Weird Categories

Every one of you managed Weird Categories.

In the data I'm analyzing, a customer could buy from a category last year or not ... then buy other merchandise (or not). This creates three twelve-month buyer segments. I segment based on behavior 13-24 months ago, then measure rebuy rates in the past year.

Here's what a normal category looks like:

• Buy From Category 2 and Buy From Anything Else = 15.2% Category Rebuy Rate.
• Buy From Category 2 no Purchase From Anything Else = 8.1% Category Rebuy Rate.
• No Order From Category 2 and Buy From Anything Else = 2.4% Category Rebuy Rate.

Normal categories benefit from purchases in other categories, but benefit most from a purchase within the category. Duh!

Here's what a weird category looks like.

• Buy From Category 6 and Buy From Anything Else = 12.4% Category Rebuy Rate.
• Buy From Category 6 no Purchase From Anything Else = 16.2% Category Rebuy Rate.
• No Order From Category 6 and Buy From Anything Else = 0.8% Category Rebuy Rate.

Very weird. The customer is less likely to repurchase from the category if the customer buys something else in the past year from other categories ... and ... the customer has virtually no chance of buying from Category 6 if the customer only bought from other categories last year.

If you are responsible for Category 6, you don't send batch-and-blast emails to customers who haven't bought from Category 6 very often because those customers just don't want to buy from this Weird Category! There are seasons that likely cause customers to consider Category 6, that's when you try to cross the customer over into this category.

Heavy Lifting

Every category plays a role in your customer/brand ecosystem.

Category 17 - the highest sales category - is responsible for bringing new customers to this brand. This category truly does the heavy lifting for the brand.

Loyal customers are attracted to categories 4 / 6 / 7 / 13.

There's a natural ebb and flow to your business. Customers enter via certain categories, develop in another set of categories, then spend their loyal efforts across a handful of categories. Knowing this ebb and flow allows you to calibrate your marketing efforts. It's stuff you need to know, correct?

New Logo

There are things a marketer can do to improve business performance. A new logo is not one of them.

At worst case, you become Cracker Barrel. At best case, absolutely nothing happens. Either way, dollars are spent and time is wasted.

Thirty years ago I worked for a Sr. VP who suggested that business was 70% merchandise, 20% marketing and 10% creative. If marketing is 20% of the reason why a business is successful (it's more than that, by the way, not a lot more, but more), the tactics you choose to work on define whether sales are +10% or -10% ... in reality, they're the reason why your business is profitable or unprofitable. Yes, correct, it's that important. All of the little things you should be working on add up and make the difference between profit/loss.

In other words, you can't waste your energy on a logo.

P.S.: Yes, I realize I just offended 40% of you.

Conflicting Data

As you've been told, I write a Weather Newsletter. I also write a Pickleball Newsletter, but that's a topic for another day.

About three weeks ago an epic heatwave gripped the Western third of the country. I received two themes of feedback.

1. This is what happens when climate change is amplified. The future is worse than this.
2. This weather pattern is a normal weather pattern with an extreme outcome and has nothing to do with climate change.

Both sides are very passionate about their argument. They're quick to educate, they're in some ways overconfident ... they surely believe they are "right".

Forty years of data analysis suggest that humans struggle with conflicting data. We struggle with feedback loops. We struggle with interactions.

It happens in ecommerce. Remember our Category Impact table.

Category 17 is the biggest sales driver (sales are not shared in this table). It is also the biggest source of new customers. It also negatively impacts Category 6. This means when Category 17 does a good job, Category 17 hurts Category 6.

Assume you are the CEO of this brand. The merchant in charge of Category 17 looks great. She's responsible for a high-volume category that brings in new customers. And yet ... every time she does a good job, the poor merchant in charge of Category 6 looks bad. His sales decrease.

Should the CEO fire the guy running Category 6 if sales decline in Category 6? Or is the guy running Category 6 at the mercy of the woman running Category 17?

It's a nuanced situation, isn't it?

Just like weather / climate is a nuanced situation.

Obviously, you need the right data to even consider a reasonable response.

Almost none of you have the data to answer this question.

Selling Chickens

If you think you're performing ecommerce magic, you probably are, but you aren't doing what Sears did in the 1930s and 1940s when they (checks notes) sold live chickens via catalog.

Categorizing Categories

Based on the table below, we can categories our categories into three groups.

• Givers.
• Neutral.
• Takers.

You want Givers/Neutral categories. You want to de-emphasize Takers.

Here's the table.

There are ten obvious Giver categories.

• 2 / 3 / 6 / 7 / 8 / 9 / 12 / 13 / 14 / 17.

There are a handful of Neutral categories.

• 0 / 4 / 10 / 14.

There are a few Taker categories.

• 1 / 5 / 11 / 16 with 11 being an egregious Taker!

The email marketer tells stories about anything not in the Taker category.

The social marketer can do "something" with Taker categories, but not much. If you have to promote Taker categories, do so with channels that have essentially no variable cost ... like oraganic social.

The search marketer adjusts spend based on Giver / Neutral / Taker ... spending more on Giver categories, spending less on Taker categories.

The catalog marketer? You won't do this, but you cannot put Neutral / Taker categories in your catalog. Maybe just the winning items in those categories, that's enough. Those pages are TOO DARN EXPENSIVE to cause harm to your existing customer base. If you disagree (and you will disagree), talk to the paper / printing / postage / boutique agency folks and demand they align the expense structure of the discipline back to 2006 levels.

Alright, I'm off the soapbox.

Next week, we'll put all of this category stuff into perspective.

