November 18, 2019

Retail Success ... and no E-Commerce!

Accounting for one out of every fourteen dollars in the UK (click here).

Do what is right for your business ... not what a pundit being paid by a vendor tells you to do.

November 17, 2019

Such a Fun Read!!

This one is fabulous (click here).

What Google and Facebook have done is this ... they've convinced feckless marketers to pay for interactions that, if the interactions disappeared, would result in orders anyway.

It's no different in the catalog industry, where boutique agencies prey on my client base via what are called "matchbacks", where you match all orders within "x" days and "y" criteria against those who received the catalog, and if the order matches via specified criteria the catalog gets credit. It's such a hopelessly WRONG methodology, one designed to protect industry vendors, paper reps, and printers. And everybody uses it, regardless. Heck, I've got hundreds of A/B tests at my disposal that prove that the methodology is hopelessly wrong and you share the results and STILL nobody cares.

Why is this the case?

In other words, why would a very smart individual willfully ignore facts? It's almost like our political situation, isn't it?

There are three phases in the evolution of this phenomenon.
  1. The professional doesn't know the facts exist and trust failed metrics as facts.
  2. The professional learns that facts exist and does not understand what the facts mean.
  3. The professional knows what the facts mean and chooses to ignore them.
It's (3) that I'm always dealing with. Take the merchant who loves to put together 88 page catalogs. If you tell her that at least half of the orders "matched back" to the catalog will still happen anyway if the catalog is not mailed, you have a series of problems that the merchant has to deal with.
  1. If the orders happen anyway, I probably have too many pages in the catalog.
  2. If the orders happen anyway, I'm probably mailing the catalog to too many customers.
  3. I love (1) and (2), therefore facts are taking away from me the thing I love doing.
  4. Therefore, I'm not going to adhere to the facts. I will ignore the facts.
  5. By ignoring the facts, I get to keep doing what I love to do.
  6. And if I decide to accept the facts, then "what" do I do to replace what I've been doing? If I don't know what to do next, then I'm stuck.
It's been my experience that it is terribly hard to fight this dynamic. Nobody wants to stop doing what they love to do.


P.S.: There is a TON of profit to be had in eliminating catalog pages and catalog contacts to individual customers. So much profit that you'd be able to waste it acquiring new customers unprofitably with catalogs, protecting your future. Put your pride aside and move forward. You have a future, a promising future!!!!!

November 14, 2019

A Brief Merchandise Attribution Example

Think about Merchandise Attribution this way.

Say your company has five merchandise divisions.

  • Mens
  • Womens
  • Kids
  • Home
  • Gifts
In 2018 each division generated the following sales levels.
  • Mens = $10 million.
  • Womens = $20 million.
  • Kids = $5 million.
  • Home = $5 million.
  • Gifts = $5 million.
  • Total Brand = $45 million.
Your Management Team decides to shut down the Home division. Projected sales through mid-November look like this, forecasted through the end of 2019.

  • Mens = $10 million.
  • Womens = $22 million.
  • Kids = $5 million.
  • Home = $0 million.
  • Gifts = $5 million.
  • Total Brand = $42 million.
Two questions:
  1. How much of the Home Division's $5 million in annual sales was truly incremental to the brand.
  2. How would you measure the incremental amount prior to shutting down the Home division at the end of 2018??
Discuss.

November 13, 2019

Merchandise Attribution

Let's tell a little story here.

Back in the stone ages of retail (1997) I worked at Eddie Bauer. We had a division in our stores called "Sport Shop".

If you walked into one of our stores, you'd first see the Sport Shop department ... a canoe handing from the ceiling, fishing lures, general manly outdoor merchandise and gear.

You'd watch a couple enter the store. The guy would look at the Sport Shop and stop dead in his tracks. The woman would walk right past the Sport Shop and head toward casual apparel or our tailored/professional line.

Well, this Sport Shop, when measured on a square footage basis, didn't pay the bills. It was a money loser ... a significant money loser.

Sport Shop was shuttered.

And then something fascinating happened.

Women's merchandise sales decreased a bit.

Men's merchandise sales decreased a lot. All of a sudden, we had a "mens problem".

