The Playbook: A Missing Element

Here's our playbook.

You, of course, are a play caller. You make decisions. You have a playbook with all sorts of "plays".

Those of you in old-school cataloging ask a common question.

• "If we didn't have a catalog, we wouldn't have anything to say. How do we close that gap?"

Yeah, there's a missing element for those folks ... an element that (some) ecommerce brands possess.

The missing element?

Events.

You just watched the Super Bowl a few days ago. That, ladies and gentlemen, is an "event". The entire football calendar is built around events.

Events can be sales, but they should be more than sales. Customers don't care about your MARCH SALE - HURRY, 50% OFF PLUS FREE SHIPPING when the customer knows that a month later there will be an APRIL SALE - HURRY, 50% OFF PLUS FREE SHIPPING. Those are events by definition only.

The old-school cataloger essentially had monthly events ... a catalog delivered to a mailbox. Take the catalog away and there is a void.

The void must be filled ... with events.

Here's Olive and Cocoa (click here). That's a business based on events ... they don't have to create events because the entire business model is based on events.

You remember Amazon? Prime Days? Yes, there is a price component to that ... but not all prices are cut, and it isn't a sale with a blanket 30% off everything.

Williams Sonoma has virtual events (click here) to complement in-store events. How hard is it to create virtual events?

The catalog is going to go away (for my catalog-centric readers) - your partners are going to increase costs to unmanageable levels ... it has already happened and will continue to happen. You will replace catalogs with events. You have no choice.

The Playbook

A rudimentary drawing of what you are dealing with.

Print the image.

Review all of the "connectors" in the image ... this isn't perfect information so I'm not looking for an email that says "you don't have display ads in here, so the whole framework collapses" ... this is designed to get you to think, not criticize.

Prospects align with the channels below them.

Shoppers align with the channels below them.

Buyers / Loyalists frequently align with the channels west/southwest of them.

We're trying to push prospects to loyalists, right?

The Play Caller

That's what you are. You are a playcaller. Your job is to call plays to score points (i.e. profit) for your company. It isn't necessarily an easy job.

Readers ask "what do you look to for inspiration?" ... well, it sure isn't marketing literature ... six miles of unimaginable dreck coated in sugary frosting".

One of my daily reads is called "One Play A Day" ... you can subscribe here if you are a football fan. The coach sends one play design per day, showing how a play caller baffles the defense.

You just watched the Super Bowl. Did the play caller run the same play over and over and over and over? No! The play caller mixes things up, deceives the defense, runs a play in the first quarter then runs a completely different play out of the same formation in the third quarter.

The play caller adjusts to the strengths of his/her team.

The play caller uses analytics ... sometimes agreeing with analytics, sometimes disagreeing, sometimes simply leveraging gut feel and instinct.

The play caller knows that yards (net sales) are kind of irrelevant ... the play caller knows that points (profit) are highly relevant. The play caller knows that chunk plays (rushes of 12+ yards or passes of 16+ yards) make a big difference ... they are like events in marketing.

The play caller adjusts when his players aren't capable of performing at a high level ... no different than the marketer adjusting when customers don't embrace merchandise. Players in football are comparable to individual items in a merchandise assortment. Everything needs to work in harmony.

In upcoming posts, we're going to talk about retention and acquisition in terms of a play caller. You are no different than an NFL or College play caller. Which means, of course, that you have an important job that requires creativity, imagination, flexibility, and raw skills/knowledge.

P.S.: You can't always trust AI to produce an accurate image ... look at the flaws in this one.

Two Tidbits for Friday

You are going to have to have a handful of key items that you build your customer acquisition strategy around. It's virtually non-negotiable in a world that is transitioning search from Google-centric algorithms to discovery via AI.

We briefly veer off-topic for a moment. Here is a comment from former football coach Mike Martz ... about going for it on 4th down and the relation of the tactic to "analytics" in football.

"When somebody says 'analytics' on TV, I just run to the bathroom to vomit".

Do you think I'd align with a pure analytics view, or would I have empathy for this comment?

I have empathy for this comment.

There's a newsletter I receive from an agency. It's pure analytics wonkery. "For our clients, sales were up 2.49% on an ad expense increase of 4.11% leading to a ROAS of 2.88, proving that Facebook is struggling to deliver new customers."

Anytime you make decisions based on somebody else's success or failure, you are sub-optimizing the very decision you seek to optimize. If somebody told you that diners enjoyed eating meatballs just 41% of the time, would that dissuade you from making meatballs? Or would diners enjoy your meatballs 89% of the time?

Business should be FUN ... and you have the knowledge to make your own decisions independent of data. You know what works for your industry, you know what works for your own customers (often the tactics are different), and you make decisions independent of the industry narrative. That's the best use of analytics.

