the long-term even though most of the startups bundled will fail.

Private Equity bundles failing companies, looking for a exit in the short-mid term. Private Equity happily bundles and unbundles as appropriate.

If you are asked what your "Amazon Strategy" is, rest assured that the person asking the question is not asking a more important question ... s/he should be asking "What is your strategy for bundling or unbundling your business?"

March 13, 2018

The LTV of an Item

Here's a common scenario. Back in 2013, you introduced 800 new items. Here is the annual demand from the items.

  • 2013 = $15,300,000.
  • 2014 = $17,600,000.
  • 2015 = $9,500,000.
  • 2016 = $5,800,000.
  • 2017 = $3,400,000.
Let's assume that the items have a 55% gross margin. Here's your gross margin dollars.
  • 2013 = $8,415,000.
  • 2014 = $9,680,000.
  • 2015 = $5,225,000.
  • 2016 = $3,190,000.
  • 2017 = $1,870,000.
Each year has a "rate of dropoff".
  • 2014 = 1.15.
  • 2015 = 0.54.
  • 2016 = 0.61.
  • 2017 = 0.59.
If we assume that the dropoff will be 58% for each of the next three years, we can "guesstimate" gross margin dollars for 2018, 2019, and 2020.

  • 2013 = $8,415,000.
  • 2014 = $9,680,000.
  • 2015 = $5,225,000.
  • 2016 = $3,190,000.
  • 2017 = $1,870,000.
  • 2018 = $1,085,000.
  • 2019 =    $629,000.
  • 2020 =    $365,000.
Let's sum gross margin dollars from 2013 projected through 2020, for the Class of 2013.
  • Total Gross Margin Dollars = $30,459,000.
  • New Items in 2013 = 800.
  • Gross Margin Dollars per Item = $38,074.
Technically, you could back out variable operating expenses and ad costs and get down to variable profit if you like ... have at it!  But this should prove the point ... each item has long-term value that can easily be quantified. 

And if your merchandising team wants to cut back on new items by 100 next year, you can tell them that they're costing the company $3.8 million in gross margin over the next eight years, with more than half coming in the next two years. Yup, that's $2,000,000 of gross margin over the next two years flushed down the toilet.

Spend time taking your customer analytics skills to the merchandising realm. You're going to find that this is "fertile ground" for improvement ... under-served by the vendor community but fully appreciated by your CFO and CEO.

March 12, 2018

Tanking and LTV

The Memphis Grizzlies are having a hard time winning ... by design. They've lost 18 consecutive games.

In sports, there is a term ... called "tanking". It's a path used by bad teams in the NBA to guarantee that they can draft one of the handful of really good players coming out of college. There might be 30 first-round draft picks, but only three or four might be "game-changing" players. As a result, there is an incentive to not be average ... you either have a title-contending team, or you "tank" and hope to get one of the first three or four picks for a couple of years which "may" lead to having a title-contending team.

As long as an NBA team can stay in business (and television contracts enable everybody to generate enough cash), there is an incentive to either win big or lose big.

In baseball, the last two World Series winners (Cubs, Astros) essentially "tanked" their way to titles. They sent their better veteran players away, they lost a ton of games for several years while younger (cheaper) players developed into quality players, and then they won the World Series. Other teams took notice. This past winter, the market for highly priced free agents dried up. Why would a middling team (or a losing team) pay $10,000,000 or $15,000,000 for a player that might allow a 78 win team to become an 81 win team? And why would a team expected to win 68 games do this to become a team that wins 71 games? You spend money and you don't get closer to making the playoffs.

Again, there is no incentive to be "in-the-middle". If you are going to be a bad team, be a bad team with a purpose. Develop young players.

Tanking is a form of lifetime value. You are measuring the long-term value a player who you paid/pay a lot of money for and who will contribute short-term wins that have no long-term value or short-term value and you say "NO" and you purposely lose even more games.

And as more teams try to lose more games you end up with an odd situation where really bad teams have more bad teams to compete against, allowing them to win more games with less talent and less expenditure.

How does this relate to your business?

Two ways.

