July 21, 2021

10% to 20%

Why do you care about reactivating lapsed buyers?

Because they are worth more than new buyers.

In this example the new buyer spends $111 in the year acquired.

The reactivated buyer spends anywhere between $123 and $132 in the year reactivated. In other words, the reactivated buyer is likely to be worth 10% to 20% more.

This also means you can spend more to reactivate a customer than you can spend to acquire a new customers (because the customer will pay you back faster) ... and marketers love that kind of stuff.

Your cheapest, most direct, and most effective tool to reactivate a customer is email marketing.

Your best indicator of a lapsed buyer ready to reactivate is a website visit in the past 1-4 weeks.

Go get those lapsed buyers ... convert them ... at least get them to your website, ok?

July 19, 2021

Dealing With Tiny Percentages

The first thing you notice when you try to reactivate customers is that they (the lapsed buyer) have very little chance of buying again in the next month.

We've talked about the importance of the Welcome Program.

All of you know about the importance of Reactivating Customers.

When you try to Reactivate a Customer, you invariably face a big problem ... you're dealing with Tiny Percentages.

Here's a typical story regarding Reactivation. I calculated the average monthly response rate for buyers across a bunch of businesses.

Let's say you are trying to reactivate a 25-36 month buyer, who only purchased one time. Every month you have a 0.7% chance of getting the job done.


As a marketer you become Shania Twain ... "that don't impress me much". You could increase the rate by 50% and it would seem like nobody would notice and you wouldn't get credit and in a year you'd be fired.

You'd be wrong.

I'll explain why in my next post.

July 18, 2021


We talked last year ... at length ... about the fact that you were going to have a glut of customers courtesy of a global pandemic. We talked about how important it is to convert a first-time buyer RIGHT NOW before the customer becomes unresponsive.

If we conducted a survey asking how many of you made meaningful changes to marketing strategy for this enormous glut of first-time buyers, we'd learn that fewer than 10% of you did anything meaningful.

Opportunity wasted.

I know ... you'd respond:  "But Kevin, we didn't waste the opportunity. You don't get it. We could barely keep enough inventory on-hand to stay in business. Nobody was in the office. Our vendors were equally impaired. And we still grew our business by 50%. I'd rather count money than spend money on a tactic that is unproven. And let me tell you, we counted the money last year."

Fair enough.

Of course, now business is slumping ... with some of you selling less in May/June/July than you sold two years ago ... and that's with a ton of new customers on the file.

That means you are going to have to reactivate customers, doesn't it?

So we'll talk about Customer Reactivation over the next few posts.

July 15, 2021

Email Chain

Yes, this is fiction ... 

From: Craig Paperman <craigp@spiffyshorts.com>
Sent: Monday, July 12, 2021 2:11 AM
To: Kevin Hillstrom <kevinh@minethatdata.com>
Subject: RE: COVID


It's been so long. Are you still wearing a mask when you go indoors with hundreds of people? We're either crazy to wear a mask after being liberated by a vaccine or we must wear a mask because we won't take a vaccine that alters your DNA or we shouldn't wear a mask because it impinges upon our Liberty and consequently we spread a virus all over everybody else. I can't make sense of any of it. I just eat Doritos all day now.

Kevin, we're down 40% to last year. Have been for eight weeks. What is going on? In the past two weeks we're down vs. two years ago. Is our COVID-bump over? And if it is over, what the heck are we going to do?

I know you have been talking about a Customer Development project. We didn't do anything to develop the glut of COVID customers, I mean, why would we do anything when we got all of that extra profit? But now I'm looking at Fall/Holiday and I'm thinking we're going to crater and miss plan by 40% or 50% and not have access to paper to mail catalogs to clear out all of this extra inventory. If customers aren't buying shorts now, they're not likely to buy them at Christmas.

I'm really worried.

I'm also worried about my file counts. We're down 30% in our 0-3 month file, but we're plus 60% in our 13-15 month file. We're out of alignment.

How did we miss this trend?

Are you willing to perform a Customer Development analysis for us? I know you say on your website that the cost is $25,000, but we can't afford to pay $25,000 when our sales are -40% to last year. Give us your best price for your best work and let's actually ... finally ... get some work done, ok?

Please help us.



From: Kevin Hillstrom <kevinh@minethatdata.com>
Sent: Monday, July 20, 2020 4:59 PM
Craig Paperman <craigp@spiffyshorts.com>
Subject: RE: COVID


My clients are paying me to analyze what is now being called a "COVID-bump", to see if it is sustainable and to see how lasting it might be.

