They Think It Is A Bad Idea

Here's something I hear often.

• "We floated the idea of an improved contact strategy by our vendor partners. They weren't excited about it".

Duh!

Of course your vendor partners think it's a bad idea to improve your contact strategy. Your contact strategy is the reason they are in business!

Have you ever spent a few minutes thinking about who gets paid by the operations of your business? Here's an example:

Product vendors deserve to be paid, of course, or YOU aren't in business!! So they earn (in our example) $45 of every $100 you sell.

Marketing vendors need to EARN the right to be paid. When I worked at Nordstrom, we spent less than 2% of net sales on marketing. Let that sink in for a moment. Meanwhile, it is common for catalogers to spend more than 30% of sales on marketing ... in our case here, the fraction is 33%. And if you break the numbers down, you learn something interesting.

• $8 of every $100 sold are paid to your Paper Rep (your rates will vary).
• $8 of every $100 sold are paid to your Printer (your rates will vary).
• $8 of every $100 sold are paid to the USPS for Postage (your rates will vary).
• $6 of every $100 sold are paid to online marketers (Google + Facebook + Retargeters + Affiliates + Assorted Middlemen & Middlewomen).
• $2 of every $100 sold are paid to catalog co-ops and assorted catalog vendors.
• $1 or less of every $100 sold are paid to your email vendor.

In our example, the cataloger earns a typical 5% pre-tax profit rate off of the operations of the business.

Your paper rep makes more off of the operation of your business than you make.

Your printer makes more off of the operation of your business than you make.

The USPS makes more off of the operation of your business than you make.

A myriad of assorted online marketers make more off of the operation of your business than you make.

This is why your vendor partners dissuade catalogers from moving into the future.

• Significantly more money is made off of the operation of a catalog brand by vendors than by the catalog brand.

When you read stuff like this (click here) and then you look at the breakdown of payments above, you begin to understand why your vendor partners think it is a bad idea to make catalog contact strategy changes that move you closer to the future.

Tomorrow, I'll share some thoughts about what the catalog industry has become.

The Next Run Of The MineThatData Elite Program!!

Every four months, we celebrate a new run of The MineThatData Elite Program! It's time to do that again.

The #subscription based program continues to evolve. With this run, I am going to shift focus just a bit.

Here's what you will get:

• Your standard comp segment analysis.
• Your standard comp new + reactivated analysis.
• A continuation of a handful of rolling twelve month metrics.
• Your annual repurchase and file composition table.

Here's two new things added for this run:

• A "grid" that illustrates where changes in your customer file generate the most "leverage" ... similar to stuff we've been talking about over the past two weeks.
• Rolling Price Point Information ... one of the biggest problems I've observed in 2017 projects is that changes in price point strategy (i.e. making items more / less expensive) is generally hurting businesses. We'll explore how price point changes are impacting your business.

Cost?

• First-Time Participants = $1,800.
• Existing Participants = $1,000.

Contact me right now (kevinh@minethatdata.com) to join the program and for file requirements.

Key Dates:

• Payment is due by October 10, 2017.
• Data is due by October 15, 2017.
• Analysis will be received by October 31, 2017.

P.S.: Ok, it's time for what is becoming a tradition ... the links at the end of the blog post. Have you read this interpretation of the new iPhone (click here)? There's a quote that all catalogers should read ... so I'll print the quote here ... we begin with the introduction of the iPhone a decade ago.

• The iPhone represented a fresh start for the company — and Steve Jobs, had learned his lessons well. Don’t depend on a third party to be enabler of your key innovations and capabilities. I have written about the critical need for vertical integration for today’s giants in the past.
  Just imagine Apple having to depend on Qualcomm to supply its chips — it will be tied into Qualcomm’s ability to come up with new technology — and thus will be working on a timeline defined by the San Diego chip giant. Mind you, this doesn’t factor the harsh reality of paying Qualcomm premiums and having to worry about losing chip supplies to someone with bigger orders and desire to work on razor thin margins.

This brings us to the catalog industry. Let's replace the second paragraph, removing "Apple" and plugging in "Catalogers" ... then removing "Qualcomm" and plugging in "Co-Ops" ... and removing "chips" and replacing it with "customers" ... now we have the following:

• "Just imagine Catalogers having to depend on Co-Ops to supply its customers - it will be tied into the Co-Ops ability to come up with new technology - and thus will be working on a timeline defined by the Co-Ops. Mind you, this doesn't factor the harsh reality of paying the Co-Ops premiums ..."

Sobering, quite honestly.

The MineThatData Forecasting Challenge!!

Ok, time for some fun, if you are an analytics guru!

I have a dataset for you ... it contains annual sales on a rolling twelve month basis for the past 83 months (month = 00 through month = 79). You can click here to download the Excel Spreadsheet.

Here are the variables in the dataset.

