November 30, 2020

The Rancho Gordo Bean Club

You probably saw the story on CBS Sunday Morning (click here).

11,000 Club Members.

11,000 on the Waiting List.

The secret over the past two years seems to be an exclusive subscriber list that you treat better than your average customer / prospect.

Makes me think about my own business ... hmmmmmmm ... what ideas do you have for your business (or mine)??!!

November 29, 2020

Does The COVID-Bump Help You In 2022?

If you are a restaurant in Los Angeles, you don't get a COVID-Bump. You get to be closed, with no assistance from anybody. Good luck!!

But if you are a direct-to-consumer e-commerce brand not selling apparel, you might still be benefiting from a massive COVID-Bump, fueled mostly by new customers. You are stunned by what has happened in 2020. What will likely be 400,000 deaths and millions of hospitalizations netted you +50% or +100% sales gains. As I was told earlier this fall ... "I'm torn between feeling awful for society and feeling blessed because my company is performing well and I have a job."

What is the question I'm asked to analyze most often this Fall?

  • "What does the COVID-Bump mean for my business in 2022?"
The answer is a simple one. If your Annual Repurchase Rate is under 40%, the benefit of the COVID-Bump evaporates quickly, giving you a small sales increase in 2022 and nothing thereafter.

If your Annual Repurchase Rate is greater than 50%, well, it's a whole different world. You get to enjoy the magic of Compound Interest for several years. God smiled upon your business model.

For any business, however, 2021 is a "setup year". It's like in baseball when you have a 4-2 lead in the 8th inning. You bring in your setup relief pitcher. It is his job to bridge the gap between the 7th inning and the 9th inning, when you bring your closer in to finish off the game. If you want 2022 to be as successful as possible, you need to set up 2021 to be as successful as possible.

  • Until there is a vaccine, keep your foot on the Customer Acquisition gas pedal.
  • Welcome Program ... Welcome Program ... Welcome Program. Convert customers to a second purchase IMMEDIATELY. This is non-negotiable, and if your Marketing Leader tells you that you do not need a Welcome Program, go find another resource to do this for you.
  • Keep the customer clicking via email marketing.
  • If you have print, separate out those who need print to purchase from everybody else, and only spend money/resources on customers who need print to purchase.
Use 2021 as your "bridge year" ... so that you are as ready for a "New Future" in 2022 as you can be. Customer behavior is likely to fundamentally change and not go back to where it was. Why not influence customer behavior as much as possible in 2021 so that you play an active role in creating the future you need to create?

November 27, 2020

Tony Hsieh

Certainly you've heard the news by now ... maybe not from the trade industry, but if you are on Twitter the outpouring of support was unavoidable for the founder of Zappos (click here).

Mr. Hsieh was an early reader of this blog. When you are getting started in this business, it's helpful to have a somebody read what a nobody has to say.

Mr. Hsieh was one of four people (Don Libey, Ben Chestnut of MailChimp, Robert Kestnbaum are the other three) who thought differently in a way that shaped how I viewed things. Three of the four are gone now. Make sure you appreciate those you think highly of. Say something to them while they are still here.

Do you have examples of individuals in our industry that have shaped how you view the world? Share those individuals with our audience ... pass me a note and I'll publish credible responses.


P.S.:  If you are a cataloger, read up on the stuff that Robert/Kate Kestnbaum wrote about in the 1990s. They used math 25-30 years ago that was smarter than the math you are using today. Hint - their math forms the basis of the catalog optimization work I perform today.

P.P.S.:  If you love email marketing, read what Ben Chestnut has to say. Also notice that he didn't choose to dominate email marketing ... he helped small businesses be excellent at email marketing, and that difficult choice made all the difference.

P.P.P.S:  Don Libey taught me how to run a consulting business as an independent consultant. He gave away his knowledge, for free. He's largely the reason that the work I perform is mostly shared ... for free ... via this blog.

November 24, 2020

New Buyers From Here On Out

Most of my project work shows two important facts (yes, there are exceptions):

  1. It is easy to acquire customers from Thanksgiving through Christmas.
  2. Customers acquired between Thanksgiving and Christmas have the worst long-term value.
This is such a challenging balancing act. In general, we don't have the tools to convert the Christmas buyer into a Jan/Feb/Mar/Apr buyer. Heck, the customer doesn't want to be converted.

Most digital marketing analytics packages don't tell you that the Christmas newbie doesn't want to buy again ... software is designed to tell you who converts, not who will convert again.

Tag all of the first-time buyers you acquire over the next five weeks, and watch them going forward. You're going to see the problem in Spring. Then you'll want to develop a credible Welcome Program to solve the problem for Spring 2022.

 

November 23, 2020

Virgil Carter

It's a lot easier in Sports to see how strategy evolves over time than it is to see how strategy evolves in Business. Sports is measured in terms of wins, losses, and Championships. As a consequence, good strategies tend to be moved into the future, where they are evolved. In business, some of the best strategies I've seen are buried in small businesses that never evolve or change, and as a consequence those strategies never see the light of day.

This brings me to the story of Virgil Carter. Virgil was a Statistics Major at BYU, and he was a good college Quarterback. In the NFL, Mr. Carter had a weak arm, so the Cincinnati Bengals had to develop an offense that would suit what he did well (he released the ball quickly and was an accurate thrower). Who was his offensive coordinator? Well, it was none other than Bill Walsh, who won multiple Super Bowls with the San Francisco 49ers in the 1980s. Bill Walsh developed what became known as the "West Coast Offense" to suit Mr. Carter's skills, then evolved the offense to a comprehensive "system" for running a football organization. Heck, Mr. Walsh wrote a book with a limited number of copies on how to run a football organization. I bought one of the copies on eBay for $$$ ... if you carefully look at the bookshelf of any NFL coach, you might just see one of the copies.


