The Green Bay Packers

This relates to e-commerce. Hang in there for a second.

In 2018 the Green Bay Packers were not a good football team. They fired their thirteen-season head coach, and started over with a new coach that had no head coaching experience. The new coach brought in a new offensive system. While 2019 was a bumpy offensive ride, the team was good, reaching the NFC Championship Game. In 2020, the offense clicked on all cylinders, and the team again reached the NFC Championship Game. A special teams catastrophe ended the 2021 season.

After losing their best wide receiver and dealing with injuries on the offensive line, the team was not great in 2022.

After losing two of three starting wide receivers and a Hall of Fame quarterback, the team is a dumpster fire in 2023 (so far).

How does this relate to e-commerce?

The same coach ... the same offensive philosophy that delivered fabulous performance in 2020 - 2021 exists today.

The players do not exist. They're gone. They players brought in to replace those who left or were injured are too young (so far) so perform consistently.

Yes, this is a discussion about what you sell. It doesn't matter what marketing talent you bring in, what vendor talent you outsource key functions to ... if you sell stuff the customer doesn't want to purchase, you will struggle. You will be the Green Bay Packers.

You'll Never Make It Up

When I perform my Merchandise Forensics work, there are two common mistakes that are very hard to come back from.

1. Discontinuing items that were "winners".
2. Not introducing enough new items.

We've all been part of merchandising regimes that kill off winners. It typically happens when a new team replaces a team ... those times when the previous management team is thrown out, the new CEO comes in, brings in a new lead merchant, and s/he has utter contempt for what used to sell well. "It's ugly!" Come fall, the "ugly" item that used to generate $794,000 in annual sales is gone. It's replaced by something that is "trend right" and generated $194,000 in annual sales. "Give it time!" we're told. No matter how much time you give the clunker, you never make up the $600,000 you lost.

Not enough new items ... there are logistical reasons why not enough new items were introduced, like the 2021 - early 2022 COVID period. That's mostly not your fault. But there are all the other times where the merchant just loses track of what is important. If the marketer needs enough new customers to fuel the future success of the business, then the merchant needs enough new items to fuel the future success of the business.

Say you generated $10,000,000 via new items two years ago, and those items produced $8,000,000 the year after. Now say this year you generated $6,000,000 via new items. What are you going to get next year from these items? Probably +/- $4,800,000. You give up another $3,200,000. No bueno. You'll never make up the loss.

If you don't work with me on a Merchandise Forensics project, be sure to have your analytics team focus effort on new customers and new items, ok?

Mentoring Your Marketing/Analytics Team

Hello Readers!

I am considering a consulting project where I mentor your analytics and/or marketing team, helping guide them toward answering the questions you have for them.

If you are interested in performing a trial of this concept between now and January 31, please email me (kevinh@minethatdata.com) with your specific questions, and we'll see if we can't figure something out, ok?

Last Chance

Last chance for the opportunity to benefit with new projects introduced in Hillstrom's Business Review, available (click here) on Amazon.

• Tell me you bought a copy of the booklet, and you get 30% off (click here) any/all of the projects discussed in the booklet.

Remember, it is still FORECASTING SEASON so Hillstrom's Business Review and Marketing Budget Experiments have never been more important. My Elite Program runs demonstrate that many businesses are turning the corner now ... things are about to get very interesting in 2024!

Third Parties

They are critically important.

We need Google/Facebook, or at least we perceive we need them.

My catalog clients need Quad, they need their Paper Rep, they need the USPS.

In mature industries, third parties seek to close out their competition. When successful, they are able to increase prices. When they increase prices, you suffer, and you don't have alternatives.

The "suffering" is what drives innovation. You need to come up with a new solution when your service providers pin you into a corner.

It's that time, folks, based on what so many of you are telling me.

You are now a media brand. You have to control your own generation of prospects who eventually become new customers.

It's time.

Call 'em

When you run an Inflection Points analysis, you quickly see a first-time buyer relationship that is impossible to miss.

The customer is hyper-responsive for, at most, two months.

If you know that ahead of time, what can you do to encourage more of these customers to purchase, before they hit an "inactive" inflection point?

