October 15, 2018

Hillstrom's Total Package

Yup, it's time for another booklet, this time including 80+ pages of goodies for the New Marketing Leader ... it's called Hillstrom's Total Package.

Let's talk for a brief second about pricing before the complaints begin, ok?

The print version is $14.99. This means that I make $2.26 and Amazon makes $12.73. The most common complaint I get about these booklets is that they are "too expensive". Well, if I lower the price to $12.99 I make $1.00 and Amazon makes $11.99. Go any lower and I make no money and Amazon gets everything. So the price is $14.99, and if you don't like that fact then I have good news for you.

The Kindle version of the booklet is $0.99.

Yes, you heard that right ... $0.99!!!

On the Kindle platform, there are two different pricing options. The first option is to price the booklet at $2.99 or higher and earn a 70% commission. If I charged $14.99 for the booklet I'd make $10.49. The second option is to price the book at an extremely inexpensive price point and earn a 35% commission.

So I'm conducting an experiment. I'm pricing the Kindle version at $0.99 and I get a whopping $0.34 while Amazon gets $0.65. And yes, I get it, some of you will say that this is dumb and I should just give the pdf away. Readers always have opinions ... and Amazon will always get the money.

Now it is time for you to act. If you have a spare dollar, use it, buy the Kindle version and tell every person you know to buy the Kindle version and let's see if the reader hypothesis of "Low Prices on Booklets" can be verified or proven wrong.

Tomorrow, I'll begin sharing what is in the booklet and will describe why you, the New Marketing Leader, should buy it.

October 14, 2018

Using Discounts To Influence Customer Behavior

The biggest marketing challenge I get to see is this ...
  1. Merchandise Productivity isn't acceptable.
  2. Marketing is blamed for the decline in productivity.
  3. Marketing does not have the proper tools in the toolbox to fix a merchandising problem.
  4. Therefore, marketing enacts all methods of discounting ... including free shipping, 10% off, 20% off, 30% off, 40% off, 40% off plus free shipping, and the classic ... loyalty program points.
  5. The customer attracted to discounts, promotions, and loyalty points becomes "the customer" ... in other words, a self-selection occurs where the customers who love various marketing programs are more likely to respond to the programs, and/or prior full-price customers become discount-centric buyers, and once that happens, the customer is less likely to go back to full-price purchasing activity.
  6. The brand is paralyzed ... locked into discounts/promotions without a solution for the merchandise productivity problem.
You'll tell me that discounts are unavoidable - they're a competitive tool you are forced to use. Ok.

So if we assume you cannot get out from under 30% off plus free shipping, and you cannot improve merchandise productivity, then we have to realize that "something" needs to be done.

So look at the table above. Do you see the color bands? The color bands represent customers with comparable monthly response levels. The color bands demonstrate customers with comparable behavior. Look at the purple band. These are customers with monthly response rates between 5% and 10%. That's a pretty good level of responsiveness!

When a customer becomes loyal, the customer is responsive, and the customer can be moved somewhat. 

When a customer is a first-time buyer, the customer is responsive for a brief period of time.

We owe it to our businesses to do something about this short timeframe. There are more customers in these three segments (first three month after a purchase) than there are in any other segment. We can use discounts to influence these customers, sure. But maybe we need to have a Welcome Program that helps grow our customer base before the customers lapse and we have no choice but to use discounts/promotions as our only lever.

October 11, 2018

Improvements Among 13+ Month Buyers

Ok, I ran a scenario where I improved the response of every 13-24 month buyer by 15% each and every month. This is different than increasing response by 15% for first-time buyers. We can probably agree that this is a much more aggressive strategy than something that impacts first-time buyers for just three months, right?

Fortunately, the outcome is about similar to a Welcome Program that increases response by 15% for months 1/2/3. Darn near identical, in fact!

That's good news, because an awful lot of energy is spent trying to convert lapsed buyers.

That's good news, because it demonstrates that Welcome Programs can be at least as effective as lapsed buyer programs.

Most important - the simulations demonstrate that our businesses have a "set process" in place in terms of customer relationships. The customer is going to do what the customer is going to do.

Allow me to repeat that statement.
  • "The customer is going to do what the customer is going to do."
This is why I strongly encourage all of us to work on acquiring new customers. If we want more loyal customers in the future, we need more new customers today.

October 10, 2018

Would Influencing Buyers Make A Difference?

In this simulation, I look at 10,000 first-time buyers, and instead of simply following the customers on their path for twenty-four months, I instead give first-time buyers a 15% bump in response during each of the first three months on the customer file.