A Taker

We've all met takers in our personal lives. It's a horrifying experience. A narcissistic politician, an angry mother-in-law, a friend who always wants everything his way. All of it exhausting.

It isn't much different in ecommerce.

You undoubtedly have a merchandise category that is a TAKER. It takes away from other categories. It doesn't develop other categories, instead it borrows customers who then spend less in other categories and more in the TAKER category.

Here's our table. Take a look at category xx.

Read across the category labeled M11.

What a train wreck.

The category only adds value to categories 8/11/12.

The category TAKES value away from a whopping ten (10) categories next year.

This is a category that you shouldn't advertise. You can offer the category if it is profitable, sure (though that is questionable given this table), but your ROAS-obsessed analytics folks are making rampant mistakes giving this category equal treatment in any marketing channel. Catalog marketers should not feature this category anywhere ... bury it in the back of the catalog! Only feature winners here. Email marketers needs to not feature these items ... make it easy for the customer to "get" to the items online but most certainly don't feature this stuff ... those items are TAKERS harming your business long-term.

If you are going to advertise TAKER categories, do so on Organic Social. It costs you nothing. Do not waste precious marketing dollars on categories that don't play well with other categories.

A Giver

What you really want is to offer merchandise that causes customers to want to buy EVERYTHING you sell. That's how you know you're doing a good job.

Remember our table from yesterday? This brand has seventeen (17) merchandise categories. Reading across the rows, we see how much money a customer will spend next year in each category (columns) based on $1 spent in the category (row) previously. I weight historical dollars (100% past year, 60% 1-2 years ago, 35% 2-3 years ago, 20% 3-4 years ago) to add a "recency" component to historical purchases.

Here's the table.

Read across the row labeled "M09". This is Merchandise Category 9. This category is a GIVER. When a customer buys from this category, the customer spends more money next year EVERYWHERE!.

• $0.05 in Category 1.
• $0.21 in Category 2.
• $0.37 in Category 3.
• $0.23 in Category 4.
• $0.20 in Category 5.
• $0.22 in Category 6.
• $0.24 in Category 7.
• $0.11 in Category 8.
• $0.20 in Category 9.
• $0.29 in Category 10.
• $0.48 in Category 11.
• $0.33 in Category 12.
• $0.18 in Category 13.
• $0.33 in Category 14.
• $0.10 in Category 15.
• $0.26 in Category 16.
• $0.22 in Category 17.

This category is a GIVER. It delivers added value to every category. It either causes customers to "need" what is offered in other categories (i.e. an iPhone buyer purchasing an Apple Watch) or adds a halo to the brand experience.

This is the category that gets extra attention on your home page, in your email marketing campaigns, in social. You pay extra in Google Ads for items in this category. Terms like ROAS have no real meaning, because ROAS is what average marketers use to judge success ... you have a category that adds value to every category in the future ... you're willing to pay more to have more success.

And for the catalog marketers in the audience? Your catalog pages are too expensive now, you can't afford to feature stuff like you used to. Feature the categories that cause customers to buy everything in the future. Use your catalog dollars in a smart manner, ok? (and yes, I realize that won't happen but it should happen).

Givers and Takers

It's unlikely you look at your business this way.

It's time for you to look at your business this way.

You have categories that "give" ... when a customer buys from the category the customer immediately becomes more valuable to most/all categories.

You have categories that "take" ... when a customer buys from the category the customer aligns with the category and spends less elsewhere because of the purchase within the category. It would be like buying a Quarter Pounder with Cheese at McDonalds ... only for the customer to switch to a Filet o' Fish and not go back to the Quarter Pounder with Cheese. If your job is to sell Quarter Pounders with Cheese, you become protective of "your" customer.

This is the table we'll start noodling tomorrow.

National Griddle Week

Watching soccer and a halftime commercial comes on ... it's Blackstone ... and they're promoting NATIONAL GRIDDLE WEEK. Whaaa?

I visit their website ... sure enough.

AI knows all about it.

It's apparently an event they made up out of thin air.

I gave a presentation back in 2016, talking about how "brands" (as the pundits say) would ultimately have events that they can promote everywhere ... that "brands" would become similar to sporting leagues in that a sporting league might have the Final Four or the FA Cup or Opening Day (baseball) or the NFL Draft ... events that build excitement and lead to free advertising (even if paid advertising is used to create free advertising ... remember, Glenn Glieber once said "I love free advertising").

I gave variants of that talk at conferences from 2016 - 2019. Attendees HATED IT! The idea of having to use your brain to create events that might not work was not embraced. The idea of doing virtually no work and paying Facebook for names ... that idea, dear readers, was embraced.

It's 2026 (I realize you already know that). My inbox is filled with feedback and commentary about doing the absolute easiest tasks that involve a bare minimum of work ... paired with comments like "show me a best practice that you see working across your client base". That sentence is the essence of empty, vapid nonsense.

We all have to take risks, creating reasons for customers to do something. If you're not willing to make up your own "National Griddle Week", you're not willing to go to bat for your "brand".

What is your version of "National Griddle Week"?

Difference: Old vs. New

On Friday, severe storms were developing in the Midwest. A storm chaser was broadcasting live to his followers ... he was at one of those speedy oil change places. When it was time to pay the $49 or whatever, the employee told the storm chaser that the oil change was free. One of the viewers recognized the establishment, called the Store Manager, and paid the bill.

That is one way that the modern economy works for those exploring new business models.

Then you have old school brands working with YouTube, as shown below.

