October 17, 2021

But They Don't Want Cheap Items

Last week I expressed my contempt for a customer base that wanted discounts / promotions. It's not the way I want to run a business (take a $50 item and sell it for $50 and then cheat all those that bought it for $50 and sell it for $35).

But it works, of course.

As a marketer, you want to make sure you understand the difference between customers wanting a $40 item for $25 and customers wanting $25 items. There is a difference.

For the brand I'm analyzing, the top three deciles (which represent customers who, after being acquired, have an average rebuy rate in the next year of 54%) generate 11% of their volume from items selling for between $20.00 and $29.99. Meanwhile, the bottom three deciles (which represent customers who, after being acquired, have an average rebuy rate in the next year of just 31%) generate 38% of their volume from items selling for between $20.00 and $29.99.

What does this mean?

It means the new buyers don't want cheap items. They want quality items sold at cheap prices.

It's the old JCP issue from a decade ago ... customers didn't want everyday low prices of $30 ... customers wanted 40% off of a $50 item.

This impacts "how" you sell stuff on your website, if your brand has customers with similar characteristics.

October 14, 2021

Items Selling Below Their Historical Average

I can't believe I even have to write this given how much I dislike promotions, but here we are. I'm looking at data for the brand we've reviewed over the past two weeks. Remember ... new customers in the best decile had a 58% chance of buying again in the next year ... new customers in the worst decile had a 28% chance of buying again in the next year.

So you want to acquire customers in decile 1/2/3. You want to avoid customers in decile 8/9/10.

I looked at the percentage of merchandise in the order sold below the historical average price point for the item. In other words, if an item was $50 and then was lowered to $40 the historical average might be $48 and if it sold for $40 it sold "below" the historical average.

Top three decile results for percentage of sales sold "below" the historical average?

  • 68% ... 72% ... 68%.
Bottom three decile results for percentage of sales sold "below" the historical average?
  • 46% ... 45% ... 59%.
The best new buyers tend to like items where they are getting deals, according to the analysis.

If you are a "data-driven" professional, you don't look for facts to confirm your bias. You tell the client what they need to do. This client needs to recognize that getting a deal is important to their prospect base.

October 13, 2021

Marketers Determine Loyalty Levels Based On The First Purchase

For the brand I'm analyzing, there are numerous marketing channels used to acquire customers.

These channels deliver above-average new buyers.

  • Marketplaces.
  • Refer-A-Friend.
  • Points Program.
  • Postcards.
These channels deliver low-value new buyers.
  • Affiliates.
  • Email Marketing.
  • Catalogs.
  • Search.
  • Space Ads.
Your mileage will vary (wildly) ... but you have clear relationships, and you know (for instance) that Amazon buyers aren't coming back to your website to build a relationship with you ... their relationship is with Amazon.

So if you knew that search buyers had low long-term value and you knew that December newbies had low long-term value, wouldn't you do something about search in December?

Wouldn't you?

Marketers determine if customers will be loyal, and they do it based on how they acquire a customer. Acquire a customer via search in December, and the marketing makes life difficult going forward.

I know ... here come the unsubs.

October 12, 2021

New Buyer Quality: Logistic Regression

Ok, a geeky detour for today in case you want to do this work yourself.

Every first-time buyer in "Hillstrom's Newbies" purchasing for the first time between a date range is analyzed ... did the customer purchase again within twelve months?

We use a Logistic Regression framework - the methodology allows us to see the impact each variable has on subsequent purchase activity.


Now, the numbers are kinda hard to read here, so don't really focus on the numbers. Focus on the bullet points below.

  • I measure the impact of each additional item purchased in a first order.
  • I measure the impact of the price of each item purchased in a first order.
  • I measure the impact of discounted/promoted items in a first order.
  • I measure the impact of new/existing items in a first order.
  • I measure the impact of canceled items in a first order.
  • I measure the impact of returned items in a first order.
  • I measure the impact of the month of acquisition.
  • I measure the impact of the share of a first order in each merchandise category.
  • I measure the impact of marketing channels in a first order.
There are other attributes worth analyzing, but for the brand being studied, this is sufficient to tell a story ... the story of why a first-time buyer purchases again.

When you get a "Hillstrom's Newbie" project, you get the Logistic Regression analysis as the foundation of your customer behavior. From there I rank-order the new buyers from most likely to purchase again to least likely ... and report to you what I learn.




October 11, 2021

New Buyers and Returned Items

Pundits love to hound you about returns, about making things right for the customer.

Maybe you don't have to do that.

In the business we've reviewed for the past two weeks, first-time buyers who lost their entire first order to returns (i.e. the customer returned everything) were 58% more likely to buy again than were customers who returned nothing.

Oh.

Always remember that when a customer returns something the customer might well replace the item. Not exchanges ... but the customer actually / physically buying something different to meet the needs of the customer.

The company I'm analyzing learned three fascinating things:
  • Canceled Items caused new buyers to be MORE likely to purchase in the future.
  • Returned Items caused new buyers to be MORE likely to purchase in the future.
  • Discounts/Promotions caused new buyers to be MORE likely to purchase in the future.
You've got enough information there ... without anything else I'm sharing in upcoming posts, to put your entire merchandising / operations / marketing / creative teams into action. They all have a purpose. They could all work in an integrated manner, with a purpose.


P.S.: This is the stuff I work on in a "Hillstrom's Newbies" project. Now I know that some of you are going to unsub right now ... "HOW DARE HE SELL US STUFF???" is the feedback I get. So go do the work. Go talk to your analyst and get busy ... you get the benefit of what I'm saying and you pay nothing. How do you beat that?

