August 31, 2023

Heading Into Fall

In the 70s, your Labor Day Weekend might have been dominated by watching the Jerry Lewis Labor Day Telethon. Would they get over $30,000,000? There was only ten minutes to go and they were at $28,000,000 ... then they got to $29,200,000 with five minutes to go ... then $29,800,000 with three minutes to go ... and then WOW they got to $31,300,000 ... THEY DID IT!

Yeah. The stone ages.

The 1976 telethon drew 85,000,000 viewers. As a percentage of the population more people watched the 1976 telethon than watched the Super Bowl last year.

Those were the days of a monoculture.

You don't run a business that operates in a monoculture. You have your customers and your zealots and virtually nobody else has ever heard about you or cares about you. You can run a $200,000,000 business with the average customer spending $100 per order buying 2 times per year and that means you have 1,000,000 annual customers out of a population of around 330,000,000 individuals. A huge business ... a tiny fraction of the population.

Based on your comments, a big focus for the rest of the year is nailing down what 2024 will look like. You want to know how much to spend to achieve the size of business and amount of profit that your Owner or Board of Directors or CEO aspire to. Some of you are growing nicely and want to measure your upside. Others are struggling. Either way, you need forecasting guidance.

I am working on one Marketing Budget Experiment in September and another one in October. I can perform about three of these per month, to be honest. So if you need forecasting help for 2024 that aligns with how many marketing dollars you should spend annually to achieve sales/profit objectives, contact me now and let's get busy (kevinh@minethatdata.com).

August 30, 2023

The Power of a Marketing Effort

I've told you this story before, but it bears repeating.

It's 1998, and I'm working at Eddie Bauer. A marketing campaign-centric brand. We had thirty "events" each year (out of 52 weeks). In essence, there was a campaign every-other-week.

We had an Executive who told me that the thirty campaigns demonstrated "the power of a marketing effort". It was one of those moments of pure gibberish. The statement sounded dynamic and meaningful in a meeting. But come on.

Back in 1998 I was highly motivated by disproving gibberish (maybe times don't change). So I forced my marketing team to conduct an experiment. For the next twenty-six weeks, a random sampling of our customer base would not receive a single marketing promotional campaign. We'd keep bulking up the catalogs ... but the marketing campaigns ("It's Summer Sale, take 50% off") were removed. No campaigns. If "the power of a marketing effort" was true, we'd see it in the test results.

Here's what the test results looked like.
  • Control Group (Campaigns):  Sales per Customer = $25.00. Profit/Customer = $5.00.
  • No Campaigns:  Sales per Customer = $25.00. Profit/Customer = $7.50.

In other words ... there was no "power of a marketing effort". 

Marketing campaigns at Eddie Bauer had no meaning to the customer. It was just an endless array of gibberish that the customer ignored.

There wasn't a soul at Eddie Bauer that believed my results. I didn't care. I had to prove to myself how feckless most marketing efforts are.

Recently a client told me that they executed a holdout test and found out that 93% of sales were organic and not driven by the catalog. They discontinued the catalog. The customer didn't even notice. The client was much more profitable as a consequence.

If you take away a marketing activity and sales don't change, you know that there was no power in that marketing effort.

By and large, most marketing campaigns cannibalize each other ... rendering each other meaningless. You're free to disagree with me.

August 29, 2023

Gibberish

Your marketing world is filled with non-stop gibberish ... empty words designed to capture your attention and separate the money in your marketing budget from your company.

"You need to surprise and delight your customer."