Before you randomly add a loyalty program that may or may not work, make sure you thoroughly understand how first-time buyers convert, understand when first-time buyers convert, and understand their long-term payback. Use your existing tools (hint - email) to quickly convert these customers. Personalize what you show them, based on a first purchase. Personalize the website when the customer visits your website, so that you get a 10% - 50% gain in conversion rates. Do the easy stuff before you implement a loyalty program. But please, do the work NOW before it is too late to do anything and you face sales declines when the COVID-bump inevitably ends.


From: Craig Paperman <craigp@spiffyshorts.com>
Sent: Monday, July 20, 2020 2:46 AM
To: Kevin Hillstrom <kevinh@minethatdata.com>
Subject: RE: COVID


Our sales are CRAZY. Who would have ever imagined all of this death and disruption would cause my team and I to earn gigantic bonus payouts this year?

Our 0-3 month file is HUGE. Do you have a list of best practices for converting these customers to loyal status? We're thinking of a loyalty program with points. I'm not looking to pay for a project, I just want a list of all of the tactics that your paying clients employ, tactics that you know for certain will work.


From: Kevin Hillstrom <kevinh@minethatdata.com>
Sent: Monday, March 23, 2018 12:40 PM
Craig Paperman <craigp@spiffyshorts.com>
Subject: RE: COVID


I'm fine, thanks for asking.

Do not be surprised if you see a huge sales gain. You might not see it, but if retail stores remain closed e-commerce brands stand to benefit from a huge bump. I'm not convinced this will happen, but time will tell.

If you see a huge sales gain, work REALLY HARD to convert all of those new buyers to a second purchase quickly, thereby getting a sales bump on top of a sales bump. Compound Interest! Don't delay and then complain in a year that you need a list of tactics that other brands use to convert inactive customers.


From: Craig Paperman <craigp@spiffyshorts.com>
Sent: Monday, March 23, 2020 3:48 AM
To: Kevin Hillstrom <kevinh@minethatdata.com>
Subject: COVID


I haven't heard from you in awhile. Are you safe?

This is crazy. How do I run a business with nobody in the office? I can't tell if anybody is actually doing any work. I keep coming in to work by myself. I think it is important to lead and show the world I'm not afraid of what has been unleashed upon us.

What are your clients saying about sales right now? I almost feel guilty about telling you this, but we're running 80% above plan. I don't know why. Why would people buy shorts during a pandemic? It's almost like they are sitting in shorts on video calls, though I have no idea who'd do something like that.

Tell me what you are hearing.



From: Kevin Hillstrom <kevinh@minethatdata.com>
Sent: Friday, November 23, 2018 11:36 AM
Craig Paperman <craigp@spiffyshorts.com>
Subject: RE: Pricing Project


The cost of my Pricing work is $25,000.

You might ask your analytics team perform some simple pricing work for you. How do repurchase rates, orders per buyer, items per order, and price per item purchased vary by product category as prices change? It won't cost you a penny and you'll learn whether you should discount more.

Please be careful as you consider your discounting tactics. This is not a bell that you can un-ring. The fact that you are following the herd and are already considering 50% off or 60% off or 70% off means that you will not be able to un-ring the bell.

Make sure you understand the impact of pricing on new merchandise. Undoubtedly you've performed your own merchandise forensics work with your in-house analytics team and fully understand how you should be pricing new items.

Finally, you probably performed a thorough multichannel forensics analysis of the impact of channels long ago, and you fully understand how your channels fit together. Once you know how they fit together, you will know why sales aren't increasing.



From: Craig Paperman <craigp@spiffyshorts.com>
Sent: Friday, November 23, 2018 3:58 AM
To: Kevin Hillstrom <kevinh@minethatdata.com>
Subject: Pricing Project


I really don't understand how the omnichannel agenda is crumbling all around us. We are really facing some serious Holiday Headwinds (I call them "HH" in meetings here). The co-ops are dead. Mall-based retail is crumbling all around us. How is that possible with all of these channels that we have available? Shouldn't all of these channels add sales to the top line? 

All of that failure is causing everybody to offer customers 50% off, and with Cyber Monday just a few days away I don't know if I should offer 50% off or 60% off or 70% off. Do I capture market share? It seems prudent to capture market share right now, am I right?

You've been writing about pricing projects for some time now. I think that it would be wise to have you run your pricing algorithm against our discounting strategy. 

We've been down this road before. I'm not paying $25,000 for analytics work. I'm willing to pay a fair price. How does $7,500 sound? Best price for best effort, as I like to say.



From: Kevin Hillstrom <kevinh@minethatdata.com>
Sent: Monday, September 20, 2016 10:03 AM
Craig Paperman <craigp@spiffyshorts.com>
Subject: RE: Interesting Project Idea


"Optimistic Caution" sounds a lot like being asked to do nothing. How much are you paying Woodside Research for their advice?

