Fallow

Is it fun to watch Beat Bobby Flay or Guy's Grocery Games? Sure. It's a fusion of Brand Marketing and Entertainment designed to provide an audience for advertisers (that's you) to interrupt the customer with a marketing message.

Last week about 365,000 people watched the new episode of Beat Bobby Flay, with 63% of the audience age 55+.

Have you watched Fallow on YouTube (click here)? This is an altogether different proposition. Two chefs in London teaching you all of the secrets of cooking in an informative and entertaining manner, with a humble, humorous, honest history-based approach. They've created more than 600 videos. They have 1.2 million subscribers. Average video clunkers attract a half-million views ... the gems attract more than three million views.

• Point of View Video:  Head Chef at a Top London Restaurant.
• Every Way to Fry an Egg.
• The Three Salmon Techniques Every Chef Should Learn.
• Is British Food Actually That Bad?
• This Is Why Vegetables Taste Better In Restaurants.
• We Cooked The Best Michelin Star Dish From Every Decade.

This is the opposite of Direct Response Marketing.

It's also the opposite of Brand Marketing. Toyota's Brand Marketing goal is to get you to buy a car. It cannot be the goal of these two chefs to teach you how to make something so you don't have to go to a restaurant, much less their restaurants, which you'll never visit anyway because you don't live on their continent.

What would you call this style of marketing? It's not vapid Influencer Marketing. It's something fundamentally different ... no different really than what Ryan Hall Y'All has done with Weather.

If you are a Direct Response Marketer dealing with dying marketing channels and/or expensive clicks and/or decreased response ... you are blessed ... somebody has opened a door for you.

P.S.: Here's a video that got over 800,000 views of a reviewer sampling the menu at Fallow. It's hard to be successful at this fusion of mini-movie-making and community and not have fabulous products/merchandise.

P.P.S.:  They freely give away all of their secrets. All of 'em. If you run a restaurant, you can copy them. Have at it. When I launched my business in 2007, I freely gave away everything I did - every technique - even today when I went through Action Streams, I shared everything in the booklet with you for two months before publishing the information for a nominal cost. You can give everything away AND still run a healthy business. Back in the 2007 - 2010 timeframe, service providers would corner me at a conference and inform me of what a moron I was for giving everything away ... "YOU DON'T KNOW HOW TO MONETIZE A BUSINESS". Sure I do. I'm using a very different business model than they were(are) using. Right now, the fusion of community and mini-movie-making is trending toward a different business model ... and from the outside, one might think these folks are morons. Time will tell.

Direct Response vs. Brand Pendulum

Here's USPS marketing mail volume since the fiscal year ending September 2008:

Aside ... when people tell you that #printisback, they fail to realize that every year the USPS publishes facts saying that marketing mail volume is contracting. The facts, publicly shared by the USPS, suggest otherwise.

When a marketing channel dies, costs within the channel disconnect with the reality of the marketing channel. Post-COVID, that is the reality of print ... paper / printing / postage costs escalate, while the effectiveness of the channel erodes. This causes those who use the channel to spend less, which causes service providers to charge more. If you believe this story doesn't end well, trust your instincts.

Those of you paying more for clicks in paid search and paid social ... pay attention to how this story plays out ... your destiny is connected.

Remember your homework assignment?

In some ways, it feels like an era is ending in ecommerce. Now, ecommerce is thriving, don't get me wrong. But an era is ending. The "direct response" era is ending. Is it "ending ending"? No. But it is ending.

Think about ecommerce as a pendulum. On one side is Direct Response. On the other side is Brand Marketing. Neither side gets along. Both sides serve a very different purpose. You don't leverage Direct Response marketing to get a customer to buy a Toyota Highlander. You can leverage Brand Marketing to get a customer to purchase Griot's Garage Speed Shine, though Direct Response is likely more appropriate.

The importance of Brand Marketing becomes painfully apparent when a Direct Response channel either becomes too expensive, unresponsive, or both. All of which is happening in 2025 ... paid search and paid social yield expensive clicks that are less responsive than they used to be. Marketplaces are a logical outcome of expensive clicks ... the Direct Response marketer leverages "somebody else's" traffic from a Marketplace to overcome expensive clicks ... paying a fixed percentage for each order instead of a variable cost for each click. Marketplaces are death, of course ... do you really want to be known as a supplier for Amazon or "that Etsy person with the cute stuff?"

Marketplaces are the digital version of a Mall. 

We all know what happened to Malls.

Your homework assignment should lead you to a realization.

