The Most Interesting Mail/Holdout Test I Was Ever Part Of

Ok, the company executing the catalog mail/holdout test had their own Visa Card. And in an interesting turn of fate, the Credit Division decided to help out with the results of the analysis. They promised to match all orders across all retailers to the customers involved in a catalog mail/holdout test.

In other words, this company could see if the catalog drove sales to competitors, or if the catalog cannibalized (stole) sales from competitors.

What was the most interesting finding?

• For every four dollars ($4) of incremental sales driven by the catalog, another six dollars ($6) of incremental sales were driven to Amazon.

Yeah, Amazon! In other words, the catalog was so effective it drove customers away from the brand to buy stuff on Amazon.

Omnichannel!!

People didn't believe the results (of course), so orders by day were matched to the mail/holdout groups and we saw that the Amazon order curve looked like the catalog order curve. Sure enough, the catalog pushed people to Amazon.

Needless to say, that was one defeated group of Executives when they saw the results of the test.

Imagine working so hard on your catalog that you drive more business to Amazon than you drive to your own brand?

Playing The Odds

When I read Scarne on Cards, I was thrilled with the discussion of probability/odds.

Studying this data in the 1970s suited me well for what we deal with today.

Take Cyber Monday newbies, for instance. You just acquired a boatload of newbies on Monday. Have you run the probability of a purchase from these customers after Cyber Monday? Do it! Perform the analysis. You're likely to see that you now have four weeks to convert those customers before you begin the long and sluggish process of losing the customer (while losing money trying to convert the customer).

Know the odds of various customer segments converting to a subsequent purchase.

P.S.: I just analyzed a business where 35% of Cyber Monday buyers who will repurchase do so within four weeks, with 42% repurchasing within eight weeks. After that? The customer dies off until the following Black Friday / Cyber Monday window. Know your odds and act appropriately.

The House

The House. In gambling, it's the facility that makes all of the money. They set the rules, and if you choose to play by their rules you'll ultimately lose.

In e-commerce, the house is Amazon, eBay, Etsy, Walmart, Shopify, Google, Facebook, just about anybody who you pay a tax to in order to have access to customers.

In late-stage catalog marketing, you pay a tax to the USPS, to your paper rep, to your printer, to your boutique agency, to the consultant broadcasting on LinkedIn with demands that you keep mailing catalogs even though the house doesn't have enough paper to allow you to play the game you've always played.

Think about how retail is changing ... the folks who were "the house" (malls / landlords) lost a lot of power in the past decade. After lousy malls are razed, the good locations are going to earn a lot of power over the next five years.

Your business has three elements that determine how profitable your merchandising efforts are.

1. Organic Sales ... customer buys from you without the aid of marketing because the customer loves you.
2. Relationship Sales ... customer buys from you because of relationship marketing efforts including catalogs, email marketing, loyalty programs, and events.
3. Transactional Sales ... customer buys from you because the customer has a need at a point in time and third parties connect the customer to you.

"The house" earns the rake from 2/3 above. Most of your profit should come from (1).

You make much of your profit on "1" above.

Where possible, you want to avoid 2/3 and focus on "1". I know, I know, that's really hard to do. But the alternative is to listen to the house. Their advice could help you, but will likely help them more.

Scarne on Cards

I'm not sure why my parents bought me a card book written by a gambling maven with connections to the mob, but the 70s were crazy times.

I still own the book. You can buy a used copy here. The writing style is not terribly different than that of Don Libey, for those of you who remember Mr. Libey. That statement alone should indicate to you what you (the reader) gets by reading the book.

I still vividly remember a key lesson taught in the book. The author spoke of the cut the house gets in poker (and honestly, in any game). The author described a situation (paraphrased here) where five players are sitting at a table with $100 each, and at the end of a hand the house gets a "rake" ... say 4%. In other words, the players bet, and at the end of the hand the pot is $50 so the house gets $50*0.04 = $2.

Pretend you play 100 hands.

100 hands times $2 per hand = $200 that goes to the house.

In other words, the five players start with $500 total ($100 each) and at the end of 100 hands the house gets $200 and the players are left with $300, divided five ways, about $60 each. Each player is down $40 from the start of the game.

The author described that the only way for the player to solve the problem was two-fold.

1. Recruit new talent - bring new money into the game.
2. Recruit talent with lesser skills.

Why am I bringing this topic up?

Well, modern marketing is all about "the house". Somebody controls the market, and for you to play in the market you have to pay the house a "rake".