In other words, what we really had was a Merchandise Attribution problem. The Sport Shop was the bait (play on words) for getting the man in the store, where the spouse frequently bought something for the man. Take the Sport Shop away, and you take the guy out of the picture, and then you reduce sales as a consequence.

Why bring this up?

Because in my projects I'm increasingly seeing "Merchandise Attribution" issues. A product category is discontinued, and as a result 2-3 other categories begin to struggle.

It's become obvious that almost nobody is studying Merchandise Attribution. It's a gaping hole that can and should be filled by the vendor community. It's entirely possible that this becomes an area of focus for me in 2020, paired with my Pricing work that has become so popular.

Show of hands ... how many of you are studying "Merchandise Attribution"????

November 12, 2019

A-Commerce

A quote from the Twitterati ...


Idle observation: this year 60% of sales on Amazon will be made by third parties, where Amazon itself did not set the price.

It's time we separated terms.
  • E-Commerce is the old-school stuff (20-25 years old) that most of our readers manage on a daily basis.
  • A-Commerce is something altogether different ... it's the ecosystem Amazon created,

In E-Commerce, you theoretically have a direct relationship with your customer.

In A-Commerce, you are an intermediary stepping between Amazon and an Amazon Customer.


Either strategy can work ... but make no mistake, these are two fully separate marketing / business channels. Your ability to guide your business into the future is fully dependent upon understanding the distinction between the two channels.

November 11, 2019

How Many Styles is Too Many Styles?

Let's say you have a category, and you have just one style / product in that category.

Then you add a second style / product. Sales rarely double, correct?

But sales increase, so you add a third style. And a fourth. And so forth. Eventually you have 250 styles.

How many styles "should" you have?

It's a difficult question to answer. You have to take into account your inventory forecasting abilities, warehouse availability and costs, product development expense, you name it.

It's not difficult to figure out what happens as you grow. Take all of your merchandise categories, and build a relationship like we see above. A classic "law of diminishing returns" relationship emerges.

You can use the relationship to determine an "optimal assortment size" by category given constraints ... if you can only have 900 styles / products, you can theoretically parse them out by category to grow top-line sales. We used to do this at Eddie Bauer more than twenty years ago, so the concept isn't a new one. But it is one worth thinking about, correct?

November 10, 2019

Always Discounting During The Cyber Monday Window

The past two days required a study of Thanksgiving - Cyber Monday activity.

Today, let's look at the share of volume going to items selling below their historical average price point, by year, for the brand we've been studying.

2014:
  • Nov = 25%.
  • Cyb = 33%.
  • Dec = 28%.
2015:
  • Nov = 17%.
  • Cyb = 31%.
  • Dec = 20%.
2016:
  • Nov = 22%.
  • Cyb = 35%.
  • Dec = 20%.
2017:
  • Nov = 22%.
  • Cyb = 27%.
  • Dec = 17%.
2018:
  • Nov = 27%.
  • Cyb = 34%.
  • Dec = 24%.
That's a consistent story, isn't it? This brand is always trying to get customers to buy during the Thanksgiving - Cyber Monday window by marking down items.

Study your Gross Margin metrics and determine if what you are doing is effective? Who cares if you gain market share during a six-day window if the market share gained results in damage to your Gross Margins?

November 07, 2019

Gap

Art Peck, CEO, steps down (click here).

4-5 years ago, we were constantly told by the experts that Gap and their "data-driven" approach was the key to success.
  • CNBC (click here).
  • Creative Directors were "False Messiahs" via Harvard Business School (click here). The brand was moving to a de-centralized, "data-driven" approach.
  • Gap touts "big data" in 2018 (click here).
  • "Art Peck is Preaching Omni-Channel Religion" (click here).
  • Forbes: Could Big Data Replace the Creative Director? (click here).
  • 2019 ShopTalk Retail Conference (billed as the future of retail) featuring Art Peck (click here for the video).
What we were told, once again, was wrong. Wrong. Completely wrong.

Now, it is entirely possible that every data-driven step the CEO took was "right" ... and it is entirely possible every step was necessary. It is entirely possible that his claim that Creative Directors are "false messiahs" was accurate. And it is entirely possible that all the store closures were needed. It was entirely possible that Gap had to go through a ten-year valley to emerge on the other side and he wasn't given nearly enough time to move the brand through the ten-year valley.