October 10, 2021

Canceled Orders / Items

Many of you are dealing with this very issue. You planned to sell Blue Widgets for nine months, you have them on your website, but most of the sizes are sold out and replacements are sitting on a ship outside of Long Beach.

Do those canceled orders or canceled items hurt future customer behavior?

Maybe.

The company I'm currently analyzing (and this was pre-COVID, so I get it, we live in a different world now)?

No.

In fact, canceled items helped ... helped A LOT!

Customers were 2.36 times more likely to repurchase if they had an item canceled than if the order was properly fulfilled for the company I analyzed for this series.

2.36 times more likely to repurchase!

In other words, when a customer was disappointed the customer became persistent. The customer looked for something else to buy, causing the brand to get two orders in a short period of time.

What am I asking you to do with this information?

Don't give up. Give the customer alternatives. Give the customer choices. Especially first-time buyers. Work hard to aid their persistent behavior.

October 07, 2021

This Is Where Kevin Says OH BOY

As you know, I hate discounts and promotions. It's the realm of the unimaginative ... when you don't have a single creative idea to grow your business you just give away hard-earned gross margin dollars. It's brain-dead easy and doesn't require any actual marketing chops.

But that doesn't mean the tactic doesn't work.

If you analyze data, you need to be honest when the data doesn't go the way you think it should go.

Such was the case with the brand I just analyzed. Here are first-time buyers by decile (1 = best, 10 = worst). The y-axis shows the percentage of customers who purchased via a discount and/or promotion.


Oh boy.

42% of the customers in the best decile purchased via discounts/promotions.

About 12% of the customers in the worst decile purchased via discounts/promotions.

So this company clearly has an opportunity ... to pursue discounts/promotions.

Of course, this company needs to perform a profitability analysis, because it is possible that at 40% off you are making less money than at full price.

In this specific case, it was more profitable long-term for the brand to offer discounts/promotions.

And I hate that.

But I have to be honest and I have to follow the data, wherever it leads me. In the case of this company, the data leads me down a path I don't like but have to honor.



October 06, 2021

Load That Cart Up!!

In our example, the best newbies (decile one) have a 58% chance of buying again in the next year, while the worst newbies (decile ten) have a 28% chance of buying again next year.

How does this relate to the number of items purchased in a first order?


In the top decile, customers purchased nearly 3.0 items in the first order.

In deciles seven / eight / nine / ten, customers purchased fewer than 1.2 items in a first order.

In other words, if you want loyal buyers in the future, make sure your first-time buyers are purchasing as many items in a first order as they possibly can. That's your job. Get those newbies to add items to the order, ok?


October 05, 2021

Christmas Newbies ... Woooooo!

Modern marketers love December. It's so "easy" to acquire customers. I worked with a "normal" brand who acquired 40% of their new buyers every December.

They didn't, however, elect to measure if this was a good decision.

Remember our data from yesterday? The best newbies had a 58% chance of buying again (decile one) and the worst newbies had a 28% chance of buying again (decile ten).

This graph shows, by decile, the fraction of new buyers acquired in December. Tell me what you observe:


Look at deciles nine and ten. These are the worst deciles ... and anywhere between a third and half of the first-time buyers in these deciles are acquired in December.

Oh oh.

In other words, if you acquire a customer in December, the customer (for this brand) is generally a low value customer, one unlikely to buy again in the future. You better collect all of your profit upfront with this customer.

In the Logistic Regression analysis performed for this brand, I learned the following:

  • January / February / March / April / May / September new buyers perform at or slightly above average.
  • July / August newbies perform above average.
  • October newbies perform below average.
  • November / December newbies perform well below average in the future.
Fortunately, this brand only acquired 27% of new buyers in October / November / December. They knew this problem existed, and they did something about it.

Go take a look at your results. How do all of those Cyber Monday newbies or Christmas newbies perform in the future?


October 04, 2021

Wildly Different Levels of New Customer Quality

You pay Facebook $100,000 a month and let them do the work. You're a Marketer!

Do you remember when you were early in your career and the financial person arrived at your company and gave a long, windy discussion about "diversifying your 401k portfolio"?

What did you do? You listened to the woman. You did what she told you to do. She's the expert, you are the one with matching company funds that will someday retire using those funds.

You diversify your portfolio, correct?

The same thing applies to the customers you acquire. You don't just outsource the work to Facebook or to an Influencer and call it quits. You have numerous sources of new customers and those customers display numerous behaviors ... some positive, some negative.

This is data from an actual brand. Here are the 12-month rebuy rates for first-time buyers, modeled via Logistic Regression and ranked by decile. "1" represents the first decile, the best customers. "10" represents the tenth decile, the worst first-time buyers. What do you observe?


The best first-time buyers have a 58% chance of buying again in the next year.

The worst first-time buyers have a 28% chance of buying again in the next year.

Which customer would you rather acquire? The one with a 58% chance of buying again in the next year, or the one with a 28% chance of buying again in the next year?

New buyers possess wildly different levels of quality.

Now let's dig into the attributes that cause a customer to be likely to buy again vs. not willing to buy again.



October 03, 2021

New Customers ... Here We Go!!!

Between now and the Supply Chain Apocalypse of 2022 (read this tread on Twitter), studying new customers and studying the impact of first purchase attributes on future spending activity will be important. Some of your customers will tolerate the issues. Some of your customers will not be customers as a consequence. Building an entire business based on what happens in China could become a dicey proposition ... a fatal proposition for some.

But that's a problem for 2022. Until then cross your fingers and hope that toilet paper is available.

As you already know, most e-commerce brands thrived during the COVID-bump of 2020. Because annual repurchase rates are generally low for e-commerce brands, sales growth is highly dependent upon new+reactivated buyers. With a veritable plethora of new+reactivated buyers in 2020, life was comparatively good (commerce life, that is).