One client had a model ... based on the attributes of the first purchase, if the customer fell into the top ten percent of first-time buyers based on model score, the client performed an outbound call to the first-time buyer within 10 days of a first purchase. It was a simple script:

• Did you receive your order?
• Was there any problem with your order?
• Is there anything you should have purchased that you didn't purchase? Because if the answer is yes, we'll expedite shipping to your home/office.

Just stupid-positive results. I saw the results. Stupid-positive.

Tell me what stops you from executing some version of this analysis?

Yes - I'll create a model for you to identify the best first-time buyers if you'd like to go down this path with your Inflection Points analysis. Email me now (kevinh@minethatdata.com) ... and if you purchased a copy of Hillstrom's Business Review you get a 30% pricing benefit through the end of the month ... a process I've always done with new products and especially new booklets.

Remember ...

Since it is FORECASTING SEASON if you need me to validate your annual forecast vs. what you see happening, it's just $2,000 to run the analysis (email me at kevinh@minethatdata.com).

And if you are interested in a Business Review, Marketing Budget Experiments, Inflection Point, or Merchandise Forensics analysis ... you get 30% off if you have purchased the booklet. Click here for pricing. Click here to purchase the booklet.

Ready For Some Wisdom!

Here's a quote from Twitter. It relates to talent development vs. talent identification. The context of the quote comes next. Ready for some wisdom via the world of sports?

Tom Byerトム•バイヤー

@tomsan106

Can’t beat teaching the basics, it’s highly underrated.

While Nike, post Michael Jordan, scoured the U.S. in search of the next Michael Jordan, foreign countries were focused on teaching young kids the basic fundamentals of ball handling. Currently, 1 out of 5 players in the NBA are foreign players. The past three MVP winners — Giannis Antetokounmpo, Jokic and Joel Embiid — are all international players. That group will include Luka Doncic someday as well. Talent Identification vs Talent Development, the later usually wins out in the long run. Football is no different. Raising the the bottom always pushes the top. Countries are too fixated on Elite Player development. Tiny countries are being taught how to identify potential talent from the tiniest of player pools instead of focusing more on Developing an army of kids who can just master a ball, the basics. This will automatically increase the Elite player pool organically. Many countries search for their Messi or Ronaldo. China searched for several years until they wised up and realized, out of their population of 1.4B people, they couldn’t find what they didn’t have. Same in India and Indonesia. Countries with the most populations seem to do the poorest when it comes to developing top players because they are being sold outdated models for development and not realizing their treasure chest are the millions of young kids that they need to just focus on, the basics! So yes, learning how to tie your shoes correctly before entering the court, is by far the most basic of basic skills needed before trying to learn how to dunk a basketball! (John Wooden, famous basketball coach, taught each player the proper way to tie shoes on the first day of practice each year).

Ok, I'm back! Do you know where I'm headed with this quote? Let's go to one sentence:

• Talent Identification vs. Talent Development, the later usually wins out in the long run.

Loyalty Programs are Talent Identification programs. You query your database, you identify the best customers, and you try to squeeze more juice out of the lemon.

Customer Acquisition efforts are Talent Development programs. You create awareness, the awareness leads to prospects, some of those prospects become customers, and some of those customers get to a point where Talent Identification determines those customers belong in a Loyalty Program.

I recall the blank stares I received thirty months ago when I posted that the best way to increase the number of loyal buyers is to increase the number of new customers. You could increase the number of loyal buyers by 10% or 20% via a loyalty program. Or, you could increase new customers by 20% every year and double the number of loyal buyers in five years.

I know this isn't what you want to hear - but we're marketing the wrong way, and your industry doesn't want you to know that.

Forecasting Season Continues

One of the components of our Elite Program is a forecast for demand/sales for next year.

I've had recent requests for a quick forecast to compare my customer-centric view of next year's business projection to your process. So, let's try something. If you want me to compare my view of customer-generated demand next year to your view, it'll cost $1,999 to run the analysis above and see where you are at.

Contact me now (kevinh@minethatdata.com) and send me five years of purchase history (file layout is listed here). After all, it is FORECASTING SEASON!

