When A Business Has Long-Term Potential

There are things that are somewhat easy to fix.

When I see a business that needs 300,000 new/reactivated customers and is only acquiring 200,000, I usually see a marketing problem that can be fixed. The client may not see the problem that way, but it's a tactical issue that can be resolved.

Businesses that have long-term potential have a signature other businesses don't have. Long-term potential businesses acquire customers that generate plentiful downstream profit. I can also tell if the business has smart marketing/analytics employees ... if the business acquires customers who generate plentiful downstream profit, smart employees compensate by acquiring customers at a loss (or as a proxy their customer acquisition efforts have an unnaturally low ROAS).

Business Without Long-Term Potential.

• Customer Acquisition ROAS = 4.00.
• Profit on Acquisition Transaction = $2.00 per customer.
• Year 1 Downstream Profit per Customer = $4.00.
• Year 2 Downstream Profit per Customer = $2.00.
• Year 3 Downstream Profit per Customer = $1.00.

Business Without Long-Term Potential, Managed for Short-Term Profit by Smart Marketers/Analytics Professionals.

• Customer Acquisition ROAS = 8.00.
• Profit on Acquisition Transaction = $12.00 per customer.
• Year 1 Downstream Profit per Customer = $4.00.
• Year 2 Downstream Profit per Customer = $2.00.
• Year 3 Downstream Profit per Customer = $1.00.

Business With Long-Term Potential, Well Managed by Marketing/Analytics.

• Customer Acquisition ROAS = 2.00.
• Profit on Acquisition Transaction = ($10.00) per customer.
• Year 1 Downstream Profit per Customer = $15.00.
• Year 2 Downstream Profit per Customer = $11.00.
• Year 3 Downstream Profit per Customer = $8.00.

The first business is one you don't want to acquire. Management doesn't know what they are doing. Marketing/Analytics don't understand the importance of profit.

The second business is worth considering only because smart people work there. It's the same business! However, the marketing/analytics folks generate enough profit acquiring a customer ... they understand that the customer doesn't have long-term potential ... so they optimize the business to make it profitable today. The buyer is purchasing "smart people" in this instance.

The third business is one that Private Equity or smart professionals want to purchase. ROAS isn't low because it's low ... it's low because marketing/analytics over-invest in new customers, losing money on the acquisition transaction to net out handsomely over three years. The owner of the first business would gladly lose $10.00 to profit $34.00 over three years ... but she can't do that because she sells merchandise that customers don't want often enough to generate future profit.

All of these dynamics are determined by "what" the brand sells. If you sell something that can be purchased year-round and the customer wants to buy it 2-3 times per year, you have the third business. If you sell something the customer only needs once every-three-years, you are managing the first business or the second business.

The first/second business cannot be fixed by the marketing/analytics folks ... it can only be optimized. The first/second business has a merchandising problem - the business is selling merchandise that customers don't want often enough to generate sufficient profit.

If you are wondering ... yes ... consultants see the first/second business every single day. Try telling the Chief Merchandising Officer that he isn't selling merchandise that customers want often enough to generate sufficient profit.

Alarms Go Off In My Head

Here's a must read if you think AI isn't a bubble that is going to explode and wreak havoc (click here).

This is the quote that caused alarm bells to go off in my head:  "This kind of mythology only grows in an environment deliberately deprived of good information."

There it is!

Ecommerce is misled by the mythology of conversion reporting, failing to understand customer relationships because Shopify shows conversion on an item among loyal buyers is 9.4%.

Catalog marketing is misled by the mythology of the matchback report (and for some bizarre reason an obsession among paper / printing folks on neuroscience).

Email marketers are misled by the mythology of open rates (a tactical metric but not a revenue-generating metric).

Social media marketers are misled by the mythology of engagement (a tactical metric but not a revenue-generating metric).

Search marketers are misled by the tyranny of ROAS (a revenue limiting metric).

Every one of us (myself included) deliberately deprive ourselves of good information in an effort to believe in the shared mythology that motivates us in our daily work but causes us to fail, to perform in a sub-optimal manner. We believe in a false marketing idol of some sort.

We don't have to do that.

Selling Your Business

When I talked about Private Equity last week (click here), I didn't expect to get the feedback I received ... from some of you about buying/selling businesses.

So, yes, if you are thinking of selling your business or buying a business, I still perform evaluations of ecommerce brands. I'll point out everything positive I see, I will perform an analytical biopsy on that odd looking patch of skin, I'll forecast out where the business is likely to head over the next few years.

If it is a catalog-centric business, there's nobody on Planet Earth who is better positioned to discuss what the future holds for that business than me.

Contact me now (kevinh@minethatdata.com) if you are thinking of buying/selling an ecommerce business.

Yes, You Need To Experiment With Merchandise

Here's what I frequently see. A client launches new items in 2019 ... a class of items. I then measure the sales of these items by year thereafter.

• 2019:  $25,000,000.
• 2020:  $40,000,000.
• 2021:  $31,000,000.
• 2022:  $23,000,000.
• 2023:  $16,000,000.
• 2024:  $10,000,000.
• 2025:  $7,000,000.

Not only is this what I frequently see, this is just the way things work for the vast majority of clients. It's just how business works.

This is why you have to constantly replenish your assortment with newness ... why you must constantly experiment with new product lines or extensions within your existing product categories. You have no choice.