Those days are gone now.

Trends in customer acquisition are trending back toward 2019 levels for so many of you. This means that customer acquisition is no longer easy, it's hard, and you (that's you ... the reader) play a disproportionate role in how loyal your customers will be in the future based on the criteria customers possess during a first order.

Over the course of the next few weeks, we're going to talk about how much influence you have on future sales/profit based on the "type" of customer you acquire. This work was inspired by a random user on Twitter who was furious that a fusion of Apple/Facebook were "killing businesses". Wrong. The owners of the businesses made the mistake of trusting Apple/Facebook, and are now getting what they deserve.

What a first-time buyer purchases dictates future loyalty.

When a first-time buyer purchases dictates future loyalty.

Quantity of items purchased by a first-time buyer dictates loyalty.

Price points purchased from dictate loyalty.

Marketing channel purchased from dictates future loyalty.

New vs. Existing items dictate future loyalty.

Items selling above/below their historical average dictate future loyalty.

Cancelled items in a first order dictate future loyalty.

Returned items in a first order dictate future loyalty.

Winning items in a first order dictate future loyalty.

We'll talk about all of that and more, starting tomorrow.


P.S.: Lots of unsubs in the past few days, and they're coming from old-school companies, old-school vendors, and old-school conference organizers. This means we are on to something. Same thing happened in 2013-2014 when we started talking about the importance of merchandise ... it chased away the establishment. You are the anti-establishment. Thanks for coming along on this journey!! 

October 01, 2021

We're Full Now

All three introductory offers for a "Hillstrom's Newbies" project have been accepted.

Since several of you continue to express interest, I'll extend another three offers at a rate of $14,000 instead of the full price of $16,000. You have one week to accept this offer.

September 29, 2021

Soldout Items

I know, you've got a container of stuff that somebody charged you $10,000 to ship over here and then extorted you for another $6,000 and now that container is sitting off of Long Beach. Those widgets you've put in print for the October catalog are not going to be available, are they?

What happens when a customer buys something and you have to tell the customer the item is not available? Does this unfortunate incident impact future rebuy rates?

Yes. Yes it does.

Assume your customer has a 35% chance of buying again next year.
  • If the customer ordered 1 item and it was backordered, it's likely the rebuy rate will stay near 35%.
  • If the customer ordered 1 item and the item was ultimately canceled, the customer frequently has the desire to order a comparable item, driving up the rebuy rate (yes, this happens often).
  • If the customer ordered 3 items and all three items were nuked in some way, the customer is ticked off and the rebuy rates goes down ... often considerably.
Work with your analyst to solve this riddle.

And if your analyst is overwhelmed with a lot of requests, email me (kevinh@minethatdata.com) and we'll get busy.

September 28, 2021

One Spot Left

Two spots for my New Customer Analysis have been taken, leaving us with one more at the introductory price of $11,500 ($16,000 for anybody thereafter).

I recommend jumping in real quick ... my schedule allows me to begin work in late October.

Thanks,
Kevin

Stop Emailing Customers Who Consistently Return A Lot Of Merchandise

Some of the omnichannel folks love it when a customer returns something. "It's another touchpoint, another chance to surprise and delight the customer!!"

Alright.

Profit, folks.

Profit is what you need to be looking at.

If you have a loyal email buyer, that buyer spends 40%(ish) of what they buy via email marketing (often it's 75%, especially if you don't have a print channel which most brands don't have). And if the customer returns 60% of what the customer bought previously, the customer is likely to return 50% (or more) of what the customer buys in the future.

Here's an example.

  • Email buyer expected to spend $120 in the next year, $60 via email marketing (gross demand before returns).
  • Average price of an item = $30.
  • Expected return rate = 50%.
  • Cost to process a return = $10 per item.
  • 30% of sales flow-through to profit.
Future Email Marketing Profit = $30*0.30 - $10 (for one item returned) = Loss of $1.

Now, if you don't email this customer (or email them 2x a month instead of 2x a day), you put money in your pocket.

Stop emailing customers who consistently return a lot of merchandise, ok? It's not hard to do. Perform the math and get busy generating more profit.

September 27, 2021

Beginning Next Week: Hillstrom's Newbies

Next week, I'll begin a process of explaining a new project that I call "Hillstrom's Newbies".

Now that the "COVID-bump" has ended for most businesses I analyze, we need to understand what help/harm we are doing to our businesses via customer acquisition. More than half of my clients generate 40% or more of their annual sales via new/reactivated buyers. Most e-commerce businesses are highly dependent upon new/reactivated buyers for success.

What was the inspiration for this project offering?

A few weeks ago on Twitter a Professional complained that iOS changes merged with Facebook performance resulted in 50% sales declines (or more) for many clients. These companies acquired most of their customers via a fusion of iPhones and Facebook ads. We all know about the "tracking changes" Apple implemented. The downstream impact on Facebook (coupled with the end of the COVID-bump) is crushing many seven-digit and eight-digit businesses.

So I began analyzing new customers in depth for several clients. The results were enlightening. Honestly, the future success of our businesses is dependent not only on having a robust customer acquisition program, but making sure we acquire the "right" customers and not just the "easy" customers.

What will you get in a "Hillstrom's Newbie" project?

  • A thorough analysis of customers acquired in the past two years.
  • Analysis of marketing channels that yield good new buyers.
  • Analysis of marketing departments that yield good new buyers.
  • Do winning items (your best sellers) deliver good new buyers?
  • Where applicable, do sold-outs and returns hurt new buyer performance?
  • Are there acquisition months that harm future performance (like December - hint hint)?
  • Do high prices or low prices help/hurt future performance?
  • Do discounts/promotions help/hurt future performance?
The cost of the project will be $16,000. If you ask for a Hillstrom's Customer Development project, I will include "Hillstrom's Newbies" for free ... yes, for free. No cost.

