July 17, 2019

The Problem With Retail

We've got three types of traffic in retail.

  1. EARNED:  This is traffic we earn, via customer loyalty or word-of-mouth or free uses of social media or email marketing.  We somewhat control this via our successes or failures.
  2. PAID:  This is traffic we pay for. Google, Facebook, Display Ads, TV Ads, Billboards, Radio, and countless other channels/tactics. We control this source of marketing via our marketing budget. The traffic flow generally is generally variable, following some form of a a^x function, where "a" is the marketing investment and "x" is the efficiency slope of marketing success.
  3. SHARED:  This is traffic we share with our peers. It's the traffic that Macy's brings into a mall, traffic that buys an old-school Bose Wave Radio. If Macy's closes or loses traffic, Bose loses business. That's bad for Bose.
The secret to fixing retail is understanding how much of your sales come from EARNED, PAID, and SHARED sources.

Let's say that you are a brilliant synergistic customer experience channel-less frictionless marketer. This area of marketing generally falls under the EARNED banner. If you do a great job, you increase your EARNED traffic.

Pretend that your traffic comes from the following sources:
  • EARNED = 30%.
  • PAID = 20%.
  • SHARED = 50%.
Now pretend that your synergistic customer experience channel-less frictionless entertainment-centric strategy results in a 10% increase in EARNED traffic (that would be really, really awesome ... and really, really hard to do).

And let's say that you boost PAID traffic by 5% via a 10% increase in marketing spend.

Finally, let's say that your SHARED traffic drops by 17% because all of your peers in your mall-based stores are not doing well.

Next Year's Traffic = 0.30*1.10 + 0.20*1.05 + 0.50*0.83 = 0.955.

You worked terribly hard to grow what you control by 10% and your total traffic drops by at least 4%.

Now you know what needs to be solved.

To be successful in retail, you have to come up with a solution for the SHARED traffic problem.

SHARED traffic will continue to be a challenge, so retailers have no choice but to increase EARNED/PAID traffic faster than SHARED traffic decreases. The problem, of course, is that if you spend money to grow EARNED/PAID traffic you de-leverage the p&l. If you don't spend money, traffic decreases and sales decrease as well.

In other words, retailers have to become really CREATIVE. That's going to be one of the key ways that we get through the SHARED traffic problem.

If your favorite retail guru doesn't have a plan for the following equation, your retail guru has some work to do:
  • x*EARNED + y*PAID > z*SHARED

July 15, 2019

Gliebers Dresses: We're Not Gonna Do That!

Yes, this is fiction. But you don't have anything better to do today than read something like this ... it's the middle of July for crying out loud. So you are going to sit there in your comfortable office chair and you are going to enjoy this, #amirite?


Setting:  The Gliebers Dresses Executive Conference Room.


Glenn Glieber (Owner):  You know, I had big hopes for the Red Sox this year. Every team in New England should at least get a chance to play for a championship. But this year the Celtics failed and the Red Sox appear to be doing the same. What am I supposed to do this October?

Lois Gladstone (Chief Financial Officer): Spend time running the business?

Glenn:  What?

Lois:  Nothing.

Meredith Thompson (Chief Merchandising Officer):  You're assuming we'll still be in business come October, with all of the tariffs and other stuff going on.

Glenn Glieber: We're always dealing with headwinds.

Roger Morgan (Chief Operating Officer):  Headwinds schmedwinds.

Glenn Glieber:  What?

Roger: Nothing.

Pepper Morgan-Pressley (Chief Marketing Officer):  I think Roger is suggesting that we control our own destiny and that we shouldn't try to find blame to make ourselves feel better.

Meredith:  Is that what you were thinking, Roger?

Roger:  I don't know. Regardless, I just finished reading this fascinating paper from Woodside Research.

Lois:  Oh here we go again.

Roger:  The paper, priced at $995, is the only paper that Woodside Research has released on the catalog industry since their ill-fated 2004 document titled "Catalogs and Retail 2020: The Golden Combination".

Meredith:  Woodside Research is talking about catalog brands? Did they mention us in the report?

Roger:  No. But they talked about a concept that is really intriguing. It's called Bifurcation.

Glenn:  Is that a show on Fox News?

Roger:  No.

Glenn:  CNN?

Roger:  Woodside Research says that Bifurcation is the endgame of catalog marketing. They suggest that as the traditional catalog audience retire, specifically, Baby Boomers, that catalog marketing will split into two pieces. The small piece will be customers age 55-74 who are retiring and have no interest in anything outside of traditional catalog marketing. Meanwhile, almost all other customers will care about e-commerce and have no interest in catalogs whatsoever. Over time, the e-commerce cohort will overwhelm the catalog cohort, ending traditional catalog marketing.