First of all, there's the brain dead marketing approach used by Michaels. Does anybody at Michaels think that my stream of Podcasts, Headphone information, Weather, and Pickleball videos aligns with their brand?

But secondly, YouTube knows everything about me. They know what I watch. They know what I subscribe to. On what planet does their algorithm (#AI) believe that THIS is the ad I need to see?

Either Michaels is dumb, YouTube is dumb, or both of 'em are dumb.

We've had the wombats telling us for nearly three decades that they can serve the right ad at the right time to the right person.

They cannot do that.

When you step back and watch what modern marketers are doing vs. old school marketers, you see a gulf that is difficult to bridge.

It Won't Impact Me

It depends.

One professional emailed me to suggest his company is using AI to generate 9% increases in reactivation rates. Another professional told me he's using RFM ... a 35-50 year old technology, to decide which customers are worthy of being reactivated.

Which professional is looking to the future?

Neither.

Or both are.

We don't know. We don't know how either individual thinks about the future.

Am I future-proofing myself by creating cartoon images via AI? Noooooooo.

You might think carefully about what happens if the return on investment on AI does not materialize fast enough? Remember 1996 - 2001? The adoption of the internet and monetization of the internet did not keep up with the Goobers who overspent. I worked for a company that went from $78 a share to $1 a share within six months. You might want to think about what it means for your company and your job if the market "corrects" because AI doesn't monetize itself fast enough.

There is going to be a generation of Leaders who navigate companies through the current political environment and the adoption of AI, avoiding bubbles and controversies. Pay attention to these people, because they're the ones who own the future.

A Glimpse Ahead

I've told you about Ryan Hall Y'all and his severe weather shows on YouTube. We're in a weather pattern that will likely lead to some severe weather for a few days, so his show becomes very popular.

When he's not broadcasting (which is the vast majority of the time), his team programmed an AI-bot to run a show that describes the weather ... called the Yall Bot (click here).

Driven by artificial intelligence, the bot communicates anything currently happening and previews weather trends likely to influence the next few days ... an automated Weather Channel if you will. In the screen shot above, with absolutely nothing happening, 1,400 people were watching, and "engaged" users were chatting ... chatting about weather being broadcast by a bot.

This is the point in the discussion where somebody tells me "Hey, Goober, what does this have to do with ecommerce and my job?" Good question!

It's trendy right now to talk about how AI will eliminate jobs like copywriting. "What will Sharon do when AI takes her job?" Yes, AI is coming for Sharon's job. Which means, of course, that Sharon has to adapt.

If a bot can be programmed to broadcast the weather 24/7 (and your awful phone weather app replaces the role of the meteorologist telling you the weather on the news), you have to change as the times change.

It's easy to see the future of ecommerce when watching the Yall Bot. Take all the modern aspects of influencer retailing on TikTok and fuse it with old-school aspects of the Home Shopping Network and you have your future job ... a computer-centric Video Director providing 24/7 programming that is a fusion of automation, creativity, and authentic human selling, all projected into AI marketplaces by the bots/agencies that replace much/most of your marketing team.

We know it's coming. We know we aren't going to stop it. We know we have to adapt. Best to start adapting today.

Out of a Job

Over on LinkedIn, an analyst mentioned that his job was eliminated as a result of increased automation and organizational change.

As we approach Easter, I'm sure there were carpenters who lost their jobs back in the day as a result of increased automation and organizational change. Or for other reasons. It's not easy to find a job, do a job, keep a job, or create a job.

Back in the day, I gave attendees at a Shop.org session a choice. If they had to downsize one position out of the following three, with no knowledge of the skill level of the person in the job, which position would you coldly eliminate?

1. Digital Marketing Director.
2. Catalog Marketing Director.
3. Social Media Manager.

I recall maybe 10% of the audience voting for the Social Media Manager, maybe 20% voting for the Digital Marketing Director, and 70%ish voting the Catalog Marketing Director off the island. I recall a catalog professional stopping me after the presentation, stunned that his profession had so little value in the eyes of other professionals. "Don't they understand how valuable my work is?"

No, they don't understand.

Imagine being a coder, having a skill few others ever possessed, being paid more than many executives, writing the code that made AI happen ... only to lose your job to the software you wrote?

If you have opportunities for side hustles, separate projects etc., by all means, take advantage of those opportunities. When bad things happen, it's good to already have a head start on your next chapter.

ASIDE:  A marketing manager reached out, asking me to volunteer my time to go through a maze of nonsense to "apply" for a consulting arrangement. He said I was "chosen among a small group of professionals they believed in". Well, if you believe in me so much, you've certainly learned from the 5,700 posts I've written over twenty years what I stand for and you already know if I can do the job you might want to underpay me to do for you. Or you just want my approach to a problem for free (most likely outcome). Long-term, this isn't how you do a job, keep a job, or create a job. It's how you cheat your own job. Employers see through this stuff over time. It's the kind of problem that automation will ultimately solve.

Brawndo

In the 2006 movie "Idiocracy" crops weren't growing.

There is a scene where Joe Bauers is trying to explain to President Camacho's Cabinet that crops were not growing because they were being given Brawndo (the thirst mutilator) when they should be irrigated with water.

This led to two problems.

• One Cabinet member repeated that Brawndo has what plants crave, and was so thoroughly brainwashed that she could not articulate why plants crave Brawndo ... she just knew that "it has what plants crave".
• Another Cabinet member suggested that it was stupid to give plants toilet water, insinuating that Joe Bauers was an idiot.

Of course this is what it feels like to spend a half-hour on LinkedIn.