Put on your lab coat, grab a beaker, and start experimenting.

Two things.

1 - It's ok to have no idea what you're doing. You're experimenting. Try things. Something is going to work. In no way am I saying you should be reckless. Don't discontinue stuff that works great to fund your experiments. Nope. I see it all the time in my work. Be smart about keeping the stuff that works and squeezing every last penny of profit from it.

2 - For the marketers in the audience, it's your job to amplify the experiments performed by your merchants. Support your co-workers. Give their new items exposure in email, on the socials, on your home page.

It's time to start experimenting.

Now What?

Years ago, an ecommerce client stopped growing.

Of course, I could see it coming. For years I told them that they were growing because they could acquire customers at a reasonable cost. For years I told them that growth would end in a few years.

I'm not sure this client believed my words, my analyses, my forecasts. They were growing.

Months before the forecasts suggested the end of growth was near, their merchandise productivity dipped marginally ... just 5% (+/-). That was it. Growth stopped.

The Executive asked me a question.

• "Now what?"

Yeah, now what?

The time to perform your lab experiments is when your business is thriving. That's when you introduce a new product line. That's when you create a new brand out of thin air. That's when you attempt to sell in a marketplace to see what happens. That's when you personalize your email marketing campaigns. That's when you explore AI and Influencers and TikTok, you name it. You experiment. You try things knowing that the majority of what you try will fail ... it's an experiment, it's ok to fail.

But you do that when you have a multi-year cushion before growth stops.

The second best time to begin your lab experiments is tomorrow. Maybe business is awful. So what? If you don't start your experiments tomorrow, how are you ever going to dig out of a challenging situation.

The second half of 2026 requires experimentation. If you want to thrive in 2027-2028, you have to identify tactics that work today so you can capitalize on them tomorrow.

Also - it's ok to fail. You'll need to fail a lot to identify a handful of successes. Don't listen to those who paralyze you with ROAS metrics and dashboards with little red stop signs next to your experiments.

Reminded Of This Grumpy Gem From 2015 And The Forced Transition To Loyal Buyers

I looked at the data.

1. Prospecting Response Down Significantly Post-COVID.
2. Ad-Costs Up 25% In The Past Three Years.
3. Huge Circulation Cuts Among Lapsed Buyers and Prospects.
4. Dire New/Reactivated Buyer Counts After The Circulation Cuts.

The response to this problem is obvious (digital marketing). It was obvious in 2005. It was obvious back in 2015. It's obvious today. Doesn't matter. I'll hop on a video conference and it is clear that to the people on the other end of the computer the answer is not obvious.

During a particularly moody time as a Consultant (2015) I wrote this grumpy treatise (click here). As Millennials might say, it was "hella-popular" back in the day. 

2015 was an interesting time ... the structural element of old-school cataloging (i.e. dying co-ops) altered the business model. Smart catalogers were well into their move into digital marketing at that time ... structural changes did not mean much to them. For others? Private Equity came calling.

2026 is so darn similar, but for different reasons. Now it is paper / printing / postage that represent the existential threat. Your own business partners are the ones that are converting the marketing channel to one that will only apply to loyal buyers in the future. This time Private Equity isn't nearly as interested in this business model. You can guess why.

Loyal Buyers

An acquaintance told me that his business was supporting the bankrupt/resurrected Saks empire with catalogs. Retail Dive boldly proclaimed that Nordstrom has their biggest Anniversary catalog ever. Amazon mails a catalog.

What are the common threads across that paragraph?

1. Huge Brands.
2. Big Budgets.
3. Loyal Buyers.

Catalog marketing certainly works among Baby Boomers, a well documented fact. If it works at all among younger customers (not documented at all for good reason), it works among the most loyal buyers.

If there is a future in catalog marketing, it is with Loyal Buyers. They will be the only segment of customers who produce enough revenue to overcome the prohibitive costs imposed upon you by the paper / printing / postage folks.

Perform a little thought experiment for me. Pretend your productivity improves by 5% over the next three years. Assume that your ad costs increase by another 25%. Run a p&l on each segment. Which segments "work"? Which segments need to be cut?

• Works = Loyal Buyers.
• Doesn't Work = Everybody Else.

In 2015 structural problems with response (i.e. co-ops) led to a catalog crisis that Private Equity capitalized on.

In 2026 structural problems with ad costs (paper / printing / postage) are leading to a crisis and Private Equity isn't as interested as in the past. This means catalog marketing will shift to a Loyal Buyer marketing channel to overcome high ad costs. Your job is to have a plan for how you will acquire new customers in this framework.

I realize many readers don't want to hear that message, especially readers in the vendor world. You're in paper, you've been contracting for a decade or more, you need to feed your family. You need to convince your current customer base to spend more for the exact same product they've always purchased. If your current customer base doesn't spend more? Bad for you. If your current customer base spends more? Bad for your current customer base.

This is a different structural problem than the one in 2015 (when co-ops were failing to produce responsive names and clients began to struggle to acquire new customers). The 2015 structural problem could easily be overcome with digital marketing for new customers and catalog marketing (as part of a portfolio - big for some, small for most) for existing customers.

The 2026 structural problem? Much worse. We're not going to beat it.

Dover Saddlery

There are plenty of articles and obituaries ... this is just one of them ... and here is a video from Reddit.