P.S.:  As of Wednesday night, this booklet was the 35th best selling Direct Marketing book on Amazon. Yeah, that'll change by the time you read this, but not bad (click here).

One of My Favorite Tables of All Time

Across thirty-five years, I've been able to quantify a bunch of relationships. There's a reason why loyalty efforts are so darn feckless. The reason is in this table.

Across brands, I modeled the relationship between annual rebuy rates (among twelve-month buyers), frequency (orders per repurchaser), AOV (your mileage will vary), NY Sales Value (Rebuy Rate * Freq * AOV), and "% Via Loyal" (percentage of total sales that come from loyal buyers with 0-12 month 5x+ LTD orders).

This is one of my favorite tables of all time, and for good reason. The table demonstrates why so many e-commerce brands attempt loyalty programs ... and nothing happens.

Pretend your e-commerce brand has customers with a 30% annual rebuy rate. This is one of those moments when somebody on your Executive Team suggests that "we'll just make 'em more loyal." #Sigh. 

The reason customers possess a 30% rebuy rate is because they don't need what you sell more than 2 times per year, if that often. It's what you sell that causes the problem, not some marketing solution including discounts.

It's what you sell that causes the problem.

If you are a department store, you might be failing, but the customers still purchasing merchandise want/need what you sell often. Your rebuy rate might by 70%, the customer might purchase six times per year.

The 30% rebuy rate brand generates $70.49 per twelve-month buyer at the start of the year.

The 70% rebuy rate brand generates $512.25 per twelve-month buyer at the start of the year.

That's a big difference.

The 30% rebuy rate brand generates 22% of annual sales from loyal buyers (0-12 month 5x+ LTD frequency).

The 70% rebuy rate brand generates 79% of annual sales from loyal buyers.

What you sell determines your annual rebuy rate.

What you sell determines if you have a large number of loyal buyers.

One of my favorite tables of all time makes this story crystal clear.

Special Offer For Hillstrom's Business Review!!!

As is customary for loyal, long-term blog readers, I offer you an opportunity.

Through October 31, send me an email saying you purchased the new booklet (click here) and you can have my new project offering ... Hillstrom's Business Review ... for 30% off as an introductory offer. I always offer new projects at a savings for my loyal readers. (Click here for pricing).

It is FORECASTING SEASON after all, so why not take advantage of a new project offering and get a head start on understanding what 2024 will deliver to your brand!

First New Booklet In Three Years: Hillstrom's Business Review

It's been a long-time coming, but building the core of my Marketing Budget Experiments framework wasn't done in an evening. I introduce to you ... Hillstrom's Business Review (available on Amazon - hint, the print version will be easier to read, the Kindle version is gonna have a lot of tiny numbers).

The booklet combines three key areas of analysis over the past three years.

• Marketing Budget Experiments.
• Merchandise Productivity.
• Inflection Points.

Combined, I present a different approach for analyzing the health of a business, allowing the reader to take action from a marketing investment standpoint and a customer interaction standpoint.

As always, I provide the general tools needed for creating your own Marketing Budget Experiment. I am not providing the actual application I use to perform my analyses.

If performing the actual work isn't your cup of tea, tomorrow I'll provide an offer for you for your own Business Review. Be ready to act tomorrow, available spots will go quickly!

Great Moments in Omnichannel History

Exhibit #14,943 ... JCP decides to pay Amazon for access to NFL viewers.

Amazon has spent the past twenty years ending JCPs business model, and JCP responds by paying Amazon to divert customers to, what, shop in a JCP store? And they aren't advertising anything. It's "remember us??"

Every single one of us now operates our own media brand. Amazon does. They had 10,000,000 to 13,000,000 people viewing Thursday Night Football on their platform. Think about that.

JCP has a YouTube channel with 700+ videos and ... and ... 46,000 subscribers (click here).

Tiny little Griot's Garage has 35,000 subscribers (click here).

We are all media brands. What we do to entertain our customers and prospects when they aren't purchasing (which is 363 out of 365 days a year) matters.