• Direct Response in an optimized state with decaying channels = trouble.
• Brand Marketing is generally wasteful (sometimes due to the incompetence of the marketer employing the tactic ... and yes, I have the receipts).
• Marketplaces in 2025 are the refuge for Direct Response marketers without a Strong Brand. This may well be the right place for a weaker brand to be ... to become an Amazon supplier. Better than not being in business at all, right?
• If your choices follow a pendulum between Direct Response and Brand Marketing, you probably feel like you have an unsatisfying future.

Yes, you should realize, by this point, that there is a different approach you'll need to consider going forward. You're probably not going to like my answer. That's fine. Tomorrow, I'll share an example to get the process started.

When Marketing Channels Die

Remember your homework assignment from last week?

In 1998, 35,000,000 people would watch a Thursday night episode of Seinfeld. 24,000,000 would stick around to watch the dreck known as "Veronica's Closet" that appeared after Seinfeld.

Yeah, network television was a blockbuster marketing channel.

And then?

Not.

It was already dying back then, to be fair. Once cable television existed and you could watch the World Wrestling Federation on USA or see Larry King interview Donald Trump where he considered running for President in the 90s (click here), why watch Veronica's Closet?

If your marketing dollars were invested in network television (like Total Hair Fitness for example, click here) and you lose that bucket of opportunity, what do you do?

Advertising generally follows a law of diminishing returns.

One of the problems with the law of diminishing returns is that when a channel begins to die, performance gets worse, but the costs associated with the channel frequently remain constant or increase for a period of time ... by the time the economics of the channel force costs down, marketing effectiveness gets even worse. Example:

• 1998:  20,000,000 viewers. Spend $1,000,000, get $3,000,000 in sales at a 40% profit factor = $3,000,000 * 0.40 - $1,000,000 = $200,000 profit.
• 2012:   8,000,000 viewers.  Spend $600,000, get $1,200,000 in sales at a 40% profit factor = $1,200,000 * 0.40 - $600,000 = ($120,000) profit.
• 2025:   4,000,000 viewers.  Spend $500,000, get $600,000 in sales at a 40% profit factor = $600,000 * 0.40 - $500,000 = ($260,000) profit.

Diminishing returns continue, unabated ... but the death of the channel overrides diminishing returns. As viewers disappear, advertisers demand the absolute best prices and smaller advertisers are pushed out. Smaller advertisers go elsewhere ... they head into the digital wilderness where costs on Facebook / Google increase while response decreases (seems like a common theme), chasing advertisers elsewhere.

I worked with a company that doubled merchandise productivity over the course of a decade. That's one important way to overcome what happens when channels die ... as a channel dies, you find ways to get customers to spend more, offsetting channel death (for awhile).

If you're going to go down the "channel optimization path" where (as described in the document at the start of this post) you focus on short-term ROAS, you have to have a plan to account for channel death. Yes, especially for digital marketers. What the heck do you do when Google becomes untenable, as will most certainly happen?

• Answering that question takes you to the "balancing direct response and brand" section of the document, FYI.
• "Balancing Direct Response and Brand" ... FYI, is a difficult proposition.
• By the end of the week, I'll share where that balance is happening ... in what I call Customer Media Marketing ... a shift away from endless variable costs that yield clicks ... a shift to something different.

Discounts / Promotions / Clicks / Channels: The "Local Maxima"

Let's go back to your homework assignment from last week (click here). Read the green section (Resilient Base of New Customer Contribution $ Via Owned and Organic Traffic) and the red section (% of Revenue on Discount). In particular, focus on the red row ... read the comment in the column titled "The Realization That You Need To Change".

• "The marketing calendar is built around discount events as much as it is around new product launches. Seems like a necessary evil in order to keep growing revenue."

One of my favorite quotes from my time at Eddie Bauer was our CEO saying that we couldn't add a 34th promotional week to the calendar because we had to maintain the integrity of the promotional calendar. Via analysis or gut feel, the hill to die on was at 33 weeks. Imagine being at 31 weeks and somebody says, "yeah, let's add another week, no integrity issue there."

There's this bowl of promotional soup that interacts with direct response ... it always, always works for awhile (ask Macy's). Always. And then, it doesn't work. Years of trying to "make it work again" lead to one of those comments from marketers:

• "Facebook and Google are too expensive and the clicks they send us don't convert as well as they used to convert."

Blame is placed on Facebook and Google ... and oh yeah, they deserve blame.

The brand deserves more blame.

• It shifted from "what" it sells to "how" to sell it (discounts, promos, clicks, channels). This is a familiar transition, one that always looks good in the short term and is harmful in the long term.

This shift maroons a brand on what in math is called a "local maxima".

Look at the peak next to the arrow. That's what happens when a brand shifts to discounts / promos / clicks / channels. Any movement in any direction away from what is "optimal" (which, by the way, is most certainly not optimal) yields a sub-optimal solution, paralyzing the brand.

