Above and Below

Remember, we have an item that normally sells for $49.99. Sometimes the brand offers blanket 30% off promotions, so when that happens the item sells for $34.99. When it sells for $49.99, the item sells at/above the historical average price point for the item. When the item sells for $34.99, the item sells below the historical average price point for the item.

Here's the percentage of items selling below their historical average price point, by month, for the past year. Tell me what you observe:

• 48% = November 2021.
• 67% = December 2021.
• 36% = January 2022.
• 14% = February 2022.
• 13% = March 2022.
• 17% = April 2022.
• 19% = May 2022.
• 22% = June 2022.
• 33% = July 2022.
• 34% = August 2022.
• 24% = September 2022.
• 16% = October 2022.

What did you observe?

Well, this brand is giving the item away in November/December, correct? They're trying to stimulate business in the dead of summer and they're giving the item away when they have ample traffic.

I'll get complaints now ... "you don't understand, we have to be competitive on pricing at Christmas or our competitors will eat our lunch".

Maybe you are right.

Ask yourself what it means if you are wrong?

Trick or Treat?

Here's what so many of you tell me is happening:

• Annual New Customers 11/1/2018 - 10/31/2019 = 100,000.
• Annual New Customers 11/1/2019 - 10/31/2020 = 140,000.
• Annual New Customers 11/1/2020 - 10/31/2021 = 128,000.
• Annual New Customers 11/1/2021 - 10/31/2022 = 105,000.

What happens in the next twelve months?

Now, some of the decline to 105,000 new customers is because of the unwinding of the COVID-bump.

Some of the decline to 105,000 new customers is because you raised prices for obvious reasons.

Some of the decline to 105,000 new customers is because it is getting much harder to find new customers.

If you ignore the last point because you firmly believe in the first two points, well, next Halloween you will be in for a nasty trick. You can treat yourself, of course, by developing customer acquisition programs that are not channel-dependent color-by-the-numbers endeavors that please vendors.

Audits / Accountability

Ok, we're going into the way-back time machine. It's 2003. My team (Database Marketing) was supported by our Credit Division. The customer database was built by and maintained by the Credit Division.

I know, I know, you are about to yell at me ... "SILOS". Have at it.

Our Credit Division decided in 2001 that they were going to create an omnichannel view of the customer by integrating all data sources into a master database. That's a big job at a ten billion dollar brand. You cannot get too frustrated with the process.

But in 2003 the database wasn't being updated properly. Heck, you'd come into work on Monday morning and the database wasn't available. It's hard to execute "Database Marketing" without a database.

My team was promised 95% database availability by 9:00am on Monday morning. My team would grumble that the database wasn't available. The Credit Division would tell anybody we grumbled to that the database "was" available. Yeah, they essentially lied.

My team couldn't understand how the Credit Division could get away with lying and with providing poor service?? Yes, my team was justifiably angry.

So we created our own audit process. It wasn't our job, of course, but the Credit Division was failing us. We created a series of audits to demonstrate that the transactions added to the database were accurate. Most importantly, we created our own count of how often the database was available at 9:00am on Monday morning.

Every Monday at 1:00pm we had a meeting with the Credit Division. We started every meeting by sharing our dashboard. There were two key metrics at the top of the dashboard. We printed them in bold, and passed the dashboard out to everybody.

• 9:00am Database Availability:  5 weeks out of 11, 45%.
• Weekly Database Accuracy:  9 weeks out of 11, 82%.
• Promised Database Availability:  95%.

It took about a quarter, 13 weeks, before our Credit Division got sick and tired of seeing the metrics printed in bold and handed out every week.

It took about 26 weeks before our problems were solved.

Turns out nobody, and I mean nobody, likes to be shamed. It's worse when you shame people after they lie.

Audit people, and hold them accountable. Please.

Start Thinking

We've talked about this before, but we're gonna talk about it more in the future.

Let's say you have an item that you sell for $49.99. The cost of goods sold on the item is $19.99. Somebody in your marketing department decides that Thursday is "EVERYTHING IS 30% OFF DAY".

