Misunderstanding The Brand Ecosystem

We just went through a nightmarish five years.

No, this isn't about making marketing great again.

Here's what Amazon did. They installed the Fear of God in Us. Think about when you are fearful. Do you make the best decisions? Have you ever watched that commercial where the youngsters are being stalked by a serial killer and they hide in a garage and one of them is breathing on the other person and then they could escape in a running car but they don't? The commercial makes for a nice story about the dilly of a pickle we got ourselves into by trying to "Respond to the Amazon Threat".

In retail, we embraced "omnichannel" ... thinking that we could "win" the customer by aligning all of our channels. We though that was what the customer wanted. But we didn't evaluate our own brand ecosystem, did we? For if we did, we would have asked ourselves a valuable question ... where is the next new customer coming from? If our existing customers wanted an integrated experience, what did new customers / prospects want?

We didn't bother to evaluate that question. New customers dried up - and they dried up in the retail channel, sending comps into the tank. Then, existing customers slowly migrated online (given that we invested in that channel the most), further depleting the in-store experience.

Had we understood the retail brand ecosystem, we would have made very different choices.

Same thing in catalog marketing. Look at where catalogs fall within the brand ecosystem above ... they are the only place where half-way loyal customers buy high-priced items. The rest of the ecosystem focuses on low prices or average prices or discounts/promotions or sales. Heck, one could say (in this case) that the business and/or the customer pushed the catalog right out of the brand ecosystem. It's clear that nobody is studying the role of the catalog in this brand ecosystem, for if somebody were studying the role, they'd question why it is becoming an outline within the entire ecosystem?

Or, somebody would question why the catalog is the only place where high-margin, profitable transactions take place, right?

Either way, somebody would be asking questions.

That's why we map out the brand ecosystem. We have to learn what role each customer-facing element of the brand plays in the overall brand ecosystem. Once we understand the brand ecosystem, we can begin implementing customer acquisition strategies that help grow the business most effectively. And, we can improve merchandise productivity, because we understand the customers and channels where various merchandise categories perform best. 

Loyal Buyers

Where do the most loyal buyers fall on our brand ecosystem image?

Average Prices, Product Category 04, and Subscriptions.

This business leverages a subscription model to cater to best customers, and that's how best customers purchase ... chicken and egg stuff. But product category 04 is where the magic happens.

So we've been able to establish the brand ecosystem.

The customer starts off buying from product category 02 via low prices and print ads. That's the primary customer acquisition channel for this brand ... not online, but via print ads.

Then, the customer leverages the internet to comparison shop for the best deals, ultimately purchasing online via discounts/promotions and buying multiple items.

As the customer becomes loyal, the customer branches out - in one direction to the catalog where high prices are the norm - or on a path to true loyalty via Flash Sales and most product categories (true product diversity), before eventually landing on average prices in product category 04 via a subscription-based model.

But make no mistake - this is a price / promotion centric brand. The ecosystem revolves around pricing games, and the pricing games change as the customer becomes ever more loyal.

Flash Sales

Where do Flash Sales fit in this brand ecosystem?

Well, customers ordering for the 6th - 10th time and 11th - 25th time align with Flash Sales. In other words, loyal buyers are the ones taking advantage of Flash Sales. Odds are these aren't full price purchases either, right?

We've seen an evolution of the customer ... first purchase via print ads and low prices ... 2nd - 5th purchases via email / affiliates / search with discounts/promotions ... then 6th - 25th purchases align with either high priced items in catalogs or via flash sales at average price points.

This is clearly an incentive-driven customer, with only the catalog buyer being willing to pay full freight.

Homework Assignment:  Tell me something about the most loyal buyers / those with 26+ orders.

Catalog Housefile Orders

What aligns with catalog housefile orders?

3rd-5th orders.

6th-10th orders.

High Prices.

Product Category 06.

So let's think about customers who want to purchase from Product Category 06 ... customers with four historical purchases. That customer gets the catalog, the catalog has high prices, so the customer heads out to search / affiliates / email and purchases multiple items via discounts/promotions.

This is a classic issue in modern omnichannel marketing. For this brand, catalogs are sent to customers who are becoming more and more loyal ... the catalogs have high prices, so some customers purchase via high price points ... but other customers go online to find "the truth". Channels are working together, sure, but the way channels are working together erode customer trust and erode brand profitability.

