July 18, 2024

Cost Differences

Do you remember Bernie Mac in Oceans Eleven ... negotiating van prices? Muttering nonsense about Aloe Vera while squeezing the sales dude's hand so hard that the sales dude dropped the price of the vans another two-thousand dollars each?





It was a more enjoyable world when Bernie Mac was with in it.


Anyway, I get to see the advertising cost of mailings. One brand puts 84 pages in the mail for $0.95, another brand for $0.67. You might imagine that one of these brands has a different perspective on cost inflation than the other. 

Maybe one of these brands has Bernie Mac doing the negotiations.

If you are on the high end of the comparison above, might it be time to have a discussion with somebody? Or if volume is the problem, maybe it is time for twenty small brands to band together in some fashion (no, not co-mailing) to be treated better.

As the late Don Libey used to ask, "what if?".


July 17, 2024

My Twitter Readers Are Admittedly Biased Toward My Content

But the thirty respondents who voted, well, they voted with uniformity.



So why do you think it is that so darn much focus is on points, promotions, discounts, and campaigns?


P.S.:  I know what some of you are thinking ... "KEVIN, YOU IDIOT, WE ARE MARKETERS, WE DON'T CONTROL THE MERCHANDISE!". Well, if you love handing out points, why not hand out points to customers who buy specific new items upon new item introduction? Or why not hand out points to customers who buy in June when you are in clearance mode to help you get rid of stuff? Why not hand out points to customers who see your Instagram post and buy the featured item in the post? You have so many choices, choices that are merchandise-centric, right?



July 16, 2024

First Three Months After A First Order

By now, most of you have a separate and fully-developed program to convert a first-time buyers to a second purchase within three months of a first order.

You have one, right?

There's all sorts of fun things you can do. I know, you're about to say "PLEASE STOP WITH THE HEADPHONE STUFF", but here's what Headphones.com did last Saturday to me, a first-time buyer with recency = 20 days since a first purchase.




This stuff is particularly effective with first-time buyers or customers who just reactivated from 37+ month recency status.

I once had an e-commerce professional tell me that her brand "had more than enough traffic, we just don't do anything to convert the traffic to a purchase". Smart woman! Try something like what is illustrated above with customers who placed a first order within the past ninety days and report back here to tell us how the program worked.


July 15, 2024

When Winners Aren't Quite Winners

It's common to measure winners via total demand generated.

It's an easy calculation. But it's also the wrong calculation.

It's important to assess ad cost as well (and gross margin and marketing promotions, yup). Email marketing is inexpensive. PLAs are frequently expensive because they attract a disproportionate number of new/reactivated customers. Catalogs are ridiculously expensive in modern times. As a result, the item that is a winner may not be a winner after accounting for profitability.



In this example, the high-performing catalog-centric item is not as profitable as the email-centric item that generates 60% of the sales of the catalog-centric item. The PLA-centric item is much less profitable ... in part because of the customers the marketing channel attracts.

I've had requests to provide more "free tips" ... this is a whopper of a free tip, I'm helping you figure out the items that are true winners, the items that should be featured where possible across your marketing channels. Please take advantage of this "free tip" that you've asked for, ok?



July 14, 2024

Alex Morgan (Yes, This Will Be About Merchandise)

When the USWNT Olympics Team was announced, all-time great Alex Morgan wasn't on the team. Nor was she on the four player alternate list. The new coach stated she was taking the team in a different direction. Which, if you follow the team, is sad.

Alex Morgan was the youngest member of the 2011 World Cup team that lost to Japan, and was a central figure in the teams that won the World Cup in 2015 and 2019. She also made the 2023 World Cup team that did not medal.

In Merchandise Dynamics terms, she was a member of the Class of 2010 (when she joined the team), was a winner for nearly a decade, and now will not play for an opportunity to win Olympic Gold.

You have items in your assortment that are comparable. Maybe it's the Start Here Slinky Tank, or the Ruched-Waist Houndstooth Floral Dress.

You'll know you have a budding problem if you measure the "age of winners". You already do this, right? For each of the items you believe are "winners", you measure the number of months the item has been offered. If you have a problem, the problem looks like this.