But this also happens at your company. There is somebody you have to convince of something important, and that person simply isn't capable of thinking critically enough to even understand your argument. To put this into Idiocracy terms, I once had a department head who asked to see the electrolyte percentage in every report ... it did not matter that electrolytes were irrelevant, it did not matter that there was another issue (water) that he needed to pay attention to, he just wanted his reports to show electrolyte percentages ... to him, that was the story to be told. (the real story in this instance was how much one business unit cannibalized another business unit and the department head simply could not understand the concept of cannibalization - no amount of arguing mattered).

In the movie Idiocracy, Joe Bauers eventually filmed a field that he was irrigating, proved he was right (growing plants), and ultimately (though not easily) became President.

Don't be afraid to take chances. I once had a CMO who told me that one of my weaknesses was that I didn't take risks - she told me that I needed to do things without her permission ... without me telling her what I was doing ... show that the concept worked, then I had to make it impossible via sales/profit for her to tell me not to do it again. That always stuck with me. It should stick with you as well.

A New Category

Imagine the terror you likely have if you make computers and Apple creates essentially a new category with the Mac Neo (click here).

You'll do the same thing within your own company. I recall working at Lands' End in the early 1990s when we'd see a surge in mock turtleneck sales ... we had analysts who'd pour over the numbers, estimating the impact mock turtleneck sales had on turtlenecks ... they'd analyze if the customer changed behavior (the customer did not change behavior, the customer simply changed product preference) ... they'd argue whether turtlenecks or mock turtlenecks should be featured in the first twenty pages of the catalog.

Regardless of the debate / arguing, they knew the impact mock turtlenecks had on turtlenecks.

You probably deal with a similar situation at your "brand", right? What do you do to understand the issue?

Read This ... < 1,200 Words

Read this (click here) ... after reading this small amount of text, you'll have an understanding (not necessarily fully accurate but that's not the point) of the life of this shark.

I share this with you because this is what you'll have to do in the age of AI ... AI is going to write better than you. You and I have to clearly, simply, beautifully compete with technology. If we don't, we lose.

One can make a strong argument that as AI consumes jobs, an increase in artistic jobs fill the void. Writing is a noble artistic job.

Your Core Micro-Businesses

We're analyzing a business that has seventeen micro-businesses (categories).

I selected all customers who bought one time last year, and bought only from one micro-business. I then measured the micro-businesses that those customers purchased at least 67% of their sales from in the next year.

What did I learn?

Customers crossed-over into mostly two categories in the next year. Just two!

This is a mostly common outcome. It means that the two micro-businesses that customers cross over into are the core of your business.

When you don't have a marketing story? Make up a story about the core of your business, because that story should resonate with the most customers.

High Crossover Microbusinesses

Back in the day at Nordstrom Mens Apparel was a "high crossover" micro-business (category).

What does that mean?

It means that a Mens Footwear customer was willing to buy Mens Apparel next.

It means that a Mens Tailored customer was willing to buy Mens Apparel next.

It means that a Womens Apparel customer was willing to buy Mens Apparel for her husband on a next purchase.

It means that a Cosmetics customer was willing to buy Mens Apparel on a next purchase.

High crossover categories are prime candidates for email marketing. You want customers early in the life cycle to crossover into as many micro-businesses (categories) as possible - the odds of future purchases increase meaning that lifetime value increases.

Email marketing isn't some mindless "set it and forget it" program. It requires thoughtful consideration. Do the small things that lead to customers who are likely to purchase more often.

You Have Relationships, And You Have Situations That Do Not Follow Your Relationships

We've been evaluating micro-businesses ... your business is comprised of dozen(s) of micro-businesses. Each of those businesses possess different dynamics.

Sometimes there is an overriding relationship. For instance, this business is represented by a graph ... the x-axis is the rebuy rate of customers buying again from each individual micro-brand (category), the y-axis is annual net sales for the micro-business (category).

In general, one could fit a line through the dots ... if a micro-business (category) retains more customers, it generates more net sales. Sort of a #duh. Snoozer.

Except for two things.

Look at the category with an approximate 7.8% rebuy rate ... but generating about $11,000,000 a year. That shouldn't happen ... that micro-business should be somewhere around $6,000,000 a year. Why so high? High price points. The category has high prices, which artificially lower rebuy rates ... but the customers who do purchase spend a lot more, resulting in a good outcome.

Look at that data point with a rebuy rate > 14%. This micro-business has as loyal of customers as any category, and yet sales are awful. Why so low? Because the category does not attract customers outside of its own micro-category. Yeah. Customers like this category, but customers who do not buy from the micro-category DO NOT LIKE this category and won't buy from it, greatly limiting the potential of the category.

There's a lot of secrets in your business ... go look for them ... then develop marketing plans for each micro-business (category).

How A Micro-Business Generates Business

Allow me to simplify the message. Here is a brand that has seventeen categories. One of the categories is Gifts. Here is how the micro-business generates sales.

• 18% from last year's Gift Buyers.
• 15% from last year's buyers, no Gift purchase last year.
• 67% from new/reactivated buyers this year.

If it is your job to grow Gifts, it is your job to work with the marketing team to create awareness among people who haven't bought anything from the brand.

Every merchant responsible for a category / micro-business needs to partner with a marketer to properly grow the business. 

Here's another example ... the micro-business is Pet Accessories.

• 4% from last year's Pet Accessory Buyers.
• 20% from last year's buyers, no Pet Accessory purchase last year.
• 76% from new/reactivated buyers this year.