• Month = 00 to Month = 79.
• Annual Sales:  Total.
• Annual Sales:  Call Center.
• Annual Sales:  Website.
• Annual Sales:  Email Marketing.
• Annual Sales:  Search (Paid and Natural).
• Annual Sales:  From Items New In The Past Year.
• Annual Sales:  From Existing Items.
• Annual Sales:  From The Primary Merchandise Category This Company Sells.
• Annual Sales:  From All Other Merchandise Categories.
• Annual Sales:  From Items $0.01 - $9.99.
• Annual Sales:  From Items $10.00 - $19.99.
• Annual Sales:  From Items $20.00 - $29.99.
• Annual Sales:  From Items $30.00 - $49.99.
• Annual Sales:  From Items $50.00 - $99.99.
• Annual Sales:  From Items $100.00 - $249.99.
• Annual Sales:  From Items $250.00+.

A few key tidbits:

• Total = Call Center + Website + Email Marketing + Search.
• Total = New Items + Existing Items.
• Total = Primary Merchandise Category + All Other Merchandise Categories.
• Total = Items $0.01 - $9.99 + Items $10.00 - $19.99 + Items $20.00 - $29.99 + Items $30.00 - $49.99 + Items $50.00 - $99.99 + Items $100.00 - $249.99 + Items $250.00+.

Here's the Forecasting Challenge:

• Given the data in the dataset, predict Annual Sales in Month = 80, Month = 81, and Month = 82.

Forecasting Challenge Extra Credit:

• Given the data in the dataset, predict Annual Sales for each variable in the dataset for Month = 80.
• Then, use the data in the dataset and the prediction for Month = 80 to predict Annual Sales for each variable in the dataset for Month = 81.
• Then, use the data in the dataset and the predictions for Month = 80 and Month = 81 to predict Annual Sales for each variable in the dataset for Month = 82.

The person / team / company that minimizes squared error for Annual Sales - Total in the Forecasting Challenge will be deemed the winner. Yes, I have the actual values for months 80/81/82.

The person / team / company that minimizes squared error for Annual Sales - Total in the Forecasting Challenge Extra Credit will also be deemed a winner. Yes, I have the actual values for all variables for months 80/81/82.

The person / team / company that wins either challenge will have their results published on this Blog (2,500 subscribers), on Twitter (6,600 followers), and on my Podcast (71,000 downloads). So yes, your answer will receive some exposure!  I will also send a free copy of Hillstrom's Fix It to the winning person / team / company.

Your solution must be written up in white paper format - fully explaining the methodology you use, and fully sharing the equations or math used to make the prediction. If you don't provide a white paper publicly outlining/sharing your methodology/results/predictions, you will not be eligible to win.

Cost to Enter = Free!

Cost to Submit a Potentially Winning Solution = Free!

Due Date:  Your solution is due no later than 11:59pm PDT on October 31. Late submissions will not be accepted.

Ok, who is ready to accept The MineThatData Forecasting Challenge??!!

MineThatData Academy!!

I've worked with many of you to get the bugs out of the simulation algorithm. There's been many different versions, and many different tests. And now, finally, the bugs have been worked out and we have a simulation that gives participants a fighting chance to test their chops ... and most important ... a fighting chance to come from behind if year one doesn't go very well.

The simulation is called "MineThatData Academy":

This is a ten-team example ... the simulation is designed to handle up to twenty individuals/teams.

You get to determine your strategy across many dimensions.

• Online Advertising.
• Offline Advertising.
• % off Strategy.
• Shipping Revenue (or Free) Strategy.
• Price of Widgets.
• Price of Bidgets.
• Price of Tidgets.
• % of Your Merchandise Assortment = New.
• Mix of Brand Marketing Strategy and Technology/Personalization.

You will be provided with limited metrics ... not enough data to "perceive" you can do a good job ... but you'll be able to do a good job because you are smart.

Alright, here's what you get.

• Option #1 = On-Site Visit. 9-12 = Simulation. 12-1 = Lunch. 1-5 = Business Discussion With Your Team, Can Go In Any Direction You Want.
• Option #2 = Virtual Academy. 1-4 = Simulation, 4-5 = Business Discussion With Your Team.

Contact me for additional details (kevinh@minethatdata.com).

These "Academy" sessions work really well at Vendors as well as E-Commerce / Retail / Catalog Clients ... and the structure is perfect for conferences.

Soooooo ... who's ready to set the HIGH SCORE at the MineThatData Academy? Who has the business chops to succeed? Email me and let's have some fun! (kevinh@minethatdata.com).


P.S.: Here's a medium-cost customer acquisition strategy discussion in fashion, should you be interested. Read what Ralph Lauren did with 300 "influencers" ... what would stop you from doing something comparable with your best customers?

P.P.S.:  Read the link in Issue #61 in this missive from MailChimp (Click Here). Do you travel the world to find stories worthy of sharing? That's a form of low-cost customer acquisition - certainly cheaper than paying Facebook a million dollars, #amirite?