  • Through 7/10/2024 = Winners are 39.4 months old.
  • Through 7/10/2023 = Winners are 33.2 months old.
  • Through 7/10/2022 = Winners are 28.5 months old.
  • Through 7/10/2021 = Winners are 27.9 months old.


This means your assortment is aging. You are not finding new items to replace the items that always worked.

Your assortment will always go through a transition, with best sellers extracting as much profit as possible from customers before tiring, before being replaces by up-and-coming items. You are no different than the General Manager of an NFL, MLB, NHL, or NBA team. In fact, you should have a prediction for every item in your assortment for how long of a life that item has left. You are no different than the Green Bay Packers, assessing the number of high-performing years that Aaron Rodgers had left, analyzing that against the upside potential of Jordan Love, and then making a decision that was very risky at the time and, in retrospect, pretty clever.

Does this make sense to you?

Measure the "age of winners", and let me know what you learn. Well-run brands may not analyze this specific metric, but they know what the metric means and they have a succession plan for every winning item in their assortment.

July 11, 2024

Focusing on Tiny Things

Sometimes on LinkedIn you'll see "all the good stuff" from the CEO. An image of twelve people sitting inside a restaurant, glasses of wine from a 2009 Paso Cab, half-eaten ribeyes and chicken piccata with nineteen dollar roasted cauliflower sharable sides, and a quote saying "My team and I are recharging before a big day tomorrow with Acme Industries!" The post will be liked seventy-nine times, with eight comments from individuals with titles like "Strategic Thinker" saying "this is what true leadership looks like". 

Oh, LinkedIn! How cute.

Conversely, I once worked for a President who sat at the cubicle of my forecast analyst for several days to watch all of the details of how the hourly call center volume forecast was created. He'd asked questions like "don't you think the forecast of 1,137 calls at 10:00am on Wednesday is 5% too high?" My analyst would look at me, pleading for help.



That is an instance of focusing on a tiny thing.

Increasingly, I'm seeing focus on "tiny things".

And I get it ... you focus on tiny things because it's easier to deal with the subject line on an email campaign than it is to deal with the existential/structural issue of paying the same amount of money for 25% fewer new customers with increases in marketing costs coming seemingly forever. Easier to put the forecast analyst on blast mode about hourly order forecasts than to figure out how those orders will be generated in two years.

Some CEOs are focusing on bigger topics right now. They have to do that. Every employee needs them to do that. The brand they support won't exist if they don't do that.

Catalog CEOs ... don't let your paper/print/postage partners push you toward small topics that keep their cash register dinging (kids - there used to be things called cash registers - you can still see them at your local grocery store). You need to be looking to the future, and you know your future involves much less print than it requires today. Could you go to Washington, DC and lobby for lower postage costs? Sure. Have dinner, enjoy yourself. But you are focusing on a small thing. No amount of work on that front matters anymore. The very organization that supported you for nearly twenty years removed the word "catalog" from the name of their brand. That tells you all you need to know. They're reducing their focus on tiny things.

July 10, 2024

McDonalds

Let's use a Dale Carnegie technique ... show of hands, how many of you have eaten at McDonalds?

Now, how many of you routinely eat salads when you go to McDonalds?

You might enjoy this article, sent to me by an intrepid reader (my wife), about the de-emphasis of salads at McDonalds (click here).

One of the seminal moments in my career happened at Nordstrom in 2003. We were having endless meetings about shutting down the catalog division, and at one point I mentioned that the catalog generated $160,000,000 in annual sales and about $8,000,000 in annual profit. My boss said "who cares"? Stunned, I said something pithy like "shareholders care, it matters that we generate sales and profit." Her response was even better.

  • "Kevin, we discontinue items every single day. Every single day. And yet, we somehow move forward. We can discontinue a marketing channel in the same way we discontinue products. Besides, we don't want that customer."

I went back to my office ... a naive 37 year old Vice President, pondering how stupid my company was to not want the profit from a catalog customer in North Dakota.

And then I thought about it.
  • You can discontinue marketing channels, it's ok.
  • It's ok to not want all customers.

So yeah, if McDonalds doesn't want the salad eater, that's fine. Go make the McRib customer happy. And yeah, they'll be told that they don't have healthy options. My goodness. There's an infinite world of healthy options. Salad and Go has 'em. Interestingly, they don't want the McRib customer.