Most of us have profit-per-new-customer guidelines. If a customer won't pay back in the long-term, the customer isn't acquired. By the same token, we can't afford to lose too much money acquiring the customer, because then we won't get paid back. This is the situation some of our vendors are trying to exploit. They'll tell us to embrace a two-year or three-year payback ... they do this to keep us spending money with them. They are asking us to "tank" ... they are asking us to lose money today so that we can win tomorrow. If you've run your long-term simulations, you know if this is smart or not (and it's easy to run the simulations ... you should be able to quote an answer right now).

The second way is with new merchandise. Each new item has a lifetime value associated with it. The new item may be a winner and generate sales for six years ... or the item might die quickly and be discontinued within three months. Merchants "tank" all the time ... they discontinue winning items quickly in an effort to introduce new items that they feel are "brand appropriate". The new items are like the Cubs/Astros tanking ... those two teams brought in new players who developed and became stars and ultimately won a World Series. In the short-term, over-expanding on new merchandise while discontinuing winning existing items will cause a performance hit.

There's a lot of crossover between what sports teams do and how our businesses are analyzed. Baseball's "Moneyball" revolution is coming to commerce. In commerce, we have all the metrics we need to run successful campaigns. We have too few metrics to evaluate the short-term vs. long-term tradeoffs we need to make to be successful.

March 11, 2018

Even Traditional Catalog Brands Have Awareness Programs

Take a look.

Awareness Programs lead to low-cost / no-cost customer acquisition. 

Now, a one-off isn't going to make a difference. But a consistent / repeated / unending Awareness Program makes sense ... more than ever in 2018.

March 08, 2018

Get Your CFO Involved Early

When setting up a credible lifetime value program, you get your CFO on your side from day one, #amirite? Otherwise, you get this:

The best performing companies I work with do an excellent job of fostering a CFO / Marketing partnership. The CFO authors the marketing budget, and the CFO knows exactly how much short-term expense, long-term sales, and downstream profit can be expected. If things go sideways by 20%, the CFO knows what the consequences are and knows what the contingency plan is.

Get your CFO involved early in your lifetime value work, ok?

March 07, 2018

Conversion Rate Impacts LTV

Let's look at two different customer segments.

  • Segment 1 = 2% conversion rate, $100 AOV, 40% Profit Flow-Through, $0.90 Ad Cost. Profit = 0.02*100*0.40 - $0.90 = ($0.10).
  • Segment 2 = 1% conversion rate, $200 AOV, 40% Profit Flow-Through, $0.90 Ad Cost. Profit = 0.01*200*0.40-$0.90 = ($0.10).
Profit in either segment is identical.

Profit per New Customer is far from identical.
  • Segment 1 = ($0.10) / 0.02 = ($5.00).
  • Segment 2 = ($0.10) / 0.01 = ($10.00).
You lost an additional five dollars acquiring the customer in Segment 2.

At this point, LTV becomes really important. The larger AOV needs to drive enough LTV to offset the additional five dollars you spent acquiring customers.

Perform a little math today, and see if your low conversion rate / low response rate customers are causing you LTV problems, ok?

March 06, 2018

But Lifetime Value Is Lower, So We Should Avoid That Channel, Right?

This one comes up all the time in project work. A client measures LTV (good for them!) and learns the following:

  • LTV From Search = $30.00 profit.
  • LTV From TV Ads = $18.00 profit.
The Marketing Executive will look at me and say "We don't want the TV Ad customer, because her LTV is worse."

You want EVERY customer that generates a ton of downstream profit. Who cares if the TV-acquired customer is worth $12.00 less if the customer is highly profitable?

You don't care.



If the customer is worth less downstream, spend less on the customer downstream.

Don't overthink this stuff, ok?!

March 05, 2018

Draft of Presentation for VT/NH Marketing Group Event on April 5

For those of you viewing this online, you can click on the image below and thumb through the slides. I will spend far more time talking about adjacent topics than focusing on the slides ... the slides are a guide to help you understand what the themes will be. Get on a plane or get in a car (or both) and get to New Hampshire on April 5.

