Online Sales Tax

Over the past decade, Amazon made a transition. Early on, they did not have a physical presence in your state. So when you purchased something, you purchased it sans sales tax. Retail brands howled how unfair this was.

Today, Amazon has a physical presence in many states. Much of what you buy from Amazon is subject to sales tax. Retail brands still howl about how unfair it is that Amazon (and you) do not have to collect sales tax.

Have you ever noticed that Amazon grows, virtually unfettered, regardless whether they collect sales tax or not?

Sales tax is one of those topics designed to generate page views. It's virtually irrelevant to your business. If you sell something that the customer wants, sales tax is a minor inconvenience.

The problem happens when we are selling stuff that the customer doesn't care about ... at that point, discounts / promotions / sales tax become important.

So maybe instead of focusing on sales tax we focus on what matters ... and what matters is what we sell.

More Cheese On The Nachos

Have you ever noticed that no matter how much cheese they put on your nachos, they still call 'em nachos?

Now, you're allowed to personalize your nachos ... more peppers, more cheese ... but they're still called nachos.

What is your strategy regarding new merchandise?

Adding a button to a dress shirt still leaves you with a dress shirt ... to the customer, the item isn't fundamentally different, is it?

It's not easy to identify new merchandise, is it? It's hard work. And too often we're just making modest changes to existing merchandise. When we have success, we truly invent new items. We don't simply put more cheese on our nachos.

Write A Bonus Plan That Actually Leads To Growing The Business

Assume you had a $50,000,000 company like Gliebers Dresses. You write two bonus objectives that look something like this:

Now assume that your team EXCEEDS each objective. Now you have to pay people.

You probably run forecasting simulations that tell you what your business looks like at the end of the year if you grow new customers and increase annual demand, right? Right? Your Finance Team added up the sum of all cash bonuses and realized that the total cash to be paid out was $1,300,000.

In the case of Gliebers Dresses, assume that we have an $8,000,000 increase in demand and the increase leads to a $2,500,000 increase in profit. In essence, the profit is being shared ... half goes to the employees that caused the profit increase, half goes to the brand.

If you write your bonuses in a smart manner, you essentially create a profit sharing plan ... a REAL profit sharing plan.

How is that a bad thing?

Discuss.

Show of hands ... how many of you work for a retail brand or e-commerce brand or catalog brand that pays healthy bonuses?

Pay 'em!

I finished presenting slides, including a series of slides outlining shared bonuses. Bonuses that are written identically for all salaried employees.

A woman stops to see me, and offers a phrase I've heard often.

• "I love the idea of bonuses, but I'm never going to pay them to my staff. My team needs to be self-motivated."

In other words, she didn't love the idea of bonuses. She loved the idea of people working together for the good of the organization, regardless of reward structure (or absent of rewards, to be more honest ... the employees should do 'what is right' while Executives and Vendors get paid).

I worked with a company that had a good year, a really good year. Going into the next year, employees enjoyed paltry 2% "cost-of-living" increases. Vendors however, well, those folks got paid. The marketing budget grew by 15%, which meant that marketing vendors were getting 15% more pay. Paper / Printing / Postage / Email / Search / Social all "reaped the rewards" of company success. The person who managed those vendors earned 2% more pay.

What in the name of Don Libey are we doing?

In the past ten years, we decided to treat our own employees worse than the vendors that our employees hire.

Please pay your employees. I simply don't understand why your vendors deserve to share in your success but your employees don't get to? Why do you prioritize your vendors over your co-workers? Seriously? I'd like to you to "join the conversation" and explain why employees are treated so poorly but vendors get to rake in coin?

Discuss.

The Importance of Merchandise Productivity

Remember our ninety-panel outcome?

In this outcome, six (6) catalogs is optimal.

What happens when Merchandise Productivity increases by 15%?

Just like that eight (8) catalogs is optimal. Wow!

And what happens when Merchandise Productivity decreases by 15%?

Now four (4) catalogs is optimal.

One of the great weaknesses of matchback analytics is the outcome of overmailing when merchandise productivity declines. For many catalogers, merchandise productivity has been in decline in the past decade - but that problem has been masked by matchback analytics. When you apply test panel results ... extrapolated to many different possibilities, you get to see just how important merchandise productivity is to your business.

Are you executing tests of this nature?

Are you analyzing different scenarios to better understand the "optimal" strategy to maximize profit?

You've got the skills and resources to do this.  Go do it!!!!

Customers At Marginal Value

In our test results, we can estimate what might happen when customers of marginal value are contacted differently.

In our case, I estimated what might happen if customers were at 50% the quality of the average customer in the test.

What do you observe?

Profit is maximized at two (2) catalogs, not six (6).

Also notice that you can open the floodgates on email campaigns, can't you? Customers are very tolerant of a hundred messages over six months.

Using a simple nine-panel test, we can easily estimate the results of a ninety-panel test. Then we can repeat the process for differing levels of customer quality - for customers with marginal value (or great value).

You execute tests like this one, all the time, right? You kinda have to if you want to know what the right "strategy" is for your business.

Optimal Profitability

A simple test with nine panels yields a ton of insight, doesn't it?

You execute tests like this all the time, right?

If you have the nine test panels, you can "estimate" what might have happened had you executed more test panels. In our case, I estimated what might have happened had we executed ninety (90) test panels.

That's a lot of test panels!

And we quickly learn that, on average, the most profitable strategy is to mail customers six catalogs within a six month period of time. The test showed a tie ... both four (4) and eight (8) catalogs yielded the optimal outcome. When we expand the test results, we see that six (6) catalogs is most profitable.

Tomorrow, we expand the test results to differing levels of customer quality.