Meredith: I hate Woodside Research.

Roger:  No really, listen. They say that the small cohort that still adores catalogs will REALLY adore catalogs. They say you'll be able to mail them forty or more times per year.

Lois:  How many?

Roger:  Forty!! Or more.

Meredith:  Oh, we're not gonna do that.

Roger:  Do what?

Meredith:  Mail forty catalogs a year to a customer. We don't have the creative staff to produce forty catalogs per year. That's nuts.

Roger:  They're not saying you need forty traditional in-home dates. They're saying that printers can dynamically create 16 page or 32 page catalogs with merchandise personalized to the interests of the customer.

Meredith:  We're really not going to do that!

Roger:  Why not?

Meredith:  Well for starters how will I forecast inventory?

Roger:  How do you forecast inventory online when you have no idea what keywords Pepper is buying?

Meredith:  What are you doing without my permission Pepper?

Pepper:  I'll tell you what I'd like to do without your permission.

Meredith:  What?

Pepper:  Nothing.

Roger:  The whole online side of the business is run without knowing where traffic will come from. It's a big mix of business. Traffic comes from catalogs, from search, from social.

Lois:  How many customers come from social, seven?

Roger:  The point is, you have no idea what customers from channels outside of the catalog are going to buy, and yet you somehow forecast inventory properly.

Meredith:  I'm not sure about that.

Roger:  So all we have to do is find a partner who can help us dynamically merchandise the catalogs at a customer level.

Meredith:  I merchandise our catalogs. I curate them. I do the work. Not a computer.

Roger:  I'm not talking about monthly campaign catalogs like we've been doing for more than forty years.

Meredith:  What we've done for forty or more years is what catalog marketing truly is. What you are talking about isn't catalog marketing, it is sorcery.

Roger:  Is this sorcery, Pepper?

Pepper:  It's easy to execute from a marketing standpoint.

Roger:  So you'd support me on this?

Pepper:  Absolutely.

Lois:  What in the name of J. Peterman is going on here?

Meredith:  We're not going to do that. Period.

Lois:  Well based on what they are saying, they don't really need you to do this, do they?

Meredith:  What?

Lois:  They can find a printer and a targeting vendor and they can just do this. They don't need you, and they certainly don't need your permission.

Meredith:  Of course they need me.

Lois:  They don't need you.

Meredith:  Who is going to curate the assortment for the customer?

Roger:  Nobody.

Meredith:  You have to curate the assortment. You have to tell the customer what to buy.

Roger:  Go ahead and do that with your monthly catalogs and Pepper and I will dynamically create twenty-eight unique, personalized pieces for individual customers who are on the plus-side of the Bifurcation equation. You'd do this, right Pepper?

Pepper:  Yes.

Meredith:  Oh knock it off.

Lois:  And there's nothing you can do to stop it Meredith.

Meredith:  Oh there's something I can do to stop it. I just need time to think.

Roger:  Can we meet later to talk about what could be done, Pepper?

Pepper:  Yeah.

Lois:  This is interesting, because it's really a marketing issue. It's not a merchandising issue. It's a power shift in how catalog marketing is executed.

Meredith:  Oh shut up Lois.

Lois:  What?

Meredith:  Nothing.

July 14, 2019

Yacht Rock

At a recent conference, I mentioned that those who worship at the altar of metrics squeezed all of the creativity out of businesses over the past decade. Well, not all of it of course, but way, way, waaaaaaay too much of it.

Creativity matters. And those who initiate creativity may not get compensated, but somebody will get compensated.

Nearly 15 years ago a group of guys created a web series called "Yacht Rock" (click here). These folks, led by J.D. Ryznar and Hunter Stair, noticed that there were a lot of "smooth" songs between 1976 and 1984. By reading the liner notes associated with various albums, they "connected the dots" ... a lot of the music at the time was connected to Michael McDonald, Kenny Loggins, various members of Toto, Steely Dan, and a handful of musicians. These folks collaborated, creating their own sound.

You can read an oral history of Yacht Rock here.

A decade later, SiriusXM created their own version of the channel, also called "Yacht Rock". They kept "many" of the core songs that Ryznar/Stair deemed worthy of being on the boat, but they added their own songs to create a broader playlist that might be commercially acceptable. Of course, Ryznar/Stair weren't fans of what SiriusXM did, and who could blame them?

But when you make elements of the original theme available to 30,000,000 subscribers, you might evangelize your version of the genre, right? And then SiriusXM invited people like Bill Simmons to DJ last year, and he offered his "rules" for the genre, which were instantly mocked by Ryznar/Stair (given that they invented the genre and here was this sports guy telling the world what the rules were/are). 

