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.

How Much Does Productivity Need To Increase To Cover Cost Increases?

You're told that if you are more strategic, if you execute better, you will increase productivity and cover the paper / printing / postage costs that come at you unabated.

Here is the optimized solution with a 12.5% ($0.10 per book) ad cost increase.

Optimal strategy drops from $9.18 profit at 12 catalogs to $8.17 profit at 9 catalogs. 

We need to add merchandise productivity to offset the increase in ad cost if we want to get our profit back. We can do that in theory - let's do that in theory here. How much merchandise productivity do we need to get back to an equal amount of optimized profit?

We need average $/book to go from $3.50 to $3.71 (+6%). If that happens, we get back to $9.18 profit ... but something else happens ... optimal catalogs are at 10 instead of 12, meaning we generate $45.44 demand per customer for the year in this segment instead of $46.96 ... we give up a bit of top-line to get a bit of bottom-line.

In other words, a 6% merchandise productivity gain offsets the 12.5% ad cost increase, but results in two fewer catalogs being mailed (10 vs. 12) which leads to less top-line demand.

Paper / Printing / Postage increases set off a chain reaction of events, none of which will be positive for anybody.

1 - The optimal profit strategy for my clients is to reduce annual contacts and/or reduce pages per contact.

2 - The optimal profit strategy for my clients is to shift dollars out of print into digital, accelerating a twenty-five year transition. Many companies have completed the transition (hint - Orvis). Other clients are well into a major shift in strategy.

3 - All of this ultimately ends badly for advocates of Paper / Printing / Postage.

4 - Blaming my clients for not being strategic, for executing poorly, represents an amazing level of hubris - given the ones doing the blaming are the ones forcing this accelerated transition upon my clients.

If you need me to score your entire file for the optimal number of catalogs each customer should receive, annually, click here and then contact me (kevinh@minethatdata.com) and I'll create personalized scores / optimal catalog assignments for each individual customer, leveraging my proprietary organic percentage centric models.

The Optimization Story

Your paper / printing / postage partners want you to execute SMARTER, they want you to be more STRATEGIC. The way they figure, if you just improved everything you did, your performance would increase by 20% and that would cover the 20% increase in paper / printing / postage you've experienced the past few years. You'd be fine if you were just smarter.

They'd also still get the $3,000,000 of value transfer I explained yesterday. You'd be back to $0 value, they'd still transfer $3,000,000 of your profit to their net sales line.

That's what they're asking you to do.

You don't operate in their world.

Here is my Catalog Optimization Worksheet. Email me (kevinh@minethatdata.com) and I'll send you this worksheet at no cost, whether you work for a vendor or one of my clients. In this example, the brand mails this catalog segment 15 times per year ... the segment averages $3.50 per book ... 40% of demand flows-through to profit ... the organic percentage via tests is 50% (you measure this, right) ... and 40% of sales flow-through to profit. Here is how optimal profit is calculated based on the number of annual contacts mailed to a customer.

The brand is generating $52.50 demand per 15 catalogs, yielding $9.00 profit.

The brand should generate $46.96 demand per 12 catalogs, yielding $9.18 profit.

When the optimal strategy isn't much different than the current strategy, we leave things alone.

Let's assume your mailing costs in 2027 will increase from $0.80/book to $0.90/book. What does that do to an optimal solution?

The brand would generate $52.50 demand per 15 catalogs, yielding $7.50 profit (not $9.00 prior to ad cost increases).

The brand should optimally generate $40.67 demand per just 9 catalogs, yielding $8.17 profit.

Do you see what is happening?

The direct transfer of funds from your bottom-line to their top-line results in several problems.

1. If you want to keep mailing the same number of times per year, you must transfer $1.50 per customer in this segment from your bottom-line to their top-line ... you are less profitable, their revenue increases. See how that works?
2. The optimal number of catalogs decreases from 12 per year for this segment to 9 per year. This means if you want to manage your business properly to account for increased costs, you have to mail 9 times per year instead of 12 (or 15) if you want an optimal strategy.
3. To achieve an optimal strategy, you lower annual demand from this segment from $46.96 to $40.67.
4. To achieve an optimal strategy, you lower ad cost as well ... meaning the support community gets paid less. This is why they're clamoring for you to be more "strategic" and not cut back.
5. Of course, you will be more "strategic". You will accelerate your twenty-five year transition to digital marketing, out of necessity.

