Groupon

Last month, Groupon canned Founder/CEO Andrew Mason (click here).

Of course, executive gossip gets all of the attention.

Have you had a chance to read through their 10-K statement?  Sure, there are problems, lots and lots of problems.  But there are things that should earn praise, too.

• 41 million customers purchased a Groupon in 2012.  Stop, and let that number sink in for a moment.  Does your business have 41 million twelve-month buyers?
• 500,000 merchants have been featured.  Again, stop, and let that number sink in for a moment.
• Mobile accounted for 37.5% of all purchases in December, 2012.  Again, stop, and let that number sink in for a moment.
• Groupon uses Television, Radio, and Billboards as part of their marketing mix.  Yes, I know, one of the digital elite, using Television, Radio, and Billboards.  You'll do those things when you learn to appreciate new customer acquisition.
• Marketing expense was reduced to 10% of net sales in Q4-2012.
• Sales force of 1,151 North American employees, and 3,526 International employees.  As we discussed with Forrester, companies selling a digital future sure seem to employ a lot of analog tactics, don't they?
• Gross Billings per Active (12-Month) Customer were $160 in 2010, $187 in 2011, and $144 in 2012.  Oh boy.
• With approximately 10,000 employees and $654 million in wages and benefits, the average Groupon employee is receiving a total compensation package that averages about $65,000 per year.
• Number of times the phrase "omnichannel" is used in the 10-K statement?  Zero.

Keep reading upcoming 10-Q and 10-K statements - pay particular attention to their ability to generate more business from existing customers - a stated goal of the management team.  It is very, very hard to get existing customers to spend more.

Dear Catalog CEOs: Input!

Dear Catalog CEOs:

A brief message today - your input is welcomed.  Send me an email message (click here please), and let me know about a blog post you'd like to see me write.  Any topic, a topic that you think would help your business and help other catalogers as well.  Pick the topic, and send me an email message.  Next week, we'll address at least one of your questions.

Thanks,
Kevin

Creative - The Hypothesis And Ramifications

This week, I presented numerous website home pages to you.  I associated the pages with the demographic that tends to shop those pages.

I conclude that there are three predominant creative presentations for our customer cohorts. This is the start of my hypothesis.

1. Judy = Merchandise-Centric Presentation Style.
2. Jennifer = Story-Centric Presentation Style.
3. Jasmine / Jadyn = Relationship-Centric Presentation Style.

These are my opinions, but I think my hypothesis surrounding the opinions is reasonable.  Businesses catering to Judy are, in many cases, businesses that pre-date the internet.  Back in 1995, it was costly to use print or television to speak to customers, so you have to present everything you possibly could present.  In catalogs, you had no choice but to feature as many skus as possible.  The legacy of this style of creative strategy lives today, as we saw with QVC's website.  Those who run businesses that cater to Judy are hard-wired to present everything.  Judy, of course, is hard-wired, having forty years of purchasing experience.  This is a co-dependent relationship.

Jennifer.  Remember, over the course of the past two years, I've shared with you that Jennifer likes to hunt for the best item at the best price with the best promotion.  So when every company offers the same merchandise at the same price with comparable promotions, we're left with almost nothing to differentiate between businesses - except for the stories businesses tell.  It's my hypothesis that we see cleaner presentations and stories because we have to differentiate ourselves.

Jasmine / Jadyn:  The world changes once we get to the under 35 cohorts.  With Judy, businesses tell her exactly what to buy.  With Jennifer, businesses tell her a story about why she should buy. With Jasmine / Jadyn, the story is shared.  Businesses tell Jasmine / Jadyn what to buy through stories, then ask Jasmine / Jadyn to provide feedback on the story, to help shape the story.  This is a shift in tone.  The co-creation that happens here results in a lot of data being exchanged between parties.

Data sharing is different across the generations.

• Judy = Shared via co-ops and database providers.
• Jennifer = Shared via Google and Microsoft.
• Jasmine / Jadyn = Shared via Social and Mobile.

With Jasmine / Jadyn, data becomes integrated with the creative presentation.  This is new, different, interesting, and maybe a bit frightening.  But we have to know this, if we want to have a relationship with Jasmine / Jadyn.