The results are not striking ... they are subtle.

In our "base case", the following quantities of customers migrated to 5x status (at least a 5th purchase):
  • 5x = 264.
  • 6x = 114.
  • 7x = 46.
  • 8x = 17.
  • 9x = 6.
  • 10x = 2.
  • 11x = 1.
If we bump response by 15% in months 1/2/3, migration is modestly changed.
  • 5x = 279.
  • 6x = 121.
  • 7x = 49.
  • 8x = 18.
  • 9x = 7.
  • 10x = 2.
  • 11x = 1.
That's not much of a difference, is it?

Total non-repurchasers after twenty-four months?
  • Base Case = 5,474.
  • 15% Gain (Months 1/2/3) = 5,335.
Repurchasers change from 4,526 to 4,635.

We are able to modestly re-direct customer behavior.

Now, you might not think this makes much difference, and you are largely correct.

There is an impact on demand from this cohort over twenty-four months.
  • Base Case = $437,200.
  • 15% Gain (Months 1/2/3) = $454,900.
  • Gain = +4%.
So we are able to increase demand by 4% by implementing a Welcome Program for months 1/2/3. 

Tomorrow, we'll look at a case where we don't execute a Welcome Program and instead to try reactivate lapsed buyers outside of 12 months.

October 09, 2018

First-Time Buyers

I created a simulation that allows me to analyze how customers within a cohort distribute over the next twenty-four months.

The image here - and yes, I get it, the numbers are tiny and hard to read - shows how a cohort of 10,000 first-time buyers migrate and evolve after twenty-four months.

After twenty-four months, 5,474 of the first-time buyers in this specific example did not repurchase, meaning that 4,526 first-time buyers did purchase.

Look at the tiny quantities in all other cells beyond 1x buyers with Recency = 25 months. There's a version of diaspora that happens here, right? Most of the customers stay within the original cohort, while those who buy move out into 2x segments (2 purchases), 3x, 4x, 5x, heck, one customer made it all the way to a 10th purchase. That customer is loyal!!

How would you define a loyal customer? Would you suggest that customers who purchase for a fifth time are loyal? Some would, some wouldn't! In our example (not shown), 264 customers make it to a 5th purchase, 114 to a 6th, 46 to a 7th, 17 to an 8th purchase, 6 to a 9th purchase, 2 to a 10th purchase, and 1 to an 11th purchase. In other words, not many customers become loyal.

In total, this cohort of 10,000 first-time buyers generated $437,200 demand over twenty-four months.

Knowing that, you have a pretty short window to impact customers. Impact them when they have just purchased ... for the first time. Tomorrow, we'll take a look at the impact of moving customers along quickly within this specific simulation.

October 08, 2018


The past two weeks have been leading up to a realization ...

... the realization is that we're not good at understanding how cohorts of customers behave.

Think of it this way ... we're really good at "campaigns". We "target" a group of customers, we attempt to get those customers to buy something, and then we measure how good of a job we did.

When we view customers as a cohort, we come to different conclusions about how customers behave. We learn that there is a pre-set motion that customers go through, and we (if we're good marketers marketing great merchandise) are simply pushing that process a bit.

Let's go a bit further tomorrow, ok?

October 07, 2018

Timmy Attends A Marketing Conference

Yes, this is business fiction. If this isn't your kind of thing, then read this article (click here) about the importance of 2nd purchases.

Timmy, an 10th grader, attended a marketing conference and was asked to write a report about his experience.

Dear Ms. Poplinski:

Last week, I attended a marketing conference. It was an engaging experience.

The first talk was from a person called a "keynote" speaker. He must have been important, because the audience gave him a standing ovation. The title of his session was "Relevancy In An Omnichannel Environment". I'm not sure Relevancy is a real word. I'm not sure Omnichannel is a real word either. But the audience sure seemed to appreciate his message. At one point, he paused his speech for dramatic effect. He told the audience that if they didn't embrace an omnichannel approach to selling, then their businesses would be dead. An attendee asked the speaker a question. She wanted a specific example of a brand that embraced Relevancy and experienced success? The speaker told her that he wouldn't focus on specific details, because that was what Google was for. The audience applauded. The attendee who asked the question left the session.

Between sessions there was an ample supply of food. One man grabbed four chocolate chip cookies with his bare hands while speaking into his bluetooth headset. He said that he was ready to "close the deal before the idiot client figured out what was going on". A woman ate fruit and told another attendee that she was concerned that her email campaigns were not engaging enough. The other attendee told her to offer 40% off instead of 30% off, saying her metrics would improve. Both attendees nodded their heads with approval. I learned that discounts are very important if you want to improve your metrics.