It's an uphill battle to pay the brand that is putting you out of business because you don't have a credible media strategy with reach.

Inflection Point Strategy

FYI - I'm about to complete a new booklet called "Hillstrom's Business Review". This booklet links my Marketing Budget Experiments work with Inflection Points and Merchandise Forensics.

One of the fun aspects of my work over the past two months is the development of an Inflection Point strategy for companies. I build models that predict how likely a customer is to purchase in the next year, the model is converted to a segmentation strategy that is generally used in email marketing to better target customers.

That's an oversimplification illustrated above - this stuff is performed/modeled at a customer level, so you know the appropriate strategy for every single customer within every single email campaign.

I know, most of you are just blasting 1-2 messages per day and wondering why response is so tepid. I get it. With a little bit more work, you can perform an awful lot better than you perform today.

NOTE:  If you want to get ahead of the curve and get in on a "Hillstrom's Business Review" project before I announce the beta, you'll get the absolute best price ... better than the beta/pilot price that will be announced in 1-2 weeks when the booklet is available. Contact me for details (kevinh@minethatdata.com).

Comp Segment Performance

Next week I begin analyzing a ton of Elite Program projects.

And unfortunately, sometimes I see something that looks like this.

That's a comp segment analysis ... I've been talking about comp segment analytics for a decade, as you are painfully aware. Here's a case where merchandise productivity crumbles in March, slumps even more in September, and is just an all-around disaster by the end of the year.

This tells us that the merchandising team messed up.

How did the mess up? Take a look at new merchandise.

My goodness. What a mess. The merchandising team just plain failed to properly manage new items (or failed to introduce enough new items or did both).

How about existing items?

They don't have a problem with existing items.

It's a new merchandise problem.

You're probably already running this table, right? If you aren't (for some reason), let me know and for just $1,800 as a new client we'll get busy with this run of the Elite Program.

There Are Months That Yield Bad Customers

In a recent project, customers buying from the following months were worth 10% less in the future:

• October.
• December.
• January.
  
• February.

Customers buying from these months were worth 10% more in the future.

• April.
• September.

Christmas and Discounting Season (Jan/Feb) yielded customers who weren't buying from the brand, they were buying for Christmas or because merch was cheap. That's an inflection point. You need to act upon the inflection point.

Similarly, this brand has new merchandise in April and again in September ... those are two months were new products are introduced. Turns out customers like that. Hmmm? That's an inflection point. Act upon it!

When Search Goes Bad

Want a search-related inflection point?

When analyzing inflection points, I measure the impact of orders attributed to search on future response. Here's a fun tidbit:

• Search can be a strong positive on a first order.
• By the time the customer orders for a third time, the fact that the order is attributed to search becomes an inflection point ... the customer is frequently less responsive going forward.

In other words, at the very time the customer should be becoming loyal to your brand, an order attributed to search suggests the opposite ... that the customer doesn't trust you.

Measure the dynamic for yourself. If you can't do it, contact me (kevinh@minethatdata.com) and I'll get busy doing just that for you.

Driving Business ... To Amazon

It's 2006, back in the stone ages. Gnarls Barkley sang "Crazy" and the song ended up being the top ranked song of the year. You could get a loan for a home by breathing on a mirror to demonstrate condensation. Amazon was becoming a force.

My team at Nordstrom had massive catalog mail/holdout tests. If our circulation was 2,000,000 catalogs, we held out 200,000 customers. Yeah, 200,000! This allowed us to measure lift at a segment level.

We also had a proprietary credit division at Nordstrom. This meant that if a customer purchased at Amazon (or Neiman Marcus or Target or your local gas station) using our credit card, we could attribute purchases to our mail/holdout test.

Yeah, that's good stuff!

So good, in fact, that we learned the following fact.

• For every incremental $1.00 we generated at Nordstrom from mailing a catalog, we drove $0.20 to Amazon.

Yeah, that's not so good.

I recall one test where we for every $1.00 we generated at Nordstrom we generated $1.00 for Amazon. Millions upon millions of dollars of free business we sent to Amazon via our own marketing efforts.