From: Craig Paperman <craigp@spiffyshorts.com>
Sent: Monday, September 20, 2016 9:45 AM
To: Kevin Hillstrom <kevinh@minethatdata.com>
Subject: RE: Interesting Project Idea


What are your clients telling you about what they are planning to do with their fall/holiday plans? How are your clients managing these headwinds?

Woodside Research suggests employing "optimistic caution". Smart advice from smart researchers.



From: Kevin Hillstrom <kevinh@minethatdata.com>
Sent: Monday, September 20, 2016 7:26 AM
Craig Paperman <craigp@spiffyshorts.com>
Subject: RE: Interesting Project Idea


You might work with your existing analytics team to obtain an answer. I am working with paying clients right now, and I need to focus my efforts on the work they are paying for, despite the tempting offer of a cobb salad.



From: Craig Paperman <craigp@spiffyshorts.com>
Sent: Monday, September 20, 2016 3:01 AM
To: Kevin Hillstrom <kevinh@minethatdata.com>
Subject: Interesting Project Idea


If you are like me, you can't take your eyes off of cable news. I'm flipping back-and-forth between Fox and MSNBC as I write this, and I can't help but think that this election is harming business. Do I shrink my plan and cancel new merchandise orders because customers are consumed with the election? I don't know. I wish I knew the impact of new merchandise on the future of my brand.

Might there be a way to analyze 2000, 2004, 2008, and 2012 to quantify the impact of prior elections on customer behavior? I think this would be a lot of fun for you. If I sent you sales data by day for the past sixteen years could you spend an hour looking at our data and then provide us with a tangible path through the rest of 2016? I can send you the data this morning and you could turn the results around for me by end-of-day, so I could present the findings at our Executive Team meeting tomorrow.

How does that sound? As a way of saying thanks, I'd buy you lunch at the Shop.org conference if you are attending.



From: Kevin Hillstrom <kevinh@minethatdata.com>
Sent: Monday, February 24, 2014 8:11 AM
Craig Paperman <craigp@spiffyshorts.com>
Subject: RE: Possible Consulting Project


I charge $4,000 a day plus all applicable travel expenses for onsite work. The cost of performing an actual Merchandise Forensics project is $25,000. I do not negotiate project prices.



From: Craig Paperman <craigp@spiffyshorts.com>
Sent: Monday, February 24, 2014 5:01 AM
To: Kevin Hillstrom <kevinh@minethatdata.com>
Subject: RE: Possible Consulting Project


Have you had a chance to reconsider the consulting project we discussed last year? Spiffy Shorts is plowing through some serious headwinds right now, with outside lists not working and our sales not meeting expectations.

I am willing to pay $10,000 for project work, and am willing to provide a $2,000 travel and hotel stipend for the two weeks you'll need to be on campus to teach our staff how to perform the work.

I'm meeting with our Executive Team at 10:00am this morning, so I need an immediate response.



From: Kevin Hillstrom <kevinh@minethatdata.com>
Sent: Monday, August 26, 2013 7:51 AM
Craig Paperman <craigp@spiffyshorts.com>
Subject: RE: Possible Consulting Project


I charge $4,000 a day plus all applicable travel expenses for onsite work. The cost of performing an actual Merchandise Forensics project is $25,000. I do not negotiate project prices.



From: Craig Paperman <craigp@spiffyshorts.com>
Sent: Monday, August 26, 2013 4:42 AM
To: Kevin Hillstrom <kevinh@minethatdata.com>
Subject: RE: Possible Consulting Project


Just getting back to this. Could you write a new proposal that includes the additional work required to adjust for the fact that outside lists via co-ops are not performing well? We need to adjust properly for the headwinds we face on the list front. It's almost like the catalog industry is dying, for crying out loud. Having said that, I am a strong believer in catalog marketing.

I'm willing to pay up to $9,500 for this project. I would also like for you to train my analytics team how to run all of your reports, so that they can produce the reporting on demand for me. I assume that you will have to spend two weeks on-site to teach my team how to run the reports on their own.



From: Kevin Hillstrom <kevinh@minethatdata.com>
Sent: Monday, May 13, 2013 5:26 PM
Craig Paperman <craigp@spiffyshorts.com>
Subject: RE: Possible Consulting Project


Thanks for the message. I don't use existing company reporting to perform my work. You already have talented staff that use existing company reporting, so what good could possibly come from my interpretation of a report that has already been interpreted multiple ways by in-house staff? I use my own proprietary code to analyze the intersection of customers and merchandise.

Project cost is $25,000, half due up-front, half due within fifteen days of project completion.