Have you ever asked yourself who the customer is that Macy's wants?

Or how about your brand?

July 09, 2024

Min-Maxing

It's a concept from video games and baseball ... "What do you do best? Let's do more of it!"

It's a concept that came up twice in projects in the past six months (and yes, I'm about to dummy-up the situations to protect the innocent).

First, an e-commerce brand was exceptionally good at acquiring new customers via product listing ads. They were so good they kept growing and growing and growing ... until they hit their optimal level. From there, every additional dollar spent was sub-optimal, harming profitability. When I explained the concept to the Chief Marketing Officer, she said "what do I do next?"

Second, an old-school catalog brand was exceptionally good at (checks notes) cataloging. One problem. The paper/printing/postage ecosystem was increasing costs that the brand could not longer generate 10% pre-tax profit while maintaining net sales at a constant level. They could get to 10% pre-tax profit by reducing circulation by 30%, but that solution was unpalatable to the Owner. The Chief Marketing Officer looked at me on a video conference and said "what do I do next?"

In fact, the phrase "what do I do next" comes up repeatedly ... not just in the two projects mentioned above, but in 75% of my projects. In the first example, the e-commerce brand was good at one thing (product listing ads). In the second example, the old-school catalog brand was good at one thing (mailing catalogs).

Now, imagine being a major league pitcher. You are good at curve balls. You change spin rates, you change speeds, you change pitching angles. All of those tactics make your curve balls more effective. And yet, you can't throw curve balls on every pitch, or you will get lit up. So you should be good at something else as well to set up your curve ball ... not as good as throwing your curve ball, but you need multiple skills to maximize the one thing you are good at.

Imagine if the e-commerce brand or the old-school catalog brand were good at something else? They wouldn't ask me the question "what do I do next?"

If you are sitting in your office (home or work office) right now wondering "what do I do next?", you know that you have min-maxed one specific skill for your brand and don't have a backup tactic to help move you into the future. You've "min-maxed" yourself into a specific way of marketing, and once you've moved past an optimal situation, you are in trouble. This is why you'll hear e-commerce brands lament Google or Facebook or Apple (for shutting off the data pipeline to Facebook) ... they're good at one thing and when that one thing is sub-optimized, they don't have something to fall back on.

Be great at something.

Be good at a couple of additional things.

It's sort of like having a diversified 401k portfolio, right?

July 08, 2024

Amazon Continues A March Toward A 21st Century Montgomery Wards

Here's the article (click here). The sub-heading catches attention.



Separate from the Amazon connection ... there is a thrilling nothing-burger of a merger statement in the article ... "many in the industry have anticipated this transaction and the benefits it would drive for customers, partners, and employees." That is filthy nonsense. Please, describe the benefits. Fewer employees? How do customers benefit over what is currently being done? Partners without money when this ship goes down in ten or fifteen years? How exactly does a customer benefit?

Meanwhile, the best thing that happened to my time consuming practices in the past two years has been my gradual move from the increasingly toxic waste-dump formerly known as Twitter to Reddit. The past month has been something to behold. Across the subreddits I follow, somebody always finds a way to say this:


I'll restate the comment here:
  • "Those prices are ridiculous cuz I seen a Vader for $15 on AliExpress."

Somebody posts a screen dump of prices of iems on Amazon, and the first comment is from somebody saying they've seen one of the items cost 1/5th as much on AliExpress.

Do you see what is happening? Venture out to Reddit and you'll see it.
  • Amazon is playing a non-competitive role in the consolidation of previously proud mall-based retail brands. Exciting!
  • Customers are comparing prices on Amazon with a hundred-billion-dollar-a-year overseas brand and finding Amazon to be (checks notes) ... uncompetitively expensive.

Commerce rhymes over time. It's unavoidable. You reach the mountain top only to find somebody else climbing a taller mountain and you end up trapped on your mountain, with no way off. It's coming, it's unavoidable, it isn't a near-term issue, and it is something you should be thinking carefully about if you call yourself a "strategist" or "strategic thinker" or a "thought leader" on LinkedIn.