Is it possible that this happens at your brand? You send out an email "blast" and you drive business to Amazon?

At Nordstrom, we knew that Neiman Marcus store openings drove business to our stores, and we knew that our marketing efforts drove business to Amazon. Imagine what your marketing efforts are truly doing?

Panel Discussion

A funny one for you.

Remember when catalogs had source codes / key codes on the back of the catalog? You'd call the contact center and Besty would say "please read the key code off of the back of the catalog" and the customer would dutifully say something like "FN2AJPFB" which actually means "Fall November Drop 2 0-3 Month 3x+ $100 AOV".

I was on a panel discussion at NEMOA in 2007 on the "future of cataloging" or something like that. A question came up ... "how will we measure catalog performance in the future?"

I remember sharing with the audience that at Nordstrom we eliminated key codes years ago and simply measured incremental lift via A/B tests (mail vs. no mail). I mentioned that there would be no key codes in the future - no need for them, and they were not calibrated to measure the complicated performance of a customer visiting a website several times a week after receiving a catalog.

The audience laughed ... in the "oh that will never happen, idiot" way that audiences tend to respond.

The late Alan Rimm-Kaufman agreed with me. The woman from L.L. Bean was mysteriously quiet, suggesting she was headed down the same path and didn't want anybody in the audience to follow her. Seriously - if she agreed with me the audience would have stopped laughing instantly and would have done whatever she told them to do because she was from L.L. Bean and L.L. Bean could do no wrong in New England in 2007. A fourth member of the panel spoke glowingly of the importance of key codes - the audience nodded with loving approval ... the "She gets us, catalogs will be here forever" look of approval.

It's late in 2023 ... we all know what happened.

Vet your panelists ... some speak about the future ("it's an AI world and we are just living in it") and know nothing about what they are saying. Others are already practicing the future and the audience isn't smart enough to realize it. Then you have the vendors selling incessantly to the uniformed ("We think all brands will leverage Pilgrim Models in the future" ... and guess what ... they sell "Pilgrim Models" ... whatever those are).

Panel Discussions ... they're an interesting pot pourri of thought leadership and actual knowledge.

An Odd Inflection Point

In a recent project, customers (across the board) who purchased new merchandise in their order were 10% more responsive going forward.

Which is a big deal. When I run a Marketing Budget Experiment project, 10% translates to a lot more than 10% over time (due to the compounding interest generated by constantly increasing the size of the customer file).

If you know this fact, how would you (for instance) change your email marketing tactics? You're sending out a daily "blast" ... surely you'd find a way to change two of those five contacts each week to speak about new products that you love, right?

Second Purchase Inflection Points

Remember our graph for first-time buyers?

Does the relationship look similar for customers after a second purchase? You tell me.

Across the board, response is higher. But the relationship is very similar. The "anniversary bump" is now at months 10/11/12 instead of just at month 12, but the relationship is very similar.

I could keep showing you these images for 3rd/4th/5th purchases. No need. This is the relationship. Your mileage will vary, but not by a lot. I just ran the relationship for customers purchasing for a ninth time - same deal.

Again - I ask you, given how you market to customers today, you likely don't act upon this information (catalogers could via print). But if you could start over, knowing what you know here, how would you change what you are doing to account for the inflection points identified above?

First Purchase Inflection Points

You have a new customer - celebrate!

Now you need to do something. Yes, you! Do something.

Most first-time buyers have tiny windows of responsiveness. I realize this goes against just about everything you've ever been taught, but it is true. Here's one example ... from a successful brand. Look at incremental rebuy rates (i.e. the likelihood of purchasing in month "x" given that the customer has not previously purchased again). Tell me where the two inflection points are.

Go look at your own data - it's gonna look very similar to this.

The new customer is very responsive for a few months - with an inflection point between 2-3 months after a first purchase. Now the customer is less responsive. Notice the inflection point at Month = 12. When a customer approaches his/her "anniversary" of a first purchase, the customer becomes temporarily responsive. That's an inflection point!

I know how you market to customers today. You largely ignore this fact.

Now that you know this fact, how would you change how you market to new customers? Be specific with your recommendations.