They'd created a genre and lost control of the script.

I was in the UK a month ago, and the BBC televised a special about "Yacht Rock", including songs that were from the mid-80s and had absolutely nothing to do with the original theme (click here). Duran Duran isn't connected to the Southern California collaboration environment of the mid-70s, but who's to stop the BBC from deviating from what Ryznar/Stair created?

Amazon has their version (click here).

Spotify has a version (click here).

Ryznar/Stair have their "Certified Playlist" on Spotify (click here).

But the cat is out of the bag, there's no going back to their original playlist. It's over. Bigger, more powerful forces take the genre in the directions they want to take it in, in an effort to commercialize/monetize it.

How much did Ryznar/Stair make for ultimately creating a movement? Virtually nothing.

And how much do all of these playlists resemble the "Certified Playlist"??  Somewhat. But frequently they've diverged to the various interests of those curating the new playlists.

So it is with modern catalog marketing. There was what catalog marketing was, and there's what catalog marketing has become. Those in the industry remember what it was, and still try to promote "what it was". What did catalog marketing become? Amazon. Big box e-commerce, Stitch Fix. Not the catalog part, but everything else about direct-to-consumer. It's now fundamentally different, frequently unrecognizable. And the modern folks, the Amazons and big-box e-commerce purveyors and the Stitch Fix's of the world get all the credit.

Times change, and the world evolves, not in a fair manner, and not in a linear manner.

But the fun part is in trying to create something new. Maybe the evolution of your business will set sail in a new direction. Maybe you'll create your own version of Yacht Rock. Just don't expect others to request permission to come aboard.

July 11, 2019

Moving The Goal Posts

Sometimes "brands" have a problem working with third parties.

Say you sell a product and/or service that Google isn't fond of (or you sell a product/service that borders on being unethical, or is addictive). Google might require approval of your digital advertising strategy before allowing their users to see the ad.

If the rules are consistent and make sense to the "brand" and to the customer, there isn't a lot of consternation.

Sometimes the vendor moves the goal posts. The vendor had rules, the vendor applied the rules consistently, and then the vendor decided to change the rules (i.e. moving the goal posts). Facebook comes to mind. They hooked you on free advertising ... and once you moved the majority of your customers to Facebook, Facebook moved the goal posts and eliminated the vast majority of organic reach and as a consequence you had to pay to speak to your own customers.

These days, it's not uncommon to see goal posts move in all industries. Even in traditional / old-school catalog marketing, where not much ever changes, goal posts occasionally move.

If the vendor changes the rules, if the vendor moves the goal posts, have a checklist ready to evaluate the vendor.
  • Is the vendor being honest? In other words, can you understand what the vendor is trying to accomplish? If the vendor uses language like "In the spirit of consumer privacy in the era of the connected customer", the vendor is not being honest with you. That's bad.
  • Is the vendor being consistent? Are you required to follow the rules but a competitor is not required to follow the rules? If the answer is "no, the vendor is not being consistent, and that's bad.
  • Is the vendor taking control over your brand? If your creative team develops something that is brand appropriate and a 3rd party vendor says "no, you can't use that imagery and/or promotional offer", that's bad. 
  • Does the vendor insert itself unnaturally into your process with other 3rd party vendors? If the answer is "yes", that's bad (i.e. you have a calendar where you and six other vendors are cooperating and the vendor creates new rules that require all six vendors and your in-house employees to change everything to accommodate the vendor).
If the answer to any of the checklist items results in a "THAT'S BAD" outcome, you really have two cards to play.
  1. Demand that the vendor adhere to the rules established prior to the change made by the vendor.
  2. If the vendor says "no", stop working with the vendor.
You're probably going to end up in a situation where the answer is "STOP WORKING WITH THE VENDOR". Now it's up to you. Are you going to repeat the mistakes you made with Facebook and let the vendor take a piece of your business (either via money or institutional control over your brand) ... or are you going to do what is right for your brand?

Do what is right for your brand.

July 10, 2019

Short-Term vs. Long-Term

Another reason you calculate profit ... profit allows you to understand the tradeoff between short-term profit and long-term profit.

You should calculate profit per new customer. Right? Right??

Say you acquire 10,000 new customers and you lost $24,000 doing so. Your profit per new customer is ($24,000) / 10,000 = ($2.40). You lost $2.40 to acquire each new customer.

Ok, now you probably calculate lifetime value (or some derivation of it) ... right? Right?? Let's assume you calculate LTV. You know that the customer delivers $11.88 profit in year one on the file.

You lost $2.40 acquiring the customer.

You generate $11.88 within just a year.

Yup, that's a good decision. You want to do MORE of this, don't you? You want to ask your CFO for more money, because the short-term loss is actually a long-term profit.