From: Craig Paperman <craigp@spiffyshorts.com>
Sent: Monday, May 13, 2013 3:16 AM
To: Kevin Hillstrom <kevinh@minethatdata.com>
Subject: Possible Consulting Project


It's been a long time. I hope you are doing well. You've been talking about Merchandise Forensics on your blog for some time. Our merchandise assortment is stunning, as always, but sometimes an impartial outside point of view can be helpful. Could you use our existing reports to look at our merchandise assortment, keeping the cost of a possible consulting project inexpensive? I don't want to spend money that could be spent on mailing catalogs that yield new customers :)

I expect your best price and best effort. Can you put together a proposal this afternoon for me?



From: Craig Paperman <craigp@spiffyshorts.com>
Sent: Monday, October 20, 2009 12:17 PM
To: Kevin Hillstrom <kevinh@minethatdata.com>
Subject: RE: Consulting Project


We'll take up the project at our next Executive Team meeting and see if we can come to a consensus on next steps.



From: Kevin Hillstrom <kevinh@minethatdata.com>
Sent: Monday, October 21, 2009 8:04 AM
Craig Paperman <craigp@spiffyshorts.com>
Subject: RE: Consulting Project


Thanks for the message. I do not discount prices on consulting work unless I can gain efficiencies in data prep across brands. The price of the project is $25,000.

Regarding channels, do not raise your hopes that you will sell more if you have more channels to sell in. Each channel has a purpose. Email might be used for speaking to best customers. Search might be used to find new customers. It's unlikely they'll all work together to generate sales gains. If they did work well together, your business would have grown over the past decade, right?


From: Craig Paperman <craigp@spiffyshorts.com>
Sent: Monday, October 20, 2009 8:55 PM
To: Kevin Hillstrom <kevinh@minethatdata.com>
Subject: Consulting Project


Crazy times, eh? Who would have ever thought that the stock market would crash like it has? We're dealing with unprecedented headwinds at Spiffy Shorts, like everybody else. Who wants to buy shorts when they are abandoning their homes, leaving the bank holding the note?

Anyway, we think there has to be a way to leverage multiple channels to grow in spite of the challenges we face. Our rep at Woodside Research told us that multichannel customers are worth seventeen times a much as single channel customers. Could your research tools help us solve this riddle?

Remember, we're dealing with significant headwinds at Spiffy Shorts, so we can't pay full price for Consulting Projects that may not yield actionable results. We expect your best price and best effort.



July 12, 2021

That Pesky Three Month Timeframe

In your Customer Development work, job one is to get the first time buyer to purchase again ... quickly. You already know this if you've been following along for the past six months, but an example is prudent at this juncture of the discussion: 

A month after a first purchase and the newbie has an 8.7% chance of buying again.

If the customer does not repurchase, we move to two months of recency, where the customer has a 5.2% chance of buying again.

If the customer does not repurchase, we move to three months of recency, where the customer has a 3.1% chance of buying again.

The customer becomes increasingly unlikely to buy again thereafter ... save for seasonal increases at 12/24/36 months following a first purchase. But even then, the odds of the customer buying again are slim.

In other words, that pesky three month timeframe following a first order becomes the most important marketing tactic to focus on. Nothing else compares. If you want to have a successful business long-term, one where you cater to loyal buyers, you'll have to spend a disproportionate amount of marketing effort focusing on first-time buyers within the past three months.

P.S.:  This is where the questions start to flow in. What is the most common question?

  • Show me examples of Welcome Programs that work.
It's not even a question, it's honestly a command.

The companies that are best at this use merchandise personalization, and they increase conversion rates to this audience to the magnitude of 10% to 50%. 

I'm not, however, going to share specific examples with you ... would you want me sharing your marketing secrets with all readers? No? Ok then!

July 11, 2021

When It's Over

Well, this post has nothing to do with the song. Other than the title, of course.

You'll know your COVID-bump is over when your Comp Segment Analysis looks like this:

Look at April/May/June comps. They're running -10% to -16% vs. last year, which isn't great. But remember, last year was the start of the COVID-bump, so it's not fair to compare against that timeframe. Compare against two years ago ... -1%, -2%, -5%. Customer spend is trending at or below two-year-ago levels. That means your COVID-bump is over.

"When it's over, that's the time you fall in love again ..." says the singer. So it will be with you. You'll fall in love again with old school Customer Development. The hard work of building lasting success begins anew.

Run the Comp Segment framework for you business ... right now ... tell me if you are seeing the trend I'm illustrating above. If you're witnessing that trend, it's time to get busy.

July 07, 2021

QuickScore Offer For Catalogers

You already know (click here) that QuickScores cost $11,000 ... you get Catalog QuickScores, Email QuickScores, Brand QuickScores and Merchandise QuickScores.

Now, the feedback I get from you is "we already have great models from our favorite vendor, and they don't think we need to change." Alright. Fair enough. Let's not change. Let's enhance what they're doing.