  • Seriously, what would it actually take for you to surprise and delight your customer? What specifically could the Vermont Bean Seed Company actually do to surprise and delight you? Be honest.
  • Want an example of surprising and delighting a customer? I was playing at a pickleball tournament on Saturday and the guy at the food stand saw one of the players gulping air while holding an empty soda cup and said to the woman ... "I'll fill that for you for free." That surprised and delighted the player. Your CFO isn't going to let you give away anything of meaning that costs virtually nothing.
"You need a 360 degree view of today's savvy consumer to be effective."
  • I'm sorry, I just threw up a little bit in my mouth. Wait a moment. Ok. What specifically would you do differently if you had a "360 degree view" of your customer? The answer is important, because if you know the answer, you'd have already implemented the idea via better data because it would be important to you and your customer, right?
"Omnichannel customers are the best customers."
  • If this is true, why did Amazon thrive while mall-based retailers died? These omnichannel sentences exemplify robust word salads of nothingness. Empty digital calories.
  • If this is true, wouldn't catalog brands have had an enormous head start over e-commerce?
"Millennials and Gen-Z increasingly crave deep, meaningful relationships with print."
  • Try a test next time you are confronted with a Gen-Z shopper. On one end of the table, lay down a Scheels catalog in front of the shopper. On the other end of the table, offer the individual her mobile phone. Let's just see how deep and meaningful the print relationship is.
"It's a full funnel experience that is seamless and frictionless."
  • It's gibberish.
  • There's no way that shopping via Google or Pinterest or Facebook or Instagram and then visiting your website and then going back out to TikTok before using your mobile site to buy online and then drive 22 miles to your store to pick up the item is seamless or frictionless. It is a full funnel experience, of course.
"Those who do 'x' will reap the rewards ..."
  • Please stop right there.
  • Nobody is reaping any rewards.
  • If there were rewards to be "reaped", the sentence would say something like "your profit will increase by 33% if you do 'x'".  Notice how none of these articles ever say that.
"Agile companies ..."
  • The very same company demanding that you make quick and nimble and effective decisions couldn't get a sales and product team on the phone with you until next week and then they present their standard/unaltered "deck" to you. Why are these folks allowed to "pitch a deck" to you demanding that you be "agile"?
Gibberish, folks. It's all around you. Put all those words in your digital fireplace and light 'em on fire.

August 28, 2023

A Huge Hurdle

A few years ago Customer Development projects were popular (click here). They were popular for a good reason ... there were all of these new customers courtesy of the COVID-bump. My client base wanted to know how those customers would stream through their customer ecosystem.

Well, thirty months later the customers streamed through the customer ecosystem. Most of the customers are now gone.

Many of you are curious why customers didn't stick around? You wonder why reactivation programs didn't work? Your vendor partners promised you "riches" in this pile of customers. Riches happened for a short period of time.

Here's what the story looks like for many of you.
  • 1st to a 2nd Purchase:  12 Month Probability = 22%. 24 Month = 28%. 60 Month = 33%.

Now, I've shared this data for nearly twenty years out here. I've repeatedly told you that when 22% of last year's customers repurchase, you don't really have a business with long-term customer value ... you just churn customers and are required to have low-cost customer acquisition programs to replace the customers to match the lack of long-term value.

Here in 2023, customer acquisition has become much harder for many of you.

The harder customer acquisition is, the more important it is that you accomplish two tasks.
  1. Get your customer acquisition costs as low as is possible (and that, by the way, is much lower than you think it is).
  2. Get your future profit per customer as high as is possible.

I know both tasks are very challenging. You believe you've already unearthed every possible option. There are more options. Try developing partnerships with comparable companies in other industries that leverage different marketing methods. Learn what can be done. I can't tell you what to do as y'all ask me 

August 23, 2023

Comp Store Sales

Oh look ... omnichannel darling Macy's is leaking sales once again (click here).

Sure, it's the fault of the "consumer" ... defaulting on credit. Sure.

Explain how Bluemercury, owned by Macy's, had comp store sales increases if the "consumer" is the problem?

Back in the stone ages when I worked at Eddie Bauer, it was always somebody else's fault that business stunk. It was never the merchandise.

Early in my time at Nordstrom, I recall sitting in a Management meeting. Business was bad. Our CEO (Blake Nordstrom) put up a slide as he always did, showing comp store sales increases/decreases by Merchandise Division. It looked something like this:

  • Accessories = +5.4%.
  • Cosmetics = +2.3%.
  • Womens Footwear = -1.0%.
  • Womens Apparel = -2.1%.
  • Mens Apparel = -3.3%.
  • Mens Footwear = -5.2%.

There were more divisions than this ... this is for illustrative purposes.

Our CEO looked at the audience, paused, then briefly opined about why, if the "consumer" was stressed as the industry stated back in the days following September 11, the Accessories Division was posting +5% comps? Why, if the "consumer" was not buying, was the customer buying Accessories?

The room got really quiet, and for good reason.

The answer, of course, was that the "consumer" and the narrative surrounding the "consumer" was irrelevant. What was relevant was finding something the Customer wanted to purchase at a price the Customer was willing to pay, enabling the Brand to be profitable.