Then you execute your plan and sales increase by 10% ... all because of YOU ... because you calculated profit. Everybody in the company benefits, Management earns a healthy bonus, and it's all because of YOU.

Yes ... YOU!

Calculate this stuff, ok? It's like printing money as far as future career salary potential is concerned.

July 08, 2019

An Example

Say you manage a paid search program. Last month you spent $100,000 and the following happened.
  • Cost = $100,000.
  • Clicks = 200,000.
  • Conversion Rate = 1.9%.
  • AOV = $100.
  • Profit Factor = 45%.
We have enough information to calculate profit, don't we?
  • Profit = 200,000 * 0.019 * $100 * 0.45 - $100,000 = $71,000.
You did a good job, didn't you??

The program you inherited performed as follows:

  • Cost = $100,000.
  • Clicks = 200,000.
  • Conversion Rate = 1.3%.
  • AOV = $85.
  • Profit Factor = 45%.
Profit = ($550).

Why do you calculate profit?

Well, you just made your company an incremental $71,550. Your company can do several different things with the money.
  1. Pocket it.
  2. Re-Invest it in marketing activities.
  3. You can lobby for an entry-level marketing staffer to help you find more opportunities to make money, giving you the opportunity to be more strategic which causes your company to make more money.
Profit allows you to easily determine your value to your company. I inherited a hot mess of a marketing team at Nordstrom in 2001 ... a year later when we demonstrated we generated an incremental $9,000,000 of profit we were able to get the resources we needed to be successful. All because we calculated the profitability of our efforts.

Calculate profit, ok?

July 07, 2019

Profit

Two weeks ago I ran a poll on Twitter, asking if users calculated the profitability of their marketing efforts.

32% said "no".

Months ago I asked a comparable question and a follower said that it was stupid to calculate profit.

Last month, a Professional told me that he didn't have a problem losing money.

Let's switch the story a bit. Many readers live in New England. What if I told you that the NFL wasn't going to keep score anymore ... if the Patriots beat the Jets 31-14 you wouldn't know it, you'd just have rushing stats and passing stats and time of possession and turnovers and your job would be to determine if the Patriots did a good job or not? You'd find that foolish, wouldn't you? You'd want to know the score!!!

Profit in Business = Keeping Score in Sports.

If you don't know how to calculate profit, go sit down with somebody in your Finance Department and learn, ok? Someday you are going to run a company and your job will 100% depend on profitability. Better to get started today so that you're ready when you are a CEO/Owner, right?

July 02, 2019

Copying Leaders

Here's a classic example ... Target (click here) announces their own sale that aligns with Amazon Prime Day.

We're so much smarter than this. It takes zero imagination to copy somebody while taking a potshot at their paid membership program.

Amazon took the risk to create their own event. If you decide to jump on their event and sell more because Amazon created the awareness of the event for you, that's fine ... and it might be a highly profitable endeavor. 

But that's not what Leadership looks like.

Instead of copying somebody ... why not create your own special event?

You can do that ... you can!!!!!!


July 01, 2019

Retail Struggles

This week it's all about articles, given that July 4 is coming and nobody is paying attention to anything anyhow, #amirite?

So read this (click here) ... an article about retail challenges.

There's a lotta lather out there about fixing retail, especially fixing retail by being "more digital". My goodness. We've had 20 years of retail evolution, with the pundits telling us to create digitally integrated experiences. Retailers listened. It resulted in a near death experience for modern retail.

Ask yourself if it is possible that "digital" is exactly opposite of what retail needs?? Of course that statement is wrong ... but that should lead you to a more important question ... that one being "How much digital and what aspects of digital does retail truly need?" It's obvious that the "digital dose" of medicine given to retail has been harmful to retail.

June 27, 2019

Catalog University Slides

For the overflow crowd who attended yesterday's session about catalog marketing in 2025 (and for those of you who missed it) you can download my slides (click here).

Visit Catalog University for more information (click here).

June 26, 2019

Can I Can Cause A Customer To Become Loyal?

Maybe.

If you are Starbucks, sure, your darn addictive product is more than enough to foster loyalty. In fact, when your customer purchases six or more times a year it isn't difficult to improve customer loyalty.

Annual purchase frequency is a function of at least four things.
  • Whether your product is addictive (Starbucks).
  • The breadth of your assortment (Amazon).
  • Whether your product is needed (i.e. food).
  • The seasonality of the products you sell.
Most of my readers aren't Starbucks, aren't Amazon, and aren't McDonald's.

Our products aren't addictive.

Our products aren't terribly broad - we aren't Walmart or Nordstrom or Target or Best Buy. We serve a niche.