Seriously, if you want the spreadsheet, email me (kevinh@minethatdata.com) ... I'll give it to you for free.

I'll wrap up this diversion in my next post, then it's back to solving actual business problems via merchandising analytics.

Oh Come On!

I receive my daily dose of propaganda from industry sources. Digging through twelve glowing articles about Macy's because they posted their first positive comp store sales metric in (checks notes) four years is tiring enough. 

The paper / printing / postage folks and their associated partners have made a habit in recent years of blaming you ... their customer ... for not being smart enough. It's YOUR fault that what used to be known as the catalog industry is crumbling.

Link from Midland Paper (click here).

The actual article from Printing Impressions (click here).

Oh come on. "Poor strategy costs more than postage ever will." You're blaming my clients for asking the wrong questions because the paper / printing / postage folks keep increasing costs? 

Unacceptable.

There is virtually nobody left in what used to be the "catalog industry" who speaks up. Don Libey would have spoken up. I need to speak up. The cost of paper / printing / postage is too onerous now, and it isn't your fault that it is onerous. You're still practicing the craft.

For most of what remains of the "catalog industry" (and as one of my readers tells me, there is no such thing as a catalog industry anymore), the cost of paper / printing / postage for a comparable catalog increased by between 50% and 100% in the past decade, with increases of 20% over the past three years very common. Who is responsible for that?

It sure as heck isn't my client base.

One of my favorite emails of all time came in several years ago. The source was Midland Paper. Somebody mistakenly sent something to Kevin Hillstrom instead of the Kevin intended to email. The email contained an attachment ... the document in the attachment outlined how catalog pages circulated had declined dramatically in fifteen years (at least 40% and up to 80% based on what I could decipher in the document). Midland Paper outlined how they'd constrain supply (i.e. close down mills) going forward, and with supply constrained they'd be able to charge my clients more for paper.

Is that outcome the fault of my clients leveraging "poor strategy"?

I recall another client calling me in 2022. Their printer (a major one in the Midwest) told them they were being fired after a multi-decade relationship. This brand had to find a broker to help them complete print runs ... naturally their printing costs went up.

Is that outcome the fault of my clients leveraging "poor strategy"?

On LinkedIn, an industry expert posted pictures of a wine-and-dine event in Washington, DC, trying to communicate for the 22,549th time to Congress the importance of a viable USPS. This poor guy keeps fighting for my catalog clients - even though he doesn't get paid to do that. He keeps losing. He keeps showing up.

Is that outcome the fault of my clients leveraging "poor strategy"?

I'm so frustrated by the behavior of a community that increased your costs by 50% to 100% and then possesses the temerity to suggest you are asking the wrong questions.

Increased costs transfer wealth from your brand to support agencies.

1. You are less profitable because you send your profit to support agencies. You lose out on equity or bonuses.
2. They generate an increase in net sales.

Do you understand that? Your hard-earned profit dollars are reduced while at the same time their net sales / top-line growth improves.

Here's what the value transfer looks like for a typical catalog brand with $60,000,000 of annual attributed catalog demand / net sales.

This would be a company that mails twelve times a year, about 1,000,000 per drop. Since 2023, paper / printing / postage costs increased by 25%. Instead of making $12,000,000 of contribution / variable profit before factoring in fixed costs (likely $6,000,000 or more), the company makes $9,000,000. Three million dollars evaporate off the bottom line, transferred from client profit to agency/vendor/supplier net sales.

Are my clients wrong to do anything but cut back on print expense and instead focus on accelerating their twenty-five year transition to digital marketing?

The author of the article doesn't go after ORVIS ... they cut it all! They got out. Did Orvis ask the wrong questions?

No, Orvis did just fine. The article author and Midland Paper (who published this sample of the article) goes after you ... the very brand still doing what they want you to do. You're paying their bills (Orvis no longer is), and they suggest you are asking the wrong questions.

You are not asking the wrong questions. 

Standing up for you will cost me business. Doesn't matter.

You simply cannot accept the ad cost increases via paper / printing / postage that are causing p&l challenges.

I'm not done. More tomorrow.