It is also entirely possible that the "retail industry" ... the experts, the pundits, the conferences, the vendors, the trade journalists ... it is entirely possible that they all continually get it wrong, every single day, leading you astray in the process.

To solve the retail problem, you need to solve five key issues concurrently.
  • Changing customer demographics ... i.e. the end of the Boomer generation as the core customer and the embrace of Millennials / Gen-Z.
  • The decimation of malls and shopping centers as a shared platform for retail brand traffic ... in other words, you have to have a solution for every store you abandon as shopping centers die.
  • You have to have cute merchandise. Period.
  • You have to present your brand in a compelling manner (i.e. great marketing and you have to have outstanding Creative Direction).
  • You have to have a complete, compelling, and cost-effective plan to acquire new customers.
When you listen to retail experts, ask them what their plans are for each of the five retail problems that must be solved concurrently, ok? We've largely proven (in the past half-decade) that data / omnichannel wonkery is not the answer.

Oh, There's A Pricing Thing Going On Here

Here was our business from yesterday ... and it's clear that volume shifted out of early November into the Cyber Monday window.

But what about pricing issues? Did this company discount everything, or did this company do something clever to manage Cyber Monday?

Let's look at the average price per item sold:
  • November = $21.26.
  • Thanksgiving - Cyber Monday = $21.38.
  • December = $21.87.
Nothing that's too big of a deal there.

Let's look at the percentage of items sold that are classified as a "Winner".
  • November = 74.4%.
  • Thanksgiving - Cyber Monday = 70.6%.
  • December = 74.0%.
Now that's interesting, don't you think? It's obvious that somebody decided to feature a non-winning item, or a series of non-winning items.

Let's look at the percentage of items that were sold below their historical average selling price.
  • November = 27.2%.
  • Thanksgiving - Cyber Monday = 33.6%.
  • December = 23.5%.
The picture is more clear now, isn't it? This brand is selling non-winning items at a discount. 

Is there a price point where this is happening? Yes! Let's look at items > $50.
  • November = 25.5%.
  • Thanksgiving - Cyber Monday = 31.2%.
  • December = 29.6%.
To manage the Cyber Monday window, this brand marked down expensive non-winning items.

Would you shift demand out of early November into the Thanksgiving - Cyber Monday window and then feature non-winning high-price-point items sold at a discount in an effort to protect gross margin dollars? Maybe. You'd have to perform the analysis to see if that's the right thing to do, correct?

But at minimum you should perform the analysis, correct?

November 06, 2019

An Open Letter To Amazon And The Folks Who Produce Amazon Catalogs

Dear Amazon:

My name is Kevin Hillstrom. I worked for catalog stalwarts Lands' End and Eddie Bauer in the 1990s. I helped close down a catalog division at Nordstrom in 2005-2006 and INCREASED sales as a result. I've spent the past twelve years helping 250ish companies understand why they are succeeding/failing, completing projects for nearly 80 catalog brands focusing on better targeting mailings (i.e. mailing far fewer catalogs) in a modern world.

In other words, I know a little something about who should receive catalogs.

You and I have a long and storied relationship, dating back twenty-ish years. You probably sent my household this catalog because somewhere back in 2007-2015 we purchased "something" directionally similar to what you sell in this catalog. I'm guessing you leveraged the magic of the "ship-to" address to decide that I should be a prime candidate for this special mailing. Not last year's mailing, mind you ... your criteria omitted that mailing. 

When I received this catalog, I had an instant reaction.


This reaction, of course, is better than the reaction a Twitter follower sent me (click here).

By now you've noticed a few interesting things about the catalog industry that you once destroyed and now are an integral part of. See, ten years ago printers were frustrated with you. Paper reps were frustrated with you. But when you decided to mail a catalog, all that changed. Have you noticed that there is a random person wandering your campus extolling the virtues of catalogs? That person is your paper rep. Nobody understands how he ended up with an office with a door when he doesn't even work at Amazon, but that's how this stuff works. He's not leaving, ever.