In this example, it's even more critical to have a merchant partner with a marketer who knows how to fish for prospects who have never purchased from the brand.

Every category / micro-business has a sales generation profile that is different than the overall profile for your brand. Be sure to partner with your merchandising co-worker, helping that professional look good. If the merchant looks good, you look good!

SugarBee Apples

I really enjoy Sprint Car Racing ... toss Weather / Pickleball / Sprint Car Racing / Headphones / Food into any day and I'm generally in a good place.

When one of the two big 410 Sprint Car Series come to Central Arizona, yeah, I'm in. My favorite driver is named Rico Abreu - the most popular driver out there.

He was the champion of this series last year, and is the obvious crowd favorite ... young and old alike. There were many young ladies and boys around his car looking to meet him after the event, wearing his merch.

You don't run a race team without $$$. Lots of $$$. One of Rico's sponsors is SugarBee Apples from Washington State (click here). How do I know this? They're not prominently featured on his car, so they must be doing something else.

Well, they have the SugarBee mascot ... who had to be BOILING on Saturday night (race time temperature was 103 degrees when I arrived) ... featured here on FloRacing's broadcast of the event ... which means, of course, that not just the people at the event are hearing about SugarBee.

SugarBee did something else ... they had free apples. If you went to Rico's merch trailer (where his wife was making $30 every thirty seconds selling merch, plus you got to meet Rico's dog Gus), you were instructed to take a free SugarBee apple ... packaged in a teeny tiny adorable carrying case.

Once word got out that you could get a free apple, there were free apples everywhere. Where I sat, maybe five people were eating a free apple at the same time. The apples looked like those yummy Honeycrisp apples to my eyes ... turns out they are half Honeycrisp / half unknown variety.

All sorts of cross promotion as well.

• Rico at the Safeway in Queen Creek handing out apples.
• Press Releases ... including a quote from a long-time MineThatData follower and Chief Marketing Officer.

Why bring this up?

One of the most common questions I receive is this question?

• "How do I find new customers? Old school methods have dried up, and digital marketing is too expensive and opaque. Do you have examples of new customer acquisition techniques that other companies execute, examples that work?"

I hate the end of the sentence ... if you're only willing to do things that work, you're not going to be in business in a few years.

Do you think SugarBee have a guarantee that handing out a thousand apples in adorable carrying cases paired with a mascot sweating in 103 degree heat will "work"?

But there they are, doing the hard work. In person.

Creating awareness.

Reaching prospects.

Encouraging customers to go to Trader Joes or Safeway to get their apples.

I'm not saying you should hand out free widgets at an event you think is beneath your sophisticated brand.

I'm saying you should do something. You ask for examples. I just gave you an example. What is a parallel for your business, one that is brand appropriate? What stops you from executing a similar strategy that is brand appropriate?

P.S.: SugarBee has other marketing programs.

• 2024 Scripps National Spelling Bee.
• A Hispanic Recipe Book.
• An E-Book.
• Adopt a Tree Workbook.

Subtle Changes Over Time

Sometimes I'll step back and look at changes across several years. Many clients don't realize the subtle changes they've caused.

In the business we're studying, there are subtle changes worth pointing out.

Comp Rebuy Rates:  -6% vs. three years ago. Not ideal.

Comp Segment Demand:  +1% vs. three years ago.

Comp Items Purchased:  -8% vs. three years ago. Yup, this company is selling more-expensive items over time. The COO is probably looking at downsizing operations folks, the CFO might be happy if gross margins are up. Always remember that items = customers. It's not a bad thing if management has metrics moving in odd directions with a top-line that is steady/growing. It's almost always a bad thing when fewer customers buy from a client.

Comp Item Price:  +9%. Wow.

Comp Full Price Selling:  -4%.

Comp Off-Price Selling:  +11%. The two metrics tell a story, don't they? The likely story is that merchants are increasing prices when they offer new items, customers rebel against the merchants, so the marketing team offers discounts/promotions which customers accept. #ohboy

Comp New Items:  +5%.

Comp Existing Items:  -2%.

I create the metrics (above) to cut through all the BS a consultant hears from "some" members of the Management Team. The business I'm analyzing here had an ownership team who wanted to "transform" the brand. After digging into the numbers and speaking with members of the Management Team, it was clear there wasn't trust/harmony between the Ownership Team and the Management Team. 

The core problem wasn't merchandise ... the core problem was trust.

As it so often is.

You run these metrics for your business ... right? Of course you do. You like to know what is happening, you like being smart.

Every business has customers shopping across micro-businesses / categories. Every business has interpersonal dynamics between ownership / management / employees that spill over into the customer relationship. The consultant / analyst cuts through all the nonsense, identifying core issues impacting the customer.

Nine More Months for the USPS - Which Means an Offer for You

That's the scare they threw at #papertarians this week.

Maybe they need Henry Adkins to come in and get things done (click here).

While your agencies and paper reps and printers furiously lobby for more of the same, your job becomes a lot more interesting.

• What happens to your business if you cannot mail catalogs anymore?
• What happens if postage increases by 50% and you ... essentially ... cannot mail catalogs anymore?

Surely you've modeled this outcome and know exactly what happens. You have mail/holdout tests that are reliable, you thoroughly understand your organic percentage, you know how you'd shift money into digital marketing channels. You know what happens to net sales. You know what happens to your customer file.

You know.

But if you don't know, it's time to hire me (kevinh@minethatdata.com). Here are your choices.