Small Details

In pickleball, if you score on 47% of your serves instead of 44% of your serves, your probability of winning a game goes from 50% to 64%. Small details matter, they're the difference between being successful or average.

The same thing happens in your business. Especially in email marketing. Back in the stone ages (2001 - 2007) at Nordstrom we personalized the merchandise that each customer observed in an email message. You're not doing this today, and that says something.

Why did we do this?

Email might have accounted for 15% of ecommerce sales, annually, maybe $45,000,000 per year. By personalizing the merchandise the customer observed, the $45,000,000 number became $54,000,000 ... the additional $9,000,000 of ecommerce sales resulted in about $2,600,000 in additional profit. All for the cost of about $150,000 in salary/benefits.

Sounds like a good tradeoff, doesn't it?

It's 2026 ... almost none of you reach out to me and tell me you do anything more clever than an old-fashioned "batch-and-blast" tactic. Easy? Yes. Profitable? Yes! Leaving all sorts of profit laying on the ground, unable to be picked up? Yup. By skipping the small details, you harm the business you work for.

Let's assume you are a $50,000,000 ecommerce brand. Email accounts for 20% of sales (if it doesn't account for at least 20% of sales, you are failing as a retention marketer). Let's assume you aren't doing any merchandise personalization, thereby missing out on a 20% sales opportunity. Let's assume that 40% of gross demand flows-through to profit. What are you missing out on?

• $50,000,000 * 0.20 = $10,000,000 as your email marketing base.
• Personalization = 0.20 * $10,000,000 = $2,000,000 additional gross sales.
• Profit?  $2,000,000 * 0.40 = $800,000.

If your business is wildly profitable, you likely generate 10% EBIT ... $50,000,000 * 0.10 = $5,000,000 profit. Would you like profit to increase by 16% (from $5,000,000 to $5,800,000)?

Hint - your CFO wants you to do this.

If your business has tepid ... just $2,500,000 ... the increase of $800,000 is more than a 30% increase in corporate profit ... from just paying attention to a small detail.

Those small details also translate to your personalized website, which you have ... right?

Lands' End in the early 90s was the only company I ever worked for that cared deeply about small details. I recall our Circulation Director sending her Circulation Managers back to the drawing board if gross margins were projected to increase by 0.2% ... they had to spend a week re-working an entire spring/summer season to account for the fact that we were every-so-marginally more profitable.

Small Details = Big Profit Swings.

Questions About Retaining Customers

If I asked you the following specific questions, would you be able to provide answers?

1. What specific tactics do you employ to quickly convert a customer from a first purchase to a second purchase?
2. What specific tactics do you employ to convert a customer who is 11/12 months after a prior purchase?
3. What specific tactics do you employ for the top 5% of your twelve-month buyer file?
4. What specific tactics do you employ for customers with 13+ months of recency to bring the customers back into the fold?
5. When a customer visits your website but does not put anything in a shopping cart, do you apply any different marketing tactics via email marketing or sms to treat the customer as an (albeit briefly) highly responsive customer?

Give yourself 20 points for each question above that you could answer with at least one specific tactic.

For each question you offered at least one specific tactic, subtract 8 points if the tactic includes a discount/promotion.

For each question you offered at least one specific tactic, subtract 4 points if the tactic is generic and applies to all customers.

Total Possible Score = 100.

To put your efforts into a headphone tier list, here is how it would break down.

• S-Tier = 100 Points.
• A-Tier = 60 - 99 Points.
• B-Tier = 45 - 59 Points.
• C-Tier = 30 - 44 Points.
• D-Tier = 15 - 29 Points.
• F-Tier = 0 - 14 Points.

If you are D-Tier or F-Tier, you likely have a customer retention issue within your marketing department.

You can kind of see where I'm heading with my retention discussions, can't you?

Nobody Expected This

Story time!

I've told this story before, but it is relevant here in 2026. It's 1998 at Eddie Bauer. Our stores were not performing well, our online/catalog business was abysmal. I was just promoted to Director of Circulation/Analytics. Within twenty-four months our Catalog Team of Executives would fix the catalog/online business, recording the most profitable year in the history of the division.

Retail was a different story.

Our bigger stores had something called a "Sport Shop", an homage to the outdoor heritage of the brand (today the casual part of the business, at least 80% of sales back then, is completely gone). If you looked at ordinary store sales reports by category, Sport Shop had a ton of square footage and a minimal amount of net sales. It was unprofitable.

Management decided to kill it. The current generation of LinkedIn experts would chime in with the #datadriven hashtag. Good idea! "The brand has a sales dashboard and the KPIs suggested this category is simply not needed - this is the very essence of letting data guide your decisions."

Six months after the category was killed ... square footage replaced by our late 90s mens/womens casual assortment, a funny thing happened.

• Existing Stores, No Prior Sport Shop.
• Mens Comps:  +2%.
• Womens Comps:  +2%.
• Existing Stores, Prior Sport Shop.
• Mens Comps:  -2%.
• Womens Comps:  -6%.

