February 10, 2019

Gliebers Dresses: The Elizabeth Farger Catalog

Yes, this is business fiction ... and for the 10% of subscribers who are new in the past year and have not been exposed to much of this over the past decade (I began writing these things in 2009 ... and it turned out that the stories became the most popular posts I've written, so win-win), I advise you to just delete today's email message and focus on something else ... like retail bankruptcy (click here).

Setting: The Gliebers Dresses Executive Conference Room

Glenn Glieber (Owner, CEO):  Well, it's another Monday morning in February after a Patriots Super Bowl win. Some things never change.

Meredith Thompson (Chief Merchandising Officer): I thought the Super Bowl parade was wonderful. Just wonderful. Thanks for giving everybody the day off, I know my team really appreciated the chance to spend a day celebrating greatness.

Pepper Morgan-Pressley (Chief Marketing Officer):  I don't think the folks at the Elizabeth Farger Catalog are celebrating greatness this morning. Did you hear the news?

Lois Gladstone (Chief Financial Officer):  News? What news?

Pepper Morgan-Pressley:  They shut down last week.

Lois Gladstone:  They what?

Pepper Morgan-Pressley:  They're done. They just walked away. It's over.

Lois Gladstone:  That's un-effin-believable.

Meredith Thompson:  I can't believe that Elizabeth quit.

Pepper Morgan-Pressley:  She didn't quit. Her business model became outdated and died. Her customers quit.

Meredith Thompson:  Of course she quit. Look at our business. We've had bumpy years. Lois, how much profit did we make last year?

Lois Gladstone:  We made just a bit north of three thousand dollars last year. Earnings before taxes, of course.

Meredith Thompson: Of course. And you don't see us quitting, do you? We keep plugging along, trying to resonate with today's fashion-savvy shopper.

Pepper Morgan-Pressley:  I heard four percent of their customer base died last year. One of the merge/purge houses told me that. They died.

Lois Gladstone:  Four percent?

Pepper Morgan-Pressley:  That's what I heard.

Lois Gladstone: That's gotta be true.

Meredith Thompson:  That's nonsense. Fake news. We need to Make Cataloging Great Again.

Pepper Morgan-Pressley:  Twelve percent of their orders came from checks mailed via the USPS. Who do you think still orders via checks sent in the mail?

Lois Gladstone:  How many of our orders are from checks mailed via the post office?

Pepper Morgan-Pressley:  Five percent.

Meredith Thompson:  See, we're a modern brand. We don't have those problems.

Pepper Morgan-Pressley:  I also heard that their ad-to-sales ratio was 30%, and they were offering 40% off plus free shipping at Christmas.

Lois Gladstone:  Sounds like the CFO was asleep at the wheel.

Meredith Thompson:  There's nothing wrong with a 30% ad-to-sales ratio. We've been at that level for decades and we're doing just fine.

Pepper Morgan-Pressley:  Everything is wrong with a 30% ad-to-sales ratio. If you have to pay the paper folks a heavy of a tax just to generate an order, something is horribly wrong with your business model, especially in the era of e-commerce where online brands don't have to pay Paper Patrick a tax.

Meredith Thompson:  That's the beauty of catalog marketing. You spend $30 to generate $100 that comes with a $40 cost of goods sold. You make $30. Paper Patrick makes money. We make money.

Lois Gladstone:  Until you give away $40 of the $30 you make via discounts and promotions. Meredith apparently didn't take Finance 101 in college in the mid 70s.

Meredith Thompson:  Back then I liked the night life. I got to boogie on the disco.

Lois Gladstone:  I think what Pepper is alluding to is the fact that you have to account for other variable and fixed costs as well as discounts and promotions. You need to make at least twenty-five or thirty cents for every dollar you sell to cover your expenses. If your catalog eats up thirty percent of sales, you're hooped. You can't invest in anything else.

Meredith Thompson: We still invest in stuff.

Lois Gladstone: Not like we should be.

Meredith Thompson:  Anyway, it's all about the merchandise and how you sell it. To be honest, the Elizabeth Farger Catalog looked like it was printed in the mid 80s. How could her customers even read the copy? And some of that junk, I mean, the dresses Elizabeth sold had to be stuff that Elizabeth used to wear while watching Dynasty.

Lois Gladstone:  Pepper, would you daughters ever buy from a catalog?