Woo.

Hoo.

So the $49.99 item becomes a $34.99 item.

And instead of generating $30.00 of gross margin, you generate $15.00 of gross margin.

In the customer databases I analyze, I calculate the average price that an item sells at over time. In our example above, most days that item sells for $49.99, but on Thursday it sells for $34.99. Maybe the average price that the item sells at ends up being $47.85.

Now, if the item sells for $49.99, I code the item as selling "at/above" the historical average price point.

If the item sells for $34.99, I code the item as selling "below" the historical average price point.

Turns out there are all sorts of interesting things you can learn when you create this attribute and store it in your customer database.

So start thinking about creating this attribute in your database, ok? We'll talk more about it in the upcoming days.

Subway

Twitter is amazing for a lot of reasons ... you can be a horrible human being and not face any semblance of accountability for completely unacceptable behavior on the platform, or you can post surveys that reveal how people think about marketing topics.

Like this one (click here).

Think about the results, and what it means when professionals really have no idea what is going on.

P.S.:  Attribution here is largely meaningless. Segmentation is largely meaningful.

Measuring Impact of Price Increases

Yeah, I've heard y'all ...

• "We have no choice but to pass cost increases on to our customers. If a $50 item has a $20 cost of goods and now that item costs $27, we have to pass the additional $7 on to the customer. It's that simple."

Well, maybe. But you're going to do what you feel like you have to do, so do it.

But at least you need to know what you are doing to your business as a consequence, right?

A simple analysis looks like this.

• By merchandise category, measure rebuy rates into the category last year, and measure average price per item purchased within the category last year.
• By merchandise category, measure rebuy rates into the category this year, and measure average price per item purchased within the category this year.
• Fit a line through the relationship. In other words, plot price change (TY vs. LY) on the x-axis, plot rebuy rate change (TY vs. LY) on the y-axis.

The relationship should look like this:

You easily see two trends.

• Rebuy rates are down about 4% independent of price changes (it's where the orange line crosses the 0.00 vertical line on the x-axis).
• A 10% increase in prices yields a 4% decrease in rebuy rates.

This is something that all of you can do ... the analysis is easy and can be finished within an hour, and you'll have two important answers to the impact of pricing on your business.

If you don't have the resources to do this, contact me (kevinh@minethatdata.com) and I'll perform the analysis for you.

A Few Trends

If I index rolling-twelve-month demand, using September 2019 as a base, this is kind of what I'm seeing.

At Month = 7 (March 2020), sales begin to accelerate ... growing about 30% within a year. From there, sales stagnate, and by Q4/2021 sales begin to slump.

We're now in the slumping phase.

Worse, sales look like that ... but customer counts are awful. Here's something I commonly observe.

• Sales vs. September 2019 = +23%.
• Prices vs. September 2019 = +30%.
• Total Customers vs. September 2019 = -7%.
• New/Reactivated Customers vs. September 2019 = - 15%.

It wasn't an awful thing to trade customers for higher prices in 2021 because there were a glut of customers from the COVID-bump.

It's become an awful thing to trade customers for higher prices in 2022 because there is no longer a glut of customers from the COVID-bump. We're consciously trading new/reactivated customers off for sales gains via higher prices (and I get it ... your cost of goods went up so you feel like you have no choice). We're consciously trading rebuy rates for sales gains via higher prices.

What happens in 2023?

You're already struggling to acquire customers. That continues. You'll continue to feel inflationary pressure, so you'll likely continue to increase prices. This will cause you to continue to lose customers. The more customers you lose in 2022/2023, the harder it will be to be successful in 2024 and beyond.

You will have to find a way to appeal to prospects, even with higher prices. This will take real marketing chops, not the color-by-numbers channel-based conversion-rate ROAS fluff you've learned to analyze via Google Analytics. Real. Marketing. Chops.

It's time to truly test your skills.

 

Discounts and Promotions

Here's one of my favorite quotes ... yes, I like things that I say.

• "Discounts and Promotions are taxes placed upon brands for being unremarkable." 