As I usually do with new projects, I will offer the first three clients who say "yes" a reduced rate of $11,500 for this project, as long as the request is received by October 10.

Contact me now (kevinh@minethatdata.com) for details.

September 26, 2021

Profit Above Replacement Customer

"Profit Above Replacement" customer ... PAR. If baseball has "WAR" or "Wins Above Replacement" player, marketing should have something comparable.

When do you need to replace a customer?

For most of my clients, once a customer fails to purchase in the past year, the customer needs to be replaced. Could the customer still purchase? Absolutely. But the odds are working against you at Recency = 13 months and beyond.

The graph below shows us how much profit a customer generates in the next year based on the recency of first-time buyers.


At Recency = 13 months, the customer is worth $4.50 of twelve-month profit. The customer has become a "replacement customer" ... s/he needs to be replaced as his/her value is now low and only forecast to become lower.

The orange curve illustrates how important the "Welcome Period" is ... during the first three months on your customer file the customer is generally worth at least $7.50 of 12-month profit.

When customers buy for a second time? $33.83 of twelve-month profit (in this example).

When customers buy for a third time?  $44.72 of twelve-month profit.

When customers buy for a fourth time? $50.59 of twelve-month profit.

Seventh time? $95.87 of twelve-month profit.

So yeah, when the customer is only worth $4.50 of twelve-month profit, it is time to find a replacement customer.

And yeah, you better work hard to convert the customer within three months ... because anywhere between $33.83 and up to > $100 of future profit is out there to be harvested from the customer.



September 22, 2021

Wins Above Replacement

In baseball you have a team of 26 players (30 in September) who all contribute to varying degrees of success.

Maybe your team is on pace to win 99 games. A team of strictly "replacement players" (i.e. players who don't cost anything or are being called up from AAA) is expected to win maybe 52 games. Therefore your team generated 47 "Wins Above Replacement". Each player, based on their contribution (i.e. statistics) is mathematically assigned how many wins they contributed over the course of the season.

Just look at the WAR column for the Milwaukee Brewers (click here) for an example. Or in the unlikely event that the Brewers aren't your favorite team, click here to see the WAR column for the Boston Red Sox.

E-commerce isn't any different. You might have a half-million twelve-month buyers. And whereas WAR is a backward-looking metric in baseball, PAR (profit above replacement customer) can be viewed as a forward-looking metric.

PAR.

Profit Above a Replacement Customer.

When you are actively trying to embrace Customer Development, you want to know how much each customer is worth ... what is their Profit Above a Replacement Customer?

What is a Replacement Customer?

It's the point where you need to replace the customer with a new customer. It's the point where the customer is no longer responsive enough to generate sufficient profit to push your business forward.

More on this topic next week.

September 21, 2021

Your Investment Strategy

A key component of Customer Development Strategy is knowing how much to invest in marketing to make sure you have a healthy business in the future.

Let me show you an example.

Let's say that you lose $15 profit acquiring a customer. Then, the customer delivers the following amount of annual profit in each subsequent year.

  • Year 0 = $8 (this is in the remainder of the acquisition year).
  • Year 1 = $12.
  • Year 2 = $8.
  • Year 3 = $5.
  • Year 4 = $4.
  • Year 5 = $3.
Each year you acquire 100,000 customers.

In the first year, you lose $15 per customer and then generate $8 downstream profit. In total, you are down $700,000 in the first year.

In the second year, you lose $700,000 from the new customers, but you get $12*100,000 = $1,200,000 profit from customers acquired the year prior. You earn $500,000 profit.

In the third year, you lose $700,000 from new customers, you get $1,200,000 from last years newbies, and you get $8*100,000 = $800,000 from customers from 2 years ago. Total = $1,300,000 profit.

In the fourth year you lose $700,000, you add $1,200,000, you add $800,000, and you add 5*100,000 = $500,000 from your initial cohort, for a total of $1,800,000 profit.

In the fifth year you lose $700,000, you add $1,200,000, you add $800,000, you add $500,000, and you add 4*100,000 = $400,000 from your initial cohort, for $2,200,000 profit.

And in the sixth year you lose $700,000, you add $1,200,000, you add $800,000, you add $500,000, you add $400,000, and you add 3*100,000 = $300,000 from your initial cohort, for $2,500,000 profit.

If you know what you gain downstream, you know how much you can spend to acquire a customer today. Losing $15 per customer today is wonderful, because downstream you make a fortune.

Leverage the concepts here to identify what the "right" payback window is. Don't just assume it is a 12-month window, ok?

September 20, 2021

Not Bad

For one brand, April 2020 - May 2020 was a bumper crop ... a COVID-bump of epic proportions. The CFO tallied up the receipts, and bonuses were paid out.

But what happened next?

This table looks at recency/frequency of the customers acquired during those two months.


The results aren't bad. There is an enormous glut of customers who haven't bought since (yellow colored cells).

About 7% of the customers are still active within a three month window (i.e. they purchased within the past three months). That's quite good, to be honest.

It is really hard to keep your customer base active and purchasing regularly. The natural inclination of customers is always decay - they gradually slip away and become harder and harder to reach.

Your marketing department has three key functions, ranked in order of importance.
  1. Create Awareness that leads to first-time buyers.
  2. Develop first-time buyers into subsequent purchases.
  3. Harvest profit from loyal customers.
This company did (1) and (2) pretty darn well, didn't they?





September 19, 2021

Oh Boy

FYI - I'm moving on to math after this one, ok?


Fans didn't like long lines and too few employees to satisfy their needs ... perceived or real (i.e. water in 90 degree sun is a real need).