Do not listen to industry narratives bemoaning a stressed "consumer". Pure garbage. It's your job to figure out what your Customer is willing to purchase at a price that is fair to the Customer and to your Brand.

August 22, 2023

My Couch

It reclines, which is certainly a nice feature.

Well, it used to recline.

It's only six years old. The latch keeps breaking. The mechanism was poorly designed. It broke. A repair man that frightened the living daylights out of me fixed it (imagine hot rage from a stranger in your living room during the repair because the repair was not going well). I found a different repair person. He fixed it and said "when this one breaks, it's over ... they don't make the mechanism anymore". That was back in June.

Every day in August you could feel the thing breaking. You just crossed your fingers and hoped for the best ... until Saturday, when it finally gave up for the third time.

One of our loyal readers recently emailed me ... lamenting how their business model felt broken. After exchanging emails, the person just sort of gave up ... if it's broken, let's just milk what works for as long as we can.

Growing up, there was a drive-in eatery on the outskirts of town ... The Penguin! They served phosphates. I'd ask my parents what those were? I was told the beverages were popular in the 1950s. It was the 1970s. The business model was broken, and they were lumbering along regardless. After all, it was the home of the Big Penny!


The Penguin is not there anymore, FYI.

Oh, it took several decades for the thing to crumble down.

If you are not actively rebuilding every aspect of your business, you are in the process of crumbling down. Just like my couch. I can keep sitting on it ... broken. Or I can choose to make a change. My knees tell me that a change is coming.

In some ways, 2020 - 2022 put everything on hold. Folks had to figure out how to work from home, they had to figure out how to deal with supply chain shortages, they had to figure out how to raise prices in a way that protected the business without greatly offending the customer.

Many things broke during this timeframe. It was easy to ignore everything that broke, because the urgency of other issues overshadowed minor breakdowns.

Well, we're headed to 2024 and now the foundation of many businesses is crumbling. 2024 almost has to be a rebuilding year ... in so many ways. It can't end up being like my couch.


P.S.: If you are in Manitowoc, stop by Late's and enjoy a perch fry. Now, this is the point in the story where somebody will parse the difference between The Penguin and Late's and say "there's no difference, Late's is still in business, so all is good" ... which of course is utter nonsense. Late's is located next to a park which sits along a beach on Lake Michigan. If you're gonna go the old school route, there has to be a catch ... an exception ... something to complement the old school route.






August 21, 2023

A Grumpy Audience

Or, in the case of network television, no audience.

More on that in a moment.

The year was 2012. I presented my Judy / Jennifer / Jasmine framework at a conference. Back then, Judy was a 59 year old catalog shopper, Jennifer was the hated 43 year old e-commerce customer, and Jasmine was the 27 year old mobile future of commerce. Today, Judy would be 70, Jennifer 54, and Jasmine 38 years old. We'd add a 22 year old Jadyn to the mix.

When I presented Jennifer, the audience hissed ... you could hear it, you could feel the contempt. The fine people of New England had no tolerance for the e-commerce loving persona. When I got to Jasmine, the audience glowed. They loved the catalog-shopping 59 year old ... they loved the 27 year old.

One of our intrepid conference attendees raised his hand, and asked me a question.
  • "Can we teach Jasmine to love paper?"

When you are speaking at a conference, you are part of a show. There's give and take. Push and pull. A quick scan of the audience showed a lot of hope ... they anticipated a favorable opinion. Would this be the moment that the speaker (me) charts a course allowing the attendees to continue doing what they love doing?

No.

I told the audience that every generation creates their own traditions. In the same way that Judy eschewed the "big books" produced by Sears or Montgomery Wards or JCP, Jasmine would eschew what had become traditional e-commerce and would not have any interest whatsoever in print. 

She most certainly fulfilled the prophesy.

It was like popping a balloon.

The audience was grumpy. The audience left unsatisfied.

But this is how transition happens. The old-school audience sticks around, you never acquire the newer audience or you acquire them and lose them. Ask linear television about this dynamic. Two things happen - younger customers "cut the cord" or never watch linear television in the first place ... and then the heavy users all end up being age 50+. Somebody will say "oh look at the numbers for the young people who watched 'show x' on 'network y'" ... but those one-offs are always said and are always meaningless. 

Why do you think ESPN is going through an existential crisis?

We are not going to teach younger people how to embrace traditions. Younger people are going to teach us how the world will change. It's our job to adapt and change, and if we don't do that, we become part of a grumpy audience, don't we?