Do you remember? Dover Saddlery was a publicly traded brand in 2015 with annual sales at or around $100,000,000 (likely 40% or 50% larger today). From there, some believe it became more a financial vehicle and less an equestrian brand within the private equity world.

From 2013 through about 2019, I did A TON of work for Private Equity, evaluating catalog brands. I have not performed one single catalog project for Private Equity post-COVID. There's a reason for that. Following the COVID-bump (mid-2021), this asset class contracted and suffered. A scan of the internet suggests intense anger toward Private Equity. Warranted. There needs to be balance. "Traditional" brands with a catalog heritage simply have not changed fast enough, and when they do (cough cough Orvis) they're beaten to a pulp by an incandescent and struggling former industry. Seriously ... ask a long-term catalog professional to describe feelings toward Orvis ... be ready to receive some serious vibes.

A few weeks ago I reviewed a list of former clients from 2007 - 2025. At least a third are out of business! Gone. My God. I get it ... #capitalism ... but it doesn't have to be this way.

I have so many clients with catalog heritage that have come out the other end. They've taken risks, they've thrown away elements of the past, they've accepted the future. They persist. They realized they sell something customers want/need, and they focused on what they sell, not "how" they sell it.

They have a story to tell, and they do a fabulous job of telling the story.

Private Equity tells a financial story. Big difference from a merchandise/brand story. Load up a brand with debt, fail to tell a compelling enough merchandise/brand story to cover the cost of the debt, and adhere to tradition ... that's trouble. Ask Eddie Bauer.

I can only imagine the competitive advantage some are exploring because of this outcome.

"I Just Don't Believe You"

That's how an Executive once responded when discussing the results of a mail/holdout test.

The results were really straightforward. Take an average of the twelve-month buyer file, select 50,000 customers randomly, then resample the group of 50,000 into two groups ... one receives the catalog, one does not receive it. In the six weeks the catalog was active, I measured total demand spent by the mailed group, I measured total demand spent by the control group.

• $6.00 spent by the mailed group.
• $4.00 spent by the control group.
• $6.00 - $4.00 = $2.00 of incremental demand.
• Organic Percentage = $4.00 / $6.00 = 67%.
• Profit = $2.00 * 0.40 - $0.90 = ($0.10).
• To The Twelve-Month Buyer File, On Average, The Mailing Was Unprofitable.

It was the last bullet-point that shook the Executive. The very thought that the heart and soul of his customer base was being managed in an unprofitable manner by ... the Executive himself ... the fact that the Executive was actually harming his business ... was unacceptable. 

So he told the room ... "I just don't believe you".

The room moved forward, harming the business.

If you are unwilling to believe the most simple level of scientific inquiry, I'm sorry, you need to reflect inward.

Do you want to hear a story about a room deciding that they finally believed "facts"?

It's 2006 at Nordstrom. When we executed a mail/holdout test, we could measure sales on our proprietary credit card within Nordstrom ... and at other brands. We could see if customers used the Nordstrom card to spend more at Neiman Marcus, or Saks, or Amazon. Was our catalog taking business from Neiman Marcus or Saks? No. It didn't impact those brands, brands we believed we competed with.

Amazon? In 2006?

• $10.00 spent at Amazon in the Mailed Group.
• $7.00 spent at Amazon in the Control Group.
• $3.00 per customer incrementally driven to Amazon.
• 15,000 credit customers per mail and holdout group.
• Results were easily statistically significant.

Want to know something even worse? Within the mail and holdout groups.

• $25.00 spent at Nordstrom in the Mailed Group.
• $23.00 spent at Nordstrom in the Control Group.
• $2.00 per customer incrementally driven to Nordstrom.
• 15,000 credit customers per mail and holdout group.
• Results were easily statistically significant.

Do you see what happened there?

Our brand-centric catalog at Nordstrom, in 2006 (we ended the ecommerce catalog program in mid-2005), DROVE MORE BUSINESS TO AMAZON THAN TO NORDSTROM. Imagine if that was happening to most catalog-centric brands (hint - it probably was)?

In the my early consulting days (2007 - 2012), I'd share this fact with catalog clients. The Executives would just sit there, dumbfounded, thinking about the consequences of driving more business to Amazon than to their own brand. Then they'd move on, pretending they never heard what I shared, because having to face the data was just a bit too much for the recipient of the message to accept.

However, when I shared this fact at Nordstrom in 2006, the data was immediately embraced. Nobody questioned it (though they frequently questioned mail/holdout results). They immediately understood the strategic implications illustrated by the data.

Nordstrom is still here.

Most catalog brands went out of business or were gobbled up by parent companies, thereby losing their identity.

I understand why you don't want to believe mail/holdout results. It's an outcome that requires sober reflection.

I understand why your paper rep doesn't believe the results. They "can't" be allowed to believe them.

I understand why your printer doesn't believe the results. They "can't" be allowed to believe them.

I understand why your boutique agency doesn't believe the results. They "can't" be allowed to believe them.

I understand why so many consultants don't believe the results.

But it doesn't mean the results are wrong.

There's always a group of individuals who chose to not believe data. Modern politics comes to mind. You don't convince people with "more data". You work around them. Because you are reading this, you're willing to accept what your customers are telling you - that's a good thing!

At Bats

I watched this podcast from Orita about email marketing (and other stuff - click here).