P.P.P.S.:  Since this industry loves paper, here's Shopcodes from Shopify (Click Here).

P.P.P.P.S.:  Two days ago, this link got 319 clicks ... that's as many as any link I've put up here (Click Here). Put Facebook and Catalogs in the same sentence and you swarm the link like wasps attacking a rotting orange!

Pages / Contacts

There's a small audience out here that encourages you to mail fewer pages and fewer contacts.

There's a larger audience that encourages you to mail more contacts and pages because sales increase. It's good that sales increase.

Actual test results and actual math and actual profit calculations (especially profit calculations) that yield more profit is much, much better.

I've spent 30 years measuring this stuff. Developing equations. Performing actual math. Testing. Thirty-flippin'-years, folks. It's why I get frustrated. I've executed the tests and done the math and calculated profit and share the advice freely with you ... and you pick Thought Leaders who ask you to mail more pages and more contacts.

Why?

Back in August, I conducted a 10-part series on the topic and shared three decades of math/findings ... for free ... (click here). Please - go revisit the links and look at the math.

Then do what is right for your business.

• Test a 50% page count reduction with the same assortment/creative. Does the "rule of thumb" hold? (hint - it probably does).
• Test a 50% page count reduction stuffed with best products and best creative. Does the "rule of thumb" hold? (hint - it can't hold, it won't hold - you'll get amazing results on fewer pages).
• Measure page count reduction tests across best customers, marginal customers, lapsed customers, and prospects. Are your results different (hint, they are).
• Test 4 catalogs a year vs. 8 vs. 12 vs. 42. Execute the test among best customers, marginal customers, lapsed customers, and prospects. I keep getting calls from catalogers who are getting 80%+ of the demand on 20% of the contacts. Hint - that's a lot of profit! Double Hint - you won't hear any of these discussions from Thought Leaders or at Conferences, and for good reason - they don't want you to know about 'em ... but you keep telling me that's what you are seeing, so enjoy!
• Develop a strategy for Best Customers, Marginal Customers, Lapsed Customers, and Prospects. Contact me (kevinh@minethatdata.com) and I'll perform the math for you for your unique situation.

Follow the math outlined in this 10 part series.

If you don't execute actual math, actual tests, and calculate actual profit ... then you stuck dealing with lizard logic. Don't get trapped in the lizard logic of mailing more pages and more contacts, ok?

Butterflies on a Reptile

Long-time reader Robby sends us this one (click here for the article):

Now look at the image here.

The image is what we do in our industry. The reptile is the core business ... the butterflies are the fun new channels we bolt on to the core business. We think we are integrating the customer experience, creating omnichannel magic.

Instead, we created this image.

There's nothing wrong with generating as much profit as possible from the reptile, and then reinvest that profit in a new online brand.

Heck, people love to criticize J. Crew these days - but think about what they're doing ... as the core brand suffers the new brand (Madewell) performs better. It's good to have multiple brands ... it's like having a diversified portfolio of stocks, right?

Think about what Gap is doing these days ... they're closing Gap stores while opening Old Navy stores. Instead of bolting butterflies on the reptile, they're shutting down reptiles and growing their assortment of butterflies.

Don't fall for omnichannel lizard logic.

Consider hiring online experts - let them start an online brand using the fraction of your merchandise assortment that appeals to a younger audience. Let them use techniques and tactics (butterflies) that do not work when bolted on to the core business (the reptile). As success happens, let the new merchandise assortment evolve and shift as the customer base evolves.

Explain why this is a bad idea?

P.S.: Speaking of online marketing experts, read this story about Alto's Adventure.

P.P.S.:  Speaking of bolting butterflies on a reptile, look at what large retailers and Facebook are doing with catalogs (click here). There's no saving traditional folks who won't at least try something like this (though we've been here for 15 years or more with "digital" catalogs). Try Something!!

High Cost Customer Acquisition Example

I submitted my MineThatData Academy Business Simulation to the DMA (and Shop.org and Internet Retailer) ... they turned the opportunity down (all three did) ... and here's why ... take a look at the email I received from Ascendant Network:

Yes - you can spend $75,000 to achieve "High Level Brand Engagement" at the EMP Lounge. Or just $40,000 at the VIP Party.

A Track Speaking Session is just $60,000 - only 1 available!

Or you can spend $15,000 to host cocktails. Who hasn't dreamed of doing that?

Do you think Kobe Bryant and Tyra Banks paid $60,000 for their speaking opportunity?

It's easy to spend money.

It's hard to be creative. Really, really hard.

This is an example of low-cost customer acquisition (which also applies to best customers). Look at what Teespring sent me on Saturday:

See - there's a little bit of creativity there. Did you know that you can find pizza socks in the laundry 37% faster? I didn't know that.

So you can do the hard work and be creative ... or you can pay $15,000 to host cocktails.

Your choice.