August 17, 2023

Creating an Event


What is the one event your brand hosts each year ... the event that is the pinnacle of everything you stand for? The one event that your customers MUST purchase from you or they have FOMO?

Do not answer "Christmas" or answer with a generic "Holiday" statement. Don't do that. That's not an event.

Do not answer "We have a sale the same day as Amazon Prime Day". That means you are a parasite.

Do not answer "We are 75% off on swimwear in July". That's not an event. That's a capitulation.

What is the one event your brand hosts each year that is the pinnacle of everything you stand for?

If you cannot answer that question, you don't have an event, and you don't stand for much.

In the NFL, you have the Super Bowl. Everything builds toward that event. Soccer/Football has the World Cup ... only held every four years. The EFL has promotion/relegation which builds all year until crazy stuff happens in late April - May.

Amazon has Prime Day. They created that, you know, out of thin air ... a summer event at an awful time of the year ... turning it into the GDP of Sweden. They duped the entire trade industry into promoting the event for them. They duped Target into supporting Amazon by creating their own parasitic event. They duped you into selling your merchandise on Prime Day on their platform to support their event.

Nordstrom has Anniversary Sale (late July - early August), selling new Fall merch at 20% off (whereas it is full-price otherwise ... not a fake sale). I saw how a brand builds anticipation toward an event, pushing the entire rewards program toward purchases that give the customer perks for the event.

What is the one event your brand hosts each year that is the pinnacle of everything you stand for?

No, it is not the "Outerwear Sale" in October ... unless everything your brand does all year builds to that one event. I was in a meeting at Eddie Bauer in 1998 where the CEO told the room he wanted to maintain "sale integrity" and he felt that having 30 sale events out of 52 weeks did that but the 31st sale would push the customer too far. So the "Outerwear Sale" had no meaning ... it was the 30th different sale.

I'm asking you what is the one event you have that sets you apart from everybody else?

Can you answer the question?

If not, maybe it is time to create an event?

August 16, 2023

Don't Get The Slope Wrong

In Paid Search, you can make budgeting mistakes and barely notice them ... until your CFO produces a p&l for you.

Some marketing channels has a nice "slope" ... you increase ad spend by 50% and you get an approximate 20% to 25% gain in sales. It's predictable, reliable, and the relationship makes you look good.

Paid Search often has a sharp cutoff ... you get a ton of sales in the first third of your ad spend, from there sales gains are trivial as you continue to spend.

If you get the relationship wrong, you have the top portion of the table below in your forecast but the bottom portion of the table represents reality.


Long-term, your guesstimate for profit for a one-year increase in investment is positive.

In reality (below), you lose a fortune in year one and you don't make in up in years 2/3/4/5.

Every marketing channel has a slope ... the slope determines the diminishing returns relationship. Don't get the slope wrong!




August 15, 2023

From Regional to National


One of the comments suggested that the 49ers can't get that many fans to attend their own regular season games.

When the Raiders moved to Las Vegas, they traded a somewhat regional environment (Oakland, part of the Bay Area) to a national presence. This comes with benefits and risks. You get the new stadium you couldn't get in Oakland, you lose the loyal fans who watched you in a run-down stadium.

I have clients from all over the world. I have two regions that deliver a disproportionate number of projects.
  1. Vermont / New Hampshire.
  2. California.

The VT/NH group is the epitome of a regional environment. This segment of e-commerce views their customer as their neighbor. Their style of marketing is regional and specific. Their products are often regional and are the reason customers from outside the region purchase. Attend a conference in their region and you'll learn all about best practices that don't have relevance in other regions of the country.

California brands (generalizing here, obviously) have gone national. Their e-commerce tactics are somewhat sterile. Their products "can" be sterile as well. They shave off personality to appeal to a larger audience. Not all of 'em, obviously, but there is a difference.

It's difficult to make the leap from regional to national (and much harder to go from national to international). You can sell in all fifty states, but "who" you are and "how" you do it is fully regional. You can be bland (Home Depot) and appeal somewhat to many people.

Choices.


August 14, 2023

Organic Percentage Post #1,149

The majority of you under-estimate how much business you generate without the aid of marketing. 

In the example I've been working through for the past few months, the brand estimated that just 15.2% of sales are "organic" and are not driven by marketing.