People are about to start yelling at me, and for good reason. Too many readers think that running a business is all about identifying discounts and promotions that "tickle the buying bone of today's ever-changing consumer" or whatever word-salad the vendors craft in defense of discounts and promotions.

Nobody tosses out discounts/promotions unless business is not meeting expectations. It was fascinating to see all of the full-price shopping that happened during the pandemic when customers wanted/needed what you were selling. You didn't need to promote anything, because customers wanted/needed what you sold.

Think of it this way. You have an item that sells for $50, with a cost of goods sold of $20. Every time you sell an item, you generate $30 of gross margin. Nice job!

But then either business doesn't meet expectations or the marketer grows an ego to the point where "something" has to be done from a marketing standpoint or the inventory team bought too many widgets or the "competition" priced the item lower. Whatever the reason, somebody decides that it is time to sell the item at 30% off.

• $50 * 0.70 = $35.
• Cost of Goods Sold = $20.
• Gross Margin Dollars = $15.

In order for this item to be equally profitable, you now have to sell two items whereas you used to only need to sell one item.

That $15 is the tax you pay for being unremarkable. It's punitive. The tax consumes half ... half ... of your profit.

This is the point in the argument where some of you yell at me about the fact that you are always running promotions so my argument is useless, you'll never sell at full price, you view Macy's as an example of a well-run business and I'm the problem, not you. That argument is also problematic. 

Back in the stone ages at Eddie Bauer, I distinctly recall our CEO yelling at a room of marketers to "do something". He complained that we had promotions in 33 of 52 weeks of the year, and he didn't want the calendar "polluted" with discounts (hint - it was already fully polluted ... like squirting fruit punch Miio into a glass of water). We were already running too many discounts/promotions, we were the problem. End of story. If we stopped running promotions, sales decreased (though via our testing profit increased ... and nobody liked that reality). If we didn't add discount/promotions, the top-line didn't grow. We were trapped by the very strategy we employed years earlier. We were done.

There are clever ways to implement discounts and promotions. 30% off of everything is NOT clever. 40% off of a key product this week only (while not discounting anything else) "could" work.

Let's not be lazy. Be a marketer. Be clever. Be creative.

Benchmarking

Here's the email:

• "Hey Kevin, question for you. Could you slice and dice all of your Elite Program data for us by industry and size of brand so that we can benchmark ourselves against similar competition? I know you've been critical of us in the past, and I just want to demonstrate that we're aligned with our competition. Thanks."

Thank you, no.

Benchmarking is one of those pointless activities that weak leaders force people to do in an effort to deflect blame for lousy performance. "It's not our fault, everybody in our vertical is within five points of rebuy rate of us."

Nonsense.

Let's assume that your "set of competitors" has a 34% rebuy rate.

Let's assume that your rebuy rate is 31%. Does that mean you are doing a bad job? Heavens no.

Let's assume that your rebuy rate is 37%. Does that mean you are doing a good job? Nope.

Your p&l tells you everything you need to know. Everything.

Are sales growing?

Are sales growing, causing profit to increase at a faster rate than normal?

Are you at 3% pre-tax profit with 65% gross margins? (hint - you are a failure).

Are you at 8% pre-tax profit with 29% gross margins? (hint - you are a success).

The vendor industry loves to prey on weak leaders who want to benchmark their brand against the "competition". Ask McKinsey how much money they've made over the years performing this task for weak leaders?

Stop benchmarking.

Start doing something.

P.S.:  When I worked at Eddie Bauer, we benchmarked ourselves against our competition (L.L. Bean, Lands' End, etc). We were a lousy company. The benchmarking exercise proved we were a lousy company. We already knew that. May as well have lit a hundred thousand dollars on fire next to the lake that Eddie himself used to fish on (a lake that is now part of the Microsoft campus, yeesh).

Loyalty Programs

There are moments, folks.

I sat in the SVPs office as the CEO walked in and handed a yellow sticky pad note to the SVP. The CEO performs the classic "back slap" or "shoulder slap" two or three times, then walks out.