More on the topic tomorrow.

Make Sure You Measure It

You measure the future value of Black Friday and Cyber Monday customers, right?

Right?

As long as you are going to burn all of these discount/promo dollars, at least measure what you get long-term for your efforts ... and measure it down to profit. Ok? Heck, you might find out that this is the best time to acquire a customer. Or not. But at least you'll know.

More Articles

You start to see a trend, and you wonder if the trend is real, or if the trend is astroturfed.

See if you can identify common themes in these articles, or common quotes from the same people, or the same people being referenced repeatedly.

• Catalogs Fill A Retail Therapy Niche.
• Why Catalogs Are Still Winning Holiday Marketing.
• Direct Marketing For The Direct To Consumer Brand.
• All Hail The Return Of Catalogs.
• Six Essential Strategies To Make Your Catalogs Stand Out.
• Retailers Rethink Holiday Ads Amid Digital Marketing Upheaval.
• Why Catalogs Are Still Winning Christmas Marketing.
• How Retailers Are Re-Thinking This Holiday Marketing Approach.

Read the articles and jot down on a piece of paper the individuals cited in the articles.

You'll quickly be forced to confront the fact that somebody hired a PR firm to spread a message at a time when the catalog industry has never been on more unstable footing (and that is saying something, dear readers).

And the PR firm is really good at getting articles published. This trend is, obviously, astroturfed. And if I worked at an agency responsible for catalog marketing, I'd be working my rear end off to get as much exposure as possible right now - you can't blame folks for hustling.

We are required to be honest. I realize that's not a popular position in 2021, the best practice is to lie and mislead and earn clicks and mindshare and all of that. Look at politics and discussions about a pandemic for a starting point on this topic. 

What has happened in the past fifteen or twenty years?

• Digital Ad Spend continues to grow at a mind-boggling rate (click here). Meanwhile, Catalog Ad Spend is about 1/20th or less (yeah, that's right) of digital ad spend (click here).
• Can I state this again? For every dollar spend mailing a catalog, between $20 and $25 are spent on digital marketing.
• I know, I know, you'll debate that the sources aren't appropriate. Fine. Go get your own sources, and tell me that the ratio isn't $1 in catalog to $20 in digital.
• Mills have been closing for the past fifteen years, greatly constraining paper supply. Mills have not been closing because catalog marketing is making a comeback. Mills close when demand is contracting.
• The pandemic ... not actual merchandising and marketing brilliance ... taught customers to buy online, often out of necessity for a period of time. As a result, catalog-centric brands saw an increase in the number of twelve-month buyers.
• The increase in twelve-month buyers means that catalog brands asked for more paper in 2021 and 2022 ... at the very time when supply had been constrained too much (oops). Less capacity paired with more names to mail created a paper shortage.
• The logical response to a paper shortage is not to let your Widgets sit in a warehouse, but to find a marketing alternative to move the Widgets out of the warehouse. This is where "digital" comes into play. "Digital" terrifies the catalog vendor community. I was in the meetings at Eddie Bauer in 1998 when e-commerce exploded and you could feel the tangible concern for a catalog career path. That was 1998. Those concerns never went away, and for good reason. I experienced how catalog professionals reacted when we shut down a $160,000,000 net sales catalog division in 2005-2006 and instead saw a net sales gain the year after. Even as sales INCREASED, catalog professionals were very uncomfortable. Very uncomfortable. Can't blame them, either.
• Notice that the articles attack Apple and Facebook. It's their fault, and the response is to go back 20 years in history for a solution. Wrong. If a digital marketer is dependent upon Apple, Facebook, and Google ... then the digital marketer is "doing it wrong". The best digital marketers do not depend upon 1-3 platforms. The best digital marketers understand the creative and merchandising processes in the digital realm, regardless of platform.

Notice that the articles really hammer home the retail side of catalog marketing. This is for good reason, because the metrics on the retail side are shoddy. It's easy to convince the Executive Vice President of Global Brand Direction to make a fashion statement with a catalog. It's hard to convince the CFO at a catalog brand that catalogs are making a comeback, because the CFO has evidence that says otherwise. We're coming out of the pandemic and many housefiles are starting to contract. CFOs and CMOs at catalog brands understand what is really happening. Talk to them.

Should you dive into catalogs and help the channel make a comeback? If the metrics say yes, why the heck not??!!