Our products aren't needed. We need weekly grocery trips to Safeway. We don't need an O&H Kringle on a weekly basis.

For some of us, our products are gift related, limiting their sales to November/December. It's hard to foster loyalty when the customer has minimal reason to buy in ten of twelve months.

The result is this ... our product assortment dictates customer loyalty ... not the other way around. If you sell something that a customer only "wants" 1.5 times per year, you can flail away all you like with loyalty efforts and you'll be successful and the customer will buy 1.63 times per year. Nothing changed. You actually did a great job, and nothing changed.

You're better off spending the money finding a new customer.

Your business model, the products you sell, that determines if customers are loyal. Offering triple points on items that customers don't need frequently is an altogether different proposition.




June 24, 2019

Three Types of Traffic

On Twitter, there's a lot of experts who "know" how to fix retail. Experiences!! Omnichannel! Digital Transformation.

All could be used to improve sales. But does it matter?

Maybe.

In my projects, it's common to observe three types of traffic.
  • Earned.
  • Purchased.
  • Shared.
Earned:
  • Think of a customer who purchased twelve times previously, and loves your brand. This customer visits your website all the time, and is more than happy to drive to your store without the need for advertising. This customer is the very definition of the "organic percentage". If you do your job well, you have a significant minority of traffic that is earned (i.e. you earned this traffic by running your business well) that generates a significant majority of sales.
  • Social media falls into the Earned category - your creative team (Instagram in particular) creates imagery and "content" so powerful that your fans share the word for you  ... you "earn" this traffic, and it costs you nothing.
Purchased:
  • This is what you read about.
  • Pay Google.
  • Pay Facebook.
  • Pay TV for ads.
  • Pay for Retargeting.
  • Pay Affiliates.
  • You give somebody money, they deliver customers. Hopefully they're the customers you need, customers with long-term value that eventually fall into the Earned category. Hopefully.
Shared:
  • Three types of shared traffic come to mind.
  • First = Paying for Real Estate in a Mall. This form of Shared Traffic is dying.
  • Second = Paying Co-Ops (catalogers) for New Customers. This form of Shared Traffic is dying.
  • Third = Amazon. This form of Shared Traffic is growing.
The problem with modern business is that too little traffic is Earned, too much traffic is Purchased, and too much Shared traffic is dying.

Think about it this way. Pretend you are a mall-based retailer.
  • Earned Traffic = 40% of Sales.
  • Purchased Traffic = 30% of Sales.
  • Shared Traffic = 30% of Sales.
  • Next year, you forecast Earned Traffic to be flat, Purchased Traffic to be flat, and Shared Traffic to be down 20%.
  • Next Year Sales = 0.40*1.00 + 0.30*1.00 + 0.30*0.80 = -6%.
If you are a mall-based retailer, this is the problem you cannot solve with any of the trending topics out on Twitter (Omnichannel, Experiences, Entertainment, Digital). 

Here's an example. Say you grow Purchased Traffic by 10% by working hard to improve Purchased Traffic ... but your mall-based competitors fail miserably (as they frequently are) causing Shared Traffic to drop by 20%.
  • Next Year Sales = 0.40*1.00 + 0.30*1.10 + 0.30*0.80 = -3%.
You do everything right, but because you are dependent upon Shared Traffic, your sales decline.

You can't solve the Retail problem until you solve the Shared Traffic problem.

Hint:  You are not going to solve the Shared Traffic problem ... that problem will continue to get worse.

Therefore, you have to solve your Earned Traffic issue and/or you have to profitably solve the Purchased Traffic situation. That's what you have to do if you have stores ... stores can no longer be dependent upon Shared Traffic.

June 23, 2019

Restoration Hardware Source Books


Source Books
  • We produce a series of catalogs, which we refer to as Source Books, to showcase our merchandise assortment. In fiscal 2018, our mailed Source Books included RH Interiors, RH Outdoor, RH Modern, RH Rugs, RH Teen, RH Baby & Child and RH Holiday. Our Source Books are one of our primary branding and advertising vehicles. We have found that merchandise assortments displayed in our Source Books contribute to increased sales of those products across all of our channels. As in our retail stores, our Source Books present our merchandise in lifestyle settings that reflect our unique design aesthetic. Our Source Books also feature profiles of select artisan vendors and other compelling editorial content regarding home d├ęcor. All creative work on our Source Books is coordinated in-house in our RH Center of Innovation & Product Leadership, providing us greater control over the brand image presented to our customers, while also reducing our Source Book production costs.
    Our Source Book mailings serve as a key driver of sales through both our websites and retail stores. Our customers respond to the Source Books across all of our channels, with sales trends closely correlating to the assortments that we emphasize and feature prominently in our Source Books, websites and retail Galleries. We continue to evaluate and optimize our Source Book strategy based on our experience.
    We maintain a database of customer information, including customer information from our RH Members Program, which includes sales patterns, detailed purchasing information, certain demographic information, as well as mailing and email addresses. We mail our Source Books to addresses within this database and to addresses provided to us by third parties. The database supports our ability to analyze our customers’ buying behaviors across sales channels and facilitates the development of targeted marketing strategies, and is maintained in accordance with our privacy policy disclosed on our website. We segment our customer files based on multiple variables, and we tailor our Source Book mailings and emails in response to the purchasing patterns and product needs of our customers. We focus on continually improving the segmentation of customer files and the expansion of our customer database.
    Our Source Books, in concert with our e-commerce channel, are a cost-effective means of testing new products, and allow us to launch categories in a disciplined, expeditious and cost-effective manner.