If you ever want to see what America is like in 2021, spend a few minutes and read through the comments on this Twitter post (just visit https://twitter.com/explore and look it up). Both sides.

So here we have your e-commerce or retail business. You have two needles you can move.
  1. Salary + Benefits.
  2. Love + Safety.
Many of you will tell me that you can't afford to pay somebody more than $11/hour to work in the call center or warehouse or retail store. You'll tell me that if you do that your business won't profitable.

Then you've got to move the Love + Safety needle. Care about your people & show it.

You can do that, right?

September 16, 2021

We're Just Going To Lie A Little Bit In Our Email Marketing, Ok?

On 9/9 this "omnichannel brand" sent out an email campaign saying "Today Only, 30% Off".

On 9/10, the same "omnichannel brand" sent out an email campaign saying "Today, 40% Off".

I guess technically the 30% offer was only for September 9.

But if you spend $200 on 9/9 you actually paid $140 ... spend $200 on 9/10 and you actually paid $120. The "omnichannel brand" cared so much about you that they were willing to charge you $20 more.

This is yet another example of a lack of love in commerce. Maybe the two are mutually exclusive, but they don't have to be mutually exclusive.

This also means that you, the reader, have an opportunity to fill that void of loveless commerce with love. Why not do just that?

September 15, 2021

It's Time!!

Yup, time flies when you are in a pandemic. Or drags on forever. One of the two.

Anyway, it is time for the next run of The MineThatData Elite Program! For just $1,800 (first-time members) and $1,000 for continuing members, you'll get your typical suite of analyses ... your rolling twelve-month view of the world, your comp segment analytics (which measure how your merchandise productivity compares to last year during COVID and vs. two years ago when life was somewhat more normal), and your annual rebuy table.

Your bonus analysis? I will perform a comparison of long-term value of the customers acquired pre-COVID to the customers acquired during COVID and then during this odd period we currently reside in. This won't be a full lifetime value analysis, for that would cost $$$$, but you'll know how the changes over the past few years are impacting your future.

Want to see what you'll get? Email me to learn more (kevinh@minethatdata.com). If you are an existing partner, you'll be invoiced next week.

Key deadlines:
  • Payment due by October 15.
  • 5 Years of data, one row per item purchased, due October 15.
  • Analysis and writeup completed by October 31.
Thanks,
Kevin

September 14, 2021

Getting The Word Out

There's a fraction of the population who says "nobody wants to work". Well, don't tell that to this guy, who manned a busy corner on an afternoon when the official high hit a record of 110 degrees ... on September 9.



There's a group of omnichannel gurus who demand that retailers "just be remarkable", as if that is easy to do.

But there's also a group who thinks that paying somebody $11/hour to stand on a street corner on a 110 degree afternoon and hold a sign for four hours is "doing something".

This is not an example of "love" in retail. If you loved a co-worker, you wouldn't make the co-worker stand outside when it is 110 degrees out and hold a sign. You just wouldn't do that.

There is a gaping void in commerce. Love is being pushed out ... probably has been since the beginning of time.

And this means that you, as somebody who cares, have a huge opportunity to fill that void. Go fill it. There are other ways to get the word out about your appliance event.



September 13, 2021

Wrong Priorities

The omnichannel tech folks love this kind of stuff. Here's the refrigerator door, adorned with technology.


Now open the door and witness the indifference.


Does that look like love to you?

No wonder they won't let you see inside.

There's a camp of omnichannel gurus who want to use technology to "surprise and delight the customer".  They'll tell you to "JUST BE REMARKABLE". That's all. Just. Be. Remarkable.

Real work happens behind the scenes. This company spent money to give the appearance of a nicely merchandised store, then refused to spend any money to stock the shelves, so to speak.

As a customer, would you prefer technology that hides the merchandise or would you prefer that the product you wish to purchase is available and presented in a loving, caring manner?

Increasingly, it is obvious that love is what is missing. We seem to be stuck in a rut right now, we have the wrong priorities and we just don't seem to care.

All of that means there is a giant opportunity for those of you who do care ... and A LOT of you still care.






September 12, 2021

Black Friday - Cyber Monday Offer Structure & Lessons

Prove me right that this will be the most clicked on link I offer this year, and this post will be the most read post I write this year.  This article outlines direct-to-consumer offer tactics (for Black Friday - Cyber Monday) from a veritable plethora of trendy brands. Click through the link, read it, and then get busy.


P.S.:  Two things happens when I do this.

  1. The content is incredibly popular.
  2. I get reader feedback that "these ideas won't work because our brand is unique and special."
But it doesn't hurt to read through the document and think about what the authors are suggesting, correct?


P.P.S.:  I have no connection whatsoever to those who produced the content in the link. I just know a significant fraction of readers love this stuff.

September 09, 2021

Merchandise / Customer Collision

In a recent e-commerce project, it became clear that Google was determining what the e-commerce brand would offer, going forward. This has been true for years, but it really accelerated once COVID hit. Look at a rank-ordering of your best sellers by marketing channel (you do this, right?), and you'll see that Google is really pushing a different agenda than are other marketing channels. Google tells your merchants what to sell. If Search is 20% of your annual sales, Google is working on taking over your merchandising team. Yes, I realize you don't believe me.

In Retail, the customer willing to shop in-store is different today than two years ago. How you merchandise a store is fundamentally different than how you merchandise your online presence. The omnichannel gurus who want sameness in every channel have led you into a vendor-fueled cul-de-sac. Some customers want to shop in stores, and their needs post-COVID are fundamentally different than are the needs of the online customer.