One of the speakers talked about "at bats" ... this isn't entirely what he meant, I'm converting his topic into my world, but he was essentially describing the importance of the customer "doing something".

I've told you about this previously ... I worked with a company where the email marketers were very interested in open rates and total sales. The data suggested something interesting.

• Customers who clicked-through two email campaigns per year were the customers who mattered to their email marketing program.
• Any customer who clicked-through an email campaign in the past thirty days was likely to shop via any marketing/physical channel.
• Clicks were very important (opens, not so much, conversion was good but was random while clicks were reliable). Specific clicks were even more important ... merchandise-centric clicks mattered more than promotional clicks.

A simple segmentation plan was created (something I've created variants of for the past fifteen years - your mileage will vary).

• Segment 1 = 2+ Email Click-Throughs Per Year.
• Segment 2 = Anybody With An Email Click In The Past 30 Days.
• Segment 3 = 1 Email Click In The Past Year, Not In The Past 30 Days.
• Segment 4 = All Other Email Subscribers

It shouldn't surprise you that the vast majority of attributed email sales in the future came from customers in Segment 1/2/3. 

Also of interest ... getting a customer to click once on positive content (i.e. merchandise) caused the customer to become more likely to click in the future ... compound interest. I bring this up because this aligns with the podcast commentary at the start of this post. It's the concept of getting more "at bats". Email marketing functions on "at bats" as the podcaster said or "compound interest" as I'd say. If you build a program that encourages more clicks, you have more customers in Segment 1/2/3 above. If you have more customers in Segment 1/2/3 above, you will have more sales in the future. If you have more sales in the future, you'll increase customer lifetime value, generating more profit for your business in the future.

And if you have more "bad clicks" (i.e. clicking on sale messages or free shipping), you'll find your email list is biased (in a bad way) when compared to your overall customer file.

A sadness of the modern era is the inability for all of this technology to point out compound interest in a meaningful manner. Many of you overcome this sadness and are able to grow your businesses. Good job!!

Subscriptions / Continuity Programs / Merchandise Categories

My Pickleball Mathlete subscription (click here) is an interesting way for me to practice being a marketer.

You can subscribe for free, or you can pay me $30 a year. I make sure free subscribers can see "some" of each article I send to subscribers. About 1/7th of my subscribers pay me. I'm sure some of you would see that as a failure. Who could blame you?

Those with real marketing chops go steps further than I do. They're managing Continuity Programs. These are the smart people. They know what one of their customers is likely to prefer "next". They enroll their customers in these programs ... if the customer doesn't like the program, the customer opts out and the brand moves on. Each purchase, each category purchased from, moves the customer into a different stream of content and commerce. Sure, the business model was popular in the 80s/90s (get twelve movies on VHS free, then buy one movie per month for a year). But the business model is completely applicable today.

Stitch Fix leveraged elements of continuity marketing ... they knew what you bought and what you'd likely prefer next. They called it a "subscription" because the Silicon Valley folks like modern terms for old ideas. Make no mistake ... at a simple level, they knew what you bought, they knew your purchase categories aligned with what you were likely to prefer next, then they sent that stuff to you ... that was a 2015 version of a continuity program.

The secret to ecommerce success is to identify like-minded cohorts, anticipate what they'd like "next", then give it to the customer before the customer knows the customer wants it next. Take a look at continuity program brands ... those who sell collectibles, or coins, or stamps, and think carefully about what they're doing and how it relates to you ... especially if your customer base shops infrequently.

Happy Birthday!

America turns 250 in a few hours!

Enjoy the long weekend! 

The World Cup

It was fun for the first 2+ weeks. People taking over Times Square, Scots drinking Boston dry, somebody from Australia eating at a Waffle House, that kind of thing.

We're in the knockout stage now, and fans are going through the blender.

You are probably being told by somebody with a keyboard that your "brand" must capitalize on World Cup momentum.

Apparently AI thinks it is 37 degrees in Houston at the game The Lemonhead is attending.

All of the reasons the World Cup is special (and it isn't special if you are not a fan of soccer/football) work against your CFO's need to deliver a net sales increase of 5% this month AND when the World Cup is over. What does the CFO ask everybody to do next year to "comp" World Cup success?

You know you have something powerful if you can convince a family to spend $10,000 attending a World Cup match in a foreign country.

You might also have something powerful if a customer is willing to pay $49 for a widget. But it is a different kind of "special", and amazingly, it likely requires harder work to move the widget than to sell tickets to a World Cup game.

Buc-ee's Is Open

They expected 75,000 attendees the first few days - to get there, you had to drive 6.4 miles out of the way so that traffic was managed appropriately.

Fan Video.

There are a LOT of videos on the socials (click here).

P.S.:  One of our intrepid readers told me that "nobody wants to work anymore" in response to store hiring challenges. Buc-ee's has no problem finding workers, and they openly publish what they pay people. Do you openly publish comparable salaries? Are your salaries competitive/better? Do you pay somebody $25/hour to clean your bathrooms?

P.P.S.:  One of the new employees told me he has to park a mile away and take a shuttle to work. It funny how Retail Dive and/or other retail-centric trade organizations don't even bother to focus on this retail business model, much less point out how successful you have to be to force your employees to ride a shuttle a mile just to get to work.

Let's Insert a Bit of Reality

Yeah, I'm a little tired of reading about the neuroscience of print and emotional engagement.