Tell me what you think happened?

Our Marketing Research team asked customers what happened. Here's what they learned.

• "When you took the Sport Shop away, you took away a shopping experience for my husband and I. He'd tinker in the Sport Shop for a half-hour while I bought clothes. Without the Sport Shop, my husband didn't want to waste a half-hour watching me shop."

Ooof.

Turns out the Sport Shop was wildly profitable but was measured incorrectly. We needed to measure the "spillover value" the category had. It attracted a browser (measured as $0) and it attracted a shopper (measured as $100 but attributed to Women's Casual).

Does this happen in your business?

Oh my Lord, does it ever happen!!

It happens every day on Instagram. That's where your browsers are ... no, not website browsers, actual browsers, people with no intention of shopping. It happens on YouTube when somebody is watching the video of one of your buyers traveling to Hawaii to meet with widget suppliers. It happens when somebody subscribes to the Substack of your Chief Merchandising Officer. I mean, all sorts of people have interesting Substacks that you wouldn't expect.

What is the category or marketing activity that bring in "browsers" who ultimately generate sales ... one way or another ... in a category that maybe doesn't deserve credit for the order?

BONUS STORY:  You probably read this little ditty yesterday. Ten years ago I fielded a phone call from an Agency Leader. At the time I was consulting with a large retail brand that mailed catalogs. The end of the conversation went like this.

• Agency Leader:  Management told me you told them to stop mailing catalogs to store buyers because holdout tests proved that catalogs had minimal value.
• Kevin:  Correct.
• Agency Leader:  God you are so stupid. Everybody knows that catalogs drive customers into stores.
• Kevin:  Mail / Holdout tests proved they didn't drive customers into stores.
• Agency Leader:  Well, I am calling to tell you that we are now the agency of record, and we are reinstating catalogs to store customers on day one.
• Kevin:  Ok.
• Agency Leader:  I am also communicating that the brand no longer is in need of your services. Is that clear?
• Kevin:  Yes.
• Agency Leader:  You know better. Goodbye.

The retail brand ultimately went bankrupt. Guess all those catalogs were, at minimum, unhelpful.

I distinctly remember the "God you are so stupid" comment. The arrogance and attitude of this individual ... the suggestion that all you had to do was override science (mail / holdout tests) with faith in paper. If the results of the test proved catalogs should be mailed, I'd have recommended more catalogs. Instead this brand drained cash reserves sending mindless / useless paper to force a customer who didn't want to go to the store to go to the store, siphoning off cash for the Agency, for Paper Reps, for Printers, and for the USPS in the process. 

Always do what is right for your client.

Paper, Printing, Postage: Eating Your Business One Bite At A Time

Here's the story that repeats, not one talked about by the experts on LinkedIn. The table on the left shows the optimal strategy for a customer segment three years ago ... the middle table shows it today ... the table on the right shows the optimal strategy three years from now if the expense structure continues to add challenges to the p&l.

Three years ago the optimal strategy for this customer was 9 mailings per year, generating $28.46 demand and $6.51 profit.

Today, the increases in paper / printing / postage require you to mail the customer 6 times per year, generating $23.24 demand and $5.06 profit. Demand is down 18%, profit is down 22% ... all because of the added expenses passed on to your business. You'll continue to mail 9 times per year, generating $28.46 demand and $4.71 profit ... less profitable but the majority of catalogers that remain just don't want to change.

If costs continue to increase similarly, you're down to mailing the customer 4 times per year, generating $18.97 demand and $4.14 profit. Most remaining catalogers don't want to change, so they'll mail 9 times per year, generating $28.46 demand and just $2.91 profit.

Either way, paper / printing / postage are eating your business one bite at a time. You get to decide if you want to optimize profit.

• Non-Optimized Profit (the route most of you will take because you don't want to change).
• $6.51 three years ago.
• $4.71 today.
• $2.91 in three years.
• Optimized Profit (my smart clients have been doing this for YEARS).
• $6.51 three years ago.
• $5.06 today.
• $4.14 in three years.

Again - show me where the paper, printing, and postage gurus are sharing this dynamic with you? They're not. They're running this aspect of your business into the ground. Until you stand up to them (i.e. shift your dollars out of print and into other marketing tactics until they provide you with cost relief), they'll continue slowly (then all at once) ending this discipline for you.

Retention: What Should I Do?

When I tell you to do something different to retain specific customers, I receive similar and common feedback:

• "What do you want me to do differently? We email customers every day. We post on Facebook. We pay Google to snare our customers. We're on Amazon. We're everywhere!"

Oh come on. You do all the easy stuff. It is not hard to stick $0.60 into Google's trillion dollar bank account. It is easy to send eleven email campaigns per week featuring 40% off and 70% off clearance.