In catalog marketing, your paper partners and industry consultants and co-op reps steered you to a 65+ year old customer who won't buy unless you send paper to the customer. What on Earth are you going to do going forward when you don't have paper available and you try to sell merchandise that a 67 year old woman likes to a 37 year old woman on social or searching via Google? That dynamic isn't going to work, is it? Imagine the 2-3 year pain window you'll have trying to sell merchandise that retired men/women like to customers thirty years younger?

Regardless of your business, there is a merchandise / customer collision awaiting, just around the corner. Your job is to manage the collision so that there aren't bigger problems. Do just that, ok?

September 08, 2021

Lies

Can I tell you a story?

I once worked with a retail brand who mailed catalogs to retail customers. We executed years of mail/holdout tests, and we knew inside-and-out that mailing catalogs to retail customers ... DID ... NOT ... WORK.

Here were the results:

Mailed Group = $10.00 spend per month across all channels (most of the spend was in retail).

Control Group = $9.70 spend per month across all channels.

Cost of the Mailing = $0.60.

Profit Factor = 40%.

Profit per Mailing = ($10.00 - $9.70) * 0.40 - $0.60 = ($0.48).

Every catalog mailed to a retail customer hemorrhaged $0.48 ... it was like taking a half-dollar coin and throwing it into the ocean ... over and over and over again, a million times a year.

So one morning my phone rings (about five years ago). It is an Executive working for a Catalog Vendor. The Executive begins yelling. The Executive tells me that their Agency is now in charge of the account with the retail brand, and that my services will never be needed again. 

The yelling continues ...

"HOW COULD YOU BE SO STUPID AND STOP MAILING CATALOGS TO RETAIL CUSTOMERS? THIS IS THE DUMBEST THING I'VE EVER HEARD OF. WE ARE IMMEDIATELY REINSTATING ALL OF THE CATALOGS AND WE ARE TELLING EVERY RETAIL BRAND THAT WE WORK WITH TO NEVER WORK WITH YOU AGAIN."

I then shared the mail/holdout results, showing how the mailings were absolutely awful.

"YOU CAN'T TRUST MAIL/HOLDOUT TESTS, THE TESTS DON'T CAPTURE THE INTANGIBLE BRAND BENEFITS OF PRINT. ARE YOU DUMB? FOCUS ON MATCHBACK RESULTS. YOU DON'T MEASURE RESULTS WITH TESTS. AND YOU KNOW THAT."

Yeah, I remember the Executive asking "are you dumb?"

For some reason, I kept trying to defend my decision via data. And if there is one thing we've learned as a society in the past five years, it is this ... there is a significant fraction of society that does not want to hear about data. A significant fraction of society just wants to believe a narrative.

This individual ... this Catalog Agency Executive ... this person lied. This person lied in an effort to grow business for the Agency ... at the expense of the truth, at the expense of what was/is right for the retail brand.

And yeah, this Executive is still doling out advice to catalog marketers who do not understand math.

Why am I telling you this?

Because if you work in the catalog industry, you are at times fed a series of lies. You are misled by "trusted partners". Ask anybody impacted by the paper crisis of 2021. You're being told that nobody wants to work on a bindery line so there may not be capacity for your job. That's a lie. Nobody wants to work at the wage offered by the printer. People seem to want to work for Amazon. 

You're being told that print is being reborn. That's a lie. Your paper partners have been shutting down mills for a decade - they wouldn't do that unless demand for paper was ... decreasing! Demand doesn't decrease when something is being reborn.

You're being told by industry experts to ignore actual experiments ... A/B test results (mail one segment and not mail another segment, measure the incremental lift between the two groups). The industry would rather have you use a highly flawed technique of attaching every order generated within "x" days of a catalog mailing. Terrible logic. Highly flawed. Analytical malpractice. And the industry would tell you that this is a "best practice". It is not a best practice. It is a lie.

In 2022, you have no choice but to re-evaluate your print efforts. Your "trusted partners" are telling you to do things to protect THEIR business. You need to protect YOUR business. And you have literally thousands of digital strategies you can employ to replaced failed tactics. Why not employ them? 

What stops you from moving into the future? 

Most importantly, what motivates you to continue believing their lies?

Contact me right now (kevinh@minethatdata.com) if you want help protecting your business in 2022. We'll get busy doing what is right for your customers and your business. Don't let industry lies trap you in a paper-based cul-de-sac.


P.S.: The Vendor Executive reached out to me two years ago ... said we should "chat" about what is going on in the industry, as if there wasn't a prior conversation at all.

P.P.S.:  I read an article today from a Catalog Industry Consultant, who said that there is a labor crunch for bindery line employees at printing facilities. Another person on Twitter said that "nobody wants to work". Saying "nobody wants to work" is a lie. If nobody wanted to work, explain how Amazon has hired more than a million ... A MILLION ... people in recent years? Explain how they'll hire another 50,000 this fall? Why is it that Amazon has no problem hiring people? Wouldn't Amazon be impacted in a dire way if "nobody wanted to work"? Of course, Amazon pays a minimum of $15/hour and benefits ... and yes, some of you are about to beat me silly because you know that there are problems at Amazon. So have at it. But always remember that the issue isn't that "nobody wants to work". The issue is that "nobody wants to work at the wage being offered." That reflects on the brand trying to hire somebody.

September 07, 2021

Never Going to be the Same

I went back and looked at the major themes I've focused on over the past fifteen years writing this blog:
  • 2006 - 2009 = Understanding how customers and channels interact.
  • 2010 - 2013 = Changing your catalog/email contact strategy to optimize your business.
  • 2014 - 2017 = Merchandise Forensics.
  • 2018 - 2019 = Fixing a struggling business.
  • 2020 = COVID.
  • 2021 = Customer Development.
We can see how, heading into 2022, Customer Development is going to be really important.