Where is your business on The Brand Lifecycle image? I have a feeling I know where it is, or you wouldn't be emailing me about the higher costs and lower performance of paid search.

I spent considerable time working on a framework for thinking about "what comes next". On LinkedIn I floated the framework to readers and a thousand people quickly read the argument. What comes next is already here ... I call it "Customer Media Marketing".

Via One of Our Intrepid Readers!

Every once in awhile you run across something compelling. One of our loyal readers forwarded this post on LinkedIn from the Co-Founder of Chubbies (click here). Heck, the writing style is reminiscent of the my days of writing Gliebers Dresses episodes (click here for the Shark Tank edition).

In the post, he references a document called "The Brand Lifecycle". Your homework assignment? Please review this link, we'll talk about it next week, ok?

Wanting to Belong

Below is what I originally wrote for today ... then I saw this story and thought that it is important you see the importance of community, of belonging (all of which your company already provides, either formally or most likely informally). Click here for the video from CBS Sunday Morning.

Ok, time for the original post.

The emailer told me he couldn't get access to magazine lists anymore (his magazine lists he rented stopped publishing via print a few years ago) and he told me that Google had become "too expensive". I privately wondered if his customers believed in his business? Did his customers want to belong to the ecosystem his brand was part of? Could his own customers share his story?

I suppose it's always been this way, but for many of you, your customers want to belong to something.

I was at the NASCAR Cup race in Phoenix two months ago. There was a long line at the Busch Light beer stand. I'd frequently hear patrons say how they won't drink Bud Light ("they don't get my money anymore") ... think about that, they won't give their money to one brand but will give their money to a sister brand, which means the customer wants to belong to something and Capitalism wins regardless. Welcome to 2025.

It's no different with the Costco / Target stuff that is going on. You'll harm Target if you don't feel like you belong to their overarching messaging ... if you don't feel like you are welcome anymore. Except there the money isn't flowing to the same parent company ... it's truly going to the competition.

There are, of course, the obvious financial implications of "not belonging". Ask Bud Light and Target.

There are the non-obvious financial implications. In a recent project (numbers dummied up here to protect the innocent), each website visit that didn't deliver a conversion added precisely one dollar to the future value of the customer. Five percent of the 0-48 month file visited the website in a given month, so this $30,000,000 brand generated $200,000 per month ... $2,400,000 per year (8% of annual sales) by simply "engaging" the customer.

Yes, there's a difference between the phony "engagement" created by gimmicks and the community building that causes a customer to want to belong, thereby visiting your website and adding $2.4 million per year because the customer feels like s/he belongs.

Maybe your customer wants to belong to something meaningful.

You likely provide something meaningful to the customer.

Connect the two.

When You Run Out Of Lists And Clicks ...

There's two trends happening ... have been happening for quite some time:

• Old-School brands lamenting that "lists don't work" or that "lists aren't available anymore".
• Ecommerce brands lamenting that "clicks don't work like they used to" ... via Facebook or Google.
  

I've yet to find one of either brand making these statements who have a strong community presence.

Here's an example from drop.com:

I can't express more clearly how much people dislike hearing about communities ... maybe 2 in 3 that I speak with or email with just get grumpy about the topic.

I can't fix the list issue ... those days are over.

I can't fix the click issue ... that entire world/ecosystem is changing.

I can recommend partnering with your own customers and your own visitors.

The Greatest Marketing Analytics Equation of All Time

It's 1992 at Lands' End, and I'm responsible for analyzing mail/holdout tests ... you execute email and/or print mail/holdout tests in 2025, right?

Here's the results of a mail/holdout test.

An average professional doesn't bother with mail/holdout tests.

A smart professional measures profit via the "Increment" line in the table above. The smart professional doesn't overstate results via matchbacks, they leverage the incremental contribution (which likely means they'll spend fewer marketing dollars).

The curious professional notices a relationship.

• 0/3 mailings = $0.
• 2/3 mailings = $8.40.
• 3/3 mailings = $10.50.

The curious professional adjusts the relationship, converting both sides of the relationship to fractions.

• 0.000 mailings = 0.000 spent.
• 0.667 mailings = 0.800 spent.
• 1.000 mailings = 1.000 spent.

The curious professional plots the relationship, then fits a line through the relationship.

The relationship above is fit via what I call a "Power Function". I use CurveExpert software (click here) if you are interested in fitting the equation.

What is the structure of a Power Function?

• Fraction of Demand = a*(Fraction of Mailings) ^ b.

The equation above?

• Fraction of Demand = 1.00 * (Fraction of Mailings) ^ 0.583.