Make sure you are looking at comparable metrics, of course.

Ignore matchbacks - that's pseudo-science designed to lie to you about the real impact of print. Use your mail/holdout test results to understand incrementality - and if you aren't comfortable giving up sales from 25,000 customers for six months via a holdout group, well, then you shouldn't be comfortable with your paper rep & printer canceling your January catalog altogether or shrinking your contracted circ by 100,000, right?

Let's say you mail a catalog to an average twelve-month buyer. During the month the catalog is mailed, customers who received the catalog spend $10.00. Those who are in a holdout group spend $6.00. Your organic percentage is 60%, your catalog drove $4.00 of incremental sales. Not a bad result.

• $10.00 customer spend.
• $6.00 would have happened anyway.
• $4.00 is incremental.
• 35% of sales flow-through to profit.
• Catalog cost is $0.75.
• Profit = $4.00 * 0.35 - $0.75 = $0.65.

Now, you also execute mail/holdout results for email marketing, right? You send five campaigns a week, you generate $0.12 per mailing, and 60% of sales are organic and would have happened anyway.

• $0.12*5*4 = $2.40 customer spend.
• 60% would have happened anyway, meaning $0.96 is incremental.
• 35% of sales flow-through to profit.
• $0.002 is the cost per email delivered, or $0.04 per month.
• Profit = $0.96*0.35-$0.02 = $0.30.

If that's your result, then yes, catalogs are generating a better return ($0.65 vs. $0.30) than email marketing. You are winning - and go ahead and mail some catalogs and have fun. Notice, however, that the math illustrated above is never cited in articles. That should cause consternation on your end. Why won't anybody ever share favorable math with you via mail/holdout results?

Do the real math. Execute the tests ... both for catalogs and for email marketing.

Do not focus on astroturfed trends generated by smart PR firms being paid to get articles published.

Focus on performing an analysis that proves whether something is making a comeback, holds ground, or is in decline.

Does that make sense? Believe your metrics, not what you read.

P.S.: I'm ok with the authors and those who were interviewed and the PR folks promoting the content pushing their agenda. That's fine. I'm focused on you. Do the work. Make good choices based on facts.

Would You Rather Acquire a Customer on October 8 or Cyber Monday?

Obviously you probably want both customers.

But do you know the answer to that question?

In a recent project I was asked to determine, out of 365 days, where Cyber Monday ranked in terms of delivering good customers most likely to repurchase.

The answer?

349th out of 365.

October 8th?

33rd out of 365.

Your mileage will vary. So please, do the work. Answer the question for yourself - it's a 16 line piece of code when the data is formatted properly and you're using SPSS to conduct the analysis.

One of the reasons your customers aren't loyal is because you choose to purposely acquire customers at times when the customers who purchase are not likely to become loyal.

Article

Here's an story for those of you in the catalog audience (click here).

Send me an email (kevinh@minethatdata.com) and tell me what you think of this article. Offer your pros and cons.

P.S.: Here's another article for readers with an affinity for retail. My goodness.

Adele

It looks like 10,000,000(ish) watched the Oprah/Adele show on Sunday night.

Network television enthusiasts signaled to their audience that "... broadcast TV can still perform mightily, when harnessed correctly."

Oh boy.

Oh boy.

Let's start by stating the obvious ... 3.03% of the population of the United States watched this episode. For every person who watched this, 32 didn't ... didn't watch it! By way of comparison, an average episode of Alice on CBS would have drawn in 30,000,000 viewers in 1979, as fans waited to hear the phrase "Kiss My Grits".

Pundits like to use phrases like "harnessed" ... as if the dying medium is so darn powerful that the idiots that use it aren't capable of using it properly.

Network Television is not coming back. There isn't a renaissance. No comeback. It's over. There will be moments when Oprah/Adele team up and create two hours to celebrate, sure. But it is over.

The same concepts apply to marketing tactics. There are times when industry experts will point to a tactic as an example of a tactic that is "being harnessed correctly". Industry experts will gather on an online forum and celebrate the "Oprah/Adele" example in their industry, clinking digital champagne glasses that their preferred tactic is "back".

It's not back.

All that being said, there's nothing wrong with celebrating success. You can hold two conflicting concepts in your mind at the same time ... it is possible that a dying medium provides a success story while at the same time revealing itself as a dying medium. Just don't confuse the former and the latter.

4th Down

If you watch an NFL game (and even college games now) you'll notice that something has changed.