Maybe you are a retail brand trying to rebuild. The customers currently using your store are different (go look at the data) today than they were in September 2019.

Maybe you are an e-commerce brand trying to battle against Amazon. Maybe you sell on Amazon and notice that Amazon buyers never purchase from you directly. You need to Develop Amazon customers differently than your own customers (i.e. it's best not to just ignore Amazon buyers and it is best to not treat Amazon buyers like your own customers).

Maybe you are a catalog brand who has been neutered by the paper / printing industry supported by a consultancy pushing a failed agenda. Maybe you've been told you MUST mail 24 catalogs a year ... nearly every other week ... to the point where you recruited a 66 year old customer who won't shop unless you mail a catalog ... only to now be told by the industry that there isn't paper available for you this November. Good luck!! For you, Customer Development just became you biggest challenge. You'll need to contact me immediately, because we have a lot of work ahead of us (click here).

Business is never going to be the same ... 2019 may as well have been 30 years ago instead of two years ago. We're moving in new directions now, and we need to focus on Customer Development if we're going to succeed.

If you disagree with me, let me know, I welcome your feedback.

September 06, 2021

Class Of

For many of you, your Fall assortment is about to be unveiled.

You have new items being introduced this Fall, assuming they aren't sitting on a ship somewhere in the Pacific.

I wrote at length about some of the analytics behind each merchandise class (click here). If you want successful marketing efforts tomorrow, you have to have successful new product classes today.

One of the hidden problems of the "COVID-bump" has been new merchandise ... specifically, Google changed the trajectory of e-commerce brands by pushing traffic via existing merchandise. While sales jumped for about a year, sales of new merchandise generally didn't jump. This is going to cause problems downstream, especially if sales recede to 2019 levels.

Marketers can help their merchant partners out. Use your email marketing campaigns to feature new merchandise. Give your merchandising partners every opportunity to succeed. The future of your brand might depend upon it.

September 01, 2021

Labor Day Weekend

I always view summer as a pair of bookends, one on Memorial Day Weekend, one on Labor Day Weekend. To me, late May is filled with optimism. Early September is an end, and I'm not a fan of endings.

You go to work every day (or you endure six hours of work-based video conferences while juggling the roofer that came to stop a leak) trying to stop or delay the end of the business you work for. If you work in retail, you know darn well what forces are trying to end your business. if you work in e-commerce, you know that Amazon accounts for 40% to 50% of e-commerce, an existential threat designed to end your business. Catalogers lost control of their business this Fall when the paper and printing industry couldn't obtain ... paper.

Take the weekend off, Lord knows you've earned it. You do not belong to a "996" work culture (click here).

But when you come back to work next week, remember that it is your job to delay the end of your business as long as you can. Regardless whether you work for Sears or Whoop, your job is the same. The trajectory of your mission is all that is different. Regardless, your work is important.

August 30, 2021

Whoop

There it is:  saw this advertised during PGA Golf over the weekend (click here).

With Fitbit you pay for the watch ... an up-front purchase. And yes, they have a premium service. But by and large, you buy a product.

Here you pay $30 a month or some annualized amount that is less than $30 a month, and in exchange you get various analytics that allegedly aid your athletic performance.

Certainly Whoop isn't the first company to offer a subscription service.

From a Customer Development standpoint, subscriptions change repurchase habits. When you buy a Fitbit, you spend $159 or $299 or whatever and then the unit functions for a couple of years. Money is exchanged up-front, repurchase is minimal thereafter until the unit fails or no longer meets the needs of the customer. Meanwhile, subscriptions filter out the customers who are not interested in repurchasing each month. Customers are actively filtered out in ways that a classic e-commerce brand wouldn't dare dream of. But the subset of customers who are left spend $30 a month or whatever. Repurchase rates, if you will, are high.

All of us make choices with our businesses, don't we? Our choices determine how our Customers Develop.

August 29, 2021

$750

About sixteen years ago we started a program where if a customer spent $750 or more in a year the customer got to pre-select Anniversary Sale merchandise in our Nordstrom stores a week before the sale actually began.

We weren't allowed to create a holdout group.

We weren't allowed to perform a typical A/B test or any other form of experimental design.

We were expected to measure the incremental impact of the decision.

My team performed a reasonably simple analysis. They measured how much the $750+ group spent the year prior, then during Anniversary Sale the year prior. They compared this to how much the $650 - $749 group spent the year prior, then during Anniversary Sale the year prior. The change in performance was "attributed" to the new Anniversary Sale program.

Here's what the analysis looked like:

Anniversary Group:

  • 2005 Pre-Spend = $1,500.
  • 2005 Anniversary Spend = $300.
  • 2006 Pre-Spend = $1,550.
  • 2006 Anniversary Spend = $380.
Lower-Spending Group:
  • 2005 Pre-Spend = $700.
  • 2005 Anniversary Spend = $150.
  • 2006 Pre-Spend = $725.
  • 2006 Anniversary Spend = $155.
We created an index for the Anniversary Group.
  • (380/1550) / (300/1500) = 1.226.
We created an index for the Lower-Spending Group.
  • (155/725) / (150/700) = 0.998.
We created a "lift index".
  • (1.226 / 0.998) = 1.228.
In other words, the lift during Anniversary Sale among the $750 group was 22.8%.

We multiply $380 by 0.228 and get $86.64. The likely lift in performance was $86.64 per customer.

Then you multiply that increase ... $86.64 ... across say 500,000 participants ... and you get $43,000,000 of incremental sales during the sale.

These obviously aren't the actual numbers, but this is the process we went through.

When you fire off your own loyalty program, you can do something similar if you aren't allowed to execute a controlled experiment. Compare to the group of customers who don't quite qualify and create a handful of indices and see what your analysis tells you. 