Aside:  When I worked at Nordstrom, the paper rep had so established himself with our print production team that he told that team not to execute my mailing plan (a plan that called for cuts in paper expense). The print production team chose to honor the paper rep until they were reminded who pays their salary & health insurance and 401k. A cautionary tale for the good folks at Amazon.

Did your printer open a satellite office near Denny Triangle? That's not a coincidence, and if you don't believe me ask yourself why a major printer rents office space a quarter mile down the road from Lands' End?? The person who randomly asks for a dinner appointment in a private room at a restaurant named "Purple" works for your printer. As an FYI, they're hoping you print more catalogs, monthly if at all possible, to a circulation depth of at least 100,000,000. They believe this could well become a "best practice".

By now you've heard of an obscure term called "matchback". One on end of the argument you have your own employees, the smartest mathematical minds in the world, folks who use experimental design and machine learning to determine exactly how your catalog interacts with the rest of your ecosystem. They know things the catalog industry couldn't possibly aspire to understand. On the other end of the argument is the boutique catalog agency that is helping with your catalog efforts. These are the folks who told you to perfect bind this mailing to "make a statement in the mailbox". These folks helped you arrive at 90 optimal pages ... so much better than 88 pages.

These folks introduced you to the term "matchback". For the past fifteen years, these people eschewed real science and instead convinced the catalog industry that every order generated in an eight week window must be matched back to the recipient of the catalog, thereby giving the catalog credit for the order. Your boutique agency wants you to believe that my 72 roll of eco-friendly toilet paper purchased on November 6 was CAUSED by the mailing of the catalog on November 4. In fact, the entire industry wants you to believe this lie.

Why would the industry want you to believe this lie?
  1. Boutique Agencies make more money if you believe the lie.
  2. Your paper rep makes more money if you believe the lie.
  3. Your printer makes more money if you believe the lie.
  4. You make less profit (although you probably don't care about profit) if you accept the lie as fact.
Do not, for one moment, fall for the seductive lure of the "matchback algorithm". Oh heck, who am I talking to? You already have the best mathematical minds in the world, and they certainly know how to target mailings and measure results, I mean why else did I receive a catalog from Amazon in the first place?

Oh oh.

They got to you, didn't they?

Your paper rep already read this blog post and somehow scheduled an "all hands on deck paper discussion at 2:30pm today". Your printer somehow scored front-row center court seats to the Maine / Washington basketball game on November 19 to keep you focused on print (and by the way, you're getting actual/physical paper tickets instead of mobile tickets - proof that paper matters). I implore you, don't go!! My printer once trapped me on a boat on Lake Washington for three hours. It felt like thirty hours for all parties. I'm confident the paper/printing folks don't want to spend time this way. It's just that you are really, really important to them.

You probably just figured out that your boutique agency is paying one of your gifted machine learning experts to speak at an "Executives Only" session in San Francisco to talk about the fusion of machine learning and matchbacks. Tell them that Alaska Air doesn't fly to the Bay Area. Please! Do it now. Do it before they get an article in the Washington Post about how catalogs boost the bottom line at Amazon.

I'm begging you.

Do something now before it is too late. Because if you don't do something now you'll mail 100,000,000 of these every month and every single order generated by Amazon will be credited to catalog mailings. Don't believe me? Ask Orvis. They've been there, they've done that.

Measure the living daylights out of this thing this year, and then target the catalog properly next year, ok?

Please. You are now the catalog industry. It's up to you to restore balance in the client-vendor relationship. If you care. And I'm quite confident this isn't that important to you. So, whatever.



P.S.: This is called "satire". If I worked for a printer I'd give Jeff Bezos whatever the heck he wanted, and I'm not exactly sure what he'd want that he couldn't buy with money outside of potentially a new President, but I'd spend every waking moment figuring it out. If I managed a boutique agency I'd personally pay the potential 1% Seattle city-based income tax placed on high-earning individuals for every high-earning individual at Amazon if it meant that my agency got more business. Yes, I'm exaggerating in the opposite direction here, for effect. Sometimes we just need to step back and take a breath ... this stuff isn't so important. Catalogs aren't dead, and they aren't making a resurgence. They're a decreasingly popular tool. Use 'em appropriately, and most importantly, measure them appropriately, ok?