In case that is TL:DR for you, here's what I want you to take from this:
  • Our Source Books are one of our primary branding and advertising vehicles. 
  • No mention of profitability. None. Interesting.
  • They have a "RH Center of Innovation & Product Leadership" which most of the companies I work with call "2nd floor" or "Creative".
  • They mail the Source Book to "addresses provided to us by third parties" ... a fancy way of saying "we rent names from co-ops".
The future of catalog marketing is a shift away from the classic business model (which began to die the minute Google began to "scale" nearly twenty years ago) into an advertising / branding vehicle. Something very different than a vehicle that maximizes sales per square inch. I can barely believe I just uttered this sentence, since it goes against everything I've historically believed ... but here we are, and we may as well acknowledge it, right?






June 19, 2019

The Pan Am Experience

Here are two posts that (if you are a true marketer with a passion for product) you should read.

  1. The Pan Am Experience.
  2. Take The Pan Am Experience Yourself.
One of my favorite Twitter quotes (I wrote it, so of course I like it) is this:
  • Discounts and Promotions are taxes placed upon brands for being unremarkable.
The more unique something is, the more you can charge for it.

It's common in project work in the past two years to see companies raise prices (significantly) on new merchandise ... a comparable item that used to sell for $24.99 is reintroduced as a new item (with a new button or zipper) and is sold for $29.99. This yields a nasty dynamic ... customers won't buy the $29.99 item, so the brand deepens the discount (goes from 30% off to 40% off) ... but does so across the board, thereby lowering the price on the item that the customer likes ($24.99) from an effective $17.49 (30% off) to $14.99 (40% off).

See what happened there?

The newer item at a higher price point doesn't sell, causing the lousy marketer to discount EVERYTHING which lowers the effective price of the good-selling item thereby mucking-up the pricing integrity of all items.

I know, I know, you can't create "The Pan Am Experience" for your brand ... you sell widgets "in a highly competitive marketplace".

But you can do SOMETHING, right? You can have elite merchandise at a high price point that nobody else bothers to sell. Right? And you can make those handful of items special, from a marketing standpoint. Right?

Right?

June 17, 2019

Treasure Hunt

A few weeks ago, a reader said this:

  • "Instead of talking about the gloom and doom of the death spiral, why not be optimistic and make the discussion fun ... like in the way a Treasure Hunt is fun??"
Think about the topic this way. The "Death Spiral" generally happens when Management reacts to changes in business performance. In other words, the "Death Spiral" is frequently caused by Management.

In the same fashion, a "Treasure Hunt" can be created by Marketing as a response ... a credible response.

Think about the elements of a Treasure Hunt:
  • An entire world must be created - one that the participant wants to be part of.
  • There is a problem to be solved - and the clues make solving the problem fun.
  • There is competition. The participant is battling somebody else for a treasure.
  • There is a TREASURE at the end, and most participants will not share in the treasure.
This brings us back to Marketing. We don't market to prospects as if we even care, do we?

Do we create an entire world around our "brand"? Almost never. Think about it this way ... what is the world that Macy's creates? Creating a world is HARD WORK, and it doesn't always work, does it? The easy half of creating a world is called "brand marketing". It's easy to create imagery that generates feelings, and it's easy to link that to customer service and pricing etc.  It's HARD WORK to create an actual world that the customer wants to be part of.

Problem Solving - what is the problem the customer is trying to solve? Do you give the customer clues to solve their own problem(s)? Think about email marketing ... we tell the customer that we have a "Friends and Family" event and that just about every living person on the planet gets 40% off as a result. That's not much of a treasure. Think about how you could use email marketing to solve problems that lead to a treasure.

Competition - this is what the Fast Fashion folks figured out ... they sold limited quantities of merchandise, creating a "competition" that resulted in urgency. What sense of urgency exists when you can buy the same pair of Dockers in any channel at any time? There's no urgency, is there? None! The marketer must create urgency.