August 25, 2021

Working With Email Buyers, Clickers, and Subscribers

There are several tiers of email customers.

  • Those Who Buy Because of Email Marketing.
  • Those Who Click Through 2+ Email Campaigns Per Year.
  • Those Who Clicked Through 1 Email Campaign Last Year.
  • Those Who Clicked Through An Email Campaign 13+ Months Ago.
  • Those Who Are Email Subscribers.
The first three segments have a high organic percentage - they don't need other marketing tactics to purchase. You can curtail outbound marketing activities and not lose much in sales.

The last two segments have good organic percentages ... maybe not the 80% seen with the top three segments but quite possibly 55% - 75%. You've already run A/B tests on these customers and know what happens when you execute outbound marketing and when you execute email marketing. The tests tell you what you need to do.

Email marketing has been seemingly around forever. Segmenting email customers has been around just as long. Reducing print expense via outbound email campaigns to responsive email customers is a two-decade-old process that always works.

August 24, 2021

Evaluating The Segment

In the catalog world we are seeing a "paper panic".

Let's pretend that we have a segment of 10,000 customers.

  • The organic percentage (you actively measure this, right?) is 50%. In other words, 50% of what a customer will spend in October has nothing to do with catalog marketing.
  • The customer has a 3% chance of buying in October, and will spend $100 if the customer purchases.
  • A mailed catalog costs $0.70.
  • 35% of sales flow through to profit.
We now know what the segment looks like with/without paper.
  • With paper = 0.03 * $100 = $3.00. Profit = $3.00*0.35 - $0.70 = $0.35 profit.
  • Without paper = 0.50 * 0.03 * $100 = $1.50. Profit = $1.50*0.35 = $0.53 profit.
  • Total profit gain = 10,000 * 0.18 = $1,800.
You will generate MORE profit by NOT mailing this customer a catalog.

Now, in theory you'll also look at what you lose long-term by not converting 150 customers. If you lost $8.00 future profit (i.e. next 12 months) because you didn't convert 150 customers, then you lose 150*8 = $1,200 of future profit.
  • Gain $1,800 today.
  • Lose $1,200 in the future.
  • Net Relationship = Positive.
  • Result = Don't mail the segment.
Don't let a crisis go to waste, folks. Wean yourselves off of print where appropriate, invest your advertising dollars elsewhere.

August 23, 2021

Looking Toward 2022

NOTE: This is the final offer of a $4,900 2022 forecast. Forecasting will become a full-fledged project going forward, likely costing 3x as much as this introductory offer. Please respond by 12:00pm PDT on Wednesday, August 25 if you would like to participate (kevinh@minethatdata.com).


By now, all of you have a forecast for 2022 that looks something like this.


Prior to COVID, this business did $24.7 million, then $25.6 million, then had a bad year and slumped to $23.5 million.

COVID changed everything. Rebuy rates improved, and new/reactivated counts jumped to nearly 105,000, sending Calendar 2020 to a $29.9 million outcome.

But as you already know, business is slumping back to normal. In the past year we see that rebuy rates decreased, spend per repurchaser actually decreased after years of gains, and new/reactivated counts are rapidly in decline after a monster 2020.

This requires us to create a projection for the rest of Calendar 2021. Forecasted customer counts at the end of 2021 lead to a forecast for 2022.

Calendar 2020 was $29.9 million.

Calendar 2021 is forecast to be $26.5 million.

Calendar 2022 is forecast to be $22.8 million.

Forecasts are a direct result of our Customer Development efforts. We had all of those "COVID-buyers". If we didn't do something to nurture and develop them in 2020/2021, our businesses will revert back to historical levels in 2022. It's not the fault of the forecaster. It's not an issue of "bad assumptions". It's an outcome.




August 22, 2021

Amazon Department Stores

This article appeared in my email inbox and in my Twitter feed numerous times (click here).

Maybe I'm just crabby in the past few days and I'm the problem, but I'm tired of some of the stuff you're told to read from the experts.

There are comments that should cause you to think carefully:

  • "Department store sales shrunk from $184 billion in sales in 2010 to $135 billion in 2019, according to Census Bureau data. In 2020, they plunged to $114 billion, according to the Census Bureau."
Those are numbers retail experts don't typically want you to know.

Of course, Amazon isn't opening a "department store", are they? At 30,000 feet, that's not a department store. So the numbers don't really mean anything to what Amazon is specifically doing.

The quote that frustrated me is here:
  • "Online is a convenient, efficient channel for repeat purchases, reordering bath tissues, diapers, batteries," said Shankar. "If you really want to build brands, the brick-and-mortar presence is critical."
Is Amazon a brand? They sell more than bath tissue, diapers, and batteries and represent at least 40% of e-commerce.

Is Wayfair a brand?

Is Zappos a brand?

Is Chewy a brand?

Is Newegg a brand?

I don't have to continue or convince you.

There are too many parties right now with a biased interest in getting you to do what they want you to do ... they either benefit financially, or they benefit with credibility. But your business doesn't necessarily benefit from the advice they give or the word salads they offer. This article is a classic one, in that they get quotes from Cohen/Saunders (as so many articles do), and you get the opinions of two people ... all the time.

Do what is right for your business. It is your business. Focus on commerce ... not retail, not e-commerce, not catalogs, not mobile ... sell stuff the way that is right for your customers. Whether that is a 100,000 square foot retail store, a 30,000 foot store, a 6,000 foot store, via Instagram with an influencer, or via paper ... just do what is right for your business and your customer.

But They Don't Want Cheap Items

Last week I expressed my contempt for a customer base that wanted discounts / promotions. It's not the way I want to run a business (tak...