Homework Assignment: Tell me what you see regarding Flash Sales.

Oh Oh - Those Online Channels

Your homework assignment was to talk about customers who purchased via Email, Affiliates, and Search.

Notice that each of the three online marketing channels aligns next to a series of points.

• Discounts/Promotions.
• Multiple Items per Order.
• 2nd Order.
• 3rd - 5th Order.
• Co-Op Orders.
• Product Category 06.
• Product Category 07.

The co-op order issue is odd, given that these should be first orders, unless lapsed customers are reactivated with co-op overlays, which can happen.

But otherwise ... what happens to the customer who is acquired via low prices on print ads?

• The customer uses online marketing channels to apply discounts/promotions that lead to orders from Product Categories 06 / 07 and have multiple items in the order.

Homework Assignment:  Tell me what aligns with orders from housefile catalog mailings?

So What Is This Wonky Plot All About, Anyway?

There it is ... a thing of beauty.

Well, maybe not. But it is a thing that requires study, for many of the secrets of your customer lifecycle are embedded in this image.

Let's look at the right hand portion of the ecosystem ... do you see the "1st Order" dot? This is where customers who place a first order reside. What are the dots near a first order?

• Product Category 02.
• Print Ads.
• Low Prices.

So we know how we bring new customers into the business, don't we?

Homework assignment for tomorrow:  Be ready to discuss Email / Affiliate / Search orders.

Another Interview With Catalog Craig Paperman

If you don't like business fiction, please move on and read my Brand Ecosystem article!

Kevin: Nice to have you hear today.

Craig: Right.

Kevin: You sound crabby.

Craig: I'm fine.

Kevin: It's the whole Victoria's Secret issue and the death of their catalog, isn't it?

Craig: It's you.

Kevin: It's my fault they stopped mailing catalogs.

Craig: You are like a pox on the innocent face of catalog marketing.

Kevin: What?

Craig: I heard your talk at the VT/NH event a few months ago.

Kevin: You are still grumbling about that talk?

Craig: Everybody is still grumbling about that talk.

Kevin: Why?

Craig: You said that 30-39 year olds should be given the keys to the catalog car.

Kevin: I did say that.

Craig: That's illegal, and you know it.

Kevin: It was a metaphor.

Craig: It was irresponsible.

Kevin: How old were you when you were promoted from Manager to Director?

Craig: I was 37 years old.

Kevin: So in your case, it was a good thing to see a 30-39 year old given responsibility, but otherwise, it's illegal?

Craig: I was talented.

Kevin: Interesting use of the past tense.

Craig: The 30-39 year olds who work for me aren't talented enough. They need seasoning.

Kevin: How long do they need to be seasoned?

Craig: Until I retire.

Kevin: So you don't trust younger employees with running your business?

Craig: I don't trust them, period.

Kevin: Why?

Craig: They haven't earned their stripes.

Kevin: What stripes?

Craig: Catalog Marketing stripes.

Kevin: But how useful are catalog marketing stripes? It's 2016. One can make the case that classic e-commerce skills are largely outdated.

Craig: Like I said, you are a pox on our innocent industry.

Kevin: How has the industry done leveraging catalog professionals with three decades of experience?

Craig: What do you mean?

Kevin: Has the catalog industry grown?

Craig: Not really.

Kevin: So the most skilled and talented catalog professionals are managing an industry that is not growing?

Craig: Oh oh.

Kevin: Shouldn't these folks be held accountable for poor performance?

Craig: That means I would be held accountable for poor performance.

Kevin: Keep going.

Craig: But I have thirty years of experience. That means something.

Kevin: Twenty years ago, somebody promoted you to a position of authority. You were thirty-seven years old. You already had fifteen years of experience. Fifteen! And the person who promoted you probably had thirty years of experience. Isn't this the way the world works? Older professionals pass the torch on to younger professionals, and then younger professionals take the industry in new and unique directions that older professionals could not previously imagine?

Craig: No.

Kevin: Why not?

Craig: The way it works is that I keep control over my profession until I retire. Then the 30-39 year olds give me a cake and a watch, and honor the ground that I walk on. It'll be a moving experience. Then I get to enjoy my 401k while the 30-39 year olds get blamed for running the company into the ground. 

Kevin: You are motivated by spite?