July 07, 2024

Sure, Kick Me Out Of Your Community

This smells like a vendor-led strategy.



I'm not a fan of vendor-fueled strategies ... "we will scare the user into keeping the account active." Always interesting, because vendors use their thought leadership platform to recommend wing-nut strategies like this ... but you'll seldom see vendors use strategies like this, will you? It's like the paper/print folks ... telling you that you must continue to mail catalogs but they market to you via email. And by vendors, I don't mean you, the ones reading this. It's the thought leaders who tell you to purge names for no good reason so their articles earn clicks. Seriously, how much was I costing Garmin by being inactive, assuming they are being honest here?

What could Garmin have done?

They might have asked "why" it's been years since I've been active. They might have learned that I traded my RV in (one that did not have navigation) for an RV with navigation that is updated via memory stick. They might have learned I use Google Maps instead of the lousy software provided in the RV I now own.

But honestly, they likely know all of this. It's hard to be in an industry in decline.

So, instead, you treat the customer in a punitive manner.



July 02, 2024

10% Better, 30% Worse

Somebody somewhere once said that a good Coach / Executive / Leader makes things 10% better than a baseline. Meanwhile, a poor Coach / Executive / Leader makes things 30% worse.

I'll bet you've experienced this phenomenon.

I recall being in a meeting where the CEO made an employee cry. I went into the bathroom just to get away from the dysfunction, but the CEO followed me in, and that's where he shared stuff that would have made the entire room cry.

That business did not perform well. The CEO was a -30% Leader. He didn't have the ability to recognize it.

I have a client where the CEO/Owner is a +10% Leader. He hires good people, kind people, and he allows them to make decisions. This business messes up ... every 18-24 months they revert back to old behaviors, but the CEO nudges the brand back in a positive direction. They're not perfect. But they're 10% ahead of everybody else, and the interest in his investment compounds over time. It's a really, really good company.

I thought about the concept (I'm writing this on Monday night) after watching the USMNT lose to Uruguay. Here's a collective group that should perform better, and just ... doesn't. Outsiders can usually see the -30% in action ... if you are on the inside, you're working too hard to know if you are a -30% Leader or a +10% Leader.

Tomorrow is July 4 ... if your boss is encouraging you to put in some extra time on July 4, you might be working for a -30% Leader.

July 01, 2024

Tolls vs. Tribes

I will paraphrase the conversation to protect those involved.


Person A:  I think I want to get the Zero:2 iems. They're $15 on AliExpress and $25 on Amazon. Anybody else had an experience with AliExpress?

Person B:  Get them on Amazon. It's only $25. Why take a risk with somebody you don't trust?

Person A:  $10 additional dollars is important to me.


The world seems to change slowly, then it changes all-of-a-sudden. The conversation above (which happened three times in the past two weeks) is an example of the world changing slowly (it was an exchange between two individuals 1-2 generations apart). Person by person, day after day, new habits are formed. There will be a day ... maybe 5 years from now, maybe 12 years from now, when all of a sudden old-school folks will say "what happened to Amazon?". They'll realize Amazon became Montgomery Wards. They'll have no idea how it happened, they'll just look and go "wow".

It happens one fifteen year old at a time, trying to save $10, seeing that Amazon is too expensive.

Think about the last half of that sentence:  "... seeing that Amazon is too expensive". A sentence unthinkable twenty years ago when the argument was that Amazon could never be profitable being so inexpensive.

I've been waiting for something to happen since the death of "omnichannelism" nearly a decade ago. We're there now. Something is happening. It's the end of catalog-style print marketing from the 80s/90s. It's the "e-commerce is now mature and at risk" situation that ultimately happens to all incumbent business models - e-commerce is now old-school, ripe for disruption. 

We're transitioning from tolls (paying Google/Amazon/Facebook for access to customers) to tribes (Seth Godin would be so happy).

From tolls to tribes.

The older individual at the start of this post is willing to pay Amazon a $10 toll because he trusts Amazon.

The younger individual is part of a tribe that needs to save $10. This individual will form habits that send commerce in a very different direction.

Cost Differences

Do you remember Bernie Mac in Oceans Eleven ... negotiating van prices? Muttering nonsense about Aloe Vera while squeezing the sales dude...