Pepper Morgan-Pressley:  My daughters wouldn't be caught dead looking at a catalog.

Lois Gladstone:  But hypothetically, if you told them they weren't going to prom unless they spent ten minutes looking through the Elizabeth Farger Catalog, would they buy something?

Pepper Morgan-Pressley:  No.

Meredith Thompson: But hypothetically, if you set aside the theory that Elizabeth was selling dresses featured in an episode of Hart to Hart, if you assume that the merchandise was cute like our merchandise is, would they buy from the catalog?

Pepper Morgan-Pressley:  Never.

Meredith Thompson:  Sonora, I can see her not shopping from a catalog. She's got issues with that purple streak in her hair, no offense. But Sedona, she's a good girl, she'd buy from a catalog if the merchandise were cute and were presented in a modern way, am I right?

Pepper Morgan-Pressley:  Never.

Meredith Thompson:  Stop messing with me and just be honest for a moment, ok?

Lois Gladstone:  Let's do a test. Pepper, do we have employee orders in our database?

Pepper Morgan-Pressley:  Of course.

Lois Gladstone:  And do we overlay customer age on customers in the database?

Pepper Morgan-Pressley:  Of course.

Lois Gladstone:  Can you write a query and see what percentage of our own customers ordered last year by age band?

Pepper Morgan-Pressley:  Give me ninety seconds.

Silence envelops the room as Pepper furiously thrashes the keyboard on her laptop.

Meredith Thompson:  Something seems odd today.

Lois Gladstone:  Something seems odd every day.

Meredith Thompson:  No, something is different. Something's missing.

More silence.

Lois Gladstone:  Where's Roger (referring to Chief Operating Officer Roger Morgan)?

Meredith Thompson:  I knew something was missing.

Pepper Morgan-Pressley:  Woodside Research invited him to a symposium on Influencer Marketing in the Apparel Industry. All expenses paid. He said it made him feel like he was an Influencer.

Lois Gladstone:  Somebody at Woodside Research has compromising information about Roger. A dossier or something. And I don't want to know what's in it.

Pepper Morgan-Pressley:  Roger says the symposium will teach us how to leverage Influencer Marketing in a way that acts a lot like free marketing.

Glenn Glieber:  I love free marketing!!

More Silence.

Pepper Morgan-Pressley:  Ok, I've got the results. Ohhhhh, Meredith, I'm sorry.

Meredith Thompson:  What?

Pepper Morgan-Pressley:  Not a single employee under the age of thirty bought our merchandise in 2018.

Meredith Thompson:  You obviously wrote a bad query.

Pepper Morgan-Pressley:  I only queried female employees. Ten percent of employees age 30-39 bought our merchandise. Thirty percent of employees age 40-49 bought our merchandise.  Seventy percent of employees age 50-59 bought our merchandise. All seventeen of our employees age sixty-plus bought our merchandise.

Lois Gladstone:  That's awful.

Meredith Thompson:  She obviously yak'd the query. Young customers love my perpetually cute merchandise.

Lois Gladstone:  Our own employees get a 30% discount on top of any promotional discount we already offer customers. Young employees don't love our stuff. At all. Or they'd buy it with their employee discount.

Meredith Thompson:  You can't assume that because our employees won't buy my stuff that our customers won't buy my stuff. That's a faulty leap of faith.

Pepper Morgan-Pressley:  Do you want me to query the average age of customers buying your cute stuff?

Meredith Thompson: Um, uh ....

Pepper Morgan-Pressley:  I already did. The average age of a customer buying your cute stuff is 61 years old.

Lois Gladstone:  You're selling to you, Meredith. You are selling to people who possess your aesthetic for dresses.

Pepper Morgan-Pressley:  Do you folks understand how all this stuff fits together?

Lois Gladstone:  Obviously not, or she wouldn't have a 61 year old customer.

Meredith Thompson:  She wasn't asking that question of me, Lois.

Pepper Morgan-Pressley:  It was a question for the room. We've studied this stuff for years.

Meredith Thompson:  I thought we were talking about the Elizabeth Farger Catalog. She's the one who screwed up. We are profitable. She quit.

Pepper Morgan-Pressley:  Let's go there. We all know why the Elizabeth Farger Catalog died. She sold to herself for forty years. That's who she knew. She knew herself. So her generation kept buying from her. Elizabeth changed as her customers changed.