In marketing, your ROAS relationships and/or investment decisions follow a Power Function. Once you see it, you cannot unsee it. In fact, the Power Function is everywhere.

• Price Elasticity.
• The Difference in Customer Segment Performance.
• Paid Social Advertising.
• Product Listing Ad Spend.
• Catalog Mailing Frequency.
• Email Marketing Weekly Contact Frequency.
• Merchandise Assortment Size.
• Creative "Winners" vs. "Experimental Photography".
• Winners vs. Contenders vs. Others within your Assortment.

I could go on and on, for hours.

Power Functions explain most of your investment decisions in marketing. The functions are different ... your Paid Social "b" coefficient is different from your Email Weekly Contact Frequency "b" coefficient.

This is the point in the post where the curious marketer will take the topic further. You're free to email me (kevinh@minethatdata.com) and ask questions. The Power Function is the greatest marketing analytics equation of all time! The equation unlocks the secrets of your business.

Raising Cane's

Have you ever eaten there?

Unless you are trying to feed 1,243 people, they realistically have five (5) items on the menu. Five.

Now, did I enjoy eating this styrofoam-infused pile of mediocrity? Not really. But somebody enjoys eating it. According to Google, an average Raising Cane's franchise might pull in $4,000,000 to $6,000,000 a year.

Meanwhile, a Burger King franchise might pull in $1,500,000 a year.

Burger King has nine burgers you can order, not counting chicken / fish / salads & veggies / breakfasts / sides / dessert ... and other choices. A much broader assortment, one that doesn't sell anything compared to Raising Cane's.

Why am I sharing this information?

Some of you are going to have problems sourcing products this fall, and the stuff you do have could potentially cost more. Your Government caused this problem, not you. Regardless, it's your job to overcome challenges. The challenge should not stop you, the brilliant marketer, from selling the heck out of what you DO have available. If Raising Cane's can outsell Burger King three-to-one with only five flippin' items on the menu, there's hope for you. A LOT of hope!

It's time to laser-focus your customers on the stuff you sell that matters. Sure, you used to have 800 styles / 5,000 skus available to the customer ... you might only have 350 styles and 2,200 skus available come November. The customer doesn't know what struggles you are having, the customer wants to know your point of view on what you have available.

Take full advantage of what you have available. You are a Marketer. Start marketing to the customer.

Oh, Kohl's

Right out of a soap opera (click here).

A few years ago a Vice President told me that she could not longer hire "the best people" ... "they just won't work in a dying industry".

There are stupid people everywhere. Two situations seem to attract an altogether different animal ... the amoral clown.

• New Industries (think crypto, AI, pickleball).
• Dying Industries (think retail, politics).

Amoral clowns like to break rules, eliminate rules, and prioritize power.

Things go in cycles ... the past decade has been a celebration of the amoral clown cycle. Better times are coming.

Calculating Merchandise Residual Value

Let's work through a very simple example of Merchandise Residual Value.

Let's pretend you have five customers and three items that the customer can purchase.

13-24 months ago, here's how much each customer spent.

• Customer #1 = $100.
• Customer #2 = $200.
• Customer #3 = $100.
• Customer #4 = $300.
• Customer #5 = $500.

0-12 months ago, here's how much each customer spent.

• Customer #1 = $0.
• Customer #2 = $100.
• Customer #3 = $100.
• Customer #4 = $0.
• Customer #5 = $300.

There are three items that the brand offered (in this overly simplistic example). Here are the items purchased 13-24 months ago.

• Customer #1 = Item 1.
• Customer #2 = Item 1, Item 3.
• Customer #3 = Item 2.
• Customer #4 = Item 1, Item 2, Item 3.
• Customer #5 = Item 1, Item 2 (twice), Item 3 (twice).

Ok, we have everything we need to calculate Merchandise Residual Value.

The average 13-24 month value of customers buying each item was:

• Item 1 = $275:  (100+200+300+500)/4
• Item 2 = $350:  (100+300+500+500)/4
• Item 3 = $375:  (100+300+500+500)/4

The average future value (0-12 month) generated by customers buying each item was:

• Item 1 = $100:  (0+100+0+300)/4
• Item 2 = $175:  (100+0+300+300)/4
• Item 3 = $175:  (100+0+300+300)/4

We can now fit Merchandise Residual Value. We regress 0-12 month value against 13-24 month value.

The equation?

• -119.231 + 0.808*(13-24 Month Value).

We calculate the prediction and compare it to what we actually observed. The difference is the residual ... Merchandise Residual Value.

Item #1 caused customers to spend $2.97 less in the next year vs. normal.