Yes, I reserve the right to change the presentation over the next four weeks. Expect me to change it. The goal of the presentation is to stimulate a discussion ... an honest discussion ... about what we're going to do during the next two years.

View the presentation below (click above if you cannot see it).

A Multi-Year Payoff Can Work, But Why Go There?

Here's a common situation.

Customer Acquisition Demand = $100,000.

Customer Acquisition AOV = $100.

Customer Acquisition / Customers Acquired = 1,000.

Customer Acquisition Marketing Cost = $80,000.

Profit Factor = 40%.

Profit = $100,000 * 0.40 - $80,000 = ($40,000). You lost $40,000.

Profit (Loss) per New Customer = ($40,000) / 1,000 = ($40.00).

Year One Housefile Profit = $22.00 per customer.

Year Two Housefile Profit = $13.00 per customer.

Year Three Housefile Profit = $7.00 per customer.

At the end of three years, your turn "profit positive".
  • ($40.00) + $22.00 + $13.00 + $7.00 = $2.00.
Of course, your paid search vendor loves this ... "YOU MADE MONEY ... KEEP SPENDING!" They say this, of course, because the lifetime value of your account goes sky-high when you keep spending.

You made $2 per customer across 1,000 customers, and it took you three years to get there ... $2,000 total.

You could have done this:
  • Put $80,000 in a savings account that earns 1% interest.
  • Year One Balance = $80,000 * 0.01 = $800.00.
  • Year Two Balance = $80,800 * 0.01 = $808.00.
  • Year Three Balance = $81,608 * 0.01 = $816.08.
  • Total Profit = $82,424.08 - $80,000 = $2,424.08.
So instead of looking for a three-year payback because your search vendor tells you it is a "best practice", how 'bout putting the money in a savings account that earns 1% interest and just sit back and do nothing going forward?

I know, I know, you'll tell me this is nonsense and you theoretically have more cash by constantly reinvesting $80,000 in customer acquisition activities. 

What's nonsense, of course, is that we let some (a minority) in the vendor community persuade us to do what is best for them. Why go down the multi-year payoff unless you've run the simulations to prove that this is the best way to spend incremental ad dollars?

You're run the simulations, right?

You know lifetime value down to the penny, right?

If the answer to both questions was "YES", then you know if you should go down the path of a multi-year payback.

March 04, 2018

Omnichannel Trade Areas

More than a year ago, I outlined a framework for evaluating what some might call an "omnichannel trade area" (click here). This is the kind of stuff we did at Eddie Bauer in the mid-1990s ... you've probably done something similar for a decade or more, right? 

Of course, others are not catching on (click here). It's helpful when more than one person says something.

If you evaluate trade areas, you learn all sorts of fun facts. 

Even if you don't have any stores, analyze trade areas anyway. Call 'em "Markets" ... like Boston or Richmond or El Paso. Chart sales trends by zip code by channel in the market over time. For many, California was a leading indicator ... customers quickly shifted out of print and into e-commerce back in 2000 - 2005. Conversely, rural New England holds on to tradition longer than most areas. Look at what customers in those trade areas purchase. Compare it to what customers in California purchase. You'll see differences. Those differences tell you what the past looks like, and what the future might look like.

Use Omnichannel Trade Areas in non-traditional ways. Then use your imagination to chart a path from today to the future.

March 01, 2018


A subscriber unsubscribed on Tuesday ... after reading this article (click here) ... citing that the content was offensive, or that the reader strongly disagreed with the content or disapproved of the content.

The goal is to appeal to the audience that will ultimately use my content or pay for project work. It's ok when somebody thinks otherwise, let 'em stay as long as they want and when they're done, no worries!

The same thing applies to your business.

P.S.: Take a look at the average age of the email professionals who responded to a survey (click here). Do you listen to employees who are young? Do you pay attention to their thoughts about how email marketing might be leveraged? Or do you align email with the rest of the business and enjoy tepid results? Please listen to what younger professionals have to say. They may just hold the key to improving your business results, right?

Your Low-Cost Items

In most of my projects in the past nine months, the importance of having "something" at a low price repeats ... a recurring theme ...