Teams that would have punted or kicked field goals on 4th down are now more likely than previous to go for it.

Your odds of winning go up when you go for it on 4th and goal at the two yard line vs. kicking a field goal, for instance.

When you are successful, you look good and you score more points.

When you are unsuccessful, you are second-guessed, you are less likely to win, and you made an unconventional decision that might cause you to lose your job.

So it is with marketing.

It is safe to execute the way you've always executed, even when conditions have radically changed and you can't execute the way you've always executed. You won't lose your job, but you won't maximize your profit opportunity either.

But if you take a risk ... you might have big success or you might look like a fool and lose your job and have the punditocracy mock you.

In the NFL the new generation of coaches are much more likely to go for it on 4th down.

And in marketing, tomorrow's leaders are going to be much more likely to execute differently. Market conditions are requiring it.

Inflation

So in 2019 you sold a Widget for $49.99 at a cost of goods of $19.99.

And now that Widget costs you $26.99.

You have choices.

• Sell the Widget for $49.99 and instead of earning $30.00 of gross margin you earn $23.00. Your CFO doesn't like this idea.
• Sell the Widget for $56.99 and you earn $30.00 of gross margin but you see a reduction in annual rebuy rates and a reduction in number of new/reactivated buyers.

Neither solution is good.

But this is where we are headed.

Each "brand" has a different relationship. 

• Some companies can raise prices and maintain rebuy rates. Those are well-managed companies.
• Some companies raise prices, which causes reductions in rebuy rates and orders per buyer and items per order but the price increase offsets the reductions. This is a common outcome.
• Some companies raise prices but the reductions in rebuy rates and orders per buyer and items per order yield a net "zero" gain. This is a common outcome, and it is an awful outcome.

Your job is to measure these relationships and know the EXACT answer to what happens as cost of goods increase. You need to measure this stuff, folks. You have no choice.

Inflation likely looks like an issue we won't shake in 2022.

Paper Update

The feedback is coming in from many directions now.

Those of you who market via paper are not going to get what you need for some time. This means if you want to stay in business, you need to move away from paper. The vast majority of e-commerce brands don't leverage paper, and somehow they do just fine.

It's common to see the following scenario.

• $30,000,000 business.
• $15,000,000 from existing customers.
• Brand spends $3,000,000 on paper marketing to these customers.
• Mail/Holdout tests show that 60% of sales is organic, 40% driven by paper.
• Therefore, $6,000,000 of sales come in via paper.
• 40% of sales flow-through to profit.

The secret is to know your "organic percentage", measured via mail/holdout tests.

This is the part of the discussion where the reader emails me and says "we can't perform mail/holdout tests because we'll lose sales".

This is the part of the discussion where I'll remind you that your paper reps and printers aren't giving you the paper you contractually agreed to and you will most certainly lose a ton of  sales. Why do you get mad at me about holding out 25,000 customers when your paper partners are canceling 500,000 in circ? Why don't you get mad at them? Be honest, ok?

If you know your organic percentage, you'll create a table like the one below that shows how much you should spend on print to generate optimal levels of profit.

This company is actually losing profit on what they currently execute ... they generate $6 million in actual print-driven sales (as measured via mail/holdout tests) on a budget of $3 million, losing $0.6 million in the process.

A better strategy might be to spend between $500,000 and $1,000,000, reducing the top-line by about $3.0 million but adding about $1.0 million in profit.

I know, you don't want the top-line to slump. Don't yell at me about that ... yell at your paper rep and printer. They're the ones who put you in a bind that now requires you to contact me.

If you want me to take a look at the ad spend / profit relationship, send me an email (kevinh@minethatdata.com), one that includes your housefile print ad spend, your housefile generated sales via matchbacks, and your organic percentage measured via mail/holdout tests. I'll plug the data into my algorithm and share the table above with you. No cost. Is your printer doing that for you? 

Then when you need to score the file to know who to not send paper to, you'll hire me to generate the equations for you, ok?

Surely You Believe ...

Speaking of Pickleball, I'm standing outside of Court 3 and a fellow player is asking about my business. I describe the type of projects I'm working on late in 2021 (Hillstrom's Newbies). 

This is the moment when the player asks a question I hear all of the time.

• "Surely you believe that the smartest play is to focus on Customer Loyalty. Given the choice between getting more profit from your most loyal buyers and spending money finding a new customer, you must focus on Loyalty. Right?"