Item #2 caused customers to spend $11.43 more in the next year vs. normal.

Item #3 caused customers to spend $8.77 less in the next year vs. normal.

If you had to protect an item, you'd protect Item #2 because it adds $11.43 of future spend (next twelve months) to each customer who bought it the year prior. Which of the three items would you feature in your next email marketing campaign?

This is how you calculate Merchandise Residual Value ... and it's a very important metric to know in a world where your cost of goods might (or might now) increase significantly in upcoming months. Make sure you know the specific items that cause customers to spend more next year, ok? And if you don't know this metric, contact me right now (kevinh@minethatdata.com) and let's get busy calculating it.

Merchandise Residual Value

Every item in your merchandise/product assortment has two key attributes.

1. It is purchased by newer customers, average customers, or loyal customers.
2. It either adds to the future value of customers, is neutral, or detracts from the future value of customers.

If you have to take a bath on an item because the cost of goods on the item skyrocket over the next few months (or it doesn't, who knows), take a bath on items that appeal to newer/loyal customers and/or items that add to the future value of customers.

Perform the analytics and know exactly who each item appeals to ... know if that item adds or detracts from future value.

A/B/C/D/F Channel Grade Opportunity

Let's try something low-cost to help you plan better for Q3/Q4.

• For $9,000 I will grade every customer in your database (A/B/C/D/F where "A" is best and "F" is non-responsive) for every large marketing channel you employ.
• You will receive a list of all 60-month buyers, all customers graded.
• I will update the list for you with data through August 1, and again with data through October 1 ... or alternatively, I'll update the list for you on September 1 ... whatever works best for you.
• This allows you to save $$$ by not mailing customers with D/F designations, especially among those with A/B/C email grades.

Those of you who leverage my catalog modeling efforts ($15,000 or $30,000) get a better and more actionable outcome paired with analysis of the importance of your print efforts ... hence, the higher cost. Your email grades are already built into how many catalogs to mail a customer on an annual basis. When I tell you to mail a customer "3" times, that is a highly actionable and prescriptive outcome, based on whether the customer is an email respondent or not, based on whether the customer buys from other digital channels or not.

This analysis ($9,000) is designed to get you an actionable and inexpensive outcome without compromising the integrity of the bigger projects I've performed over the past fifteen years. I want you to have an opportunity to "do something" to save you money during what could well be a spirited eight months to follow. I want to do something to help you. And it helps me, too!

You can click here for the file layout.

Does this seem reasonable?

Send me an email right now (kevinh@minethatdata.com) and we'll get started, ok?!

Making Good Decisions

Those of you deciding to save money in upcoming months ... especially those of you in the print world ... will need to make good decisions. Really good decisions. Like not killing customer acquisition efforts. Like finding ways to keep customers buying whatever is available without spending a lot of money telling customers to buy stuff.

A good decision? Not mailing email buyers. Not mailing digital buyers. Not mailing 25+ month buyers. I've been telling many of you this for nearly twenty years. A fair number of you listened, hiring me to cut back on wasteful variable marketing dollars.

Now the rest of you are going to be forced down this path. Or not. Who knows?

But if you are forced down this path, score every darn customer in your database for propensity to purchase from different marketing channels.

Example:

• Print Customers ... top 5% = "A", 6% - 15% = "B", 16% - 35% = "C", 36% - 60% = "D", 61% to bottom of file = "F".
  
• Apply Same Modeling Logic to "Omnichannel" Customers (respond to print online), Website Customers, Email Customers, "Digital Marketing" Customers, and Social Customers.

You likely mail a TON of "D" and "F" customers. Don't do that!

Here's a great example of an individual customer from a large dataset:

• "F" for Print.
• "D" for Omnichannel (Print via the Website).
• "C" for Website.
• "B" for Email.
• "B" for Digital Marketing.

Catalog brands likely mail this customer 2-8 times per year. Stop it! The customer is in the top 15% for email marketing. You're already speaking to this customer 7-21 times per week.

If you want to conserve marketing dollars without putting the top-line at risk, here's the place where you can make a good decision ... so do it!

More News

An FYI.

Solving Two Problems At Once

I get two types of feedback these days.

• We need tariffs to even the playing field and not be taken advantage of anymore.
• My business is about to be clobbered for no good reason, my own Government is killing us.

Somewhere between those two comments ... surely ... must exist a reasonable solution. Right?

I mean, I've been to Tucumcari, New Mexico. Have you? Any reasonable solution must solve the "Tucumcari Problem".

This city is equidistant between Albuquerque and Amarillo ... cities north of 500,000 people and 200,000 people, respectively. Two hours east and two hours west, that's where the jobs are.