Treasure!!  Apple understands the treasure (or at least they used to understand it). Think about customers waiting to buy a new iPhone. There needs to be a Treasure at the end of the Hunt, and the Treasure should be something that conveys status. What do you sell that represents the Treasure at the end of the hunt?

This brings us back to the concept of a seamless / frictionless omichannel shopping experience. Boring!!! It's comparatively easy to sell the same products in all channels at the same price and to integrate everything together ... it just takes software and money. In the Treasure Hunt mindset, the omnichannel solution is a small part of the treasure. If you want a customer to earn a treasure, you might require the customer to buy in an omnichannel manner (i.e. buy online pickup in store).

This transitions us to the concept of a Treasure Hunt within the structure of a Loyalty Program. Instead of giving the customer points when the customer buys something, why not create a Treasure Hunt???? Why not given the customer 10 points when the customer buys in store and 2 points when the customer buys online? That'll push a customer into your store, I can guarantee you that much!! Make your points structure flexible so that if you are having a hard time selling Widgets then you give more points for Widgets purchases. Give five times as many points to the customer when the customer buys new items ... thereby growing new merchandise sales (which means you'll sell more existing merchandise in the future). Use email to give clues that allows the customer to find the items that earn the most loyalty (treasure) points. DO SOMETHING!!!!!! Use email marketing to offer quadruple point events on specific items that are important to the Treasure Hunt. And then tell a compelling story around the items that support the Treasure Hunt.

Give the customer something the customer will actually treasure. If the customer earns 60 Treasure points the customer gets an actual ... wait for it ... wait for it ... an actual TREASURE!!!  Something nobody else gets. Put your product people / merchants to work to come up with something amazing that only those who win the treasure hunt earn.

What am I trying to say here?

I'm trying to say that the Marketer pulls a company out of the Death Spiral. Yes, merchandise is most important ... but the Marketer has a key responsibility to generate interest ... the marketer creates a Treasure Hunt that causes the customer to want to buy something.

Go do that, ok?

June 16, 2019

Example of an Old-School Anniversary Program

Here you go. Doesn't take any effort whatsoever.



P.S.:  When I share stuff like this at conferences, there are groans and eye rolls and heads shaking "nooooooo". That's ok, that's the right of the conference attendee. But as a speaker, I marvel at the ability of an audience to reject ideas and then grumble that "business is bad".

P.P.S.:  It's Nordstrom, 2001. My boss, the President of the Online Division, blows his top (in his way) because I correlate business struggles with S&P 500 declines. His quote lives with me:

  • "It's not your job to correlate business struggles with the S&P 500. It's your job to fix business problems. Do your job."

So before you just reject the concept above, think about the quote, and then go fix a few problems, ok??!!

June 12, 2019

Join Me on June 27 at 12:00pm EDT!!!

I'll be doing a virtual event for Catalog University on June 27 at Noon EDT ... titled WHAT CATALOG MARKETING WILL LOOK LIKE IN 2025.

Yes, we'll talk about the future ... about Bifurcation ... and about how we'll all need to employ the Great Eight if we want to survive.

How much will this cost you?  NOTHING!!!

Click here to register - it's not like you have anything better to do a week before July 4 and you'll learn a ton in the process:  https://www.cataloguniversity.com/pubtalk/the-great-eight-what-catalog-marketing-will-look-like-in-2025/

June 10, 2019

What Merchandise Goes Into A 22 Page Catalog?

The future of catalog marketing skews in two directions.

  1. 30+ contacts to a small fraction of long-term catalog-centric customers.
  2. A handful of 22ish page contacts to non-catalog customers in an effort to generate awareness.
When the latter is a goal (and yes, it's going to be a goal in the future), you cannot afford to mess around with merchandise that doesn't sell well.

Period.

You will stuff that 22 page catalog with the absolute best merchandise you have. It's the only way you are going to generate positive return on investment.

This is coming ... we're not going to stop it, it's the future. Best be prepared now ... test the living daylights out of formats and ideas so that you are ready to embrace the future.

Right?

June 09, 2019

22 Pages

Yup, that's it. That's what Williams Sonoma published a week ago, delivered on a Saturday.

Bifurcation of traditional catalog marketing is coming to all of ya. Yes, all of ya.

For non-catalogers, 16-22 pages will represent a way to create awareness. For non-catalogers, the format will not generate a ton of sales, and the format will barely be profitable. But it will be a better form of awareness than display ads.

For catalogers, it's time to buckle up. 