Loyalty is a belief. There are marketers and the vendors who support marketers who strongly believe that you can take an ordinary customer and make the customer loyal ... or you can take a loyal customer and keep the customer in a status of loyalty.

The data I analyze shows that there is a serious "attribution issue" when it comes to loyalty.

In other words, customers have a natural rhythm. There might be 1,000 loyal customers and 700 will remain loyal in the next year and the marketer executes a program that causes 720 customers to remain loyal (net increase of 20 customers) but the marketer takes credit for 700 customers staying loyal and says that their tactics "work".

The marketer is wrong.

Now, moving the needle from 700 customers to 720 customers is HARD WORK and the marketer deserves credit for doing the hard work.

But taking credit for 720 customers (which I see happen every day)?

Surely you believe that isn't right!

Podcast with Mage Montreal

If podcasts are your thing, then give this interview that I had with Mage Montreal a listen (click here). Lots of Customer Development goodness here.

A Seamless, Frictionless Omnichannel Experience

That's what the pundits tell us we have to do. That's all. Just be perfect across millions of transactions a week. 

Relentlessly perfect. Seamless. Frictionless. Omnichannel. The pundits use words like "table stakes" as they glowingly criticize everybody who isn't perfect.

So I go to the grocery store. In the parking lot I order pizza from the restaurant next door. Easy, quick, efficient. The omnichannel punditocracy clinks their champagne glasses, anticipating another delighted customer across online and retail.

My order will be ready between 7:15pm and 7:21pm, and I will receive a message when the order is ready.

7:15pm passes.

7:20pm passes.

7:25pm passes.

7:30pm passes.

I'm done grocery shopping, so I enter the store, where I am greeted by six customers waiting. 

There is a message.

The portals are down!!

Two exclamation points.

The omnichannel system has completely broken down. This isn't seamless, this isn't frictionless. But the problem can be solved. It will be up to the "cashier" to solve the problem.

Turns out there are a lot of customers waiting in the tiny lobby because the "cashier" isn't working as a "cashier" right now ... for the $11/hour she's being paid she is fighting for her life making pizzas, trying to take care of customers. She's hustling, she's scrappy, gritty, doing what she can.

Every few minutes she pops out with a pizza and barks out a name ... "TREVOR ... TREVOR??"

Then she keeps making pizzas, fighting again for her employment life at $11/hour.

There's now nine people crammed into the small lobby and the political comments are flying.

• "NOBODY WANTS TO WORK, THAT'S WHAT CAUSES THIS PROBLEM."
• "THE GOVERNMENT IS PAYING EVERYBODY TO SIT AT HOME, SO EVERYBODY HAS MONEY AND NOBODY IS WORKING AND EVERYBODY IS SPENDING GOVERNMENT MONEY. THAT'S WHAT WE'RE SEEING HERE, SHEEPLE."
• "WHERE IS MY FREE VETERANS DAY PIZZA?"

Meanwhile the "cashier" is absolutely battling. Balling. She's trying to save the entire omnichannel thesis on her own. She asks my name. She goes back, comes back out and says "we're almost done!". I don't believe her for a moment.

I should have surmised that maybe there was a good chance that the "wrong" pies were being moved in and out, because when she asks the other two employees where my pizzas are the other two employees look at her like she has candy canes coming out of her ears. She barks at her co-workers ... "THE SYSTEM SAYS HIS PIZZAS ARE READY". The co-workers look at each other again, realize that the "cashier" needs to see two pizzas immediately, and they grab two boxes and yell "KEVIN".

I should have said something, but I was worried about the two marinara sauces that were not being handed to me. One of the co-workers addresses me ... "THIS IS A REALLY ROUGH NIGHT", goes back, and gets me two marinara sauces.

Nearly a half-hour late and relieved to have two pizzas while avoiding an angry mob of customers frustrated with free government money, I drive home.

Mistake.

When I get home, I have two pizzas that have nothing to do with me. And I should have known this because I saw the chaos exhibited by the co-workers who were being barked at by the "cashier". I could tell by their faces that they were just randomly making pizzas to get them out the door. "HE'LL LOVE PEPPERONI!".

It all starts with this:

Seamless.

Frictionless.

Omnichannel.

Tomorrow the Store Manager will explain to the Regional Manager what the heck happened on Thursday night. The Store Manager will keep her job because there is a labor shortage.