As you can see in the image/map above, the town is bypassed by I-40. If you're whistling by with a half-tank of gas, you don't need to stop at the "interchange commerce" resources (gas stations, hotels, fast food) at each exit.

Any reasonable solution should allow the residents of Tucumcari to earn an honorable wage, making a living doing something the residents want to do. Residents shouldn't have to move to Amarillo or Albuquerque because that's where the money is.

Of course, plenty of people do move, they do what they have to do ... which is why the population of Tucumcari is in decline.

I don't expect you to come up with a solution.

I do expect you to have some compassion for a town that was largely abandoned by the modern world the minute Route 66 was replaced by I-40. Somewhere between what we've done the past "x" years and the path we're taking is a reasonable solution.

P.S.:  If you want an example of how one town can be impacted by leadership and industry, allow me to present you with Green Bay, Wisconsin. Green Bay is hosting the NFL draft this weekend. Green Bay is a city of 107,000 people. That's it. The financial impact of having an NFL team in such a small town is felt region-wide. I grew up in Manitowoc ... any town from Sturgeon Bay to Manitowoc to Sheboygan to Fond du Lac to Oshkosh to Appleton to Shawano to Marinette/Menomonee ... any town in that region is impacted. Dollars come "in" to that region. In Tucumcari? Outside of interchange commerce, dollars go "out" of that community. We need to solve the problem of money leaving communities. Ok. I'm done now.

A Couple of Scenarios - Stop Wasting Marketing Variable Costs

When customers become less productive (as happened in April), decisions need to be made. Especially among lapsed buyers. These customers are, by definition ... lapsed ... and therefore are not terribly responsive.

When a customer is not terribly responsive, the last thing you want to do is spend a ton of money on the customer. It's just dumb. You can spend the money elsewhere ... find a new customer, make the best video about widgets ever.

Here's an example.

You could send a direct mail piece to the customer (assuming the customer is 60+ years old). Or, you could send an email campaign to the customer. One tool creates a good amount of lift, one tool creates very little lift. Take a look.

It's common for outsiders to look at the lift observed in print and say "Look at that, you moved the needle!" And you did ... the customer (in the example above) would have averaged $1.60 in the two weeks after the piece was mailed ... but instead spends $2.40. You did move the needle ... a lot.

Outsiders will look at the $0.23 profit generated by the audience mailed and say, "see, that's a lot of profit". And they are right. But they are measuring things wrong. Compare the mailed group to the holdout group ... $0.23 (mailed) vs. $0.69 (not mailed). Which strategy yields more profit? NOT MAILING THE CUSTOMER!!

Now look at email marketing ... it barely moves the needle ($1.70 vs. $1.60). But ... but ... the end result is MORE PROFIT.

In 2025, it is FOOLISH to waste marketing dollars on customers not likely to respond. Go ahead and spend $$$ on customers who are responsive ... if the lapsed customer just visited your website, have at it, because the customer is temporarily responsive.

In 2025, you don't spend marketing dollars ... you spend marketing effort. Sure, pay for that silly click because the customer is responsive. Otherwise, leverage your YouTube presence, your social media presence, and your email marketing program to teach customers why they should buy from you at minimal/no variable cost.

We're not wasting variable costs anymore, got it?

And Away We Go!

 

File Power is Not Impacted By Your Decision to Hunker Down ... For Awhile, At Least

So you've decided to cut back on the marketing budget by 35% in an effort to conserve cash and "get through" 2025.

What's interesting, of course, is that as of today, you don't lose file power. Your customer file is still capable of generating volume, you're the one constraining the ability of your customers to deliver volume.

You can see the "File Power" section at the bottom of the table ... this is what your twelve-month buyer file is capable of (sales in thousands).

• $29.2 million through today.
• $29.5 million through the next year.
• $29.4 million for the year after.

If you decide to take a hatchet to the marketing budget, you impact the size/quality of the customer file a year from now ... which means your customer file has less "File Power".

Notice how File Power changes for the period of 1-2 years from now?

• $29.2 million through today.
• $29.5 million through the next year.
• $27.5 million for the year after.

The top-line contracts by eight million in the next year because the marketer and CFO decided to conserve cash. Then, the business contracts by another $1.9 million the following year solely because of reduced "File Power".

You'll want to be very, very careful about how you approach conserving money in upcoming months.

What Happens When You Sell 100 Items And You Can't Fulfill 40 Of Them?

A few days ago I shared with you how many of my items in my "shopping list" on Amazon are no longer available ... the logical outcome of tariffs ... some items will be more expensive, and when tariffs are too high other items simply aren't available anymore.

Hopefully you aren't exposed to China. Some of you are woefully exposed.