• $9,000 and I'll tell you what happens, I'll model the outcome for you. You'll know. Within a few weeks. You'll know. I'll analyze any mail/holdout tests executed in the past year at no additional cost. Pretty good deal, given the millions you spend on paper, printing & postage.
• $15,000 and I'll model the outcome for you AND score your file AND I'll provide you with the scoring equations so you can implement the equations in-house. I'll also score customers for email responsiveness so you can use that information as part of your transition. You'll know, and you'll be able to take action.
• $35,000 gets you more ... I'll model the outcome for you AND score your file AND I'll update your scores at least once a month AND I'll score your email file monthly AND ... AND ... I'll be on-call for general marketing challenges you have, providing advice ... you get me on video conference for 90 minutes per month and I'm available via email whenever you need me ... all through 3/31/2027. Sort of a Virtual CMO to assist with your business transition. You don't get me for on-demand ad-hoc analytics like some clients do (that's more like a six-figure situation and on-demand email/chat response and 60 minutes of video conferencing per week ... but if you need that for your transition, contact me as well, I probably have bandwidth for one (1) additional client in this circumstance). But you'll do well with this arrangement.

Here's my email address (kevinh@minethatdata.com).

Contact me immediately, 'cause this stuff usually gets me busy quickly and I don't have bandwidth to help everybody. Act right now. Be prepared.

Micro-Businesses Moving In Different Directions

Every business is comprised of a series of micro-businesses / categories. Some micro-businesses are dependent on other micro-businesses, others move independently.

I evaluate micro-business movement in terms of comp segment performance on an annual basis. You remember comp segment analysis, don't you? I select all customers who bought exactly two times in the past year - then measure how much customers spent in a future period of time (in this case, one year ... in my Elite Program runs, it's the following month). I want to see how "good" customers behave.

In the case of the business I'm analyzing in this study, here is comp segment performance (annual) for the merchandise categories that have meaningful amounts of net sales.

• Category 02 = +19%.
• Category 03 = +6%.
• Category 04 = +8%.
• Category 05 = -12%.
• Category 06 = -18%.
• Category 07 = +12%.
• Category 10 = +22%.
• Category 11 = +41%.
• Category 13 = +8%.
• Category 15 = -13%.
• Category 16 = +10%.
• Category 17 = +5%.

Yeah ... #chaos.

In total, comp segment performance was +7%. In other words, the merchants as a whole are doing a very good job.

But at a micro-business / category level?

#ohboy

Remember Category 03 from earlier this week? The category had a significant sales decline ... and yet, "good" customers spent more in the category. This is even more sad ... because it means that declines caused by likely discontinuation of items from 2/3 years ago harmed new/reactivated buyers.

What are you seeing across your business, when you evaluate customer behavior at a micro-business / category level?

When A Micro-Business Crumbles

Here's one ... this category had problems last year.

• 4 Years Ago = $6.1 million.
• 3 Years Ago = $6.7 million.
• 2 Year Ago = $6.7 million.
• 1 Year Ago = $6.7 million.
• As of Today = $5.9 million.

The decrease happened in a growing business. This means somebody messed up. If customers like other categories and this category is struggling, it's a merchant who messed up.

I like to look at my "Class Of Report" next - analyzing merchandise classes over time. The story becomes obvious when we look at the table.

Look at the classes from three years ago and two years ago. Tell me if you see a problem?

The problem is sales in the year ending "today".

• 3 Years Ago Class = $1.4 million to $0.8 million.
• 2 Years Ago Class = $1.4 million to $0.8 million.

A "normal" drop-off might have been 20% ... these two classes dropped off by more than 40%. In other words, "somebody" decided to discontinue a bunch of items from these classes, and the business got hammered to the tune of about $600,000.

Look at the number of new items in the class ending today. New items went from 176 the year prior to 250 ... regardless, demand decreased by $100,000.

Look at the price of new items across time ... from $61 to $76 to $99 down to $86. What impact did this have? Quantity of items sold are half of what they were three years prior.

Yup - this is a merchandising problem.

It gets worse.

Customers who bought from this category exhibited the following behavior the following year (within the entire business, not just within this category).

• They were 6% more likely to repurchase next year.
• If they repurchased, they spent an additional $35.00 next year.

The merchants hurt the business this year.

The merchants hurt the potential of the business next year.

When a micro-business crumbles, problems cascade.

Every business has a set of cascading micro-business problems.

Are you looking for these problems?

You Run A Collection Of Micro-Businesses

Way back (around 2010) a CFO told me that his brand had a category (socks) that was the place where his brand developed talent. The category was < 5% of total sales, so as he said, "they can't muck it up". His company used the category as a training ground - the employees who marketed the product, the employees who sourced the product, those who wrote copy, those who managed inventory ... they formed a team ... and it was their job to grow their "business".

Every one of you runs a collection of micro-businesses. Here's Silk & Willow ... a whole collection of micro-businesses.

Now, you could develop employees in key micro-businesses / categories. That's a good idea.

It's also a good idea to understand how every category / micro-business fits together. When "business stinks", it isn't that business is bad ... it's that some of your micro-businesses are causing a cascading set of problems.

For instance, when I worked at Eddie Bauer, it was common to see a bad Women's Apparel business spill over into Home ... if customers didn't buy Women's Apparel, they didn't become good Home customers and consequently Home suffered. If Home suffered? No impact on Women's Apparel. Each category / micro-business played a role, but the role was different ... it was important to understand "what" role each category / micro-business played.

Do you understand the role each category / micro-business plays in your brand?

Why Is My Business Struggling?

That's what the CEO asked me. "Why is my business struggling?"

The CEO could tell you about the following.