If you respond by July 15, I'll run just the Catalog QuickScore for you for just $4,000. That's almost free for you, and you can overlay the Catalog QuickScore (which accounts for the Organic Percentage, guaranteeing you'll omit just those die-hard email and social and online buyers who don't care about catalogs). This isn't the Catalog Contact Strategy work I performed in the past (that's a lot more expensive and a lot more complicated) ... but it will get you pointed in the right direction.

Overlay the model with their model, and give them credit when the fusion of the two works a lot better than their model. Praise your vendor!!

Contact me now (kevinh@minethatdata.com) and we'll get started.

P.S.: If you are wondering what the most popular project request is this year, click here. Cost is only $25,000.

July 06, 2021

Customer Development Example: Birds Aren't Real

By now you probably know that Birds Aren't Real ... the Government killed all birds and replaced them with surveillance drones.

When you purchase merchandise form Birds Aren't Real, you are given a surprise in your package.

See what you get in the package?

You get a sticker ... that's probably something you'll attach to the Subaru Forrester across the street. You get a Drone Field Guide ... a bit of levity to brighten your order. And you get your Official Membership Card, something you'll proudly share with a fellow citizen the next time a pigeon harasses your in a park. You'll know "why" the pigeon is harassing you.

Does this work? Who the heck knows? I don't have access to their numbers.

But it doesn't hurt in all likelihood.

I've been harping on Welcome Programs for years ... and when I do that somebody says "give me an example." Well, here's an example. And I know you're going to say "that won't work at our brand, we're unique and we're special, what else do you have?" That's what I always hear. It's what people say when they don't want to experiment, when they don't want to take risks, and when they don't want to change.

It costs almost nothing to have a "point of view". Use your unique point of view and combine it with a package to a first-time buyer and just like that you have the seeds of a Welcome Program. Now you are focusing on Customer Development instead of letting it happen organically.

July 05, 2021

Customer Development via Merchandise: The Supper Club

When you chat with an Executive at a traditional brand, you get feedback that sounds contrary to normal.

  • "Yeah, we'd love to run an influencer program, but our customer is 67 years old and isn't on Instagram."
You kinda feel bad for the Executive, simply because she is right. She can't employ a strategy that appeals to a 26 year old customer when her customer is 67 years old.

The Executive digs in:
  • "Given that we can't do modern things to acquire customers, we're stuck. The co-ops don't work anymore and Google is more expensive with fewer conversions. We're just stuck."
This brings me to the topic of a Supper Club.

In Wisconsin, Supper Clubs are a dying breed. Why would you spend two hours at a Supper Club when you could spend 55 minutes in-and-out at Applebees?

So as Supper Clubs die out, those that remain offer an experience that is fundamentally different than you get ordering a shrimp bowl at Chili's with seamless curbside pickup. The omnichannel offering at Chili's must be battled with a different approach.

Ever drive up to a Supper Club at 4:20 in the afternoon?

Yeah, those two places don't quite look like the Olive Garden, now do they?

You don't really ask for a table. You tell the bartender that you have four people, and you order drinks.

The restaurant isn't adorned with big screen TVs showing you a Braves/Nationals game, that's for sure.

This is the point in the script where the omnichannel experts tell you that you are wrong with just about everything you are doing.

Instead, the Supper Club leans into the experience.

At some point a table is going to become available. Ten or fifteen minutes before that happens, somebody takes your order in the bar. Prices are reasonable. Who wouldn't eat Yellow Lake Perch for just $20.95?

When your table is finally available, your are sent to your table, where your salad (french dressing is mandatory) awaits.

You're likely to be served some bread along with a generous amount of butter. You like butter, right?

With your salad you will be served a relish tray (because you care about what you eat). In particularly swanky Supper Clubs, you'll also get bread sticks or crackers wrapped in plastic.

Maybe you order the broasted chicken (yes ... broasted ... the only way to enjoy chicken). You also order the broasted chicken so you can be served rye bread.

Want some butter with your chicken and alfredo shells?

Many eschew the broasted chicken for surf and turf ... in this case, prime rib with walleye (notice the amply supply of healthy vegetables, including an entire baked potato stuffed with cheese and bacon and sour cream).

Or maybe you indulge in an enticing side dish.

Health-conscious patrons will enjoy the whitefish with a quart of drawn butter.

Some will partake in a 16" thin-crust pizza. Why wouldn't you?

Once you've finished the following:
  • 2-3 drinks at the bar.
  • Your salad with french dressing #mandatory.
  • Your relish tray.
  • Crackers and/or bread sticks wrapped in plastic.
  • Warm bread and countless pads of butter.
  • 16oz prime rib plus four fillets of deep-fried walleye coupled with a baked potato and a generous side of heart-healthy vegetables ... or an oversized thin-crust crispy pizza ... or broasted chicken ... and butter.
... once you've finished all of that ... it is time for dessert. Might I recommend a grasshopper?