In my project work, I'm sometimes asked to demonstrate what might happen if items are simply no longer available. If a brand had 100 items and our geopolitical environment took 40 of those items away, would sales drop by 40%?

Probably not. There's a lot of product overlap.

On one recent dataset, the relationship was noisy. By product category, I measured total annual sales and total skus sold that accounted for 90% of total sales in the category (to eliminate onesey-twosey issues) ... the relationship looked like this:

It's not a perfect relationship by any stretch of the imagination (an R-Squared of about 0.50). But the relationship suggests the following:

• If you could only sell 20% of your skus, you'd generate 32% of sales.
• If you could only sell 40% of your skus, you'd generate 53% of sales.
• If you could only sell 60% of your skus, you'd generate 70% of sales.
• If you could only sell 80% of your skus, you'd generate 86% of sales.

If you worked for this brand, you'd have a reasonable idea what would happen if your exposure to China created a nightmare for you.

Of course, your mileage will vary. That's why you'll contact me (kevinh@minethatdata.com) and have me run an inexpensive pricing/forecasting project for you.

What I'm Hearing

From your emails and comments from various professionals, in early April business took a -5% to -10% (ish) turn. Some are hopeful the shift in the Easter Holiday played a role, most of you tell me a different story.

Fortunately, nothing is permanent. Things could get worse, they could get better.

Last week we discussed the impact of increased prices. Would you like to see what your next issue could be?

On Amazon, I maintain a "Hobbies" shopping list ... stuff I'd like to purchase someday. Here's a portion of my shopping list. Do you see prices next to each item?

I've wanted that aune Flamingo DAC/Amp for a half-year! When I click on it, here's what I see.

Currently unavailable!

Many favorites are not available ... the stuff from China simply disappeared. That means containers on ships are going to disappear as well. Which means what if you are driving trucks on I-10 or I-40?

Here's another one a reader sent to me (by the way, notice the "community" link at the top of the page #justsaying).

Have you given any consideration to what happens when you sell 1,000 items ... and you can't sell 350 of them because you can't get access to those items anymore? Or you sell an item that is the composition of thirty-eight parts and you can't get access to seven of the parts anymore?

You're going to make interesting decisions ... some of you might be in a situation where you cannot sell a third of your assortment. You'll probably want to know what impact that has on your business.

Or, everything will turn out just fine. We don't know what will happen.

But we have to plan on two things happening.

1. Prices are likely to increase.
2. Items may not be available, limiting your product assortment, constraining your ability to meet your sales/profit goals.

My guess is you'd rather have answer to those questions, right?

Believe it or not, I have to spend time reading about freight these days. Yeah ... freight.

I mean, read through this guy's timeline (click here). That's some fun stuff. Bookmark freightwaves.com for more details.

Other fun stuff is on the horizon ... some of you are telling me that you are "hunkering down". This is what "hunkering down" looks like.

You probably have many people working through potential challenges.

You probably have statistics folks analyzing how the customer is going to respond, right? I mean, that's what I do for a living. You are undoubtedly crunching every conceivable number right now, correct? You kind of have to be doing this, right?

What are your thoughts? (kevinh@minethatdata.com).  Do you have a different perspective?

Saturday Semi-Off-Topic: Pickleball!!

This post will come back to marketing in a moment ... I'm nudging you in a direction here.

Pickleball!

Can I show you a few things? Just watch a few points from a 2016 pro women's bronze medal match (click here) ... watch up to maybe 60 seconds. It's a slow-motion low-skill train wreck. At that time, this was pickleball at the highest level. My wife and I play close to this level today. Now, if you were "born" into the pickleball community from 2010 - 2018ish, this was the "best practice" ... you hit a soft third-shot drop, you ran up to the kitchen, and you tried to out-dink each other. Notice the low camera angle to capture all of the dinking "action".

Something happened in 2019 that lurched the game in a completely different direction. That thing? A precocious twelve-year old woman who won a National Championship with her Mom as partner. What did they do different? Watch a few points here ... what shot are they attempting on their third shot? They're blasting their third shots ... hitting drives until the opponent makes a mistake. You don't see them doing a lot of "soft" play unless they are forced into it ... otherwise it is bombs away.

It shouldn't surprise you that "everybody" took notice. Within a year, the style of pickleball changed. Yes, players adhered to the "old style" ... those players lost games. An awful lot of players told those employing the new style that they were "doing it wrong".

Do me a favor here. Watch just this one point from a pro match a few weeks ago (click here). I mean, the game isn't even recognizable from a few years ago, is it? Hands are fast, there are extended gunfights, you have to be able to execute soft play, you have to be able to execute power, you have to be able to play excellent defense in the transition zone, and you have to have a ton of strategy. Also - the twelve-year-old from the second video is playing in this match as an eighteen year old ... and ultimately loses!