• Traffic
• Conversion Rates
• AOV
• Gross Margin %
• Marketing Expenditure

The CEO didn't know much about the interaction of merchandise and customers. How could she? Very few companies are smart enough to create their own reporting to measure the interaction between merchandise and customers. The relationship changes between "brands" ... it's not cost effective for vendors to create reporting to measure the dynamic.

Let's spend some time talking about ways that merchandise and customers interact. It turns out the relationship between what you offer and what customers purchase has a lot more to do with why your business succeeds/struggles than anybody gives credit for. Maybe your business is struggling because you did something from a merchandising standpoint that impacted how customers respond.

Your Questions, Answered!!

Here we go, as promised! There are many questions. Skip the ones you don't want answers to.

Steven:  In all your meetings, whether working for or consulting with a brand, was there ever a moment when you saw the participants grasp what you were imparting on them? It would be great to hear an example of how you saw a team or group work, either from the ground up or top down to really change the culture and business trajectory.

It is rare for an entire group of people to grasp a concept at the same time or on a similar timeline. The core themes of my work (customer acquisition > customer retention ... incremental response vs. reported response ... importance of new merchandise and winning items) are not concepts that are accepted by average professionals. Imagine being the person who manages paid social and I tell the person that 70% of the conversions he observes in his reporting via Facebook would happen anyway if he didn't advertise?

There are individuals who grasp concepts. Those individuals generally run with the idea. I work with a CEO/Owner (for close to fifteen years) - this guy gets it and in general does a fabulous job implementing the concepts. When I analyze his data, I can see when he hires somebody who disagrees with him ... customer data changes and his business doesn't grow as fast. This would be an example of a top-down approach. The leader asks staff to execute a certain way, and sometimes the team working for him chooses otherwise.

I worked with a Marketing Vice President who took the concepts and ran with them on his own, independent of the rest of the business. Merchandise productivity was bad, his marketing investments in new customers were good, the business grew as a consequence. When the individual left, the new marketing person identified "low hanging fruit" ... cutting marketing spend significantly. The business crumbled, and has not recovered.

I am currently working with a team that is getting results ... the individuals may or may not agree with me, but they are working together to make change happen. Their Leader sets the tone, the team respects the Leader, consequently, they listen to me. As you'd expect, implementation is bumpy ... it always is ... and it doesn't matter ... the team knows they want to see better performance and they are working together to make it happen. People have to be able to get along with each other for this to happen.

Anne:  Increasingly, I am seeing nonprofits I work with say they are not going to do postal mail because of cost. They want to use email and social only. They invite me to be on their board but they do not want to listen. I want to give them guidance but I do not want to lead them astray because conditions are changing rapidly and nonprofit budgets are thin and endangered. Any help would be appreciated.

Ok print lovers, here is your moment ... I'm about to land on your side! There are three issues with print ... costs are increasing, response is declining, and those who respond are generally 65+ years old. For non-profits, do you care if those who respond are generally more than 65 years old?

If costs increase, response has to increase in response to increased costs. This is the challenge - nonprofits I've worked with don't know if response increases or decreases ... they sometimes see marketing costs as a budget line, but they don't marry response to costs.

My catalog clients have something they call the "profit factor" ... it's the percentage of sales that flow through to profit. Let's pretend that factor is 40%. If a catalog costs $1.00 to put in the mail, then the client has to generate $1.00 / 0.40 = $2.50 of sales in order for the segment to break-even. If the cost to put the catalog in the mail increases to $1.10, the client has to generate $1.10 / 0.40 = $2.75 of sales in order for the segment to break-even. My clients would cut circulation on anybody expected to generate $2.50 to $2.74 to offset the increased cost of the mailing.

You should be in a similar circumstance ... your mailings must offset the cost of the mailer and generate enough donations to cover overhead and have enough left over to actually do good work. Which means you probably need to generate between $3.00 and $5.00 per recipient in donations to offset the cost of direct mail. And if direct mail costs increase by 10%, you need to generate $3.30 to $5.50 to offset increased costs.

As long as you generate enough donations to offset costs and have plenty left over to do good work, print is important regardless of cost increases.

Liz:  I understand your advice on building communities outside of Meta and Google. What is the expected range of outcomes from these programs? How long does it take to generate results via new customers, and what can I expect in terms of share of new customers from building communities?

Here's an answer my readers won't like ... it will likely take 3-4 years of hard work to make a difference. Also ... you have no choice but to do the hard work.

This isn't a place where you want a direct marketer leading the efforts. At all. The direct marketer doesn't have great ideas in this realm, and will quit long before the program has a chance of succeeding.

This isn't the place where you want an ROI-based digital marketer leading the efforts. At all. This individual will also quit long before the program has a chance of succeeding, citing low "ROAS". The individual would rather pay Facebook money today for orders tonight.

I know of a company that spent six years building the community. In years 4/5/6 efforts paid off. Roughly half of their sales come from new customers, they believe roughly a quarter of their new customers come from their community of registered users. They believe that each registered user is worth $10 net sales per year. The reality is that these are guesses, but they aren't bad guesses based on the data shared with me.

The community must be passionate about what the company sells (is anybody passionate about what Macy's or Kohl's sells, for instance?) and feel like there are benefits to being in your community ... purchasing your merchandise ... over what somebody else sells.

The first year will be a hot mess ... virtually no positive results ... a lot of numbers wonks asking you why you are wasting so much time/money on something so pointless?

The concept of a "registered user" is important - you have to track if your community is visiting your website and/or looking at your merchandise. If you can demonstrate that a registered user visits your website monthly, you're on to something.