Your ESP provides software that allows you to separate any customer with recency = 8 months. Set those customers aside, and create specialized campaigns that override normal campaigns. Teach every customer getting ready to be "active" again what you're selling in three months. Create events for those customers ... three months out of course, but create the events regardless. Do some work! Educate the customers, prime the pump, create some excitement. Be exclusive, unique, differentiate yourself from the lemmings preparing to jump off of the Cyber Monday cliff.

Again ... your ESP provides you with software to perform customized Action Streams for any customer at any status in the Customer Life Stage. Use the tools you are already paying for.

Retention: When The Fish Are Biting

Here is one of my retention tables for a Home brand. The table illustrates incremental monthly rebuy rates. Tell me what you observe.

Did you miss it? Look at the row with twelve-months since a prior purchase. Heck, look at 10/11/12 months since a prior purchase. Those customers are MORE RESPONSIVE than are customers who bought 4/5/6/7/8/9 months ago.

This happens all the time ... run the table above for your brand and tell me what you see.

If you care about retention, and from your emails and messages on the socials it is clear you value retention a lot more than you value customer acquisition, why aren't you capitalizing on this window of opportunity? Why do you treat these people the same as you treat everybody else? Please, tell me the reason why you don't do anything different with seasonal buyers?

Access To Your Own Customers = 7% Fee

So many of you use Shopify. I've spoken at length about the day when Shopify is an AI-infused marketplace. Those days inch closer (click here).

In my work, there is something called the "Profit Factor" ... it is the percentage of sales that flow-through to profit/contribution prior to fixed costs. I have clients where the percentage might be in the upper teens ... I have other clients where the percentage is 45%.

The goal of any service provider / vendor is to take as much of your post-profit-factor contribution as possible without compromising your business ... if they take too much, you lose too much money and stop working with them (which harms them) ... if they take too little, they aren't profitable enough and they cannot "#scale" their businesses to the level they desire. There is this teeter-totter effect that is constantly being balanced.

Let's pretend you are one of my clients with a 35% profit factor. You generate a $100 order, and with a profit factor of 35% this means you generate $35 of contribution. Shopify/ChatGPT believe they deserve $100*0.07 (it's 6.9% plus a few pennies of a fixed fee) = $7 of the $35 of profit you just earned.

You have 200 employees for your $60,000,000 business ... you work so darn hard ... and then a third party is entitled to 7/35 = 20% of all profit/contribution dollars you generate.

Of course, this means nothing today ... ChatGPT generated orders are a rounding error. In five years? In five years, all of your search-centric orders will be AI-generated orders, all with a toll applied ... the days of organic search will be no more.

From a vendor perspective, tolls are best collected under three circumstances.

1. Tolls are variable, they apply to every order. Fixed charges are limiting.
2. Tolls are necessary, meaning the vendor makes the case that without the toll the order doesn't happen, even though the order likely happens without the toll.
3. Tolls are easy, they require very little additional work per order.

From a "brand" perspective, tolls are necessary when the brand is unable to generate orders organically via storytelling and/or merchandise the customer must have. The best "brands" don't have to discount, and they don't need a third party interjecting themselves into the customer relationship.

So that's the balance we're all fighting. Some of us do it better than others. Don't get stuck on the high end of a teeter-totter.

Here's What Saks Needs To Do To Fix Their Business

That's the way these LinkedIn posts start ... a "transformational retail expert" will talk about "products customers actually want to buy" ... Good Lord, do we think the folks at Saks read that and say "Yeah, let's try that, let's try to sell something customers actually want to buy, let's get in the war room on Monday and workshop it a bit, all hands on deck for this one!" "Treat the customers better." Great advice. When I worked at Nordstrom we paid sales floor staff 7% of the order ... not surprisingly, customers were treated well, and customers actually wanted to buy what we sold. Are you willing to give non-salaried employees 7% of everything? No, of course not. And that's part of your problem.

Here's something you don't ever read about ... how do you get 16,000 Saks employees to all move in lock-step in a new direction at the same time, harmoniously?

That one is tougher, isn't it?

A half decade ago I received an email from a client that they client mistakenly/accidentally sent to me (this happens all the time, and woo-boy, the stuff I get to read ... Midland Paper comes to mind). The Marketing Executive was lambasting the Management Team because I (Kevin) authored recommendations that the Marketing Executive absolutely did not want to implement. "We're not actually listening to this idiot, are we?" she bellowed to her Management Team. She was right ... they chose to not listen to the idiot. Ideas? Dead. Ideas killed off by one (1) employee. I mean, you can't get your family to agree upon Panda Express or Sonic for a quick, salty, calorie-laden dinner ... so explain to me, LinkedIn gurus, how exactly you will get 16,000 employees to embrace your ideas? Be specific. Show your work.