Did you notice something across the three videos?

One of the players is playing in each video ... Catherine Parenteau. She's playing at the highest level in each year, and her playing style in 2025 looks NOTHING like the tepid, gentle, unrefined style she leveraged in 2016. As the game changed, she changed.

By now you're probably saying to yourself "What in God's name does this have to do with marketing and e-commerce?"

Plenty.

Look at how the game evolved over just nine (9) years.

Your business is likely to be "evolved" over the next nine (9) months. This means you get to be Catherine Parenteau in the videos above (constantly growing, changing, improving, evolving). If you don't evolve through the challenges coming our way, you'll look like the video of game play in 2016. During COVID, we re-invented how we work. During tariffs, we'll re-invent how we merchandise our brands. This isn't something we "hunker down and get through". Nope. Not at all. Hopefully I'm proven wrong. If proven right?

Cutting The Marketing Budget

In my pricing / forecasting projects ($4,900 ... kevinh@minethatdata.com) I'm typically asked a common question.

• When we're facing tariffs or economic headwinds, it makes good sense to conserve money and not spend as much money on marketing activities, correct?

Well, this is the kind of question that made sense back in 1995, when we didn't have good tools to make decisions. In 2025, we have tools. The answer is "maybe". Your customer base and your p&l will decide the answer for you.

Let's say we simply pass the increase in cost of goods along to the customer. That scenario didn't look spectacular.

Demand/Sales don't look bad, but profit looks bad and the customer file contracts by about 2%. If your CFO is smart, she'll have you evaluate every marketing dollar to identify waste. If your CFO is not smart, he'll tell you to cut the digital budget by 30% ... just some dumb arbitrary number.

Well, we can simulate the 30% drop in the digital marketing budget. What happens?

All sorts of moving parts here.

• You spend $1.5 million less on digital marketing.
• You generate $1.7 less in demand/sales.
• Profit improves, and is now just 10% less than the year prior.

You likely noticed the problem, right?

• All of your good customer segments contract by about 4%.
• New buyers contract by 6% ... those digital dollars align with new customers, don't they?

Remember, these are simulated/modeled results ... we don't know that this is what will happen. We do have prior results that the simulation is rooted in. This is a better prediction than any guess anybody else is likely to come up with ... it's based on your actual customers and their behavior.

What is the right answer?

There is no right answer. There are hundreds of possibilities, all of them are bad, the more you eat the cost of goods impact the worse profit looks ... the more you try to mitigate short term profit pain you pay for it in the long-term.

But at least you have choices, right? That's what the pricing / forecasting simulation does for you. And I only charge $4,900 for it. Seems like a reasonable investment if you are going to be put in a spot where you are forced to pass along cost of goods increases to the customer.

P.S.: Next week we'll talk a bit about what happens to demand when you cannot physically sell products you planned to sell.

Prices Go Up, Problems Start Appearing

In my pricing / forecasting projects ($4,900 ... kevinh@minethatdata.com), I establish a base case. From there, the goal is to see what happens to the business as prices increase. Yesterday we observed that profit is harmed when cost of goods increase.

Let's say we pass the cost along to the customer ... a 15% cost of goods in this example is $2.97, we simply pass $2.97 along to the customer. What happens?

Ok, the simulator shows us that ...

• Rebuy rates decrease by 3%.
• New buyers decrease by 2%.
• Spend per buyer increases by 2%.

In other words, we're going to keep demand/sales at a reasonable level ... on the right side of the image demand/sales decrease by just 0.3%. However, you work your way through the p&l and you see we're still down $2.5 million in profit. Not down $4.0 million, but still down.

Your CFO probably doesn't like that outcome, right?

Your CFO asks you to run a scenario where prices increase by 15%, matching the cost of goods increase of 15%. Ready?

Things are getting interesting.

• Rebuy rates will decrease by 8%.
• New buyers are forecast to decrease by 5%.
• Spend per buyer should increase by 5%.
• Annual Demand/Sales decrease by $1.1 million.
• Annual Contribution/Profit decreases by just $530,000.

This might be an answer your CFO is comfortable with.

It might not be a solution the Analytics guru is comfortable with. Why?

• The twelve-month buyer file decreases by 5.5%.
• This means that the demand/sales stabilization observed this year will be erased next year. Next year, without enough file power, sales are doing to decrease, costing you top-line volume and profit.

That's why you run simulations ... you need to know what happens in the future, and you need to know that you're always going to pay a price, in one way or another.

Tomorrow we'll talk about reducing the marketing budget (hint - not a great idea).