November 05, 2019

Diagnosing Thanksgiving - Cyber Monday

In my projects, I take the "Day Before Thanksgiving to Cyber Monday" window and analyze it separately from the rest of November/December.

Here's actual data ... what do you see happening with this brand during the Thanksgiving - Cyber Monday window?


First of all, the brand is imploding. Regardless, what is happened in 2018? Demand shifted out of November, bleeding into Thanksgiving / Cyber Monday and the rest of December.

It looks like Thanksgiving / Cyber Monday window is likely cannibalizing business from earlier in November, doesn't it? Now if you are lowering prices to make magic happen here, well, God help you, because you are just throwing away Gross Margin / Profit dollars in an effort to help a trade journalist earn clicks. Congrats!!!

Tomorrow we'll look at pricing data in relation to the Cyber Monday window.



November 04, 2019

Lemonade out of Lemons

Yes, this image is allegedly real (click here).

If you plan something important for an entire year, of course you are going to make lemonade out of lemons ... what choice do you have?

If your merchandising team made a mistake and "ruined the new item assortment for 2019", well, it's your job to make lemonade out of those lemons.
  • Promote the new items that worked best via email, home page, landing pages, and Instagram. Promote the living daylights out of the "best of" the assortment.
  • Offer discounts on only the items that aren't working ... don't taint the entire assortment because a portion of the assortment isn't working.
  • Segment your customer file into bargain hunters and full-price fanatics ... offer the junk at a discounted price to your bargain hunters.
This stuff doesn't have to be rocket science ... use good judgment and make lemonade out of lemons!

November 03, 2019

Price Deflation

The transactional brand has no qualms with discounting.

A few years ago, a Private Equity firm asked me to speak with the Chief Marketing Officer at a business they were looking to acquire. During the call, the CMO said something that just stopped me in my tracks. Here's the paraphrased quote from the CMO:
  • "I don't care what we're selling. I can craft an offer, any offer, that will cause any customer to buy anything. Period."
That's the definition of a Transactional CMO!

I'll bet I've analyzed a dozen brands in 2019 that introduced new items at prices more expensive than the brand average. In other words, if the average item sold for $25, the brand introduced new items that cost $29.

This causes a unique dynamic among existing customers. Your existing customer sees a $29 item and says "that's too expensive". Instead, the customer buys the $25 item. Your merchandising / inventory / product team then measures results, and notices that customers "don't like" new $29 items. Now there's an inventory problem. What's the best way of getting out of an inventory problem? Discounting items.

Here's where the marketing team gets involved. They apply 25% off your entire order (how generous), meaning that $25 items are now $18.75 and $29 items are now $21.75. The customer finds both price points appealing, and buys something.

Of course, gross margins are normally around 60% ... so let's say that the customer places an AOV of $75. Cost of Goods = $30.
  • Gross Margin at Full Price = $75 - $30 = $45.00.
  • Gross Margin at 25% Off = $56.25 - $30 = $26.25.
So now you have to generate 71% more business just to equalize gross margin dollars. Good luck!!

A lot of the price deflation I'm seeing in 2019 starts with a merchant trying to generate gross margin dollars by introducing new items that are more expensive. This creates a customer response problem, which becomes an inventory problem, which becomes a marketing discounting problem, which becomes a gross margin problem which is addressed by introducing more new items at more expensive price points which ... yeesh!

October 31, 2019

CYBER MONDAY OFFER FOR BLOG SUBSCRIBERS ONLY!!!!!

You love Cyber Monday offers, don't you?? It's the Super Bowl of the marketing season.

Is Cyber Monday generating positive business for your brand? In other words, is the Thanksgiving - Cyber Monday window generating incremental customers for your brand, or are you cannibalizing sales from the rest of November/December?

Here's a Cyber Monday offer for you, the intrepid reader.
  • For just $3,000 I will analyze your multi-year Black Friday - Cyber Monday trends. I'll show you whether your customers are incremental or cannibalized. I'll show you if your sales are shifting out of Nov/Dec into the Black Friday - Cyber Monday window. And I'll provide you with a forecast for sales for this year's Black Friday - Cyber Monday window.
Just $3,000. Who's in?  The offer must be accepted by November 6 to be valid. You love deals. This is a deal! What's stopping you from obtaining this analysis prior to Cyber Monday 2019??