Early in my time at Eddie Bauer, the CEO passed a note from the company that owned us to my Sr. Vice President. He opened the note, read it, waited for the CEO to leave, looked at me, and said "Yeah, we're never going to do that", crumpled up the note, threw it in the garbage can, then continued his discussion with me. That happens a thousand times a day at big companies. It's happening "at scale" as the pundits say.

There are a small number of dynamic leaders who pull this stuff off. But my goodness, it takes interpersonal gifts of an order of magnitude to get 16,000 people to execute the way you want your company to execute.

P.S.: Do you want your salaried employees to do what you want? Try creating a reasonable bonus structure ... salaried staff get a 20% annual bonus, managers 30%, directors 40%, vice presidents 60%, Sr. Management get more (they always get more). Divide the bonus into three pieces ... a third based on sales gains, a third based on profit improvement, a third based on department goals (like personalizing all email campaigns, for instance). When a manager is earning $100,000 a year and another $30,000 is at risk and $10,000 of the $30,000 is dependent upon personalizing all email campaigns, I promise you from personal experience, things get done.

It's Time!

Four months ... it went by quickly, didn't it?

If you'd like to participate in the next run of The MineThatData Elite Program, here are the particulars:

• Five years of data from 2/1/2021 to 1/31/2026, one row per item purchased, ask me to send you details.
• Data due by 2/15/2026.
• Payment ($1,800 first-time participant, $1,000 for participants in their 2nd+ run) due by 2/15/206.
• Analysis delivered by 2/28/2026.

I'm leaning toward adding more information from comp segment analytics in this run, looking at new/existing items ... items selling at full price vs. on sale ... category data ... price band data ... some high-level views I wouldn't normally provide.

Contact me right now (kevinh@minethatdata.com) to get started!

Retaining Really Good Customers

Let's look at a problem for catalog advocates.

Matchbacks will give you a misleading outcome. You need mail/holdout tests and you need frequency testing to get to a "better" view of profitability. For instance, you might have a customer who receives 10 catalogs and spends $30.00 across the 10 catalogs. Each catalog would look "profitable" on the surface. When frequency testing is applied to the situation, 10 catalogs isn't best ... it's around 6.

The most profitable outcome is six catalogs. When it comes to retaining most customers, the catalog is not as optimal as it could be ... send six catalogs to this customer instead of ten and take the $3.60 per customer you save and spend it digitally ... something so many catalog professionals are loathe to do.

Here's another thing that so many catalog professionals are loathe to do. This customer received 10 catalogs and it a bit more than twice as productive as the customer above is. What is the optimal number of catalogs for this customer?

It's not ten, is it?

It's 25!

When I share this with catalog professionals, they ... don't ... like ... this ... outcome.

• "We're not ever going to have 25 in-home dates, so this outcome doesn't have any meaning for us. Please recommend an actionable strategy."

This is where so many catalog professionals just choose to dump their head in the sand.

1. They won't mail a customer fewer times even though profit would increase.
2. They won't mail a loyal customer more times even though profit would increase.

Which, of course, means one thing.

• They won't change.

It's 2026. If a catalog professional won't mail nearly every customer less often to generate profit and free up dollars for digital marketing while simultaneously mailing really good customers more often to retain more of 'em ... well ... the professional simply doesn't want to change / evolve / grow. It means that the catalog professional is holding his/her company back.

I realize your favorite catalog agency, your paper rep, your printer, your industry consultant ... few of them want to hear this message. It's 2026. It's time to hear this message.

Loyalty Gives You Options

There are probably at least two ways to define loyalty.

• Customer Purchases At High Rates, Repeatedly.
• Customer Pays Attention To You.

I can't even believe I'm typing the second bullet point. But 2026 is not 1996. Or 2006. Or 2016. Times change. Attention matters. In my website visitation models, each visit adds to future value, regardless whether the customer purchases anything or not. Which means each time the customer reads your Instagram Post or watches your YouTube Video or actually bothers to look at your Email Campaign, the "attention" is adding long-term value. 

I've measured it.

Loyalty gives you options.

Want an example?

Do you know which post I wrote in 2025 that attracted the most eyeballs?

Are you ready?

It's this one.

I mean, are you kidding?

When your customer pays attention to you, you are able to steer your customer in interesting directions.

What are the four topics I write about that generate the most email communications from you to me?

1. Headphones, In-Ear Monitors in Particular.
2. Politics ... I don't generally write about politics, but some of you will somehow connect a topic to either "Trump is God" or "Trump is Satan".
3. The impact of "paper" in marketing. Just a stunning thought given it is 2026 and it has been 30 years since paper mattered.
4. Pickleball!

Almost none of the topics have anything to do with what pays the bills.

At least directly.

It's hard to ascertain what talking about Headphones and Pickleball does for business. It can't hurt. Someday I'll expand into another hobby (weather), and we'll see what happens.

