Case Study

Let's spend some time talking about a case study. I will analyze a business called "Beans". The data is real, the company and scenario is fictional.

The business is owned by Paisley Ingram. She calls Beans "The Internet's Only Variety Store". If you ask Paisley, she'll tell you ... "I sell whatever I want to sell. Always have. My customers love me."

Annual Demand/Sales for the past five years.

• Demand 4 Years Ago:  $31.0 million.
• Demand 3 Years Ago:  $28.4 million.
• Demand 2 Years Ago:  $27.4 million.
• Demand 1 Year Ago:  $25.6 million.
• Demand as of 1/1/2026:  $20.8 million.

Woo boy.

Let's dive in and see what a study of merchandise and categories can tell us about the problems at The World's Only Variety Store.

Your Mission

Years ago I worked with a CEO who had a Mission for his team.

He firmly believed in retaining customers, in loyalty programs. He believed that he could "force" a customer to become loyal. Seriously. He talked about it. Just get the right offer in front of the right customer at the right time. Throw some points at the customer. Let the customer redeem points when he told the customer it was the right time to redeem points. "It works for BJ's Restaurant and Brewhouse!" Good for him ... free pizookies all around.

The Mission? "We're going to thrive by creating a large number of highly loyal customers, and we have the tools to do this outside of the merchandise we sell."

I mostly disagree with the guy, but he had a clear Mission for his team. 

• (IDEAS) * (TALENT + LEADERSHP + STORYTELLING) = MISSIONS

His team moved in lock step with his Mission. The guy did his job as a Leader. His Team was talented. His Leadership was good. His ideas were poor. His storytelling was non-existent. This meant his Mission, while clearly articulated, had minimal value.

He needed new customers.

It is possible to have a good Mission but a bad outcome.

Stories Support Missions

I met with a client ... the analyst was struggling to articulate something important. I spent fifteen seconds tying thoughts together ... an Executive then said to the analyst "Why didn't you say that?"

The analyst looked mortified.

Because HE DID SAY THAT!!!

Of course, he didn't say it in a way that resonated with anybody.

Every three or four years, stories re-emerge. They re-emerge because technology moves us in a direction we don't fully understand, leading to a handful of individuals who articulate the future in a way that allows us to feel comfortable, feel knowledgeable, feel confident, and consequently take action.

In my hobby (headphones), people will ask questions about headphones or review headphones on Reddit (https://www.reddit.com/r/headphones/). You can sniff out bad storytelling in two seconds ... it is clear contributors using AI to write, and you know it the minute you see it. AI has a structure that is synthetic and inauthentic. It's obvious. Bad storytelling.

The same thing happens in business.

In catalog marketing, there are no storytellers ... and that is horrifying because the most famous sitcom of all time leveraged catalog storytelling as a core component of the series (Elaine working at the J. Peterman catalog). Seriously ... pick one employee from any ... ANY catalog brand who is a brilliant storyteller. I'll wait for your reply ...

You'd think the catalog vendor community would be able to communicate a compelling story that does not use terms like "digital fatigue", "Gen-Z", or "leading brands".

Human Teams = Talent + Leadership + Storytelling.

Our equation evolves.

• (IDEAS) * (TALENT + LEADERSHP + STORYTELLING) = MISSIONS

Strong Teams, Weak Teams

Last year, my Green Bay Packers were a very good team that was decimated by injuries to key players.

There are three overriding teams on a football team.

• Offense
• Defense
• Special Teams

In the playoff game in Chicago, the Bears scored 25 points in the fourth quarter to rally for a 31-27 win. They entered the fourth quarter trailing 21-6.

On offense, the Packers generated 421 yards and had zero turnovers. That should be enough to win a game.

On defense, the Packers yielded 445 yards, but generated two turnovers.

In terms of penalties, the Packers had 65 penalty yards vs. just five for Chicago.

Here's a fun stat. On special teams, the Packers kicker missed two field goals and an extra point. That's seven points given away in a four point loss.

In other words:

• The offense was good enough to win.
• The defense was good enough for three quarters then fell apart in the fourth quarter.
• Special teams gave up seven points in the kicking game.

One team ... three sub-teams with varying levels of success.

Does the same thing happen at your company?

I'll go out on a limb and say ... yes ... yes it does.

It's easy to pick on the merchandising team ... they source the products that customers buy. If they do a poor job, there's no amount of help that anybody else can provide to prevent a lousy outcome.

It's also easy to pick on the marketing team. It's a discipline that, historically, has been populated by an odd combination of absolutely dim-witted knuckleheads, brilliant business leaders who will run brands in the future, highly competent individuals who execute campaigns flawlessly, and analytics professionals who want to optimize things that nobody else wants to optimize. Try running a great team with that combination of talent!