In one session, the speaker used a series of Powerpoint slides to tell the audience that they should not use Powerpoint to communicate messages.

One of the Kardashians hosted a session titled "How To Make A Hundred Million Dollars In A Month By Creating Your Own App". More than a thousand people attended the session. A lot of people said they were going to build an app when they got back to the office. I asked an enthusiastic attendee if he knew how to build an app? He said "no". Another attendee said that the morons in the information technology department were on "lockdown" until Christmas was over, so she didn't think they'd ever build an app.

Three people asked me if I was an "Instagram Influencer".

One person offered me ten thousand dollars to promote her brand (porcelain gifts). I asked her how she would measure success if my teacher let me promote her brand? She said that "this would only be a branding play designed to foster engagement". I asked her how she got to keep her job if she didn't have to measure success? She told me that I didn't know anything about marketing. Of course I don't know anything about marketing. That's why I am attending this conference.

A lot of people complained at lunch that the chicken was too dry. They should try eating anything my Dad makes.

After lunch attendees were forced to walk through the vendor hall. Seriously. The hallways were roped off so that attendees had no choice but to walk through the vendor hall. An attendee jumped the rope and tried to go outside to get some sun. The attendee was tackled by security and dragged into the vendor hall, where he was forced to listen to a round-table discussion about capitalizing on retargeting by using advanced machine learning. I heard a security guard say that the session was "punishment enough".

When you walk through the vendor hall, you have to stop at each booth and get the QR code on your badge scanned. If you don't get your badge scanned the people in the vendor booth will yell things at you like "Don't you want to learn how to provide a relevant, engaging, personalized experience for your customer base?" Folks appeared dumbfounded when I said I didn't have a customer base. One vendor said to another vendor "He's right, he doesn't have customers, he probably has brand advocates".

If your QR code was scanned, you earned a free pen. Pens must be valuable commodities in modern marketing. Some vendors enter you into a raffle for valuable gifts like an RCA Android tablet, as long as you provide the vendor with a valid email address. I didn't hear a single attendee say that they won anything. Since attending the conference, however, I receive a dozen emails a day from vendors asking me if I want help building a 360-degree view of the consumer, whatever that means.

In the afternoon the audience was enthralled by a person who called himself a "thought leader". The thought leader talked about strategy, and constantly referenced his book titled "Eternal Engagement". As best I can tell, a thought leader is a marketing version of the people who yell at you on Fox News or MSNBC, except that the thought leader paces back and forth on the stage and asks a lot of questions beginning with the words "What if"?

I'd like to be a thought leader when I grow up. My Dad says I am lazy and I don't want to work hard. I'm very willing to pace on a stage and ask "What if"?

The late afternoon speaker spoke glowingly about something called a "Net Promoter Score". He said marketers are successful when the number of people who like your compay outnumber the people who dislike your company. In marketing, they call this "science".

After the afternoon sessions ended attendees were again forced to visit the Vendor Hall, where they were given coupons for three free glasses of wine. One attendee got coupons from two different co-workers and drank nine free glasses of wine. He seemed really happy.

The conference ended with a performance by a band called the Gin Blossoms. I checked on Spotify, the Gin Blossoms were a popular band twenty-five years ago. The dude who drank nine glasses of wine jumped up on the stage and helped the band sing "Til I Hear It From You".  He seemed really happy. One of the attendees told me that "this isn't a good look for Simon".

Ms. Poplinski, thank you giving me the opportunity to attend a marketing conference. I decided I'd like to earn a Marketing Degree with a Minor in Thought Leadership when I go to college. The conference proved to me that there are lot of people who like to have fun. I think work should be fun.

October 04, 2018

Welcome Program vs. Loyalty Program

Loyalty Programs exist for a good reason ... you're trying to turn a loyal buyer into a hyper-loyal buyer.

Let's take one segment and use it as an example. How about customers with 13 life-to-date purchases? How about those who lapsed down to 3 months?

Did you find this segment on the grid? The chance of these customers buying in the next month is 20.1% (in our example). That's a responsive segment, no doubt about it!!

Ok, I did a little research, and it turns out that there are 13,225 customers in this segment. If I can increase response by 10% (and that's a big "if"), then I gain 13,225 * 0.201 * 0.10 = 266 customers. In the next month, these customers have a 24.6% chance of buying again ... they would have had an 18.5% chance of buying again if they didn't buy. So I get 266 buyers at (0.246 - 0.185) = 16 net additional customers the next month.