The SVP looks at the note, makes a face that simulates the face one would make when smelling sulfur, then crumples the note and throws it away.

I asked.  "What did the note say?"

He responded.  "It said, 'push our customers to pay with proprietary credit to boost our loyalty program.'  Kevin, that's not gonna happen."

There are other moments. The President of a Brand is sitting at the table with me. I'm going over some of the customer reporting I generate for this business. Repurchase rates are (predictably) in the low 30% range, as they are (or are lower) for most of the e-commerce businesses I analyze.

This guy is stubborn. Really, really stubborn. He directed marketing to invest much less in customer acquisition. He directed marketing to boost rebuy rates among the most loyal buyers. Guess what? The business plummeted as it was starved from new customers ... but ... but ... rebuy rates among loyal buyers increased from about 55% to about 60%. The net of the two outcomes? A very, very unhealthy business.

The guy would just smile at me ... "Give it time, Kevin, everybody knows it costs 8 times as much to acquire a customer as it costs to keep a customer. My strategy will work as we give our loyal customers a chance to pay us back."

His strategy did not work.

One final moment. About 12 years ago an Executive asks me the following question.

• "Can you help craft a new loyalty program that makes it look like the customer is earning amazing benefits like double/triple points but the program doesn't really give anything away? We went the benefit of a loyalty program without the cost. Thanks."

Yeah, I'll be the Executive wanted the benefit of a loyalty program without the cost. Who wouldn't?

If folks want to talk to you about loyalty initiatives, don't walk away, run away.

Probabilities

On Saturday night at about 2:00am EDT the San Diego Padres eliminated the Los Angeles Dodgers.

I made a comment that with a "small sample" of a five-game series, just about anything could happen. Dodgers Twitter found the comment, and spent three days telling me how ignorant I am.

An awful lot of things in life boil down to probabilities. If we have a reasonable guess of how likely something is to happen, we can string together probabilities and determine the odds of, say, the Dodgers losing a series they are favored to win.

Let make two assumptions. These are assumptions, and your assumptions may be better, they may be worse. We cannot know the truth.

• Assumption #1 = Dodgers have a 65% chance of winning a home playoff game vs. San Diego.
• Assumption #2 = Dodgers have a 50% chance of winning a road playoff game at San Diego.

Given these assumptions, we can estimate the probability of the Dodgers winning the series.

• Win 3 games to 0 = 21%.
• Win 3 games to 1 = 22%.
• Win 3 games to 2 = 24%.
• Lose 3 games to 2 = 13%.
• Lose 3 games to 1 = 14%.
• Lose 3 games to 0 = 6%.
• Win the Series = 67%.
• Lose the Series = 33%.

So yeah, the Dodgers "should" have won the series.

But there was a 33% chance they'd lose the series. Not 5%. Not 11%. 33%.

The probabilities are based on assumptions, yes.

But there is a credible chance that an underdog will win a series.

The odds create good television.

The odds do not reward a 162 game season-long effort.

We like to view things in a binary nature ... wins or losses. Then we assign accountability to wins or losses. It's not as satisfying to suggest that we can try our hardest and do everything to the best of our ability and be better prepared and more talented and still lose a third of the time.

But that is the way life works.

It Happens Every Year Now

October is the month where some of our readers decide to offer me feedback.

• "I just got a catalog from Amazon. It's proof that an omnichannel approach works."
• "I got my Amazon catalog in the mail. It provides that 'sitting by the fireplace feeling' that customers love. Amazon is clearly trend-right when it comes to catalogs."
• "Kevin, you are such a moron. If Amazon is mailing catalogs, then catalogs work."

One of you sent me mail/holdout results measured via proprietary credit. You showed that when you mail a catalog Amazon generates more incremental sales from the mailing than you generate. Let's see if I have the logic right here:

1. Cataloger spends a million dollars mailing a catalog.
2. Amazon makes more profit from the mailing than the catalog makes.
3. This causes the cataloger to struggle.
4. Amazon uses the knowledge to mail their own catalog.
5. "Trusted partners" help Amazon (paper and packaging) while telling catalogers there is a paper shortage, hurting catalogers.
6. Catalog pundits "raise a champagne glass" to praise Amazon for adopting an omnichannel strategy.
7. Meanwhile, catalogers sell their products on Amazon and Amazon collects an approximate 15% +/- commission from everything catalogers sell.