As you wait for your arteries to stop clogging, you get the bill. $57 for two people. On a pound-for-pound basis you'll be hard-pressed to get out of Red Lobster for $57.

Why did I just spend ten minutes going through this advertisement for obesity?

At some point you just have to "lean in" to your destiny. The Supper Clubs that remain in Wisconsin do pretty much the opposite of "Best Practices". They offer an "experience" unlike anything you'll find in a chain restaurant. Is it any wonder these places are packed to the rafters at 4:15 in the afternoon on a Thursday?

The same logic applies to so many of you reading this missive. Your brands have been poo-poo'd by the pundits for not being omnichannel enough for their tastes ... for not being "digitally native" ... for not leveraging AI and/or Machine Learning ... for not having a micro-influencer program on Instagram ... for not "engaging" audiences on Tik-Toc.

Ignore the pundits.

Go deep into your situation, and capture every single customer in your vertical ... like the Supper Club proprietors did in Wisconsin. These folks have Developed Customers who appreciate the old-school stylings of the food they offer.

June 30, 2021

We Can't Acquire Customers Anymore

The analysis indicated problems prior to COVID:

  • New + Reactivated Buyers in 2019 = 206,593.
  • New + Reactivated Buyers in 2018 = 247,194.
  • New + Reactivated Buyers in 2017 = 277,550.
  • New + Reactivated Buyers in 2016 = 316,902.
  • New + Reactivated Buyers in 2015 = 334,441.
COVID slowed the problem, allowing this brand to generate 201,006 new + reactivated buyers.

But since February 2021, quantities are once again in free fall.

When I shared the data with the Executive, the Executive said something interesting:
  • "We just can't pay for new customers anymore. The math doesn't work. Paid Search, our primary source of new buyers, is imploding with fewer conversions and more cost. We honestly just don't know what to do anymore. It's exasperating."
COVID masked underlying business challenges. When you force people to sit at home, e-commerce businesses thrive.

The past fifteen years showed us what the future is going to look like.
  • 2006 - 2011 = Catalogers lost significant sales volume to e-commerce brands.
  • 2014 - 2019 = Retailers lost significant sales volume to Amazon / e-commerce brands.
  • 2022+ = Stale e-commerce brands are about to lose sales volume to Amazon, to modern e-commerce brands that cater to younger customers, to Shopify-based brands, and to newer Retail brands moving into abandoned retail centers.
The first place you see negative trends happening is with new+reactivated buyers. Your most loyal customers hang in there with you ... but prospect audiences don't have a history with you ... they just don't care.

So please, monitor your numbers, and as we head into 2022 adjust for your COVID-bump and then analyze underlying trends. If you are struggling with new+reactivated buyers after accounting for the COVID-bump, you need to take action with your customer acquisition programs now in an effort to avoid what the Executive (above) is dealing with.

P.S.: For catalog brands, this means getting away from co-ops.

P.P.S.: For many of us, this is going to mean finding paths outside of Google.

June 27, 2021

Increase Unsubscribes

Marketers live in a constant state of fear. If customers/prospects unsubscribe from your 6x/week email blasts that always offer 40% off or 50% off or 60% off, somebody gets mad ... "WHAT DID YOU SCREW UP TO CAUSE THAT? FIX IT!"

A few weeks ago I wrote a post telling you that the Salad Days were over (click here). We're in a spot now where the COVID-bump is winding down for many(most) e-commerce brands. We aren't going back to normal, but we are moving on to something new.

The next morning I check my email and here's what I observe:

I had more unsubscribes from that post ... a post telling you what is coming and telling you to think mathematically about the challenge and what it means to your business ... than any other post this year. People were so offended they said "THAT'S IT, I'M OUTTA HERE!"


Good riddance.

Our community doesn't need people who are offended by the prospect of a sales decline caused by the resumption of civilization following a global pandemic.

And you don't need to worry if somebody doesn't want to receive your 6x/week missives about the promotions you are offering. Let them go. Let them buy from Macy's or any other brand that doesn't want to be profitable.

You don't want large quantities of subscribers. 

You want the right subscribers.

You already know this. Your Customer Development Executive constantly harps on what the ideal customer is, right?

So don't worry when some of your customers walk away. 

Worry when the ideal customer walks away.

June 23, 2021

Customer Development: Putting All Pricing Factors Together

We built three relationships:

If we multiply all three factors together, we get a picture of how much a customer is worth. If rebuy rates are lower and orders per year are lower and items per order are lower but the price of an item is higher, the customer can potentially be worth more.

Pretend that prices currently average $9.00 per item.