October 30, 2019

Rebuy Refresher

There's a clear distinction between Transactional Brands and Relationship Brands. You can see it via annual repurchase rates:
  • Annual Repurchase Rates < 40% align with Transactional Brands.
Look at it this way. Let's say that you retain 28% of last year's buyer file. Let's say that you had 100 buyers last year:
  • 100 * 0.28 = 28 retained buyers.
How many new/reactivated buyers do you need to keep the buyer file level?
  • 100 - (100 * 0.28) = 72 new/reactivated buyers.
You're clearly a Transactional Brand when this happens. You are looking for customers who have a need at a point in time, and you're looking to capture that order RIGHT NOW, aren't you?

Go calculate your annual repurchase rate among twelve-month buyers. What is the rate? Is it under 40%? Yes? It probably is. And that means that, in all likelihood, you are a Transactional Brand. That's not good/bad ... but the reality of the situation dictates the marketing tactics that are likely to work.

There's a reason that the majority of customer loyalty efforts employed by "brands" fail or lose money or do not generate sales gains ... they're applied to Transactional Brands.

Make sense?

October 29, 2019

Broasted Chicken

In a Transactional Brand, you'd sell fried chicken. You'd offer the chicken at a low cost (your deep fryer is essentially free), you'd advertise digitally, and you'd seek out customers who demand to eat fried chicken RIGHT NOW ... demanding that the customer buy IMMEDIATELY. You're there to generate a transaction.

In a Relationship Brand you spend $5,000 to purchase a Broaster ... a combination Broiler / Roaster that is licensed by the Broaster brand. You'd buy the secret coating that goes on the chicken. The chicken is "made to order", so you're going to disappoint customers with long wait times if many customers order broasted chicken at the same time. You realize that only a fraction of customers care about broasted chicken, and you realize that these customers will come back repeatedly because you possess a broaster and the competition does not possess a broaster.

The Transactional Brand sell the same junk everybody sells, at a low cost. The Transactional Brand uses tricks and gimmicks to get the customer to buy RIGHT NOW.

The Relationship Brand sells something unique, often at a moderate / high cost. The Relationship Brand uses merchandise to get the customer to come back TOMORROW.

Do you see the difference I'm talking about here?

It's really hard to increase customer loyalty if your business is calibrated around Transactions.

October 28, 2019

How Do I Know I Operate A Transactional Brand?

How do I know I operate a transactional brand?

  • Annual Repurchase Rates are low, under 30%.
  • I grumble when third parties charge me more for the exact same service.
  • My new customers come from Facebook.
  • My new customers come from Instagram.
  • My new customers come from Pinterest.
  • For catalogers, new customers come from Catalog Co-Ops.
  • My new customers come from Google.
  • I transact on Amazon and Amazon gets a generous cut of the action.
  • I hound customers all across the internet via retargeting programs, stalking them, begging them to cash in an abandoned shopping cart.
  • I have a robust shopping cart abandonment program.
  • I offer bigger discounts for customers who abandon carts than for customers who complete an initial transaction.
  • I offer discounts, period.
  • I offer free shipping.
And that's just a sampling of likely outcomes that determine if you operate a Transactional Brand.

A Transactional Brand is at the mercy of strategic algorithms.

A Relationship Brand is at the mercy of strategic marketing/merchandising decisions.

October 27, 2019

The Transactional Brand

Sometimes business changes, and when it changes, nobody notices.

Tell me how you'd use Google Analytics (without writing any supplemental code) to determine if your customer base is more loyal or less loyal? More specifically, tell me how you'd use Google Analytics to determine if you have a customer loyalty program.

Here's a huge change I've observed over the past decade.
  • 2009 = It was common for a B2C brand to retain 37% of last year's customer base.
  • 2019 = It is common for a B2C brand to retain 20% of last year's customer base.
For all of the wonky nonsense you read about how to retain customers, none of the wonky nonsense is working anymore.

Oh sure, I see brands that retain 45% of last year's customer base. It happens. But it used to happen ALL THE TIME ... and now it RARELY HAPPENS.

Don't tell me that this is because of Amazon. Amazon isn't big enough to make a difference. Walmart is big enough to make a difference, and Walmart was dominant when retention rates were 37%. So this isn't an Amazon issue.

