February 12, 2020

A Classic Case Of Applying File Power Incorrectly

Alright peeps, here's what happened.

Over the past three years, this brand made a choice to maximize the short-term while squelching the long-term.

The segments that are growing have solid File Power ... but are segments associated with old-school business models (call center, print).

The segments that are shrinking have poor File Power ... but are segments associated with modern e-commerce (online marketing, paid search, natural search).

This is a classic mistake.

And it is a mistake that sooooooooooooo many companies make. The company has their back against the wall, and has to make numbers in the short-term in order for the p&l to work. So the company doubles down ... the company markets to existing buyers with predictable behavior via old-school channels.

This strategy almost always works in the short-term. There's proof that the strategy worked, too ... the customer file barely grew but File Power improved, yielding a stronger customer file.

This strategy almost always fails in the long-term.

How are you going to modernize your business if you are constantly trying to squeeze every last penny out of old-school buyers?

And I get it ... this company realizes that the "modern" buyer doesn't have great File Power. This company "runs the numbers" and decides to stay away from low-value customers. Then marketers wonder why it has become so disconnected from modern business? 

Many old-school brands go through a painful transition.
  1. They trade old-school valuable customers for modern less-valuable customers.
  2. They evolve to generate 1.5x - 2.0x as many modern less-valuable customers in an effort to maintain profit.
  3. They move into the future.
Old-school brands that do not go through this transition face a more painful future. So many catalog brands (for instance) ended in 2019 because they assessed File Power incorrectly.

There's a reason I've been discussing File Power for the past six weeks.

File Power is the story of 2020.

If you aren't actively measuring File Power in 2020, you may well be treating your business like it was 2002 instead. That's a problem.

Measure File Power. It's terribly important to the future health of your brand.

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