  • Fitted Rebuy Rate is 20.4%.
  • Fitted Orders per Year is 1.594.
  • Fitted Items per Order is 5.315.
  • Calculated AOV = $47.84.
  • Next Year Sales = $9.00 * 0.204 * 1.594 * 5.315 = $9.73.
Pretend that you are forced to raise prices to an average of $10.00 per item.

  • Fitted Rebuy Rate is 19.7%.
  • Fitted Orders per Year is 1.576.
  • Fitted Items per Order is 5.054.
  • Calculated AOV = $50.54.
  • Next Year Sales = $9.00 * 0.204 * 1.594 * 5.315 = $9.97.
In our example, net sales per twelve-month buyer are forecasted to increase (from $9.73 to $9.97). Net sales increase. Now, if cost of goods increased more than the $0.24 gain, then the net result is negative.

But that's how I put the pricing/forecasting work together for you in a Customer Development project.

June 21, 2021

Customer Development: Price Increases and Items per Order

Recall the first two quantified relationships.

What does the relationship look like for Price vs. Items per Order.

As prices increase, customers purchase fewer items per order (#duh).

In this example (using actual data), we see three trends associated with increased prices.
  1. Customers Are Less Likely To Repurchase Again.
  2. Customers Purchase Fewer Times Per Year.
  3. Customers Purchase Fewer Items Per Order.
Is this bad?

Not necessarily.

The key is to multiply the relationship out across metrics ... if the net result is an increase in gross margin dollars, the short-term is protected.

The long-term, however, is undoubtedly hurt. You'll have fewer customers long-term, and that means you'll most likely have a smaller business than you otherwise would have.

June 20, 2021

Customer Development: Price vs. Annual Orders per Buyer

Last time we talked, I shared with you a fitted relationship between price and rebuy rates:

I can generate a comparable relationship between price changes and annual orders per buyer. Do increased prices cause customers to purchase fewer times per year?

The answer is "yes".

For the brand we're studying, we have learned that higher prices lead to lower annual repurchase rates (inferring that you'd also see fewer new customers), and we have learned that higher prices lead to fewer orders per year.

This doesn't mean that higher prices are "bad". It means that higher prices changes how Customers Develop.

Next up? We'll look at items per order.

June 16, 2021

Customer Development: Price vs. Rebuy Rate

As prices increase, annual repurchase rates decrease. For the Merchandise Categories at an actual brand, here's what the relationship looked like.

At a price point of $9.00 a unit, rebuy rates averaged around 20.7%.

At a price point of $10.00 a unit, rebuy rates averaged around19.5%.

The red line represents the fitted relationship (power function for those of you who are interested).

As prices increase, repurchase/rebuy rates decrease.

This is going to be an issue should inflation begin to creep into our business models.

June 15, 2021

Customer Development and Inflation

In a recent conversation, the Executive said that a key item that normally sells for $9 will have to sell for $10 this fall, because the cost to get the item here has gone up. The Executive wanted to know what impact "inflation" will have on this item.

While inflation doesn't appear to be an across-the-board issue, it certainly impacts some of us in certain instances.

We have the data to understand what impact inflation "could" have. Each of us have numerous Merchandise Categories. The items in each Merchandise Category tend to be offered at different price points, meaning that the average price point within a Merchandise Category is different than in another Merchandise Category.

Here's what I do in my Customer Development projects. For each Merchandise Category, I measure annual customer repurchase rates, orders per buyer, items per order, and price per item purchased.

Below I illustrate two examples from actual customer behavior within two Merchandise Categories.

Merchandise Category #1
  • Rebuy Rate = 18.6%
  • Orders per Buyer = 1.548.
  • Items per Order = 4.905.
  • Price per Item Purchased = $10.13.
Merchandise Category #2
  • Rebuy Rate = 13.1%.
  • Orders per Buyer = 1.376.
  • Items per Order = 4.219.
  • Price per Item Purchased = $12.94.
As the price increases from $10.13 to $12.94, rebuy rates decrease from 18.6% to 13.1%.

As the price increases from $10.13 to $12.94, orders per buyer decrease from 1.548 to 1.376.

As the price increases from $10.13 to $12.94, items per order decrease from 4.905 to 4.219.

There are two important concepts to think about here.
  1. Does the higher price point result in more overall sales?
  2. Does the higher price point result in fewer future customers?
In this case, there is essentially no impact on future sales.
  • Category 1 = 0.186 * 1.548 * 4.905 * 10.13 = $76.97.
  • Category 2 = 0.131 * 1.376 * 4.219 * 12.94 = $75.12.
Based on the error rate of the methodology, there isn't really a difference in sales. The higher price offsets lower metrics, yielding comparable spend.

However ... however ... rebuy rates are lower (18.6% vs. 13.1%), meaning that there will be fewer active customers next year in category two than in category one.