Who is most strategic here?

1. The Catalog Brand.
2. Amazon.
3. "Trusted Partners" who support the paper industry.

Why Share The 10Q Statements?

There's a reason that the TV you want at Best Buy is never offered at 40% off (unless it is being liquidated). With a gross margin around 20%, you can't make money offering 40% off.

We review 10Q and 10K statements because the statements reveal the type of business we're evaluating. We see all of those Duluth Trading Company television commercials and we see all of their catalogs and we wonder how they can afford to do that while others don't execute old-school tactics like that? Well, their gross margins allow them to execute those tactics ... their gross margins pay for the tactics.

The danger for a high gross-margin business is that it becomes a "marketing" business. We see this happen all the time. In the early days of the brand the brand is highly profitable (think Lands' End in 1993). Then the brand wants to grow, so the brand spends more gross margin dollars executing more marketing programs ... the minute there is a merchandise productivity issue (like there was in 1995) the p&l doesn't work and people lose their jobs. This is the problem with so many businesses I analyze these days ... Leadership decides to spend ALL of the gross margin dollars on marketing instead of growing at a slower rate while being far more profitable. The minute merchandise productivity fails, the business fails.

You hear me harp on the importance of organic customer acquisition ... acquiring customers at low-cost or no-cost. You need to do this because if your business is like Best Buy, you don't have the gross margin dollars available to expand your marketing programs like you want to. You need to do this because if your business is like Duluth Trading Company, you are spending all of your gross margin dollars on physical stores, catalogs, and television and are not generating enough profit to pay for more new customers - you have to have an organic customer acquisition program to grow.

That's why we study 10Q and 10K statements. They help us understand the business model being employed, and they help us understand if there is any profit available to spend more money on marketing.

P.S.:  I didn't spend any time on a unique topic in this series ... but in these statements, take a look at interest paid on debt, especially among retail brands. It's not uncommon to see half of profit eaten way by interest payments.

Duluth Trading Company 10Q

Here's a link to the most recent Duluth Trading Company 10Q statement, representing the first six months of their fiscal year.

On page five, we observe the following for 2022.

• Net Sales of $264.4 million.
• Gross Margin of $142.7 million ... 54.0%.
• Selling, General, and Administrative Expense of $139.7 million.
• EBIT of $2.9 million ... just 1.1% of sales.
• Notice that last year EBIT was $15.0 million ... 5.3% of sales.
• Yeah, this business is STRUGGLING.

We observe a different business model here, don't we? Instead of 22% gross margins at Best Buy, we have 54% gross margins at Duluth Trading Company. This gives Duluth a lot more money to spend ... on marketing ... and they mail catalogs ... lots of catalogs ... and they have stores ... lots of overhead.

All of those extra gross margin dollars enable cash flow used to market more often (catalogs, television), which generate sales which generate gross margin dollars which enable cash flow and you get the picture here.

While Best Buy cannot be marketing-dependent, Duluth Trading Company "can" be marketing-dependent because of their gross margins.

What you sell dictates what your marketing strategy is.

Best Buy 10Q Statement

You probably study this stuff and already know it, but here is the most recent Best Buy 10Q Statement (click here).

On page four, you'll see that Best Buy sold $21.0 billion dollars of merchandise in the first six months of their fiscal year. And you'll instinctively (and correctly) think "that's ... a ... lot".

However, gross margin dollars aren't all that and a bag of chips.

• $21.0 billion in sales.
• $4.6 billion in gross margin dollars.
• 21.9% gross margin percentage.

In other words, when Best Buy sells a $1,000 television they generate $110 of gross margin.

And then it costs a lot of money for Best Buy to support the $110 they made.