Meredith Thompson:  That's smart. She listened to her customers.

Pepper Morgan-Pressley:  Smart as long as you are marketing to a cohort. But what happens when the cohort gets old?

Lois Gladstone:  Four percent of your cohort dies.

Pepper Morgan-Pressley:  That's one problem, sure. But there's a bigger problem. You merchandise to the cohort that followed you for forty years, and by doing so you shut everybody else out. Your copy represents what your cohort wants to read. Your payment methods reflect how your cohort wants to pay. Your marketing channels include the channels your cohort shops from. And anytime you stray from the formula, your cohort spends less and reminds you that you are in business to serve your cohort. Worse, all the modern stuff doesn't work, because the cohort hates modern stuff and the modern stuff features merchandise that the cohort likes so as a result younger customers think you're selling gross crap in modern channels.

Meredith Thompson:  You're just making all this up. Fake news! We need to Make Cataloging Great Again.

Pepper Morgan-Pressley:  I've been saying this for a decade. Heck, Roger's been saying this for a decade. We've A/B tested our website to death, overlaying customer demographics on top of the analysis. We've A/B tested our emails. We've A/B tested different catalog concepts. Any time we go younger, we get pummeled by our cohort of customers. Any time a younger customer considers us, she tells us our merchandise and presentation of merchandise is tailored to her Mom or Grandmother.

Lois Gladstone:  So we're doomed?

Meredith Thompson:  We're not doomed. We're profitable.

Pepper Morgan-Pressley:  The Elizabeth Farger Catalog is a cautionary tale for what happens when you follow your cohort through the full length of her life. At some point, you need modern merchandise, a modern selling approach, and you need to leverage modern channels.

Lois Gladstone:  And you can't make that leap when you are spending 30% of your sales on catalog marketing.

Pepper Morgan-Pressley:  Bingo! But you can't cut back on catalog spend because your cohort will get mad at you and spend less with you as a consequence, forcing you back into spending more money on catalog marketing.

Lois Gladstone:  So what do we do?

Pepper Morgan-Pressley:  We need to milk every last dollar of profit out of the core Gliebers Dresses concept. We need to mail our best catalog buyers every darn week if necessary, while mailing nearly everybody else once or twice a year, tops. Let the rest of 'em buy from the website and via email campaigns.

Meredith Thompson:  That's insane. I can't create fifty mailings a year. My team will collapse from exhaustion. Worse, almost nobody else will get to see my catalog. That's not how you Make Cataloging Great Again.

Pepper Morgan-Pressley:  Printers have solutions to get dynamically generated pieces in the hands of best customers on a weekly basis. This allows us to make more profit. Then we cut way back on mailings to 75% of the file, allowing us to make evne more profit. We take the profit we make and we invest it in a dress startup catering to customers age 35-54.

Meredith Thompson:  What is this, Shark Tank?

Pepper Morgan-Pressley:  It's common sense. 

Meredith Thompson:  It's voodoo. We haven't tried any of this, and even if we had, it probably wouldn't have worked. Your ideas have not been tested in a rollout environment.

Pepper Morgan-Pressley:  My team simulated all of the outcomes. They know it will work. And you'll have enough profit to make Lois happy and to move us into a possible future business catering to a different customer.

Meredith Thompson:  Sorry, that won't make me happy.

Pepper Morgan-Pressley:  Or we can keep doing what we've been doing for forty years and we'll end up like the Elizabeth Farger Catalog.

Meredith Thompson:  We'll keep doing things the way we've always done them and we won't end up like the Elizabeth Farger Catalog. We're better than those folks. We're gonna Make Cataloging Great Again.

Pepper Morgan-Pressley:  Like I said, I've been telling y'all for ten years what we need to do. We just don't do it.

Lois Gladstone:  But we sure love reading about or hearing about the misery of others. At least we don't have the problems those other idiots have!!

Glenn Glieber:  Strategic discussions are important, and that's the job of an Executive Team ... we get paid the big bucks to have important strategic discussions.

Lois Gladstone:  As long as you're happy with making three thousand dollars of profit a year.

Glenn Glieber:  Pre-tax, Lois.

Lois Gladstone:  Uh huh.

Glenn Glieber:  Just like the Patriots winning the Super Bowl, some things never change.

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