Obviously, the brand is wrong. This brand has email holdout tests, and knows how much of the email total happens when emails aren't sent. The brand has print holdout tests, and knows how much of the print total happens when print isn't put in the mail. The brand knows what happens when their search/social budgets are trimmed. They know they'll get more sales ... but they attribute organic sales to marketing efforts regardless.

The more organic sales you attribute to marketing efforts, the more valuable your marketing team looks. See how that works?

The best brands I work with have a large chunk of unattributed sales. They know that customers mysteriously wobble into purchases ... successful businesses do that all day, every day.

August 13, 2023

Forecasting

One of the least favorite parts of running old-school circulation functions 20-25 years ago was forecasting sales by hour the week a catalog was in-home.

What an awful, awful job.

Fool's gold.

A catalog would have an in-home window courtesy of the USPS (Monday - Wednesday). Your printer would deliver your catalogs deep into the USPS system, and then the USPS would deliver the catalog to the mailbox.

I had one analyst 100% dedicated to forecasting, and half of what this person did was create a forecast by hour for delivery measurement purposes (which to be fair fed our call center forecast, even though the call center had been gutted by the transition of customers to online purchases).

  • 8:00am = $100,000 sales.
  • 9:00am = $140,000 sales.
  • 10:00am = $200,000 sales.
  • 11:00am = $180,000 sales.
The forecast was created based on history. We knew what slow/average/fast delivery looked like, and we had a forecast for sales for the catalog.

So on Monday morning, there would be a phone call ... usually around 11:00am.


Ring ring.

Ring ring.

Ring ring.

Kevin:  "Hello".

Chief Merchandising Officer:  "Kevin, the catalog is off by 15%. Is this because delivery is slow, or is the forecast wrong?"

Kevin:  "Maybe customers don't like the merchandise?"

Chief Merchandising Officer:  "You make d&*$ sure your forecast is accurate."

It was never be possible that the catalog was awful. It was always the forecast.

For the next four days my analyst and I would get screamed at ... by merchants ... by inventory leaders ... by the CFO ... by the CEO ... by randos.

By the following week, one week later, it was clear that the catalog was awful. Sure, delivery might have been a bit slow, but the catalog was a clunker and the merchants were accountable and attention would shift from blaming the forecast to blaming delivery to blaming my team for "mailing the wrong customers". Just non-stop petulance from those accountable.

The secret to forecasting is to not micro-manage hourly forecasts. None of us are capable of accurately forecasting anything hourly.

All of us are capable of forecasting stuff at a high level. And honestly, this is all that matters (unless you are running a call center, of course). Forecasting high-level issues allows your brand to pre-emptively prevent bad outcomes. Micro-forecasts create myriad opportunities for somebody to criticize.

August 09, 2023

We Raised Prices. It Worked For A Year

Never trade a customer for a dollar.

Here's a common scenario.

  • Prices were increased by 10% in 2022.
  • Response decreased by 10%.
  • Spend per Customer increased by 11.1%.
The outcome of this tradeoff is flat demand/sales. All is good.

Now it's 2023. And guess what? The relationship isn't working anymore.

You know why?

Because in 2022 when response decreased by 10%, you lost 10% of your housefile. Congrats! Those customers aren't there to buy from you anymore.

Want to see what that relationship looks like over five years?


Assuming prices remain at this level for the next five years, this business goes from $210 million on the top-line to $192 million because the business is starved of customers.

Never trade a customer for a dollar.

Profit suffers as well. In fact, in this Marketing Budget Experiment, gross margin percentages would have to increase by 1.4 points (from 50.1% to 51.5%) ... if you're passing cost of goods increases on to the customer, you might even have a gross margin percentage decrease.

I realize you likely have to pass cost increases on to the customer. But there is a price you pay ... and you can't see that price for 2-3 years AFTER you make the decision. By then it is too late.

I'm guessing you run some sort of long-term scenario that fuses price increases with customer response, customer spend, and customer segment migration patterns ... so you already know much of what I'm sharing here. Regardless, the facts need to be shared with all of you.


August 08, 2023

Fast vs. Long Payback Window

The table below features two different payback windows. Both windows pay you back the same amount of profit within five years. The top portion of the table pays you back quickly, the bottom portion of the table pays you back slowly.


Which business would you prefer to run? I'd prefer the top business. With rapid payback, you are profitable faster, meaning you can actually invest even more money today.

