- 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.
September 29, 2021
September 28, 2021
Some of the omnichannel folks love it when a customer returns something. "It's another touchpoint, another chance to surprise and delight the customer!!"
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.
September 27, 2021
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?
September 26, 2021
"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
September 21, 2021
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.
September 20, 2021
The results aren't bad. There is an enormous glut of customers who haven't bought since (yellow colored cells).
- Create Awareness that leads to first-time buyers.
- Develop first-time buyers into subsequent purchases.
- Harvest profit from loyal customers.
September 19, 2021
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.
- Salary + Benefits.
- Love + Safety.
September 16, 2021
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
- Payment due by October 15.
- 5 Years of data, one row per item purchased, due October 15.
- Analysis and writeup completed by October 31.
September 14, 2021
September 13, 2021
September 12, 2021
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.
- The content is incredibly popular.
- I get reader feedback that "these ideas won't work because our brand is unique and special."
September 09, 2021
September 08, 2021
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 (firstname.lastname@example.org) 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
- 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.
September 06, 2021
September 01, 2021
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.
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