Let's think about the actual / quantifiable ways that many of you have seen your catalog-centric efforts work. My ecommerce readers can take the day off - enjoy!

Average Order Value:  If you run a business with an AOV north of $500, you can make catalog marketing work. Try doing that with a $55 AOV. That doesn't work, and it doesn't matter how many Gen-Z recipients have "digital fatigue" as the print folks say. I had a B2B client with a $700 AOV. That AOV covered "ALL" catalog marketing sins. The future of catalog marketing is gigantic AOVs or ...

Highly Loyal Buyers:  If you don't have a $700 AOV and want to continue your craft for the next decade, your catalogs will avoid low-response customers/prospects ... the math does not work. If you have a customer with a 70% chance of repurchasing with 6+ purchases per year ... that's a situation that works.

High Frequency Contact Strategy:  Every one of my contact strategy optimization projects suggests that the most loyal customers are being UNDER-CONTACTED. If you want to practice your craft, you'll figure out how to contact your most loyal customers WEEKLY. Yes, you'll have to do that. I know you don't want to do that.

Winning Items Only:  Enough "sharing our assortment with the customer". That's what you did in 1996. It's 2026. You will only be able to afford to put the absolute best-selling stuff in front of the customer (this applies to email marketing too).

Targeting:  Gen-Z DOES NOT CARE about your 56 page Summer Sale catalog. At all. Millennials don't care. Gen-X mostly does not care. Catalog marketing is a Baby Boomer discipline. I'll catch heck on LinkedIn for saying this (#hedoesntunderstand #digitalfatigue #neuroscience). Just look at your response data by age cohort. Seriously. Go do it. Don't look at a survey of 277 likely ecommerce shoppers ... look at your own data by age cohort. You'll need to mail your very best customers, you'll need to filter out most customers < age 60 unless they purchase only in the in-home week when you send catalogs, you'll need to focus on customers who call your contact center. You'll need to filter out customers who buy items that reduce the likelihood of a future purchase. You'll need high AOV customers or high response customers. You don't need AI (other ecommerce brands are going to need it). You need common sense.

Nostalgia and Fox News: That's what you are competing against, and you are likely better at nostalgia when it comes to resonating with Baby Boomers. You are not competing against Amazon. You are not competing against Macy's. You are not competing against Buc-ee's. You are competing against Fox News, and your version of nostalgia has to be better than their version of it. Your ability to garner attention in short bursts needs to be better than their ability to garner attention six hours per day.

Incrementality:  So many of you choose to ignore the results of your mail/holdout tests. "I JUST DON'T BELIEVE IT!!" Of course you don't believe it. If you believed it, you'd have to do something drastically different, and you don't want to do that, do you? Believe your incrementality tests. Please! Not believing your mail/holdout test results is comparable to not believing that our planet is an oblate spheroid ... you're just ignoring evidence for ... well, for preservation of your profession I suppose.

Cost Increases:  To overcome the immense damage caused by your paper friends, your printer, and the USPS (they all want you to transfer money from your profit line to their net sales line, for varying reasons), you are not going to be able to be a sloppy marketer. I've been amazed that the paper folks have come after you, criticizing your marketing efforts as not being sufficient to drive response. Your efforts are sufficient, their cost increases break trust. I've analyzed many of your businesses in my Elite Program - your comp segment performance is up 50% in the past decade for some and probably averaging a 20% increase across all catalogers analyzed. You aren't the problem. You'll always be able to figure out how to be more productive. But you'll act accordingly as the paper / printing / postage folks continue to disrespect your loyalty.

Orvis:  Those who email me seem to have contempt for Orvis, as if they betrayed the trust of the entire marketing community in New England. Readers, have you looked around? Do you have comparable contempt for Lillian Vernon? Do you have contempt for Universal Screen Arts going bankrupt a few years ago ... because they no longer mail catalogs either?!! How about the Newport News catalog? It's gone, they aren't mailing either. As best I can tell, a whopping 80% of catalog printed pages have been removed from the mail since 2001. This isn't the fault of Orvis. They're doing what they have to do to not become the Newport News catalog. Your mileage will vary, no need to be resentful. Maybe your business applies to the positives above ... if so, keep doing what you're doing. But you aren't obligated to keep doing what you are doing. Wells Fargo didn't keep selling gold dust via express shipping, they changed as times changed.

You are a smart professional, and you know what you need to do to maximize the productivity of your business. Go make good things happen!

AI Already Knows What You Should Do

I gave one of the AI applications a quick task. I gave it annual results for a segment of customers. I shared catalog costs, profit factors, average catalogs mailed to the segment for the year. I told the application the organic percentage.

In my contact strategy algorithm, I determined that the segment received twelve mailings on average, and should have received nine to achieve optimal profitability.

Within five seconds, the AI application created its own curve of diminishing returns, then authored a solution of 8.7 catalogs to achieve optimal profitability.

Several things.

1. This is probably bad for my business. Wrong. More on that in a moment.
2. If you are able to speak properly to AI and provide data in a manner that AI can deal with, AI should be able to guide your entire investment strategy as a marketer. No need for a third party to tell you that ROAS was 3.443 in June, worse than the 3.184 measure in May.
3. This is really good for YOU. You get to experiment without having to write 3,000 lines of computer code yourself or have somebody else write 3,000 lines of code for you.
4. If you ask questions the right way, you should be able to see what the future holds for your business.