The Regional Manager will explain to the Vice President of Stores what happened at Store 2826 last night. The Vice President of Stores will compare notes across 173 different stores that all had the same problem with the "portal". Maybe it was an IT problem. Maybe the vendor who sold the solution sold the pizza brand a piece of junk. Maybe the "cashier" botched operation of the portal.

The VP of Stores will tell the Executive Team that this was an "anomaly". The "Omnichannel Services" team will deal with 12,577 angry customers, like they do every day, apologize, and offer 15% off on the next visit.

Then everybody will face Friday. It will be Groundhog Day.

Retail is not seamless. It is not frictionless. It's warfare. The best retailers hide how the sausage pizza is made, hide all of the challenges, and somehow repeatedly get through the day pleasing as many customers as possible. The employees who hide all of the problem do so earning less than what is required to make a reasonable living. The omnichannel solutions that cause problems are offered by folks making enough money to live in a cul-de-sac where homes appreciated 33% in the past two years. 

The pundits demanding that you execute in a perfect manner every single time? They need to obtain some empathy. The employees they demand perfection from are fighting an uphill battle every single day, sometimes caused by the vendors selling solutions that promise a seamless, frictionless omnichannel experience.

P.S.: I received an email that my order was ready ... about five minutes after I left the store, 26 minutes after the time-window I was promised. Omnichannel!!

It's Like It Is 1992 Again

Right?

Thirty years ago, you'd load-up sales from mid-October through Thanksgiving. In the modern world, you'd load up sales from Cyber Monday through Christmas.

So we're back to 1992 now. Clean up before the snow starts to fly.

Taking A Step Back

As many of you know, I play a lot of pickleball. It's a year-round outdoor sport in Arizona, it is far more competitive than you'd imagine, and it is heart healthy. A two-mile walk would have worn me down me five years ago. Today I can play for five hours and tally up 20,000 steps and feel pleased when I'm done. Tired, but pleased.

There are different levels in Pickleball ... beginners are typically 2.0 players, then you progress through the 2.5 level, move on to 3.0 where you can start to play in tournaments, then 3.5 and 4.0 which are low/high mid-levels, then you get to 4.5 where you are highly proficient and 5.0 where you are expert. Pro players reach 6.5 or 7.0 levels.

At each level, you learn something different. You learn the rules and how to play at 2.5. At 3.0 you learn the importance of drop shots. At 3.5 you learn the importance of your soft game, you start to learn spins and deception. At 4.0 the "transition zone" has to be mastered, along with implementing strategy. Sophisticated strategies and expert play dominate 4.5 and 5.0 levels.

When you master a level, you are beating your competition, handily. You test, you get moved up, and then you are at the bottom of the next level. Instead of winning games 11-6 you are losing games 5-11. You go from hero to zero. You invest a year learning the skills at the next level, you eventually win games 11-6, you test, you move up a level, and you start over losing games 5-11 again.

Two players I adore are going through a transition as they attempt to move up a level or start in a new level. They have to unlearn habits that worked in the old level. As the habits are unlearned, the players take a step backwards. They become less competitive than they were previously. I've been there. Every pickleball player has been there.

What happens in business when you try to move up a level?

Maybe you have a $30,000,000 business and you want to become a $50,000,000 business. That's like moving up from 3.0 to 3.5 in pickleball. The skills that got you to $30,000,000 will not be enough to get you to $50,000,000. Worse, many of the good habits (the "best practices") at becoming a $30,000,000 brand have to be unlearned ... truly ... if you want to become a $50,000,000 brand.

And the minute you attempt to make this transition, the wheels come off the bus. You try things and they don't work. You waste money. You doubt yourself. Sales even decline. Management wants to fire you.

But you have to go through the transition.

The best way to start the transition is to focus on new customers. You'll need them if you are going from $30,000,000 to $50,000,000, you won't get the $$$ out of your existing customers no matter what your vendor partners tell you (they, by the way, get $$$ by telling you to focus on existing customers, that's why they tell you that). So start with what you know. And experiment along the way, test new ideas and concepts. You have to. You'll fail repeatedly. But along the way you'll pick up the skills necessary to become better.

You might have to take a step back.

But you'll ultimately move forward.

DraftKings

In case you were wondering if the woman talking about "winner winner chicken dinner sounds kinda good right now" is paying off in those commercials during the Browns/Bengals game, click here and learn the answer.

Customer Acquisition, folks. Don't let the loyalty marketers tell you otherwise. All of your customer acquisition work fuels the pipeline with buyers who eventually become loyal ... allowing the loyalty marketer to take credit. 