• Selling, General, Administrative Expense (which includes marketing and stores and the website, and pick/pack/ship and salaries all that good stuff) was $3.8 billion.
• Best Buy, because of the business model they chose, cannot afford to spend a ton of money on marketing because there won't be any earnings before taxes if they spend marketing dollars unprofitably.

In other words, Best Buy sold $21.0 billion worth of merchandise to make $0.8 billion in EBIT ... about 3.8%.

Best Buy cannot afford to spend a lot of money on marketing. They have to create traffic in different ways, they have to create traffic organically. They have no choice.

The merchandise you sell ... the periodicity with which customer purchase it ... that dictates what your marketing strategy will be.

Gross Margin Dollars

Your business (and your marketing strategies) are determined by the gross margin dollars you generate per order. It's the primary reason I detest it when you decide to offer 40% off of your merchandise.

Want an example?

Here's a pair of trail shorts from Vuori ... priced at $78 flippin' dollars for a pair of shorts (click here).

Meanwhile, Northyard is selling hiking shorts on Amazon for $24.99 (click here).

Vuori is likely generating 60% gross margins on their products, +/-. Every time they sell a pair of trail shorts for $78 they generate $46.80 of gross margin dollars.

Lower priced items typically have lower gross margin percentages ... I don't know what Northyard generates for a gross margin percentage, but assume it is 50% (because they are selling at 20% off their list price). Every time they sell a pair of trail shorts for $24.99 they generate $12.50 of gross margin dollars. Then they have to give Amazon $2.50 for the luxury of selling the item on Amazon, so they're left with $10.00 of gross margin after paying a commission to Amazon.

Now, you're about to beat me up about the fact that one brand is selling low-cost commodity items on Amazon and the other brand is selling fashion on their own so I can't compare the two tactics.

Yes, I can compare the two tactics, because the comparison enables all of us to open our minds to the power of gross margin dollars.

One brand is making $46.80 per item. Then they have to ship the item to you, and that likely costs them $5.00 or more.

The other brand, selling via Amazon, is making $10.00 per item, then they have to ship the item to you at a cost of $5.00. Uh oh.

Which business would you rather operate?

Here come the comments again!

• "Kevin, did you injure your brain? I'll make $10.00 per item all day long as long as Amazon is driving all of the traffic for me. You obviously don't understand the power of different marketing channels. Let Amazon do all of the marketing work, let me benefit from the work Amazon does."

There we go.

One marketer (Vuori) has to do all of the marketing work, but gets to make a ton of money doing it. Vuori, I mentioned yesterday, was profitable before accepting nine figures worth of money to help them move along and pay off original investors. But this brand has to figure out how to market in a cost effective manner, protecting as much gross margin dollars as possible. Yeah, you'll strive for organic customer acquisition in this scenario. And again, this is the point where you start yelling at me.

• "Kevin, this forces Vuori to market to affluent customers. Poor people cannot afford their products. This greatly limits their market potential. Bad idea."

Well, yeah ... there are consequences to brand positioning.

One marketer lets Amazon do some of the marketing work for them. Now, this brand needs to do organic customer acquisition as well because so few gross margin dollars drop to the bottom line ... they can offset this dynamic by offloading work to a 3rd party (Amazon) or by employing high-traffic marketing tactics to generate a 5x increase in traffic to make the same amount of gross margin dollars as Vuori.

Do you see how important gross margin dollars per order is? Gross margin dollars per order dictate the marketing tactics a brand employs.

Organic Customer Acquisition

You know that I'm not sold on the content published by Retail Dive ... they seem to like making money by talking about retailers who "could" go bankrupt. But something in an older article crossed my desk on Friday. Here's the article. And here is the quote.

• Kudla said. “And so when a lot of our peers launching in this DTC era were out raising $20, $30, $50, sometimes $100 million, they could afford to be a little more aggressive from a customer acquisition standpoint.” Vuori went a different direction than most. The company focused on organic customer acquisition, which to Kudla required creating high quality, differentiated products, and building strong relationships with suppliers and customers. That strategy is part of why Kudla thinks Vuori has been able to achieve profitability, alongside an early start with wholesale partners".

"Organic Customer Acquisition".