Craig: I'm motivated by being right.

Kevin: Which brings us back to Victoria's Secret.

Craig: Idiots.

Kevin: Why are they idiots?

Craig: Catalogs are a part of their heritage.

Kevin: Merchandise is their heritage.

Craig: They're making a huge mistake.

Kevin: They executed tests. The tests showed that they didn't lose sales when they stopped mailing catalogs. Some of those tests went on for six months or a year.

Craig: But what about the long-term impact?

Kevin: A year-long test isn't long-term?

Craig: It's foolish.

Kevin: They have data on their side. They have profit on their side. 

Craig: They have some idiot data scientist running tests. They're making decisions based on the fact that some beaker of fluid didn't change colors.

Kevin: What are you talking about?

Craig: Lands' End did a test back in 1999.

Kevin: Stop it.

Craig: And that test showed that when they stopped mailing catalogs, sales declined.

Kevin: Nordstrom stopped mailing catalogs in 2006 and sales increased.

Craig: That's cherry-picking the results that benefit your argument.

Kevin: Isn't that what you just did?

Craig: You are so glib. You and your Brand Response Marketing Team comprised of infants. You and your "just test it" strategy. You and your focus on merchandise and customer acquisition.

Kevin: Those things aren't important?

Craig: People lose jobs when Victoria's Secret abandons print. There's a whole facility in Indiana that will have to close down. What did these people do to deserve the loss of a job?

Kevin: They didn't do anything wrong.

Craig: Exactly.

Kevin: So Victoria's Secret should keep mailing catalogs, even if they are unprofitable, so that print-based employees can keep their jobs?

Craig: We have to keep the ecosystem moving in the right direction.

Kevin: But if the co-ops weren't absolutely floundering right now, wouldn't circulation be on the increase and then the industry ecosystem would be healthier and printers would see improved performance? If you're going to blame Victoria's Secret because their tests showed that catalogs were not profitable, shouldn't you also blame the co-ops because their names are increasingly unprofitable?

Craig: Oh oh.

Kevin: Why aren't the printers jumping all over the co-ops?

Craig: You are a co-op hater.

Kevin: I don't understand why you beat up brands like Victoria's Secret for doing what is right for them, but you will not hold your own industry accountable when your own industry is causing catalogers to have to find digital sources for names, sources that do not include print? Your own industry is causing your own industry to mail fewer catalogs, for crying out loud!!!

Craig: Millennials are the problem. Those thirty year olds.

Kevin: They are not the problem.

Craig: Of course they are the problem. We need to train them. We need to train the employees how to cherish catalogs. We need to train the customers how to cherish catalogs.

Kevin: Is that your job?

Craig: Absolutely.

Kevin: How good of a job have you done training "them"?

Craig: Oh oh.

Kevin: Is it possible that you should be held accountable for not training your employees well enough and for not training Millennials, whoever they are, to shop your catalogs?

Craig: I blame the iPhone. It gutted cataloging.

Kevin: So what are you going to do about all of this?

Craig: I'll blame you. I like 90% of what you say. But the other 10% is way out there, and it allows me to refute the remaining 90% that makes sense. The 10% I disagree with allows me to reject 100% of the argument.

Kevin: You aren't going to change, are you?

Craig: Why don't you give me some actionable findings that will turbocharge my business immediately? Do a series of tips that are guaranteed to work. Give away all of your ideas for free. That should help!

Kevin: But I did that for more than two hours when you heard me speak at the VT/NH event. I spent four months working on the content, generating nearly 20,000 downloads on Slideshare. And then I followed that up with a two month series on my blog, all for free. Did you listen to a word I said? Did you implement any of my findings? Or did you simply talk about the 10% of the argument you didn't like with the rest of the industry ... yapping and talking and doing nothing about improving business.

Craig: Your series was garbage. Nobody wants to hear nonsense about giving 30-39 year olds responsibility.

Kevin: Even though you were given comparable responsibility at age 37?

Craig: Exactly.

Kevin: I think we're done here.

Craig: Let me know when you're going to write about Eight Ways That Cataloging And Retargeting Can Be Used In Tandem To Turbocharge Your Business, and I will be there to consume your tips for free.

Kevin: Even if you agreed with me, you wouldn't hire me, right?

Craig: Correct. I just want free tips that I agree with.

Kevin: Alright.