My hypothesis, then, is as follows.

• Judy requires a merchandise-centric presentation.
• Jennifer requires a story-centric presentation.
• Jasmine / Jadyn requires a relationship-centric presentation.
• The style of presentation attracts or repels customers across generational cohorts.
• When we repel various customers, we attract others, and as a consequence, we optimize our creative treatment among those who stick around and buy merchandise.  This is called "hyper-optimization".
• When we "hyper-optimize", we make it very difficult to shift from selling from one generation to another generation.

There are two very important ramifications to my hypothesis.

1. If we shift to tactics that are required of younger generations, we repel our core customer, causing us short-term pain.
2. If we fail to shift tactics, over time, we repel younger customers, causing us long-term pain.

Catalogers, in particular, are trapped in both ramifications.  Anytime the cataloger tries to change, the core customer rejects the change.  The cataloger is forced to hyper-optimize, then, to appeal to the core customer, and this hyper-optimization leads to catalogers repelling younger customers, trapping the catalog brand.

If you're a catalog brand, you kind of have to make a choice, don't you?

1. Maximize the value of the core customer, following the cohort into retirement.
2. Or, create a new brand that appeals to a younger demographic, using profit obtained from the core customer to fund exploration into a creative strategy that appeals to a younger demographic.

Now, could I be wrong?  Absolutely!  Could a business catering to a 57 year old customer change, and cater to a 27 year old customer?  Absolutely!  Anything is possible.  Nobody knows what the future holds.

Ok, time for your thoughts.  Is the hypothesis right or wrong?  If it is right, how would you recommend businesses deal with the ramifications of the hypothesis?  If it is wrong, how would you modify the hypothesis to more closely align with reality?

Google Reader and Channel Dependency

If you read this blog via Google Reader (hint - that's more than half of you), then you already know that Google is killing Google Reader (click here).

This means, that in my case, without interaction, I lose about 60% of my readership.  Think about a retail store losing 60% of foot traffic, or an e-commerce brand losing 60% of visitors to a website.  Yeah, it's kind of an important thing.

You have options ... click here to see what some of your options are.  A good choice is to visit my blog (click here), and enter your email address in the Feedblitz box.  You'll get my posts each day at about 10:45pm PDT.

I've been playing with Feedly today (click here) ... it offers a newspaper-style presentation that, honestly, is pretty ... I'll need to have more images in my posts to capitalize on Feedly, and that's a good thing.  FYI, I know many of you are already switching to Feedly, I see the referring URLs popping up this morning, so thank you!

So - please, choose a new RSS reader or subscribe via email.  Gosh, what would happen if you missed my updates?  Think of the ramifications, folks ... think!

Now for the business side of this development.

Never ... ever ... ever ... become overly dependent upon one marketing channel, or source of customers.  Ever.  This is similar to a cataloger depending upon an insolvent USPS to deliver catalogs, an e-commerce brand depending upon Google for SEO, or a retailer depending upon a historically strong anchor store like Sears.

Be very careful trusting free cloud-based services for anything.

Thoughts?

Creative - Part 3

We started with QVC, a Judy-centric business.  We moved to J. Jill, a Jennifer-centric business.  Now let's look at a couple of businesses that have a different style of presentation.

Here's Pacsun:

You can rotate through several stories - here's another one.

Ok, here's the demographic story from Quantcast (click here).  Who is the customer?

1. Judy, Average Age = 60.
2. Jennifer, Average Age = 44.
3. Jasmine, Average Age = 28.
4. Jadyn, Average Age = 12.

This is somewhere between Jasmine and Jadyn, right?

Notice that we're still focusing on stories, but some of the links divert us from merchandise, to content / connection.  There's a link to the blog, or you can log in to the site via Facebook (at which time, lots of data is being shared between the brand, Facebook, and friends of the person visiting the site).

Let's look at Journey's, a decidedly Jasmine / Jadyn focused business.

Sure, it's a clean presentation - but look at what's going on here - on my first visit, they want information from me, so that they can stay in touch with me (or collect information that they can mine in a Big Data environment).  This style of relationship building is not readily apparent among most Judy-centric brands, and is found infrequently among Jennifer-centric brands.