I've spent a lot of time talking about category performance in the past month, for good reason. When the marketer or analytics professional understands how merchandise categories fit together (and interact with marketing channels), the professional can "be a bridge" between marketing and merchandising ... the professional can be a Leader, growing categories that yield high-value customers, capitalizing on the profit generated by specific categories.

Your business has a lot of teams. Those teams are unlikely to function perfectly. Be the person who helps teams function better.

Ideas * Human Teams = Missions

A quote from the Prof G newsletter:

• This is the moment where we should all start believing again, when ideas become missions ..."

Ideas do not become Missions without Human Teams.

That's where you enter the picture!

Ideas generally come from an individual. To implement the idea, you need one or more (sometimes many) Human Teams to get the work done, to build the bridge from ideas to a Mission.

Take a moment, and articulate in ONE SENTENCE what the MISSION is of your marketing team.

I know, it's hard to boil the essence of your marketing team down to one sentence.

This might be the MISSION of your MARKETING TEAM.

• "To connect as many people to your brand as many times as possible at the lowest possible cost, thereby generating increased profit."

The equation that represents your MISSION is as follows:

• (IDEAS) * (HUMAN TEAMS) = MISSIONS

The equation can be stated differently. Are your HUMAN TEAMS effective? Divide each side of the equation by IDEAS and you get the following:

• HUMAN TEAMS = (MISSIONS) / (IDEAS).

This is where it gets good! For instance, assume you have 1 mission and 10 ideas.

• HUMAN TEAMS = 1 / 10 = 0.10.

Now assume you have 1 mission and 100 ideas.

• HUMAN TEAMS = 1 / 100 = 0.01.

You have a framework for thinking about how effective your HUMAN TEAMS are. What if your marketing team has no missions and 200 ideas?

• HUMAN TEAMS = 0 / 200 = 0.00.

Your HUMAN TEAMS are effective when they convert ideas to missions at a high rate.

This is the thing we all observe ... all the time. There's nothing more irritating than sitting next to an "ideas person". The "ideas person" slows everything down ... they are ineffective in that nothing gets done at a reasonable pace but they control the discourse by constantly polluting your marketing ecosystem with ideas. "Big Ideas" are even worse.

Now think about Apple with the iPhone. That's an IDEA that is converted to a MISSION through HUMAN TEAMS. The device doesn't have to do everything ... that's too many ideas.

Bad ideas also result in problems, because bad ideas consume human teams, taking resources away from good MISSIONS. When #papertarians demand that you turn the clock back to 1955 and mail a catalog (because Gen-Z has digital fatigue or whatever), they are asking you to implement a bad idea that consumes the resources of human teams, taking away your ability to complete your MISSION.

(IDEAS) * (HUMAN TEAMS) = MISSIONS.

Teams

Sometimes content and ideas just coalesce into a meaningful narrative.

I'm reading Prof. G's Friday newsletter about traveling to the Moon and "ding" everything came together. He talked about the Artemis 2 mission. On the one end, we have the AI gurus and those backing 'em with investments ... suggesting AI will bring the end of work as we know it and the only thing we can do is trust those who are bringing the end of work to us to ... well ... to do who knows what.

That's one end.

There's the other end of the spectrum. That's the end you are on.

You are part of an ecosystem of Teams.

Your marketing team is part of that ecosystem.

Your merchandising team is part of that ecosystem.

Other teams support marketing or merchandising ... creative, IT, website ops.

Your teams are supported by vendor-based teams ... really important people. They manage social media or your search budget (as examples). They help execute your email marketing program.

Teams aren't only represented by people. Your categories represent "teams" of product working together to support your customer. Your marketing channels represent "teams" that support the products that support your customer.

All these Teams interact. With each other. With your customers.

As every new technology evolves and advances, it seeks to become a Team that interacts with your existing human-based Teams and marketing/merchandising Teams.

The metrics we have to measure Teams are woefully inadequate. We measure the ROAS of digital advertising without regard to the effectiveness of the Team of humans managing the process or the long-term payback of digital advertising. FACEBOOK ROAS IS 3.43 THIS WEEK, DOWN 8%. So what? What if ROAS is down 8% but the Team of humans managing the process prevented ROAS from being -16%? I'll take the the Team of humans all day long. But how are you measuring the Team of humans?

What about a lousy Leader managing a category that is growing by 15% industry-wide? Is the lousy Leader responsible for good performance? Is Amazon responsible for developing a great marketplace that causes 5% of the 15% increase?

I'm going to frame discussions in terms of Teams and Storytelling in the near term. It has become painfully clear that we don't have a framework for thinking about the importance of Teams ... and not just human Teams ... we have Teams of categories that work together, we have Teams of marketing channels that work together. We need to do a better job before AI does our jobs for us.

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.