If you run this table for your business, you fully understand how your payback window looks by marketing channel, correct? If you don't run this table, give me a holler and we'll get you started with a Marketing Budget Experiment.


August 07, 2023

It Does Make A Difference

In yesterday's post (click here), far more of you clicked on the bait-centric link about the Top 20 Omnichannel Brands than clicked on the story about merchandise/presentation in a Macy's store.

#sigh

Can I show you something? I ran a Marketing Budget Experiment for the brand below. In each year, I added 2.5% to merchandise productivity ... 1.25% to response, 1.25% to spend. Look at how the top-line and p&l changes over time.


I mean, you barely notice a difference after one year.

At year five, the business is almost 20% larger, with more than 33% more variable profit (likely leading to 50% more earnings before taxes).

The best companies I work with are relentlessly looking for 2.5% more merchandise productivity, annually. They never quit.

When I share this stuff on Twitter, that audience looks for "marketing hacks" ... ways to cheat by spending marketing dollars.

The easiest place to improve merchandise productivity is email marketing. Easiest. By far. Look at how you present merchandise via email marketing ... this can easily be improved via testing. Look at what you present ... this can easily be improved by analyzing what customers purchase via email marketing (hint, it's different than what customers purchase via other channels). Look at what you offer ... this can be improved dramatically by showing every customer a different subset of your assortment.

Come on, let's get busy ... you can do this ... you can grow your brand without blaming Google for changes in their PLAs ... you can grow without depending upon an unholy alliance between Facebook and Apple paired with fabricated reporting from your favorite social media source. You can do this!



August 06, 2023

For Your Reading Pleasure



Repeatedly ... repeatedly ... merchandising/presentation issues are an overriding challenge in 2023. E-commerce or Retail, it does not matter. We're executing whatever the marketing gurus want executed. We aren't executing "what" we sell or "how" it is presented, and we aren't even bothering with human details.

If you are the customer, you are buying "what" we sell, and "how" we present it matters. I mean, you can spend tens of millions of dollars to facilitate "buy online, pickup in store" and then you go to store and it looks awful and is thoroughly understaffed ... you just blew the "how".

Here's a fun quote from the second article:
  • "But when I went to the register, no one was there to help me check out. I waited for a few minutes, just long enough to change my mind and put the shirt back."
Omnichannel!!

I once consulted with a retail brand. I noticed that there were no employees (there weren't any customers, either). I waited a good ten minutes until an employee somehow appeared ... the employee looked at me and said "you aren't one of those spies from corporate, are you?" The store was sloppy, unappealing, lifeless. I did take pictures. I shared them with the Executive Team. Heads slumped. I never sensed they slumped enough to do anything about what they saw.

We're going through a process of stripping humans out of the retail and e-commerce experience. Something is gained and something is lost when progress happens. We're losing more than we're gaining in 2023.

August 02, 2023

A Telling Statement

I frequently referenced this website to find out how many people were watching Pickleball on ESPN or CBS ... a month ago they announced that they were finished (click here).
One of the statements is absolutely telling.
  • "As everyone is aware, the bottom has dropped out of linear viewership, and the ratings have had increasingly less utility.  (Last Thursday’s cable ratings in the 18-49 demo included 25 shows clustered between 0.09-0.12, basically molecules of difference.)  The balance of home viewing, for better or worse, has swung toward streaming, and the proprietors of those companies have chosen to be opaque with their information, providing data that’s incomplete and unverified when it’s available at all.  That very lack of transparency is one of the key issues in the ongoing Writers Guild strike.  Meanwhile, scrutiny of linear numbers is becoming a preoccupation akin to documenting angels on the head of a pin."

For the first nine years of my consulting work, catalog brands represented more than half of my business. Now a quarter to half of those companies are no longer in business! As I shifted my content toward merchandise and forecasting/budgeting and customer development, I lost "some" readers from the catalog world ... "content no longer relevant" was the reason they gave.

Meanwhile, an industry leader penned a piece saying that even when the customer throws out a catalog there is value because the customer had to look at a catalog to throw it out. Sort of like there is value in a dollar because you have to look at the dollar as you light it on fire.

There are amazing competitive differences out there right now. There are brands I'm working with who have ten million dollars to spend and want to know how much money they lose paired with how many customers they generate so that the business looks ripe to an investor in a few years. This kind of stuff has always happened, but wowzer, what a difference from a catalog brand looking to cut back on catalog spend by 50% because they can't get paper and the paper they can get is terribly expensive and response is declining anyway and the customers buying are age 65+. I mean, it's two completely opposite worlds. It's like the two different worlds in the quote above.