Back to Virgil Carter.

Remember when I told you that Mr. Carter was a statistician? Well, it turns out that Mr. Carter also contributed to the future of football by analyzing the outcome of plays (click here). He learned how many expected points you would generate if you took over possession of the ball at your own 33 yard line, for instance.

So Virgil Carter played two key roles in the evolution of football.

  1. His limitations (weak arm) led to the development of the West Coast offense and short-passing game, which took advantage of his strengths (accuracy, smarts). This offense eventually branched into two different directions ... one developed by Andy Reid for his MVP quarterback (Patrick Mahomes) ... and one that was evolved by Mike Shanahan (for John Elway) that was further evolved into the offenses currently run by the San Francisco 49ers, Los Angeles Rams, and Green Bay Packers (among others).
  2. His college major (statistics) led him to develop his own version of "expected points" ... which ultimately became "advanced analytics" that are employed all across football today. You'll see "expected points" used repeatedly as teams now routinely go for it on, say, 4th and goal at the one yard line (expected points = 3.5 with a 50% chance of scoring a touchdown and a 50% chance of failing, greater than the 3.0 points you'll get for kicking an easy field goal). 
By next September - November, a vaccine will be prevalent enough to help us return to a "new normal".

And when that happens, the next "Virgil Carter" will have spent the prior year developing a methodology for how to adapt a business in a post-COVID world. That person will have an enormous head start over everybody else ... a huge competitive advantage that will be difficult to overcome.

Why can't that person be you?

November 22, 2020

Opting Out

Last week was fun ... I wrote about risk ... and close to 1% of subscribers opted-out, citing that "CONTENT IS NO LONGER RELEVANT".

I've always judged that when many people unsubscribe because CONTENT IS NO LONGER RELEVANT that I am headed down the right path. I lost a ton of subscribers back in 2013 when I started talking about the importance of merchandise performance ... then I generated more annual revenue over the next three years than during any other three year period ... because you (the loyal reader) hired me to analyze merchandise performance.

I've learned a lot about the audience over the past fourteen years. A key finding is that the audience tends to want very specific answers to very specific questions. If I write about general topics that relate to general questions, the audience rebels.

In recent years, a fraction of the audience has become more combative. These individuals want very specific answers to very specific questions ... and more important, they want to ARGUE about specific answers. The arguing is the end result that "some" readers seem to embrace ... sort of like in politics. The reader can "appear" smart by arguing a small fact in a large argument, without ever having to apply any smarts to a challenging business situation.

I had one subscriber who was with me for several years. This person held a C-Level position with a company that was headed toward bankruptcy. This person always argued ... he wasn't mean (he was very kind to be honest, I assume a very good person), but he was always nitpicking 5% of an argument in an effort to invalidate 100% of an argument. He was quite good at this. I can't imagine how frustrating it would have been to work for this individual. Worse, he had answers to every specific argument you could imagine ("here are four reasons why Amazon will not take over e-commerce") but didn't have a single argument for solving the problem at hand ... that being, of course, the fact that his own company was headed into bankruptcy. 

His company went bankrupt.

You didn't opt out last week ... I know that because you are still reading today's post. That means you are at least somewhat open-minded to different concepts. Frequently I develop ideas as a stream-of-thought over several days/weeks, and those ideas infrequently become products that eventually help your business. That's how I use this blog. I use it to develop concepts. I'm not trying to provide a specific answer to a specific question. I'm trying to hover a level or two above specific answers to specific questions. If I do that successfully, your business performance can improve.


P.S.: Speaking of highly specific answers, here is an example of what I am talking about, one that everybody can form an opinion of (click here). This is what so many readers want ... a highly specific solution that everybody can "weigh in on".


November 19, 2020

Profit and Risk

I promised you I'd share how variable profit is under normal circumstances.


10% of the time profit will be below $2.0 million.

25% of the time profit will be below $2.3 million.

50% of the time profit will be around $2.8 million.

25% of the time profit will be above $3.2 million.

10% of the time profit will be above $3.6 million.

Our CFO ... she's not going to be pleased with profit numbers that could vary between $2.0 million and $3.6 million.

But this is what we're dealing with when we craft a plan. We do all of this work, hard work, to produce a certain outcome. But the outcome is not certain. The outcome is highly variable. I mean, half the time profit could be between $2.3 million and $3.2 million. And the other half of the time? It's an outcome more variable than that.

And that's under normal circumstances.

Every one of you is dealing with a business that has that kind of variability. Your estimates for what "will" happen next year are filled with risk, filled with variability.

Then you layer COVID on top of it.

It's going to be darn important to communicate risk to people. Unbelievers. Folks who think because a spreadsheet says you will generate $62,000,000 means you are promising to deliver $62,000,000. In a normal year you could not make that promise, though you've done so for a long time. In 2021? You are facing more risk than you've faced since 2020.

A flexible and adjustable plan, one where you clearly communicate a range of possible outcomes ... that's what is needed in 2021.



The Rancho Gordo Bean Club

You probably saw the story on CBS Sunday Morning ( click here ). 11,000 Club Members. 11,000 on the Waiting List. The secret over the past t...