October 21, 2021

There's Email, Again

Our focus on opens/clicks (when it comes to email) is so ridiculously misguided.

Email marketing serves many different purposes.

It should be used to teach customers about new product launches.

It should be used to sell winning items at above-average rates.

It should be used to replace expensive marketing tactics, especially among infrequent shoppers.

It should be used to convey loyalty benefits to the best customers.

And it should darn well be used to build a prospect list of shoppers who eventually become customers.

In the image below, we look by decile. Best new buyers are on the left, worst new buyers are on the right. Does a first purchase via email marketing align with the best new customers, or the worst new customers?


The top three deciles had about 20% to 32% of new buyers sourced via email marketing.

The bottom three deciles had about 2% to 3% of new buyers sourced via email marketing.

So yeah, email marketing matters ... if you build a list of prospects via email marketing you generate new customers who are much more likely to repurchase in the future than customers from other sources.

This is the point in the discussion where I get an email from somebody who says to me "Sure, this sounds good, but make it ACTIONABLE." 

The word "actionable", of course, means "I'm not doing anything until you give me a solution that works perfectly within my company culture and tech capabilities and I know you can't do that so that means I don't have to do anything." This happens repeatedly.

If you have a quality email marketing team (one not completely outsourced to vendors demanding that you create engaging content that increases opens and clicks), you have multiple email programs, don't you?

  • One for Prospects.
  • One for First-Time Buyers (i.e. a Welcome Program).
  • One for Emerging Customers.
  • One for Loyal Buyers.
  • One for Lapsed Buyers.
Each program has their own cadence/frequency, their own messaging, their own creative look/feel, their own merchandising strategy, their own performance metrics.

This is where you tell me that this approach "isn't actionable".

And so we go ....

October 20, 2021

Amazon Gets Some Paper

This is for catalog brands ... if that's not you, please read the other post I wrote today.

By now your paper rep isn't returning your calls. Your November 10 mailing is in jeopardy. The inventory you were able to get your hands on, however limited, is about to become liquidations material if you don't get catalogs out the door.

Meanwhile ... Amazon:


Yeah, that's the Amazon catalog I received today.

Amazon. I doubt their circulation was 122,000. They sent out 100 pages to millions of customers. Ready, set, play.

Ask your paper rep ... that "trusted partner" that you prioritize over your own employees (think of the $$$ your paper rep gets from your business vs. your own employees) ... ask that person why Amazon is sending out 100 pages while your Christmas season is in jeopardy because they don't have paper for you ... paper you committed to nine months ago?

You are being taken advantage of by your "trusted partners".

I'm tired of you being taken advantage of by your trusted partners. I'm exasperated. Enough is enough.

Are you tired of it?

If the answer is "yes", what are you going to do about it?

If the answer is "no", what does that say about your company?

Right Down The Middle

Buying from Merchandise Category 10 was good.

Buying from Merchandise Category 03 was bad.

How about Merchandise Category 05?

 


That's kind of down the middle, wouldn't you say? Merchandise Category 05 delivers mostly average new buyers, new buyers that will perform about average in the future.

Once you see this stuff, you can't "unsee it". Now you know what you "should" be selling to your first-time buyers. If you have outbound programs, you feature categories ten and five, right? And while you'll allow a first-time buyer to purchase from category three, you don't feature category three.

Just focus on the simple stuff, and maybe you'll start acquiring customers who are of reasonable quality, customers who have a chance to become loyal.

October 19, 2021

It Works The Other Way, Too

Yesterday we discussed how the best new customers bought from Merchandise Category 10.

Look at what the data shows for Merchandise Category 03.


Oh oh.

If the first-time buyer is buying from Merchandise Category 03, the first-time buyer is much less likely to purchase again in the future (remember, Decile 1 rebuy rates were 58%, Decile 10 rebuy rates were 28%).

So if you think you have a loyalty problem (and what marketer doesn't think that?), look at what you sold the customer in a first order. Maybe you caused the loyalty problem by selling stuff that causes the customer to not come back and buy again?




October 18, 2021

Popular Merchandise Categories Dictate Future Customer Trajectories

Take a look at this gem from our dataset.



Remember, the best new buyers (in terms of future repurchase rates) are in deciles 1/2/3. These customers all comprised 40% to 55% of their first order from Merchandise Category 10. Meanwhile, the three worst deciles (8/9/10) averaged about 10% of their first order from Merchandise Category 10.

Sure, there's some chicken/egg stuff going on here. Always happens.

But there's also your response to chicken/egg stuff.

If you know that you acquire high-quality new customers via Merchandise Category 10, why aren't you capitalizing on that fact?







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.

There's Email, Again

Our focus on opens/clicks (when it comes to email) is so ridiculously misguided. Email marketing serves many different purposes. It should b...