Without customer acquisition, loyalty cannot happen. You can't have a loyal customer unless somebody worked hard to acquire a customer.

Ghost Demand

A vendor recently told folks that because of the sheer volume of products that are not available this Fall, there will be "ghost demand" (click here). The theory suggests that a customer wanted to order a widget, the widget wasn't available and therefore not even featured online, and as a consequence the sales generated by customers is undercounted by the fact that you can't record that the customer bought something that wasn't available.

In the old days (i.e. pre-2002), "demand" was always recorded (because e-commerce wasn't a large share of total volume). The customer called the call center, asked for a Widget, and when the Widget wasn't available, the customer was disappointed but the "ghost demand" was recorded nonetheless.

When planning the following year (2003), the marketing analyst predicted how much a customer would spend based on "demand" and not "sales".

So when you read about "ghost demand", you are reading about a concept that was highly popular from 1980 - 2002. It's logical and it makes sense when predicting what might happen next year. If all of your products are sitting on a ship off of Long Beach, well, you can't sell them.

The concept makes sense if you view the world in a 2002 framework.

It's 2021, of course.

Customers are wily. They can browse your entire website, and if you have Bidgets as a substitute for Widgets, the customer will buy a Bidget. You capture the sale regardless, and there isn't "ghost demand". Ghost demand, therefore, correlates with how well you perform as a marketer/merchant. If you are a lousy marketer/merchant, you might need to worry about "ghost demand".

My comp segment analytics suggest that "substitutions" are rampant in 2021.

In other words, if you are good at what you do as a "brand", you don't have a "ghost demand" problem, or it is a tiny problem.

If you aren't good at what you do, then pay heed to what the author of the article is saying.

You know if you are a good marketer/merchant, so you know what to do in this instance. 

P.S.: Adding a random percentage to your "ghost demand" rate needs to be rooted in analytical savvy. You have to thoroughly know the "substitution rate" you have in order to make an already flawed and inaccurate guess. In other words, if you had an item that generated $1,000,000 in sales in 2019 or 2020 and it was not available in 2021 but you have substitute items that were expected to generate $500,000 and instead generated $1,300,000, then you captured $800,000 of the $1,000,000 you lost, and your "ghost demand" rate is low. Without knowing the "substitution rate" for key items, how could you ever know your "ghost demand" rate? Do the work, folks, don't just throw a dart at something that protects the paper industry, printing industry, and associated vendor support teams. If you do the work and your analysis tells you that you have a 25% "ghost demand" rate, so be it, apply it and move on. But do the work. Don't be lazy.

Taken From The Nordstrom 2005 Playbook

There's no reason why you can't execute this type of tactic.

• Easy.
• Pushes Sales Early Into The Season (when products will be available).
• Identifies "who" Is Likely To Shop, which is a handy attribute to have in your database.
• Creates a new email marketing list you can leverage.

What stops you from doing this?

Trader Joes

This thread is worth the ninety seconds it will take you to read it (click here).

Hillstrom's Newbies: One Additional Opening Just Became Available

I promised you I'd take three projects at a cost of $11,500 (click here for details). Well, one of my three projects fell through, and if it comes back I'll honor the price ... however, assuming it won't come back, this means there is an opportunity for you to hop on for a new customer analysis project at the introductory rate.

So somebody ... SOMEBODY ... send me an email (kevinh@minethatdata.com) and I can get started somewhere between November 15 and November 20.

Thanks,

Kevin

Holding Out Hope

I talk a lot about new customers, and for good reason ... it's the lifeblood of your business.

Every once in a while a reader will tell me something about how "Brand X" pulled out a surprise from the marketing playbook ... they mailed a catalog or they opened a store or something comparable from the 1980s and the strategy worked, and that is proof that you have to hang on to hope.

Did you see the end of the Packers / Cardinals game from last Thursday?

Completely doomed, the Packers got a late end zone interception and held on to win the game.

You can hold out hope that your defense will do something amazing.

How often does "hope" happen?

Well, the last time a team was intercepted in the end zone trailing by 3 or less with 15 seconds or less was ... in 1996.

Twenty-five years ago.

Holding out hope that something amazing will happen with your business is like hoping for an interception in the final seconds in a tight game. It "can" happen, but it is unlikely to happen.

Focus on what happens every day ... you acquire new customers every day. Choose new customers that are likely to become loyal.