Here's why this isn't bad for business - the minute you do things better than last year, your optimization solution needs to be recalibrated. Let an algorithm do that - analysis of categories and customer interaction with merchandise categories is where your success comes from. 

AI probably won't be good for quite awhile at knowing how you should assort stuff to customers (others will disagree with me) ... but it already knows what you should do to optimize what you're currently doing.

Reasons "Brands" Don't Trust What Others Say

Thirty years ago at Eddie Bauer, I'd receive a Monday call from a sales person responsible for weather software. Not a call every few months. A call every Monday.

"Hi Kevin, it's Tom from Weather Solutions. How's your family doing? Listen, I don't know if you noticed, but there is a cold front coming down from Ontario that is going to change everything. Temperatures will be fifteen degrees below normal in New England this weekend. Are your stores ready?"

I'd explain that we were an outerwear brand. I'd explain that our stores were always ready for a cold front. He was undaunted. "Kevin, imagine the sales gains you'd experience if you followed the advice of our software like leading brands do, and you put your outerwear at the front of the store? Customers would notice. Sales would surge. All because of our software. That's the opportunity you are missing out on."

We'd have the same inane discussion in May. "Kevin, it's going to be fifteen degrees above normal in Ohio this weekend. Imagine how sales would surge if you had this level of intelligence and put swimwear at the front of the store ... all because of our software."

For this guy, every problem was a problem that would be solved by moving products to the "front of the store".

After awhile, I'd see his number on caller id and take the call just because I wanted to hear this week's sales pitch.

And awhile later, I stopped taking his inane calls.

He probably thought ... "another dumb brand with employees who just can't see the future."

You're probably dealing with somebody who wants to solve your "AI Problem" for you. You know you'll solve problems with AI in the future. But you won't hire this guy. Nope. Because you don't trust this guy, in the same way I didn't trust the weather pundit from 1996.

Or, you're dealing with somebody who wants you to focus on neuroscience that generates emotional engagement. 

I used to deal with a Forrester Research sales professional who spent months figuring out the weak link in our salesperson defense program (it was a Credit Vice President). I'd attend a 10:00am meeting, walk in the room, and there was the guy, smiling at me with a look that said "you can't beat me". Well, I can beat you ... as a consultant I never once recommended Forrester Research because I couldn't let my clients run into this guy. Short term gains, long-term pains.

Sometimes "brands" simply don't trust what you are saying ... the employees aren't stupid, the employees simply have been burned so many times by vendor reps who make life miserable for their victims that they simply shut down and stop trusting anything.

We've all worked with vendor partners who are brilliant, kind, and have our best interests at heart. If you find an individual like this, hold on to him/her like grim death.

Email Marketing Article From 1996

Here it is ... click to see who the author was/is.

Old-school articles were different, weren't they? Here's an image of the bottom of page one of a twelve-page missive from Don Libey in 2005.

On page three, he discussed the political polarization (caused by economic disruption) that began with Ross Perot and would dominate our discussions in 2026. He missed the jet fighter fluid that would be poured on the topic by Fox News, for nobody is perfect. He argued that people studied individual trees when they needed not just to study the forest but the regional and global issues that influenced the forest. A good analogy for 2005. Imagine if he'd seen the forest fires coming and tried to explain why they would happen? He'd have been mocked (more than he already was for trying to tell you about the future).

Back to the email marketing article.

I've worked with more than three hundred "brands" in my twenty years of consulting. Here's a quiz question for you. How many of those brands did a good job with email marketing, the kind of job that Seth Godin would be proud of?

1. 2 clients.
2. 17 clients.
3. 29 clients.
4. 50 clients.

The answer is (1) ... two clients.

Two!!

The first client had a young female employee who presented her findings to the Executive Team, showing all the profit she generated for her company. As she left the Executive Conference Room, one of the Executives whispered to me "God, what a nerd". 

It's easy to lose faith when you hear those comments. 

I was once asked to speak at a conference - the conference asked me to attend a dinner for Executives attending the conference. One of the CEOs, sitting across the table, said "Why should we listen to you, you are just a nerd? Meanwhile, we run businesses!" The table chuckled. Yeah, ha ha. Funny. I later created a term to define this person. "Lemonhead".

Two years after Seth Godin wrote the article at the start of this post, Management at Eddie Bauer asked him to speak to Leadership. The most used phrase I heard from co-workers after he described his premise of "Permission Marketing" was "we're not going to do that". Of course, Eddie Bauer went bankrupt multiple times since then, but that's a topic for another day. Any vision of the future that goes beyond standardized, routinized, templatized work is one not likely to be embraced. 

There are reasons that nearly every single company scrubs the humanity out of public-facing work.

Garden variety Managers and Analysts don't want to do the additional work because they won't be recognized for the brilliance required to do it and they won't be compensated for their efforts.

Directors and Vice Presidents don't want to do the additional work because if the additional work "doesn't work" they won't be believed/respected the next time they want to implement something important to them.

C-Level Executives and Owners don't want to do the additional work because it doesn't align with their "vision" for the future.

So nobody does the work.

Which means the competitive advantage of "doing the work" has never been greater ... even for a discipline like email marketing that is three decades old.