If ... and this is an "if" ... if this methodology can be applied to theoretical price increases within a category (our example is across categories), we can get a good idea whether we should eat increases in cost of goods sold or whether we should pass the costs on to the customer.

Sound interesting?

Good! We'll discuss this in more detail in the next few weeks.

June 14, 2021

Who Embraces Discounted Merchandise?

Many customers embrace discounted merchandise, but the preference is not universal or uniform.

In this Time Lapse Analysis, green represents segments of customers at points of time spending above-average amounts of money on discounted merchandise. Red represents a skew toward full-priced merchandise.

About twenty months ago the "middle" of the file was thriving because of discounts/promotions.

In the last three months the very best corner of the customer file (and the very bottom of the customer file) are generally buying because of full-priced merchandise.

If you have to liquidate merchandise, make sure you know "who" is most likely to buy the stuff. Develop the Customers who specifically want to be developed via liquidations/discounted-merchandise, ok?

P.S.:  If you see birds flying overhead, you might think it's a random occurrence. Maybe. It could also be migratory behavior. Click here to see is you are under the flight path of a major migratory event.

June 13, 2021

The End of the Salad Days

An awful lot of e-commerce brands are about to experience a trend not experienced since before COVID started.

It's the end of the Salad Days.

Let's walk through a very simple example. Pretend that your brand had a 30% rebuy rate, had 100 customers to start 2019 and acquired 70 new/reactivated buyers during 2019. Pretend each existing buyer spent $150 and each new/reactivated buyer spent $100, annually.

Here's what the old business looked like:
  • Existing Buyers = 100 * 0.30 Rebuy Rate = 30 existing buyers @ $150 each.
  • New/Reactivated Buyers = 70 @ $100 each.
  • Total Net Sales = 30*150 + 70*100 = $11,500.
  • Total Year-End Buyers = 30+70 = 100.
During COVID, let's assume you had a 35% rebuy rate and let's assume that instead of acquiring 70 new/reactivated buyers you acquire 125 new/reactivated buyers.

Here's what your COVID business looks like:
  • Existing Buyers = 100 * 0.35 Rebuy Rate = 35 existing buyers @ $150 each.
  • New/Reactivated Buyers = 125 @ $100 each.
  • Total Net Sales = 35*150 + 125*100 = $17,750.
  • Total Year-End Buyers = 35+125 = 155.
Your business is more than 50% larger during the COVID era.

Those days are coming to an end, as you already know from your in-house reporting. So let's pretend that we go back to pre-COVID metrics. Does this mean that sales go back to $11,500 as per our example above?
  • Existing Buyers = 155 * 0.30 Rebuy Rate = 47 existing buyers @ $150 each.
  • New/Reactivated Buyers = 70 @ $100 each.
  • Total Net Sales = 47*150 + 70*100 = $14,050.
  • Total Year-End Buyers = 47+70 = 117.
Sales don't go back to $11,500, but they don't stay at $17,750. Sales trend "somewhere in-between" at $14,050.

Let's move ahead another year.
  • Existing Buyers = 117 * 0.30 Rebuy Rate = 35 existing buyers @ $150 each.
  • New/Reactivated Buyers = 70 @ $100 each.
  • Total Net Sales = 35*150 + 70*100 = $12,250.
  • Total Year-End Buyers = 35+70 = 105.
After two years the bump is virtually gone.

Let's move ahead to a third year.
  • Existing Buyers = 105 * 0.30 Rebuy Rate = 32 existing buyers @ $150 each.
  • New/Reactivated Buyers = 70 @ $100 each.
  • Total Net Sales = 32*150 + 70*100 = $11,800.
  • Total Year-End Buyers = 32+70 = 102.
I'll recap annual net sales in our example:
  • 1-2 Years Ago = $11,500.
  • COVID Year = $17,750.
  • Next Year = $14,050.
  • 2 Years Ahead = $12,250.
  • 3 Years Ahead = $11,800.
The COVID era ... the Salad Days, they're going to end.

However, even with comparable customer productivity, you'll get a sales bump because of all of those customers you acquired during COVID. Those customers will pay you compound interest for a few years.

But ... but ... eventually your business goes right back to where it was. With the same customer dynamics as before COVID the trend is inevitable.

So this leads me to a handful of questions.
  1. Have you measured this dynamic? If not, email me (kevinh@minethatdata.com) and I'll get it measured for you.
  2. Have you planned your inventory metrics around this concept? If not, now is a good time to adjust your plans.
  3. Unless you fixed core issues with your business, your business is going to slowly lope back to where it was during Calendar 2019. The trend is unavoidable.

10% to 20%

Why do you care about reactivating lapsed buyers? Because they are worth more than new buyers. In this example the new buyer spends $111 in ...