Toss in subscription-based business models (it's a key way to overcome the tepid 25% annual rebuy rate e-commerce businesses suffer with), and we realize just how much the word changed. Yeah. Completely different than a decade ago. I mean, last weekend CBS showed Pickleball at a time when an affiliate might have broadcast a scripted show a decade ago. A completely different world.

It's time for you, a Leader in my industry, to respond to this different world. You've got this! You have so many choices, so many ways to be successful.


August 01, 2023

Yeah, Merchandise!

Seven years ago, I'd wake up on a summer morning, drive down to the port, walk down to the fish shop, and select from whatever was caught in Puget Sound the night before or whatever was flown in from Alaska from 24 hours ago. Let me tell you, this stuff tasted infinitely better than what you'd find at your local Kroger-based store. It cost more, as well.

When you move to the desert, fresh seafood is not something easy to find.



It's a half-hour drive from my house to the store. The store is all of 350 square feet ... all fresh fish. It's more expensive than buying frozen fish sticks, I'll tell ya that much. But the taste? Ohhhhhh.

When I showed up on Saturday, the line at the counter was ten-deep ... every person in there spending $100. Do the math. Their costs must be stupid high ... their revenue also stupid high.

Now, their Instagram page seems reasonable. Their emails, which I subscribe to, violate just about every single best practice your favorite thought leader can dream up.

"THIS IS THE BEST PIECE OF FISH I'VE EATEN THIS YEAR"--NELLIE.  WILD STRIPED SEA BASS MA. 1ST OF THE SEASON.  WHATEVER THEY ARE FEEDING ON THIS YEAR (MOST LIKELY SQUID + EEL) HAS CREATED AN ICREDIBLY MOIST, FATTY, SWEET, DELICATE FLAKEY FLESH...NOT TO BE MISSED IF YOU LOVE GREAT SEAFOOD!


All caps text screaming out their passion. It's five pages of this stuff! All good enough to get me in my car on a 116 degree day to drive thirty minutes to a 350 square foot store with a line ten-deep bending around the counter purchasing seafood at $42.50 a pound, in $100 quantities.

If you are the only place in Phoenix flying in fresh Faroe Island Salmon on a daily basis, you can charge $34 a pound, and without any competition to speak of, you can maintain price integrity.

Yeah, merchandise! What we sell matters. If we choose to sell stuff everybody else sells, it's hard to sell stuff, isn't it?

One of the brands many of my readers love sent me three emails on Sunday offering more than 50% off. Three! Seriously, do you even care about the merchandise you sell if you have to send me three emails on a Sunday begging me to pay half? "You'll love our Chinos!" You don't even love your own Chinos! If you loved them you wouldn't price them at $59.99 and then offer them at half-off and then offer an additional 30% off on top of the half-off because it's "Christmas in July". You are selling the Chinos for $21.00, which means the gross margin is probably $14.00. It's contempt for the product, and it's contempt for the customer.

I worked with a company that had Seth Godin visit and speak to the employees. Yeah, that's old-school. He was the pundit of the day. This company sold stuff you can purchase just about anywhere. This brand spent about 25% of their net sales on marketing, a whopping percentage. Mr. Godin alluded (gently) to the fact that if you have to spend 25% of net sales on marketing you don't have a compelling story. Shoulders slumped. Mr. Godin got paid. Nothing changed.

Your merchandise should easily translate to a compelling story. 

And if your merchandise does not easily translate into a compelling story, you have to create a story tangential to your merchandise. How the heck does Crutchfield stay in business when Amazon or Best Buy copied their assortment? How the heck does Orvis still do $300,000,000 in annual net sales?

Sell something unique and charge whatever you want - the merchandise becomes your story.

Sell something anybody can get anywhere and you better have a compelling story tangential to what you are selling.

These themes keep coming up in my Marketing Budget Experiments work (click here). Merchandise productivity is simply not sufficient to fuel brand health. Merchandise productivity is a fusion of what you sell and the story you tell when selling it.

Good Vendor Employees Are Working All Around You

So I'm on a Zoom yesterday, and the individual representing the vendor did SUCH a good job. What does doing a good job look like? Patien...