I know, I know, some of you are about to send the hate mail ... "I know I ask you to send me examples, but their example doesn't count because they are fashion and their gross margins allow them to do things we can't do."

If you repeatedly find ways to discount the free advice you're getting here, maybe the free advice isn't the issue?

Tomorrow I'll talk about gross margins ... because gross margins are really important.

Attribution

Catalog agencies use analytical techniques designed to encourage you to mail more ... and for good reason! They make more money when you mail more often.

If you execute mail/holdout tests, you know the truth. It's usually a startling truth, because the truth is so different from the story told by our trusted partners.

For a retail brand, here are results of a mail/holdout test run against RETAIL ONLY customers.

Matchback analytics lie the worst. Just because a customer bought from your favorite retail brand on a Tuesday two weeks after receiving a postcard doesn't mean the customer bought because of the postcard. Taking the postcard list and matching against every customer who bought within "x" days and then assigning every order to the postcard is malpractice. Think about it this way. You need to buy groceries each week. You have to. If Safeway sent you coupons for Doritos and you purchased Doritos, should the entire $275 purchase be matched back to the coupon distribution? No, never. The coupon has nothing to do with the $275 purchase.

Attribution analytics are not a lie, but they are a guess, and that's just as bad. Your attribution vendor parses the $275 grocery order and allocates shares of the $275 to your marketing efforts, as if they were inside the mind of your customer. Sure, they're using "advanced AI or machine language", but that is meaningless if they aren't using mail/holdout tests as the basis for their analytical genius.

In the image above, we see that the segment generated $2.69 profit via matchback analytics, $1.13 profit (per customer) via attribution algorithms ... but the segment of customers lost $0.18 when measured incrementally via mail/holdout tests.

Can you see why your agency wants you to believe their matchback analytics or attribution analytics?

The mail/holdout results above commonly happen for retail brands mailing retail-only customers. The results commonly happen for e-commerce brands mailing lapsed buyers. The results commonly happen for catalog brands with 90%+ e-commerce sales penetration.

Think about how differently you approach marketing investment if you choose to prioritize the truth over the stories told by matchback/attribution analytics? It literally changes how you think about marketing. By the way, the same concepts apply to email marketing. And display. And geographic tests for paid search. And paid social. 

Now imagine how your marketing efforts change once you know that what is displayed above happens across all of your marketing efforts?

Think about it.

P.S.:  Yes, you guessed right ... I'm going to get hate mail from two sources ... agencies ... and hardened 55-year-old-plus professionals who chose to believe agency stories (matchback/attribution) because it allows them to keep doing what they love doing. This blog has been active for nearly seventeen years, and the same cast of characters always berate me after I write this content. It's almost like politics ... if you tell lies long enough your viewers/customers believe the lies and run with them. There are "true believers" who adore matchbacks and flawed attribution analytics ... they will berate me and they are not the people who this post is written for. I'm writing this for you, the open-minded professional who wants to do the right thing for your company.

P.P.S.:  Here's a tweet from yesterday (click here). Yeah, he's correct.

Still Time!

Guess what? We're gonna set a record here in October, as this features the most Elite Program participants in program history!

Existing/Prior Elite Program participants pay just $1,000 per run, new participants pay $1,800 for the first run and $1,000 thereafter.

You get my typical rolling twelve-month analysis, you get comp segment and comp new/reactivated customer reporting, and you get an annual view of repurchase/spend activity. In this run, I'm going to determine how many "loyal" buyers you have.

I know, the program is virtually free ... and by the way, this is the 8th October run of the program (it began in October 2015) ... and it took a full seven years to break the record for participants set in the first month of the program.

Think about that for a moment ... the program started strong, then slumped, then treaded water into COVID, then modestly improved ... and is now setting a record. See, you don't have to be successful at something right out of the gate ... this program is a success seven years in the making.

Had I quit the program during the early days of COVID when the program was about half of where it was, I wouldn't have hit a record this month.

Keep that in mind when you try different customer acquisition activities that don't work right out of the gate.

Anyway, there's still time to participate.