Loyalty gives you options. You get to step outside of "TODAY 60% OFF PLUS 85% OFF CLEARANCE!" In 2026, we need to step outside of our standard messaging and start relating to our customer base.

 

Months to Loyalty

When you know how likely a customer is to repurchase in any given month, you can also derive a fun metric that I call "Months to Loyalty".

• Months to Loyalty = How Many Months It Takes, On Average, For a First-Time Buyer To Achieve A Fifth Purchase.

Mind you, few customers ever achieve loyalty status, so the metric applies to the vast minority of customers who ever become loyal. The metric informs us of the long process the customer must go through to ever become highly profitable.

I reshaped yesterday's data, so I could calculate Months to Loyalty.

At the bottom of the table you see two metrics.

• Months to 5x = Average # of Months Until the Customer Buys for the 5th Time.
• Months to 10x = Average # of Months Until the Customer Buys for the 10th Time.

In this case, Months to Loyalty is 28.6 ... it takes the average customer who becomes loyal 28.6 months to get there ... about 2.5 years.

28.6 months. In this case, it means you have a lot of work to do for several years to nudge the customer to loyal (5x) status ... realizing of course that very few customers will make it there.

The more months required to generate loyal status (i.e. a fifth order), the more you focus actually needs to be on new customers. When the metric is lower (i.e. 12 months) you can leverage all of those wonderful loyalty tactics you've been craving to implement.

A Beautiful Retention Table

This table shows the conditional probability of a customer repurchasing, given that the customer in the frequency band has not repurchased in the previous "x" months. Look at this beautiful retention table!

The secrets of your business are outlined in this table.

For instance, you've heard me harp incessantly about the first three months following a first order being critically important in the development of a customer. That fact reveals itself in this table ... look down the "1x Buyer" column ... in this example, the customer has a 14.0% chance of buying again in the first month, then 7.8% in month two (conditional on the fact that the customer did not purchase again in month one), then 4.9% in month three. From there, the customer slowly fades away.

If you knew you had three months to make a difference with new buyers, would you do anything differently? If the answer is "yes", would the company you work for allow you to do anything differently? The answer is frequently "no", and that's why ecommerce (outside of marketplaces) is so darn hard ... customers churn too often, mostly due to a failure to imagine an experience for the new customer within three months of acquisition.

The Score

You probably don't want to read three hundred plus pages, so if that's you, Pablo Torre has a podcast interview with the author that is fabulous (click here). And if an hour of you time is too big a commitment, here is a couple of minutes (click here).

But if you want all of the details at a nominal cost, buy the book.

Last week a long-time friend sent me one of my posts from 2009. He said "It is incredible to see how much has not changed since 2009." Well, one of the reasons things don't change is that the way we keep score has not changed.

In email marketing, it is open rates, click-through rates, and occasionally conversion rates. This is how most email marketers keep score. If I suggest that the email marketer keep score via profit generated, I'm speaking a bizarre language that does not fit within their scoring/ranking system. Once the scoring system is set, it is incredibly difficult to make changes.

In search or paid social, it is ROAS ... return on ad spend. Amazingly, the digital marketing folks figured out how to create something unique albeit indifferent from the past ... they took the inverse of the old-school "ad-to-sales ratio" ... and converted it to ROAS.

• ROAS = 1 / (ad-to-sales ratio).

Once ROAS became entrenched as the scoring system for digital marketing, you're crazy to suggest that the marketer rank activities by profitability. You have one simplified metric that works across industries and the professionals who work within those industries.

In old-school catalog marketing, the ranking score was "dollars per book". Two generations of catalog marketers used either "dollars per book" or a version of "dollars per book" fueled by matchback analytics. Regardless, there was a way to keep score, to rank segments/customers, and if you ever suggested anything different (i.e. applying the organic percentage to each segment) you were viewed as being insane. Ask any catalog agency, vendor, or paper-centric professional if a catalog brand should work with me and you'll get a hearty "noooooooo" from the individual/organization. You'll get a "no" because I use a different scoring mechanism than they use.

I had the unfortunate experience of rating pickleball players at my club of 1,800+ members. I computerized the process ... your rating (2.0 - 5.0) was based on whether you won matches. If you won a match against somebody you should beat, your rating increased from 3.50 to 3.51. If you won a match against somebody you should never beat, your rating increased from 3.50 to 3.59. The same dynamic happened in reverse if you lost. People HATED the system. HATED IT!!! I essentially changed the scoring/ranking process from a human saying "you're good, the other player isn't good" to a scoring/ranking process based on winning. Shouldn't the better player win more often? That was a fact that many players simply couldn't accept. They wanted a different ranking system.

Our scoring/ranking systems influence our flexibility with change. When business conditions change, do we change with business conditions, or do we try to fit the change within our scoring/ranking system?