Subscribe To Our Channel On YouTube

Here's the image from Skagit Speedway on Friday night on FloRacing (if you didn't understand a word of what I just said, no worries, that's our modern world, where things only matter within the 10,000 people who care).

"Subscribe to our YouTube Channel". If you do that, you can watch every race on Saturday night for free instead of paying to go an hour north of Seattle / an hour south of Vancouver to pay $20 to watch the races.

That's what a small dirt track that features sprint cars north of Seattle wants you to do.

One of you recently told me that "video is not who we are" when queried on the topic.

Really?

Does what Midland Paper thinks more closely align with who you are?

I mean, read that ... my goodness. "Emotional Engagement". Notice there are two things not mentioned in the word salad ... sales increases ... and profit. #telling

There are frustrating days. Today is one of those days. Come on people, a dirt racing track in Northwest Washington should not be a better marketer than you are!

They're Testifying About (Checks Notes) Pickles

Here's the article about a music industry blogger and pickles (click here).

Here are his readers testifying about said pickles (click here). Read the comments about how his readers interacted with marketing.

Here is their Instagram - 600,000+ followers. Spend 10 minutes here, please. Here's a marketing tactic. Another one.

They're selling PICKLES for crying out loud.

Somebody has to be excited about what you sell. Get some stories going, folks.

An Unpopular Message

Like this one, for instance.

"Stop Hiring Humans".

Multiple things can be true at the same time. We're about to go through a painful process where work is reinvented. Coders, for instance, who were able to command salary premiums that were offensive to other employees (I've been in the HR meetings where salary band discussions get pretty lively), become a line-item-expense that is compared to what a computer might be able to do cheaper. That's a significant transformation. The same transformation is coming for marketing. Ten years from now, your marketing department is unrecognizable. A CMO told me his future department is him guiding the controls like an airplane pilot while bots do everything else for him. It's hard to argue with his vision for the future. He told me the only reason you needed a marketing staff was because technology had not caught up to the needs of modern marketing. Once technology caught up (it's about to catch up), no more marketers.

The other thing that can be true at the same time is that it's probably not brilliant to rub people's noses in change. "Stop Hiring Humans" is rubbing your nose in the future. When you rub somebody's nose in something too often for too long, backlash happens.

We don't know what "backlash" will look like, but history tells us backlash happens.

Regardless, this is a time in history where you want to understand "how business works". Knowing how "paid social works" means you get automated out of the customer relationship. Knowing "how business works" means you get to direct the automation of the customer relationship, with or without AI.

P.S.:  If you want the opposite of "Stop Hiring Humans", here's a different perspective about AI. FYI, there's swearing in the article, so don't read it if you don't want to see those words. Those who have been in business since 1990 have witnessed an endless number of scams, from the dot.com era to mortgage securities to Bernie Madoff to omnichannel strategy to social media to mobile to non-fungible tokens to politics to crypto to Kalshi/Gambling to the use of the phrase "at scale" to AI and "tokens" (and I'm just scratching the surface here). You know what pyramid schemes look like, you know when you're being taken advantage of and/or lied to. The article (on several occasions) references the term "Business Idiots". I frequently call these individuals "Lemonheads".

Theorists

Sometimes you run into what I'd call a "Theorist".

Theorists hold companies back, in three ways.

1. They don't bridge the gap between theory and practice.
2. They alienate co-workers via hubris, thereby stopping any possible progress.
3. They don't understand "business".

Say you have a Marketing Director who "skews Theorist" and wants to leverage AI in email marketing to boost conversion rates. Seems like a good idea. She doesn't have any in-house capabilities. She likely has a Theorist in IT that talks a good game but knows little. She probably has to work with a vendor to accomplish her goals. This can be a bumpy process. The vendor could care less about "inventory position" in specific items ... thereby recommending an algorithm that personalizes the merchandise assortment for a group of customers. The assortment features popular selling items (in an effort to boost conversion rates) ... of course, those items sell out quickly and the algorithm doesn't recognize this fact so customers are inevitably disappointed and the inventory team loses faith in "AI".  The inventory team and the merchants grumble about the Marketing Director, the CFO wants to know why the Marketing Team is spending $$$ and conversion rates are only up from 3.0% to 3.1%, questioning whether that would have happened without "AI" and the "AI" vendor doesn't recommend AI/No-AI testing so you can't answer the CFO's question and the wheels come off the bus.

That's what happens when Theorists run the show.

What happens the next time the Theorist wants to do something? It's the image above, that's what happens. In other words, nothing happens.

Many of you are going to go through a significant transition over the next five years. You will be well-served by not letting the Theorist get anywhere near your transition, even though the Theorist will be the first in line to encourage the transition.

2014 - 2018

When I look back on what my clients have endured over the past decade, I cannot help but reflect upon the era of 2014 - 2018.

In 2018 a Private Equity individual reached out. We had worked together for the past half-decade. His firm owned a brand, and he was looking to fill out the Board of Directors. I asked him what he wanted to accomplish. His response caught me off-guard.

• "I want to collaborate with bright people and I want to have fun."

Since 2018, how many of you have genuinely had fun at work? Not an enjoyable day or two, but consistent, satisfying fun?

Can I use Macy's as a proxy for something?

Here is a fifteen-year net sales trend for Macy's.