• Five Years of Purchase History 10/1/2017 - 9/30/2022.
• Data Due by 10/15.
• Payment Due by 10/15.
• Writeup Delivered to You by 10/31/2022.

It Has To Work Now

You get emails from people. All sorts of interesting feedback.

One of the common ones goes like this:

• "I need a tactic and the tactic has to work right away. It has to work now. What can you share with me? What are other people doing?"

Two things. First, I cannot share what my other clients are doing. That's not right. Second, why must it work now?

There was a time, long ago, back when website redesigns had significant impact on conversion rates. A large brand completely rebuilt their website from scratch. Here's what happened to conversion rates by time.

• Two Months Prior = 3.0% Conversion Rate.
• One Month Prior = 3.1% Conversion Rate.
• One Month After = 2.5% Conversion Rate.
• Two Months After = 2.8% Conversion Rate.
• Three Months After = 3.0% Conversion Rate.

What would this company (a large brand many of you know) have done if the new strategy "had to work now?"

Whatever you are trying, it's unlikely it will "work now".

And I realize that frustrates you. You are being paid to execute ideas that work now.

Look to sports for comparables ... the NY Jets have been a hot mess for years. When they hire a new coach, does it "work now?" Most teams that hire new coaches struggle for a period of time ... then they acquire the right players and the system eventually clicks (or it doesn't).

Here's the thing. If you do enough "things" you'll get to a point where "some" of the "things" work out. If you do enough of these things, some of them will work quickly.

I worked with a company that executed thousands of online tests per day. Thousands! Guess what? Some of those "things" worked, and some of them worked right now.

Feeder Program

I know, you're not going to watch a podcast about the business of pickleball, so by all means please don't click through this link.

But if you do watch part of it, around the 7:00 mark Tyson talks about his YouTube training videos being part of a "feeder program" to get players into his camps (where they pay $$$ ... where he makes $$$).

What is your "feeder program"?

I keep hearing how hard it has become for you to acquire new customers, and the data you send me mirrors your comments.

But again, what is your "feeder program"?

What is the program that you offer or employ to create awareness so that customers eventually purchase from you for the first time?

If you cannot answer the question in five seconds, you don't have a feeder program (paid social is not a feeder program, FYI).

What is the product you feature in your feeder program? Who is the person(ality) who cannot stop talking about the product in your feeder program (this person(ality) is not the influencer you pay to talk)?

What is your "feeder program"?

P.S.:  Pay attention to the comments that follow ... after he set up his program, crickets ... nothing happened for three months, causing a LOT of anxiety. And then ... then ... it worked. I know you hate to hear that stuff, because you want everything to work eleven seconds after launch. Life doesn't happen that way, does it?

P.P.S.:  In the 12th minute, Tyson talks about how the owner of one of the three entities in professional pickleball (Major League Pickleball) offered Tyson a "home" so that he could play in Austin. The guy is a billionaire, so that certainly helps, but he purchases homes and lets the best players live in those homes (in Austin) so they can play together, train, improve, and thereby improve his product (Major League Pickleball). What are the ways that you bring your customers together to improve your customer base and ultimately improve your "brand"?

Costco Hot Dog

Here's the tweet with the quote you should read (click here).

It's a $1.50 for a quarter pound hot dog and a drink and a free refill of the drink.

The combination of the end of the COVID-bump, the challenge of finding new customers, the (for catalogers) inability to get paper to even execute marketing tactics, the implosion of Facebook paid social thanks to Apple ... it results in a lot of emails being sent to me, asking for "strategies" to find new customers ... with quotes like "What is the next thing that worked as great as Facebook did for so long?"

That's a question ... there are better questions.

Like ... "what is our version of the Costco hot dog?"

This is where I start getting complaint mails from some of you in the studio audience ... "that won't work for us, we sell widgets, we're unique and we're special".

If you are that unique and you are that special then you have a version of the Costco hot dog and you should get busy promoting it so you can find new customers at an exceptionally low cost "and" be known for something "and" Facebook-proof your customer acquisition efforts.

Get busy!