Doing The Opposite

Give this little article about keeping a newspaper alive a read:  http://flashesandflames.com/2013/06/20/reinventing-newspaper-groups.

What did you notice?

The argument is for doing the opposite of "multi-channel" or "omnichannel", isn't it?

Oh, I know, I can already hear the snide comments:

• "That's the newspaper industry, we're Catalogers, we're Different.
• "That's just one case, what about the thousands of newspapers who did exactly what the author suggested and failed, there's no case study about the morons who tried and failed, correct?"
• "Multi-channel and Omnichannel are proven, just look at Macy's."

If we assume you're correct, then why is the catalog industry consistently the slowest growing of any in the Internet Retailer Top 500?  The industry followed the multi-channel playbook, fully integrating e-commerce with catalog operations, correct?  Well, we should have observed that catalogs were the fastest growing of any sector in the Internet Retailer Top 500 ... right?

In the past year, I consistently observe a "different customer" from the "core customer".  This customer is almost exclusively shopping online, and is buying different/unique merchandise.  It's almost like, magically, somebody is showing you a portal to the future, a path to long-term viability.

Take advantage today.  Ignore the omnichannel arguments that only benefit vendors and trade journalists.  Do what is right for your employees, your customers, and your business.

Put A Bird On It

Maybe you watch Portlandia ... and know of the skit called "Put A Bird On It".

Here, Carrie notices a "sad little tote bag" ... she puts a bird on it ... all better!

Marketers take different directions, don't they?  When faced with a product that isn't performing so well, there are choices.

1. Ignore everything and hope the problem simply goes away.
2. "Put A Bird On It" ... 30% off Plus Free Shipping, for instance ... that's puttin' a bird on it!
3. Find out why a customer isn't buying something.

The marketer slaps a bird on the problem, then moves on.  Job well done.

There are so many reasons why merchandise productivity fails.

Sometimes, the price of newly introduced items is too high.

Sometimes, the number of skus are cut back, while the demand forecast at a customer level is unchanged, creating the perception that business stinks when, in reality, business is exactly where it is supposed to be when skus are reduced.

Sometimes, old products are dying faster than new product productivity accelerates.

Sometimes, a category that "feeds" other categories (i.e. an audio/video receiver feeds the need for speakers, speaker wire, HDMI cables, that kind of thing) is performing poorly, causing feeder categories to perform poorly.

Almost none of this information can be obtained via a web analytics tool, or print-based response reporting.  Sure, it's there, waiting to be mined, it's hiding in plain sight.  But we can't analyze it with the tools we have.

So we put a bird on it.  And we measure the performance of the bird.

Take some time this summer to analyze merchandise performance.  It's worth the effort.

Dear Catalog CEOs: Cataloging For Dummies

Dear Catalog CEOs:

Most of you have heard of the "... for Dummies" series.

The series covers the basics, the "best practices" if you will, to get you up to speed, quickly.

Maybe we should review some of the tidbits we're hearing:

Cataloging For Dummies:  Align all of your channels, the customer demands the same experience in all channels.

Real Advice For Smarties:  Aligning all channels results in two problems - the core audience is satiated, any other niche audience is alienated.  As a result, the customer file ages, rapidly, eventually separating the catalog brand from the future, enabling Amazon to capture 25% of all e-commerce transactions.

Cataloging For Dummies:  The best way to grow your business is to get your existing customers to buy more of your merchandise.

Real Advice For Smarties:  If this was true, then annual purchase frequency would increase by 10% a year, every year.  This never happens.  Your growth is almost entirely based, on a long-term basis, on new customer acquisition.  The smartest companies thoroughly understand this fact.

Cataloging For Dummies:  Wrap the cover and back cover with new content, keep the interior of your catalog the same, and remail the catalog to your best customers, you'll earn more business at minimal cost.

Real Advice For Smarties:  In a world where a customer can instantly obtain information on a hand-held phone with the computing power of a 2010 laptop, you're going to send the exact same marketing content via a mailbox six weeks later?  It's 2013.  At least afford the customer the luxury of a new creative experience.

Cataloging For Dummies:  Drive the customer online using print.

Real Advice For Smarties:  Do the opposite.  Calibrate your catalog for a 60 year old or older customer who doesn't want to go online.  Conversely, create a great online experience for customers age 40-59, and create a fantastic mobile/social experience for customers age 18-39.  Or just focus on one audience.  Do what's right.  Don't try to use one medium to force a customer to use another medium because your printer thinks that's a great way to keep the print industry alive.

Cataloging For Dummies:  All customers love catalogs.

Real Advice For Smarties:  Baby Boomers and Moms shopping for Children, they seem to appreciate catalogs.

Cataloging For Dummies:  Contribute your names to the co-ops, and reap the rewards of instant access to the names/addresses of your competition.

Real Advice For Smarties:  Diversify your portfolio of new customers, or risk the acceleration of acquiring a customer age 60 or older.

Cataloging For Dummies:  Mail all customers catalogs, you're a cataloger!

Real Advice For Smarties:  Minimize mailing of catalogs to mobile/social/search/email buyers.

Use the comments section to offer your version of Real Advice For Smarties.

Seeing The Future - New Items

You can't see what is coming on this road, can you?

Thank goodness the yellow sign tells you curves are coming, and you'll have to slow down to negotiate the curves.