Remember Subscriptions?

There was a time (pre-COVID) when we were told we had to have subscription-based ecommerce business models.

Netflix is a great subscription model ... you don't own anything, you are constantly paying them. You need a new supply of money each month (i.e. your salary), they need a constant supply of fresh content each month. Everybody wins ... especially Netflix.

Of course, you sell widgets. The customer only needs a new widget every two-hundred days, which limits your subscription opportunities to an annual basis.

There's a reason commerce always devolves into a marketplace/mall.

• If you sell everything, then the customer needs you every day.

And if the customer needs you every day, then you can get away with an annual subscription of pre-paid shipping (fused with content, obviously). The rest of us either get to have a sunglasses stand in the mall or we're on our own. There are countless advantages to being on our own, but the work is a lot harder.

Then You Finally Get There!

The customer works really hard ... buying stuff at 40% off, earning rewards, doing the hard work.

I mean, you keep giving the customer points and the customer redeems the points and the machine keeps rolling along. Shouldn't there be an end and a new beginning? Remember Elaine on Seinfeld and her sub card ... each 23 subs and you get a ... 

... and then you start over.

One of the things I learned back in the 2005ish timeframe at Nordstrom was the power of having a "Super Bowl" for the loyal customer. The customer did all this hard work during the year, and if the customer spent $750 the customer was invited to the Anniversary Pre-Sale. It was our Super Bowl, and the customer got to pre-select merchandise, waltz into the store on day one of the event while the commoners were fighting for whatever we had on the sale floor, pick up her order, and walk out of the store while the commoners were shopping.

I remember quantifying something like a $20,000,000 lift that came from this tactic. Just a stupid amount of sales and profit, and it cost us nothing. It probably cost us less than the free subs that Elaine's sub brand had to pay for.

Your loyal customers deserve an annual Super Bowl, an event that "rewards" the customer for having a great year.

You are a smart marketer ... you aren't some wonky Lemonhead giving double and triple points that can be redeemed for 50% off instead of 40% off. Be creative. What is your Super Bowl at your brand? Please don't say it is Cyber Monday.

Culture

Spend a few minutes on LinkedIn and you'll read plenty of thought leadership pieces about corporate culture ... often from individuals who never played a role in creating corporate culture.

Enough about that.

The marketer sets the culture with the customer. The marketer is the one who speaks with the customer or prospect. You'll hear the term "relationship", but it isn't really a relationship, is it? One side has a megaphone and merchandise, the other side is silent, purchasing every 200 days if you are lucky.

What you do between purchase events is "set the culture".

Want an example?

Here is the discount level that one company communicated to me last week Monday - Friday.

• 40% Off
• 40% Off
• 40% Off
• 40% Off
• 50% Off
• 40% Off
• 40% Off
• 40% Off
• 40% Off
• 40% Off
• 40% Off
• 40% Off
• 40% Off
• 40% Off
• 40% Off
• 40% Off

That's sixteen communications in five days. They've set the culture. They have NOTHING to say. NOTHING. You're given this gift of setting the culture, and you squander it.

Do you love what you sell? The answer should be an enthusiastic YES! You'd think you couldn't help but scream about your best-selling products or your new creations.

Your customer notices. Your customer knows the culture you promote.

There are professionals who might suggest that this is your "brand". I'm not sold on that. "Brand" is bigger than culture. Culture leads to brand, yes. Amazon can have a ruthless culture and be a brand you purchase from daily.

You likely have hundreds / thousands of employees, but fewer than a dozen actually get to have a relationship with the customer ... get to set the culture with the customer. Be wise about who you assign this precious task to. And if the answer is "C-Level Executives constantly make changes and tell us what to do, that's why we are 40% off three or four times a day", then you work for a company with an intolerably poor culture.

Not The Right Offer

Sometimes we're not aligned with our customer.

I have no idea why AI added the text "Mt. Loyalty" to ... Mt. Loyalty.

Our poor friend, the Lemonhead, he's experiencing what we do. He's exhausted, and we offer him 30% off a tent with a port-a-potty when he needs a Buc-ee's.

Now, if you work at Starbucks, you know exactly what the customer wants ... a sugary and addictive drink to somehow make it through another day. Because the customer purchases something 200 times a year at $7 a pop, yeah, your loyalty efforts are going to work. You can easily make the "right offer" and the "right time". The job is ... too easy.

Your job?

Endlessly hard.

You're forced to sell that stupid tent (above) or a port-a-potty. The customer doesn't want a stupid tent or a port-a-potty.

I recently analyzed a business where the average purchase frequency interval was about 200 days. Might it be a better idea to wait for the customer and find another customer actively interested in buying a tent right now?

Let the customer recharge before forcing the customer back up Mt. Loyalty.

Mt. Loyalty

Oh, it's quite a climb.