Let's view the world a bit differently. How about customers with Recency = 1 month and Frequency = 1 order? It turns out that there are 77,086 customers in this segment. If I can increase response by 10% (and that's a big "if"), then I gain 77,086 * 0.061 * 0.10 = 470 customers. In the next month, these customers have an 8.6% chance of buying again ... they would have had a 5.2% chance of buying again if they didn't buy. So I get 470 buyers at (0.086 - 0.052) = 16 net additional customers the next month.

Do you see what just happened there?
  • Targeting Loyal Buyers via a loyalty program gets me fewer orders this month and equal downstream orders the next month.
  • Targeting First-Time Buyers via a welcome program gets me more orders this month and equal downstream orders the next month.
Yes ... your mind should be blown at this very moment!!!! You've been taught stuff that works, but isn't optimal for improving business performance. Get after those first-time buyers and get a Welcome Program in place, now!!

October 03, 2018

Response Grid

You create Response Grids, right? RIGHT??

I ran twelve queries to create this table. For each month for the past year, I segmented 1-48 month buyers and measured their response in the next month. Then I averaged the results of all twelve months, and here we go, we have the table!!

Each color band represents customer segments with "comparable" monthly response rates. Look at the red numbers ... those are the most "loyal" buyers ... with monthly response rates greater than 20% ... heck, these customers have at least a 1-in-5 chance of buying next month. Wow! Notice that they're at 11+ life-to-date orders and they generally last purchased 1-3 months ago. They are the best customers.

In fact, in the table any customer with a monthly response rate >= 10% is likely to be considered "loyal". This is the audience that the CRM industry lusts over. This is the audience that you read about in trade journals.

Tomorrow I'm going to share with you an interesting tidbit about this audience, ok?

October 02, 2018

Even At Recency = 22 Months ...

Here we are ... customers with Recency = 22 months ... the customers have not purchased in 22 months. That's a long time. They're lapsed buyers.

We're all trained to "target" lapsed buyers who have a lot of historical purchases ... they're "more responsive" and of course if they buy the are probably a "loyal buyer" ... so that's who we "target". Especially catalogers ... I'm as guilty of it as anybody.

But where is the biggest improvement in response? Going from a first to a second purchase. By an order of magnitude.

Spend your money trying to get a 22 month buyer with 5 life-to-date orders to buy for a sixth time, sure.

But how 'bout spending effort (not money) trying to get a 22 month buyer with 1 life-to-date order to buy for a second time? That's where the biggest gain is in terms of impact on your customer file.

Spend Money:  Higher Value Customers.

Spend Effort:  1x Buyers Who Could Become 2x Buyers.

We've forgotten how to "Spend Effort". We just pay folks (Google, Facebook, Instagram, Catalog Co-Ops). We need to "Spend Effort" on customer cohorts who have potential to improve the overall value of the customer base ... at low cost or no cost. Gee ... email marketing comes to mind here ... essentially free.

What stops you from "Spending Effort" on essentially free channels???

October 01, 2018

Nudging The Customer Along

This table evaluates customers with Recency = 1 Month. It measures the likelihood of the customer buying in the next month by life-to-date orders. It's a derivation of the life-table methodology I've been talking about for a few weeks.

As one might expect, a customer with seven life-to-date orders is more responsive than a customer with one life-to-date order.

This does not mean that the "opportunity" is with loyal customers.

Where does the biggest improvement happen? Simple ... going from a first purchase to a second purchase. The change in incremental response (8.6% vs. 6.1%) is +41% ... far better than you obtain getting a customer to go from a 7th order to an 8th order (16.6% vs. 15.0% = +11%). Look a the column labeled "Point Gain" ... 1st to 2nd order gets you a 2.5 point gain (8.6% - 6.1%) ... 7th to 8th order get you a 1.6 point gain (16.6% - 15.0%).

You're reading more and more about "brands" that are pushing loyalty programs on customers, trying to get loyal buyers to become even more loyal. Can you generate profit here? Sure. Is this the best way to invest money in customer segments? Absolutely not.

The place where you make the biggest difference is in converting a recent first-time buyer to a second purchase. This is where your Welcome Program pays off in spades.

Spend your money where you make the biggest impact. There are two clever ways to end up with highly loyal buyers.
  1. Acquire more first-time buyers ... they'll eventually become loyal buyers.
  2. Quickly convert the first-time buyer via a Welcome Program.
I keep sharing data (actual data, mind you) ... what's stopping you from taking action? Discuss.

Hillstrom's Total Package

Yup, it's time for another booklet, this time including 80+ pages of goodies for the New Marketing Leader ... it's called Hillstr...