Robby:  How is AI influencing prospecting and what is the best way to take advantage of it? Is any company excelling at it?

In digital marketing, AI has already stamped itself over everything you do. It determines the content/merchandise in email messages sent to non-buyers. Ask the Listraks and Klaviyos of the world for examples. Search is already aligned with AI ... when I search for HEADPHONES WITH A NEUTRAL SOUND SIGNATURE Google isn't looking for keywords, Google is inferring my meaning via AI.

AI-centric marketplaces will likely supplant modern search in the next 5-10 years, assuming the AI wonks don't boil all of our fresh water cooling their servers.

I have a direct mail client who uses AI models for reactivation, and has good results ... good meaning +20% over their baseline models. This is a bare-bones use of AI, of course ... they're just using AI like one would use a regression model.

Most of my clients tell me that classic direct mail prospecting is "dead", and when something is "dead", AI isn't going to be of much help. I recently saw a mail plan comparing 2026 to 2016 ... prospecting circulation was down 80% due to a combination of terrible response and increased costs. AI cannot overcome structural changes in an industry, which is why we don't see many AI solutions applied to direct mail paired with outstanding outcomes ... if that existed, the print folks on LinkedIn would be screaming from the mountaintops - their glee would be unavoidable.

Honestly ... if 40% of an email subscriber list has not purchased anything historically, I'd gather whatever attributes I could for this audience and use AI to align messaging and merchandise with non-buyers.

Bob:  What advice of yours changes when a new business or a business with sales < $1,000,000 a year has a handful of unique products/SKUs where product/market fit is still evolving, and where the database is < 10,000 customers?

The general theme of my advice doesn't change, the level of complexity required to implement ideas changes considerably. If the small business wants to grow, it needs to find clever ways to identify likely prospects - and the small business will have to do it "on the cheap". The organic social route is very important for these companies. It's very important until the business exceeds $10,000,000ish per year ... then the rules begin to change and there needs to be a more-generous marketing budget.

The small business needs to understand if the product they sell leads to repeat purchases. If the product is a one-and-done product, well, it's all about finding new customers for a long time. If the small business is selling body wash? Well, that's a different business model, and a small number of very happy customers can do a lot of free marketing on behalf of the brand.

Small databases change the way experimentation happens. If you have 10,000 customers and 5,000 have an email address, you are likely to just split the file in half when experimenting with email marketing concepts. The small brand is likely to segment customers into a small number of segments so that any analysis/results are statistically relevant.

The small business that has one or two key items needs to closely monitor when those items are dying. The slightest miss against budget/expectations should set off alarm bells. There needs to be a plan for the small business ... an exit plan for a limited assortment (i.e. be bought by a larger brand or become an Amazon supplier) or a product development plan to become a "brand".

The small business looks a lot less at customer metrics and looks a lot more at conversion metrics. Where is traffic coming from? How does traffic convert? Do customers buy multiple items or a single item (this becomes an important segmentation variable)? Are customers clicking-through email campaigns? Analytics sophistication grows as net sales grow. It doesn't mean the small brand isn't analytically driven ... quite the opposite ... but the small brand worries much less about complex questions/solutions, focusing instead on what it controls and what it can understand with limited resources.

One area where the small business is no different from a large brand is in purchase activity within the first 3-4 months following a first purchase. Regardless of ecommerce brand, it is really important to convert a customer to a second purchase quickly before the customer fades away. Small businesses that focus on this metric have an inherent advantage over other small businesses.

Using a "simple is better" approach, the small brand is infinitely more nimble than Macy's ... an enormous advantage.

Ed:  We used to mail a 184 page catalog, but shifted to 124 pages when paper / printing / postage costs increased. Around that time our sales slumped. Did sales slump because we featured fewer pages in catalogs?

Believe it or not, I first analyzed this challenge in (checks notes) 1991. THIRTY-FIVE YEARS AGO! We had an equation at Lands' End that calculated the elasticity between pages offered and merchandise sold. Each additional page (i.e. going from 160 pages to 164 pages) generated incremental sales, but at an ever-decreasing rate.

At Eddie Bauer in (checks notes) 1999 ... TWENTY-SEVEN YEARS AGO we had an equation that optimized circ depth, page count, and quality of product offered. Small page counts were super-charged with best-selling products ... allowing 96 pages to perform nearly as well as 248 pages from a sales standpoint (meaning we could mail 96 pages forever because of the profit advantage those pages had).

But times change.

If you are like many modern catalogers ... you have an approximate 75% organic percentage ... page counts are nearly irrelevant. You heard that correctly. Your customer has moved on, and responds digitally. Spend your time on social, search, email, video, community ... it's over.

If you are like many B2B brands ... you have an approximate 35% organic percentage ... it's like it is the mid-90s. Your catalog IS THE REASON why the customer purchases. For these customers, you have to show the customer your merchandise assortment or the customer might not look for those items online.

Be willing to experiment ... if you mail 124 pages ten times per year, go ahead and mail 184 pages one time per year, and reduce circulation by a third in response. Try it. See what happens. Also be willing to test ... conduct a mail/holdout test and see if your organic percentage (the share of sales that still happen if a catalog is not mailed) is 35% or 75%.

Also - be willing to check your merchandise productivity. Most of the time pages offered is minimally relevant while merchandise productivity is maximally relevant. If customers like what you sell less year-over-year, it's easy to misattribute that issue to something less meaningful (like email marketing click-through rates and/or catalog pages and/or traffic from Instagram).