This is an issue of how you "transact" with channels.

What do I mean by "transact"??

Marketing shifted. Ten years ago we were in the final days of "relationship branding". The goal was to build a relationship with the customer. The goal was, of course, expensive ... darn expensive. 

Since then, digital analytics have stripped anything expensive from the profit-and-loss statement. Everything today is a transaction. You look to convert the customer, you try to extract every penny of profit from the customer, and then you move on to find the next customer looking to buy something RIGHT NOW.

Customer Relationship / Loyalty discussions are just that ... they're discussions. The discussions don't reflect reality.

Since the economic crash, now more than a decade ago, we shifted from relationships to transactions. Think I'm wrong? Look at the desperation in a typical email marketing message. Everybody is trying to get you to buy something RIGHT NOW and they'll give you free shipping and 40% off and loyalty points and additional 20% off on top of the 40% off to get you to buy RIGHT NOW.

It's all about Transactional Commerce now. This is one of the reasons mall-based retail is dead. Mall-based retail requires a relationship ... nobody gets in a car and drives 15 minutes to visit a mall unless a relationship exists. Shift the relationship to transactions, and the mall serves no purpose.

Transactional Brands aren't good, and they aren't bad. They're just different. The issue is if you think you are managing a Relationship Brand and you focus your efforts on Google / Facebook / Instagram / Digital, you are sub-optimally managing your brand. And here's a strong hint ... the vast majority of my client base thinks they're a Relationship Brand but their marketing team focuses on being a Transactional Brand. Align the business properly, and the p&l will work just fine.

The vast majority of folks I speak with or work for are managing Transactional Brands when they think they're managing Relationship Brands. Please align your goals with your marketing efforts, and then results might just improve, ok?



October 24, 2019

Creative

On Twitter you find all sorts of odd and untested ideas.

One follower told me that he outsources all of his creative imagery to his customers ... "we simply can't hire enough staff to do what we want to do, and to be honest, our customers know what they want more than we know what they want, so we let them create the imagery we use."

A couple of things.
  1. You can afford to hire professionals, you choose not to hire professionals.
  2. Outsourcing creative to customers isn't right/wrong ... it's just a choice. One of many choices you make.
Your in-house team probably won't publish the image of the corgi in this post ... that's something a customer does. As a result, your brand is taken in different direction than it would head under the Leadership of a Creative Director.

This is what creative looks like under the Leadership of a Creative Director.


I worked at Nordstrom when the Creative Director was sent to pasture to "spend more time with family and friends". It's a risky job, and if you lead your company in the wrong direction you lose your job.

Neither approach is right/wrong.

Based on my project work, I'm not convinced enough thought is being given to the importance of Creative in a user-generated world.


October 23, 2019

What Is The Total Package, Anyway??

Tom from Ann Arbor has a question:

Dear Kevin:  Long-time reader, first-time questioner.  I reviewed your product offerings. I don't understand the difference between a Pricing project, a Total Package project, and a Contact Strategy project. Can you describe the differences for me. Thanks, Tom.

Tom, here's your long-distance dedication. No, wait, that's American Top 40 from the 70s.

Anyway, there are several different projects I typically perform for nearly 250 clients since founding MineThatData in 2007. 

We have the Elite Program, which just wrapped up an October run. For just $1,800 (and then $1,000 thereafter, three runs per year) you get a sampling of Total Package and Pricing tables, and a writeup of how your business is performing. It's the perfect entry-level project!

Next is Hillstrom's Pricing. For $8,500 through 12/31 ($12,000 therearfter) you get a full study of how your customers respond to different price points. You'll learn if you have a "pricing problem" or not. I created Hillstrom's Pricing because so many clients were increasing prices on new items, and then discovered they had a "new item" problem. Noooo ... they had a pricing problem. You'll also get a series of channel-based, product-based, and price-point-based targeting variables that you can program into your omnichannel database.