I don't know what you've learned about Mt. Loyalty, but that mountain is full of challenges. Did you know that most climbers never even make it to the base camp at 1,000 feet on fictional Mt. Loyalty?

A few years ago I was connected somehow to an EVP of Marketing. This guy was fascinating. He believed he could do the entire marketing function by himself ... no employees. He said his goal was to outsource every function of marketing. His job? Create the discounts and promotions that would be used. He told me that is the only aspect of marketing that adds value. He then said something interesting (paraphrased below).

• "I can sell anything. It does not matter what my company sells a customer. All I need to know is where in the customer lifecycle the customer is and then I create an appropriate promotion to convert the buyer. Merchandise is meaningless."

As you might expect, I believe in the exact opposite thesis.

• It is not easy to climb Mt. Loyalty. What the customer previously purchased and is likely to purchase again in the future, coupled with key inflection points, dictate whether the customer ever becomes loyal.

It's January. You'd think those Cyber Monday customers would be busting down the door to buy from you right now. They're not. That's a timing issue, it's an issue of what the customer previously purchased and is likely to purchase again in the future. The Cyber Monday customer is an out-of-shape customer unable to make the climb up Mt. Loyalty.

Customer Loyalty

Customer Retention and Customer Loyalty are cousins.

1. You can have low retention rates and high loyalty ... if you buy a product that you only need every 3-4 years, you might come back and buy from the company every 3-4 years but you'll come back to the company immediately because you love/trust their products (the iPhone comes to mind).
2. You can have high retention rates and low loyalty ... you might get gas at the local Chevron but also get gas at three other area gas stations.

Most of the ecommerce brands you support have customers with a +/- 25% to 35% annual retention rate. For you, it's terribly hard to generate loyal buyers, and worse, creating a silly loyalty program doesn't move the needle because your merchandise assortment is too limited (small) to foster the number of purchases required to harvest loyal buyers.

If you had the data to graph the relationship, you'd see that loyal buyers grow exponentially as rebuy/retention rates increase linearly. By having an assortment that fosters multiple purchases per year, you accelerate the number of customers who become "loyal".

For my clients, I use a predicted 60% rebuy rate as my level for a customer being "loyal". At that point, the customer prints money for your brand ... the customer is very profitable!

On average, it takes about five (5) purchases before a customer becomes "loyal" across my e-commerce clients. Generate 100 new customers and after 2-3 years you might be lucky to have five of the cohort become loyal ... and most of 'em won't stay loyal.

As I've previously stated, if you want loyal customers, acquire a lot of customers. After you acquire a lot of customers, develop the customers in the first three months following a first purchase. The three-month window after a first purchase is far more important at generating loyal buyers than trying to get a 60% loyal rebuy-rate buyer to increase to 65%.

Money is wasted on loyalty efforts (at low rebuy rate brands) when the money could easily be spent on acquisition and the first three months following a first purchase. But you already knew that.

Customer Retention

You've heard me say this many times before ... Customer Retention is a function of your Merchandise Assortment.

This doesn't mean you cannot impact rebuy rates ... you can!

But you can only do so much.

In the early 90s at Lands' End we retained about 55% of prior year twelve-month buyers. That's a very high rate. We sold mens/womens casual, mens/womens tailored, kids, home merchandise.

In the late 90s at Eddie Bauer we retained about 45% of prior year twelve-month buyers, even though we had catalogs and e-commerce and stores. Our customers didn't really like us, even though we were a direct competitor to Lands' End.

In other words, similar companies had 45% - 55% rebuy rates. The difference was due to marketing effectiveness and customer trust.

In the first half of the 00s at Nordstrom we retained about 74% of prior year twelve-month buyers. Not only did our customers trust us, but with more skus than people living in Milwaukee we had a breadth of merchandise to allow customers to continually purchase all year long.

I have gift-centric clients with rebuy rates around, say, 20%. Those brands might be brilliant marketers, but with a limited assortment for nine months of the year rebuy rates will be suppressed.

Starbucks operates a whole 'nuther business model. When you sell a product that can be purchased daily (or more often), you'll retain even more customers on an annual basis ... maybe 90%. Thought Leaders will tell you to emulate what Starbucks does in an effort to create your own loyal customer base, but unless you sell an addictive product that can be purchased daily, nothing that Starbucks does applies to your business. Nothing.

If you sell products that are needed often (like Starbucks), your retention rates will be high.

If you sell products that are not needed often (i.e. a Lexus SUV), your retention rates are incredibly low.

Customer Retention is a function of what you sell. There is no right/wrong rebuy rate, given that rates are dependent on how often customers need what you sell and the depth of your merchandise assortment. Rates can vary based on marketing effectiveness ... +/- 5% off of a baseline is common ... if a company has a 30% rebuy rate, the good marketer will hit 35%, the bad marketer will hit 25%.