What about Aeropostale, shifting even further to Jadyn:

This is my first visit - and again, very clean presentation, very "brand centric" and not "merchandise centric" ... but the immediate request for data, so that Aeropostale can communicate with me.  Below the fold, you find opportunities to connect via text, email, Facebook, Twitter, and YouTube.

As you migrate from Judy (merchandise-centric) to Jennifer (story-centric) to Jasmine/Jadyn (relationship centric), you see themes, don't you?

Tomorrow, we'll talk about the ramifications of these themes.

Creative - Part 2

Yesterday, we talked about the style of creative used on home pages that appeal to customers like Judy, the 60 year old catalog shopping maven.

Today, let's take a look at J. Jill - here's their home page as of March 9.

And again, let's visit Quantcast to see who the audience is (click here).  Who is the audience, on average, visiting J. Jill?

1. Judy - Average Age = 60.
2. Jennifer - Average Age = 44.
3. Jasmine - Average Age = 28.
4. Jaydn - Average Age = 12.

Ok, let's compare the creative treatment to QVC, from yesterday:

The style is evolving, no doubt about it.  I'm not saying one style converts better than another, no way.  What I am saying is that as the target customer becomes younger, the presentation style changes - we offer fewer options, we begin prioritizing the telling of stories over the presentation of merchandise.

Here's Dillard's - another Jennifer-centric business.

Again, there are three stories that Dillard's is telling (see the black circles on the bottom-left of the image).  But the overall story is clarity.  We move away from featuring the breadth of assortment, we move toward the story the business wants to communicate to us.

We'll continue tomorrow with a shift from Jennifer to Jasmine.

Creative - A Home Page Study

For decades, it's been understood that creative (how we present merchandise to a customer) is worth +/- 10% to the sales potential of a business.  We identify this fact by testing different creative treatments, then by measuring response/conversion - we know there is considerable truth to this statement.  

Notice that this style of measurement is "short-term" in nature.  In other words, the impact of creative is +/- 10% in the short term.  What is the impact, long-term?  That's something few people measure.

That's something that many people should measure.

I will offer you a hypothesis, my hypothesis:

• The creative treatment you employ has a +/- 10% impact on the short-term value of your business, and has a +/- 50% (or larger) impact on the long-term health of your business.

This is a hypothesis, because I don't have the data to prove my hypothesis.

But I do have information that is compelling.  This week, I'm going to share some of the compelling differences in creative, and associate the compelling differences with our Judy / Jennifer / Jasmine framework.

Let's start with an example.  This is the home page of QVC, as of the evening of March 8.

Which audience purchases from QVC?

1. Judy - Average Age = 60.
2. Jennifer - Average Age = 44.
3. Jasmine - Average Age = 28.
4. Jadyn - Average Age = 12.

Click here to find out if your guess is right - visit Quantcast to identify their estimate of the audience buying from QVC.

Carefully study the creative treatment used on the home page.  Look at all the "stuff" presented to Judy on this page.  Yes, there's a story here "A Clean Start", but, wow, QVC doesn't want you to leave the home page.

Here's Footsmart ... another Judy-centric business, according to Quantcast (click here).

Again, there's a theme ... but from the home page, there's a desire to get you to whatever you want, without any waste of time.

If you are +/- 60 years old, go find your favorite brand, and look at the presentation of merchandise on the home page.  You're likely to find similarities to this style of presentation. And if you look at the websites preferred by younger generations, you'll see a different style of presentation.

For instance, here's Zappos (Quantcast says Zappos is preferred by 25-54 year olds, the average, of course, would be Jennifer).

We've got four stories being shared instead of three (not that that matters much), but the presentation is a bit cleaner above the fold - and there is the focus on free shipping and free returns (which, you'll find, is frequently aligned with websites that appeal to Jennifer - take a look for yourselves).

You'll find that Judy-centric websites are drill-down focused, less story-oriented, and are more likely to increase the assortment on the home page.  As you move from Judy to Jennifer, you start to see the introduction of stories - still easy to get around, but the creative presentation is more story oriented.

Tomorrow, we'll continue our discussion.