Hillstrom's Total Package is a combination of former products. You get the following:
  1. Hillstrom's Pricing.
  2. Hillstrom's Merchandise Forensics.
  3. Hillstrom's Fix it.
You ask for a Total Package project when you are not sure why your business is not meeting expectations. Most often, I discover the following:
  • A customer acquisition problem (i.e. a marketing problem).
  • A merchandise problem (i.e. merchandising issues related to new / existing items).
  • A pricing problem (oftentimes rooted in discontinuing inexpensive items that loyal customers crave).
You'll learn why your business is struggling, and you'll have a road map for improving performance.

Finally, we have Hillstrom's Contact Strategy ... a product specifically for catalog marketers. In this project, I determine (for every customer on your customer file) the number of annual catalogs that optimizes profitability. Based on the now famous "organic percentage" ... the fraction of annual volume that happens independent of catalog marketing, I am able to generate a hundred million dollar catalog brand a million dollars of incremental annual profit ... oftentimes more!

October 22, 2019

You Don't Have To Like It

Last week I talked briefly about printer profits (click here).

You liked that, based on measurements like "engagement".

Of course "engagement" doesn't pay the bills.

When I talk about Merchandise Forensics or Pricing Issues, "engagement" data is lousy. At the same time, people choose to hire me.

You don't have to like the focus on merchandise or on pricing. You might hate it. You might prefer engaging content that allows you to debate "strategy".

What matters most, of course, is that you take concepts you read about here and apply them to your business in a profitable manner. You can search for keys to improving conversion rate, but if pricing is not right and/or merchandising strategy is off, conversion rate is going to be below your expectations. Don't look for magic. Look to what you sell and how you sell it. Teach your co-workers the dynamics that cause customers to respond. Go make a difference, ok?!!

October 21, 2019

Perception

Free shipping sends one message. You're willing to stand behind your prices, but you are willing to absorb losses from an operational standpoint.

25% off sends a different message. You suggest to the customer that the reason the customer isn't buying isn't your merchandise, but instead that your prices are simply too high.

Everyday low prices teach the customer that you can be trusted.

There isn't a right/wrong way to do any of this. JCP and Macy's have been discounting forever, it's part of their game and the customer still shopping there understand the game. But understand ... you are who you say you are. 

And what you prioritize via email & home/landing pages & print determines who you are. You can trim the number of low-cost items you sell and still feature low-cost items. There are many ways to make customers happy while optimizing profitability.

October 17, 2019

Given The Choice ...

... between selling a winning item at $14.99 or selling a winning item at $44.99, pick the winning item at $14.99.

Why?

On average, units = customers. A winning item at $14.99 sells 3x as many units (on average) as a winning item at $44.99. Therefore, the lower-priced winning item attracts more customers, who tend to deliver long-term value.

At least think about the concept, ok?

October 16, 2019

Look For Balance

It's common to see this in my project work.

Existing Items:

  • 2019 = $24 average price.
  • 2018 = $25 average price.
  • 2017 = $26 average price.
  • 2016 = $28 average price.
  • 2015 = $27 average price.
New Items:
  • 2019 = $33 average price.
  • 2018 = $31 average price.
  • 2017 = $30 average price.
  • 2016 = $29 average price.
  • 2015 = $28 average price.
This is a classic case of "divergence" ... the items the merchandising team carries over are increasingly cheaper over time ... while the new items introduced are more expensive over time.

No balance.

Just divergence.

Divergence is bad because of how we typically deal with the issue. It's common for customers to not respond to new items that have diverged from the prices of existing items carried over from last year. This causes the merchandising team to freak out ... the inventory managers in particular. They put pressure on the marketing team (or the CFO puts pressure on the marketing team), and in kind we see emails for 40% off of everything ... yes, everything. This causes existing items at $24 to be sold at a real price of about $14, even though those items were selling acceptably. Price deflation kills the brand.

So please, look for balance in pricing between new items and existing items that are being carried over.

October 15, 2019

We Need A Lot More New Items

Here's our forecast case from yesterday.


If I substitute in 2,250 new items per year instead of 1,577, and if I assume that the rate of these items becoming Winners / Contenders / Others remains constant (which is a risky assumption), then this price point band generates increased demand in the future.


This is the style of analysis that you want to apply at a category level, given that the relationships by category are likely different.





Retail Success ... and no E-Commerce!

Accounting for one out of every fourteen dollars in the UK ( click here ). Do what is right for your business ... not what a pundit bei...