At 10,000 Feet?

We established that there are four categories that the Merchandising Team believes in ... and seven categories that are being purposely contracted.

Does a contracted category impact customer response?

Yes.

Let's look at how many customers bought from the four primary categories and all other categories (both) in the past four years.

• 3 Years Ago:  180,286.
• 2 Years Ago:  171,306.
• 1 Year Ago:  169,072.
• Today:  110,850.

Yeah, that's a problem.

How many customers purchased just from the four primary categories?

• 3 Years Ago:  168,952.
• 2 Years Ago:  156,288.
• 1 Year Ago:  174,994.
• Today:  184,286.

Counts are holding mostly steady.

How many customers purchased just from the other seven categories?

• 3 Years Ago:  217,656.
• 2 Years Ago:  243,028.
• 1 Year Ago:  218,436.
• Today:  130,866.

Yeah, counts are crumbling.

Which customer do you want? Here is the amount of spend each customer segment generated in the past year based on how the customer was segmented a year prior.

• Both Groups = $11.46.
• Primary Categories Only = $6.44.
• Secondary Categories Only = $4.60.

In other words, when you lose customers from Secondary Categories, you aren't losing highly productive customers. When you lose customers from Secondary Categories who also buy from the four Primary Categories, you lose $11.46 per customer, which is too much.

Worse, when a Primary+Secondary customer becomes a Primary-Only customer, value drops from $11.46 to $6.44. That's a stunning drop.

As the Merchandising Team at "Beans: The Internet's Only Variety Store" contracts the majority of categories, the Merchandising Team weakens the customer file - shifting customers from high-value segments to low-value segments. No Bueno! They are weakening the customer file, which lowers demand in all categories next year, which requires more of a marketing investment in new customers, which harms the p&l (in the short term).

So yes, before you start messing around with your merchandise assortment, think about what you are messing with! If you are lowering the value of customers for no good reason, well, that means you are harming the business.

The 15,000 Foot View

Yesterday we took a step back, looking at the business from a 30,000 foot view. We clearly observed that there was a new merchandise problem over the past two years.

I drilled down one level ... there are four categories that the Merchandising Team appear to have faith in.

Apparel Tops / Apparel Bottoms / Outside / Decorations were less than half the business three years ago ... today they're more than 60% of the business. Demand isn't necessarily stable, but it isn't bad. Existing items are stable, new items are down about $900,000 from two years ago.

Everything else?

Wow.

New items are down 45% from just two years ago. New item demand is down a whopping 70% from two years ago!!!!! In the past year, existing item demand is down a million dollars.

Tomorrow we'll apply this 15,000 foot level view of the business to customer response. It's obvious the Merchandising Team is doing something on purpose ... are customers impacted (hint - yes, they're impacted).

Click here for more information and file layouts.

The 30,000 Foot Level

It's common to run across a Marketing Team that is persecuted. "They don't know what they're doing!!" And yes, there are a ton of marketing teams that have absolutely no clue what they're doing ... that's life.

But there are marketing teams that are being persecuted ... they're blamed for problems that they have nothing to do with. Maybe the website has a 2.8% conversion rate and it was 3.3% last year ... "the marketing team is sending us terrible traffic". The Marketing Team blames Google & Facebook. Everybody is pointing at somebody.

Somebody should be pointing at the data. Here's the high level view of Beans ... at 30,000 feet, it is easy to see this isn't a marketing problem.

The business was at $27.4 million two years ago ... it is at $20.8 million today. Yes, there is a problem.

A simple cut of the data by new item sales vs. existing item sales shows us there is a merchandising problem.

• New Items:  Decreased by $6.5 million.
• Existing Items:  Decreased by $0.1 million.

Marketing problems result in equal declines.

Merchandising problems result in uneven and chaotic outcomes.

Here's a worse problem ... if you have a new merchandise problem today, you'll have an existing merchandise problem tomorrow. New items become existing items, and if you are down 40% in new items demand you'll be down a bunch in existing item demand in a year or two.

One simple table ... the one illustrated above ... it's not hard to run. If you are in marketing you need to know what the table illustrates. You need to know "what" specific problem you are solving, and it's frequently not the problem others in your company think you need to solve.

P.S.:  Click here for information about your own "Categories" analysis.