There were a few positive comps before 2014, a handful through some of 2018. From there? No fun. By and large, the business began contracting in 2015. There is some evidence in the top portion of the chart that Management might be bringing this flight in for a safe landing.

Meanwhile, click here to look at Amazon's trajectory over time. From the link, here's the image that matters.

It's not hard to see that began, unabated, in the 2014 - 2018 timeframe.

Maybe more interesting is what began at Shopify in the 2014 - 2018 timeframe.

They went from $0 in the 2014ish timeframe to $12,400,000,000 in the most recent twelve months.

The 2014 - 2018 timeframe was one of massive transformation. Either we were paying attention, or we weren't paying attention. We're suffering today if we didn't pay attention back then.

Two distractions since 2018 ... COVID ... and now AI. Both distract us from actual changes in customer behavior and competitive balance.

Example:  A few months ago, one of you emailed me, wondering why I don't require you to pay for a subscription to my blog? I responded that I can't ask you to pay for something I've given away for free for twenty years, and that if somebody wanted to compensate me for my content they could purchase a booklet. They professional then said "nah, at minimum you should at least have a Venmo-enabled tip jar on your blog, nobody wants to buy books but people do want to say thank you for your content". Over the weekend, I'm watching a storm chaser who was about to lose a $100 deposit on a hotel room and within seconds his 3,000 viewers donated $100 so he'd break even. He raises $500 a day from his viewers to pay for his gas. He raises $3,000 a month from his viewers to cover travel costs.

• Not long ago, I took up the professional on his "tip jar" comment ... but in a different realm. I started a pickelball Substack. Dollars started flowing in.

Why bring up the "example" above?

There are subtle changes that happen, and if we don't pay attention we miss them even though they become standard across our industry. When the Private Equity individual wanted to "have fun" back in 2018 with a catalog brand, he kind of missed out on what that catalog brand needed to pay attention to. Today, I go back and look at Elite Program results from the 2014 - 2018 timeframe, and I'm struck by how so many companies missed out on how business was changing.

• Rise of Social Media as "dark matter" in creating awareness (even though it has been doing that for two decades). It's not a source that an attribution model appreciates, nor should it be ... it serves a completely different purpose. It's "dark matter".
• Rise of Amazon at taking away your ability to grow your own brand.
• Rise of Shopify at birthing new companies who take away your ability to grow your own brand.
• Post-COVID, rise of video and trust in causing customers to stick with you when they aren't buying merchandise. If a customer buys from you twice a year, you need to have something to keep them interested the other 363 days of the year.
• Post-COVID, the rise of "alternate revenue streams" ... the Orvis-Endorsed Adventure model, for instance, or the role of a Gorsuch cafe in then month of December.
• For my catalog audience, the "land grab" transfer of wealth from brand p&l to paper / printing / postage net sales ... maybe necessary from a capitalism standpoint to keep the paper / printing world in business, but completely devastating to my client base to see their trusted partners turn on them.

What do you think we'll look back on in 2034 and say "we missed that in 2026"?

World Series of Poker

You know I enjoy Weather, and Pickleball, and Ryan Hall Y'all (which is weather again), and Headphones.

I also thoroughly enjoy YouTube coverage of the World Series of Poker each June.

Why?

These folks are doing the exact same thing you're asked to do ... except they have to do it every ninety seconds.

You have a report where the ROAS of a Facebook campaign is measured. You know what the campaign costs, you know the sales you generate, and you had better darn well know how much the customer pays you downstream to know if your investment was a good decision or not. You know what your customers pay you downstream, right? Right?

It's not different here. You have two cards that nobody can see. Your opponents have two cards you can't see. Based on your two cards and your guess of somebody else's cards, you calculate your probability of winning the hand. Maybe your probability of winning the hand is 48%. Your opponent bets $1,000,000. You have $5,000,000 left, and there are $3,000,000 in the pot. Do you call? I mean, you'll be paid 3x as much as your bet for an approximate 50/50 chance of winning ... what do you do? What happens if the hand continues and you are forced to go all-in (which will undoubtedly happen)?

You make decisions every ninety seconds.

One of the things I've witnessed in my consulting career is the behavior of professionals who don't have to make decisions once every ninety seconds. The less often the professional has to make hard decisions with incomplete information, the more the professional stalls and refuses to make any decisions until the professional has complete information.

Attribution vendors prey on these people. Every single attribution solution is horribly wrong, but they are sold as "truth". Because it is sold as "truth", the professional is willing to make decisions ... often bad decisions, believing what s/he is doing is "right".

I spoke at a conference in 2016 ... that's a lifetime ago! The presenter (who worked for an attribution vendor) shared five (5) different attribution solutions produced by her agency ... and she (and her agency) had the courage to say that every single solution offered a different view of campaign results. The audience simply groaned. They didn't want five possible / different outcomes. They wanted "truth". They groaned because the vendor had integrity.

If you want to be a great decision maker, learn to play poker. Poker teaches you how to guess properly, poker teaches you to "pretend" (bluff), poker teaches you to calculate short-term and long-term value. Poker teaches you that you can lose even if you do everything right. Poker teaches you that you can win even if you do everything wrong (this happens in business every day).

And you don't have to play against the "unsavories" (i.e. personalities you'd rather never have to meet in person). Play against a computer. You'll learn everything you need to learn to become a better Marketing Professional.

By the way, AI has no idea how to create a reasonable poker cartoon.