At the recent Datamann Conference, I shared the concept of "Bifurcation" with the audience. Your customer files are splitting in half. You spent 15 years trying to hold the customer file together (#multichannel #omnichannel), and the customer chose otherwise.
  1. A minority of the file, age 60+, are running head-first into retirement, and they're not about to don VR headsets to watch a simulated in-store display in 3D. They're comfortable doing what they've always done. They're going to buy from catalogs until they can't anymore. You can mail these customers 30-50 times per year.
  2. A vast majority of the file, age 15-59, do not see you as a catalog brand and have minimal or no interest whatsoever in print. Period. They're buying merchandise from your brand. As a consequence, you'll greatly reduce your contacts to this audience until, one day, you simply won't ever mail them again (if you continue to have 80-120 page contacts in your strategy).
So where does the 22 page contact come into play? How does this represent the future?
  • The 22 page contact acts as contact #31 or contact #43 to the best pure catalog customer.
  • The 22 page contact is a bridge for the 15-59 year old customer who couldn't care less about print ... bridging the past (catalog marketing) to the future (catalog as an awareness tool).

June 05, 2019

Solving The Problem

There's probably a thousand different ways to escape the death spiral.

If you want your core brand to succeed, you'll need to focus on Audience, Awareness, and Acquisition ... no doubt about it. Your Awareness Programs have to be at low-cost / no-cost. You'll have to reach different Audiences (or if you are a smaller brand you'll have to find your Audience).

I know, I know, you don't want to hear that.
  • "That won't work at our brand. We're unique. We're special. Our heritage is our advantage, and we leverage an omnichannel shopping model that our customers crave."
I get this feedback often.

There are other options.
  • Buy a small startup and then choose to not meddle in their business.
  • Create a separate brand. J. Crew is in a death spiral. Madewell is not. Good thing Management at J. Crew created a separate brand.
  • Create an upscale channel or a low-price channel. A third of what Nordstrom sells is via their off-price channel. A full THIRD. Let that one sink in for a moment. It was probably closer to 10% when I worked there fifteen years ago.
  • Become a Supplier/Vendor:  In other words, get your products sold in Target or Walmart or another large brand. I know you don't want to do this, but you already have a presence on Amazon, right? So you're already doing this, right?
I could list a thousand ideas, but you get the picture.

How do you diagnose if your business is in a death spiral? See how many of the bullet points below fit your situation:
  • Customer Acquisition counts are in decline on comparable spend levels.
  • You have a channel where > 50% of new customers are acquired, and that channel is dying (i.e. retail/malls or catalogs/co-ops).
  • Your Management Team reacts by spending less on marketing / customer acquisition and then spends more to cause customers to become more loyal.
  • Your average %-off discount to your loyal customer base is increasing over time.
  • Your primary sales channel is in structural decline (retail = malls, catalogs = well, catalogs).
  • Your best customers prefer existing items that have been sold for several years and do not diversify into new products offered by your merchandising team.
  • You create new channels (i.e. BOPIS in retail) and new customers largely ignore the new channel while existing customers switch to the new channel without increasing spend.
  • You invest heavily in Loyalty Programs but have few customers with > 60% chance of purchasing again in the next year.
  • Management responds to customer acquisition challenges and de-leveraged ad-to-sales ratios by cutting marketing spend further ... accelerating the death spiral.
  • You pay for more than 85% of your new customers.
  • When you have an idea somebody with history at your company says "we tried that in 2009 and it didn't work."
  • Merchandise productivity is in decline.
  • Merchandise productivity is improving but customer acquisition counts are falling at a faster rate, causing sales declines.
How do you dig yourself out?
  • Create low-cost / no-cost Awareness Programs.
  • Diversify your Customer Acquisition Programs beyond malls/retail, catalogs/co-ops, Google, and Facebook.
  • Develop new brands and do not market those brands to your existing customer base.
  • Buy small startups and let them grow without interference.
  • Buy a dying company and integrate their customers into your brand.
  • Develop luxury channels or off-price channels.
  • Become a vendor for major brands.
  • Maintain marketing spend.
  • Shift discounts from blanket 40% off promos that are run 5x a week to limited promotions on individual items, and couple this with limited inventory buys that exempt your brand from non-stop clearance activity.
  • Shift focus from loyalty to awareness and customer acquisition. If loyalty was the answer there would be four thousand case studies of brands who saved themselves while dying by focusing on the most loyal customers.
Next week I'll have a potpourri of topics while I'm in Europe ... the week after, I'm going to flip-the-script ... instead of focusing on a Death Spiral, I'll focus on a Treasure Hunt ... in other words, we'll view the problem from a positive standpoint, ok?

The Problem With Retail

We've got three types of traffic in retail. EARNED:  This is traffic we earn, via customer loyalty or word-of-mouth or free uses of ...