In Merchandise Forensics, we can see the future, in part, by performing what is called a "Class Of" report.

In other words, we identify all items introduced in, say, the "Class Of" 2006.  Then we measure how much demand these items generate going forward.

• 2006 (Introduction Year) = $800,000.
• 2007 (First Full Year) = $1,000,000.
• 2008 = $850,000.
• 2009 = $720,000.
• 2010 = $600,000.
• 2011 = $500,000.
• 2012 = $420,000.

Now, let's say that your merchandising team does an outstanding job, harvesting a bumper crop of outstanding new items.  In 2012, these new items generated $1,400,000 demand.

Downstream, we'll apply the same relationship to these items.

• 2012 (Introduction Year) = $1,400,000.
• 2013 (First Full Year) = $1,750,000.
• 2014 = $1,487,500.
• 2015 = $1,260,000.

Let's say that the average year yields $800,000 in new item demand.  These items will generate $2.6 million in demand in the next three years.

Your bumper crop of $1,400,000 in new items, under similar circumstances, will generate $4.5 million in demand in the next three years.

In a Merchandise Forensics project, with appropriate customer history, we can identify how future demand is impacted by historical new item introductions.  We can easily see how merchandising successes/failures lead to marketing gains/challenges over time.  Run your own "Class Of" report, and identify the impact of new product introductions on your business.

Contact me (kevinh@minethatdata.com) for your own, customized, Merchandise Forensics project.

Items That Fuel Future Purchases

All things being equal, you want to sell items that cause customers to purchase future items related to the original purchase.  Of course, you have to sell the original item, and that's not easy, but from a marketing standpoint, you want to capitalize on items that fuel subsequent loyalty.

If you owned an RV with a 50 amp connection, you'll learn that you need a 30 amp adapter.

In other words, the RV purchase leads to a need for add-ons, those add-ons generate incremental profit.

In Merchandise Forensics, I analyze items that foster subsequent add-on behavior.  These items accelerate customer loyalty.  The marketer advertises these items via landing pages and email campaigns.

How do I do this?

1. Segment all items sold between May 1, 2012 and April 30, 2013.
2. Identify all customers who purchased items sold during this timeframe.
3. Identify all customers who repurchased between May 1, 2013 and May 31, 2013.
4. Identify customer characteristics of customers buying items from 5/1/2012 - 4/30/2013.
5. Aggregate dataset down to one row per item.
6. Create model relating attributes of customers buying items to future repurchase rate of customers buying items.
7. Index the results.

This gives you a rank-ordering of the items that cause customers to come back and purchase ... and it also identifies the items that squelch future customer purchases.

In your email marketing campaigns, be sure to feature items that cause customers to come back and purchase again.  Simple!

Contact Kevin (kevinh@minethatdata.com) for your own, customized Merchandise Forensics project.

Dear Catalog CEOs: Time In New England

Dear Catalog CEOs:

You already know I'll be in Vermont July 22-24, attending the Direct Gardening Association conference (click here please).  My schedule is full on the 23rd and 24th ... but there is still the possibility of a slot or two on the 22nd or the 25th. 

I'm buying plane tickets this evening (Monday), so if you still have interest in arranging a meeting, please contact me immediately (kevinh@minethatdata.com).

Thanks,
Kevin

Guardian

Have you heard this song?

I'll bet 9 in 10 of you have not heard it.

This song was released in May of 2012, by one of the best selling artists of all time.

A key tenant of a Merchandise Forensics project is "decay".  Basically, items don't remain best sellers forever.  Each item has a time in the sun, then performance begins to decay.

Take a look at US/Canada-based Album sales for Alanis Morissette (click here for more details):

• Alanis, 1991, 100,000 copies (Canada Only).
• Now Is The Time, 1992, 50,000 copies (Canada Only).
• Jagged Little Pill, 1995, 14,820,000 copies (US).
• Supposed Former Infatuation Junkie, 1998, 2,600,000 copies (US).
• Under Rug Swept, 2002, 1,000,000 copies (US).
• So-Called Chaos, 2004, 475,000 copies (US).
• Flavors of Entanglement, 2008, 235,000 copies (US).
• Havoc and Bright Lights, 2012, 70,000 copies (US).

Three things are happening here.

1. Decay.  Each successive album sells fewer copies than the prior album.  This happens to your merchandise assortment, as well.  You must understand this dynamic, in order to understand why your marketing efforts succeed/fail.
2. Channel.  As sales shifted from CDs to MP3s, measuring success via albums sold becomes futile.
3. Awareness.  As the number of channels become nearly infinite, it becomes infinitely difficult to reach the audience necessary to create the awareness required to drive sales.

We tend to focus our efforts on (2).  We are all about the shift from old-school catalogs to e-commerce, and now, the shift from old-school e-commerce to mobile.

We spend too little time on (3).

And almost none of us focus on decay (1).

When decay is left unchecked, merchandise productivity falls.  When merchandise productivity falls, email performance and search performance and mobile performance and catalog performance all suffer.  When marketing performance suffers, marketers get fired.

You don't want to get fired.

So work hard to understand merchandise decay.  It's a critical element to understanding merchandise productivity - and merchandise productivity dictates marketing success.

Click here to contact me for your own, personalized merchandise forensics project.