Life Tables and Anniversary Programs

We ended last week by talking about Welcome Programs.

Another important program is your Anniversary Program.

You have an Anniversary Program, right?

Right?

For the past twenty years, my website hosting provider employed their version of an Anniversary Program. Once 10 months have elapsed since my annual purchase, they send me an email and offer me 12 months of service for the price of 10. Done! For twenty consecutive year we've played this dance.

Look at the two "red" rows in the table ... labeled "12" and "24". These are at twelve months and twenty-four months after a first purchase. Notice that the incremental rebuy rates in those specific months are much higher than in surrounding months. This means that the customer is exhibiting "seasonal buying habits".

Seasonal buying habits happen all the time.

• Christmas.
• Spring (for gardening companies).
• Nordstrom Anniversary Sale.
• Web Hosting Companies (as mentioned above).

Way back in the day at Lands' End, we had swimsuit buyers ... they'd buy in February (for spring break), then in March - April (south), then in May - June (north). Well, that's part of your Anniversary Program, right? You use email marketing to speak to the customer as the anniversary of a prior purchase happens, marketing the family of products that the customer likes to buy during an anniversary period, right?

When I worked at Eddie Bauer, we had big anniversary periods in Outerwear in October. Once again, when you know that is the case, you use email marketing to take full advantage.

The life table clearly illustrates the need for Welcome Programs and Anniversary Programs. Please take advantage of what you learned here.

1. Run life tables for first-time buyers.
2. Use email marketing to take full advantage of your Welcome Program and Anniversary Program. It costs you nothing ... and the data strongly suggests that the stakes are high. Again, the cost is virtually nothing ... and the rewards are "something".

Do something!

Life Tables and Welcome Programs

Look at the first four rows of our life table (values of 0/1/2/3).

These are the first 12-15 weeks after a customer buys for the first time. And as it turns out, these are 12-15 really, really critical weeks.

In total, the customer has a 22.6% chance (in our example) of buying for a second time. Now go all the way to the bottom of the table, at the 30th month. The customer has a 41.1% chance of buying again after 30 months.

This is important. It means that more than half the customers who are going to repurchase (likely ever) do so within three months.

Now if you knew that half-ish of the customers you just acquired were going to buy for a second time in the NEXT THREE MONTHS, wouldn't you do something about it?

And no, this doesn't mean you are "taking care of business" by doing your normal marketing activities.

This is why Welcome Programs are so darn critical. So. Darn. Critical. You have this limited window when you have to convert the customer before the customer just kinda fades away.

Goal and Objective #1 for 2019: Develop a credible Welcome Program that cross-shops the first-time buyer into other merchandise categories and potentially other channels. Increase the three-month repurchase rate by five points.

The Life Table

You probably run Life Tables for your customer file, right?

Right?

They've been around forever (click here for a reference from Wikipedia).

A life table calculates the probability of a first-time buyer (or any buyer cohort) purchasing again.

In e-commerce (and especially in catalog marketing), the table has particular relevance, especially among first-time buyers. Typically, the table takes the shape of the table illustrated here.

See the column where it says "Months After 1st Purchase"?? If a customer purchased for the first time on September 8, then the row with a "0" shows how many of the customers purchased for a second time in the remainder of September.

If the customer did not buy in the remainder of September, then we move down to the row with a "1" ... this represents what happens when the customer is marketed to in October. If the customer does not buy, we move down to the next row, and so on.

Tomorrow we'll talk about the data in the table - and how you use the information.

Low-Cost Customer Acquisition

Sure the video represents a tender moment in Yankees / Red Sox history (click here), but notice who is sponsoring the section of the wall where the tender moment happens.

Marketing > Discounts

One of the smartest things I ever heard happened about twenty-five years ago.

Business wasn't great - and I'm sitting in a meeting where an Executive wants to take 20% off and "move some merchandise".

Another Executive looks at the first Executive and says, "We need to market our way out of this." The room (of course) is filled with blank stares. What is this person talking about?

Think of it this way. You could take 20% off and you'll move merchandise. You'll also train customers to not shop at full price again. Short-term gain, long-term gain. .cc: Macy's.

You can take the profit dollars you lose running discounts/promotions and instead invest in marketing. Greatly increase what you're willing to pay Google/Facebook to acquire customers. Run some TV and Radio spots. Sponsor podcasts. Hound customers all over the internet with retargeting tactics. But the goal is to overspend on these tactics ... you'll lose money (just like you'll likely lose money running discounts/promos) but you will generate new customers who will pay you back. And if you love catalog-centric business models, add mailings - you'll generate sales you wouldn't otherwise generate.

In other words, instead of giving away margin dollars, give away marketing dollars. Either way you lose money, but the latter allows you to grow your business at full price.

Smart, huh?

Another Discussion With Catalog Craig Paperman

If you don't like these interviews, go ahead and click here and read about how women are discriminated against in Venture Capital.

Kevin: Craig, you look like the delivery of your September catalog is slow, is everything ok?

Craig: I'm still thinking about your visit to our brand last week.

Kevin: It was a good meeting, wasn't it?

Craig: I have no idea why the marketing team invited you. I didn't invite you.

Kevin: Then why didn't you just cancel the meeting?

Craig: I don't like to micro-manage my team.

Kevin: Alright.

Craig: One thing I learned in the meeting is that you don't accept criticism well.

Kevin: Why do you say that?

Craig: You had a lot of ideas in the meeting. But you seemed to get frustrated when we told you why the ideas wouldn't work.

Kevin: Give me an example.

Craig: You told us to only send prospect catalogs with winning merchandise. That's a bad idea.

Kevin: I've seen it work over and over and over again.

Craig: See, you don't accept criticism well.

Kevin: You are criticizing an idea that has worked repeatedly for catalogers for thirty or more years.

Craig: Again, you are being defensive. You don't accept criticism.

Kevin: Your team paid me to give you ideas. This is as simple an idea as you are ever going to find. Just execute it and enjoy the sales and profit.

Craig: Look at you. You keep harping on the topic. The idea won't work. Give me an idea that will work.

Kevin: You could do something simple like personalize your email campaigns.

Craig: That's stupid.

Kevin: No, it's something that many companies do to increase sales by about 20% in their email campaigns.

Craig: See, you don't accept criticism well. 

Kevin: But it is so easy to do, just personalize via customer merchandise preference. It takes almost no work and you generate sales and profit. Isn't that why you are in business in the first place?

Craig: Personalization isn't appropriate in an omnichannel environment. We're supposed to offer a unified message. There's nothing unified about a thousand different messages in email campaigns.

Kevin: Isn't it best to do what is right for the customer?

Craig: Again, you cannot accept criticism. You keep pushing back. Why not just accept that you are wrong and that we're right? Just concede the argument and we can move on.

Kevin: There's nothing to concede. Just execute a simple tactic and pick up the dollar bills that float down from above.

Craig: You are a public voice, and if you are going to be a public voice, you have to accept criticism.

Kevin: I want to make sure I understand your thesis. Most companies execute the simple tactics that you aren't executing. They're making money doing it. Your response to the ideas is to criticize me and then suggest that I'm not not capable of accepting your criticism?

Craig: I know it's frustrating to be on the wrong side of an argument. But you can be gracious and admit you are wrong. I mean, your ideas wouldn't work at our brand. We're unique, and we're special.

Kevin: I shared twenty different ideas with your Leadership Team. Your team didn't want to execute any of them.

Craig: And that's because they are bad ideas.

Kevin: I said you needed more new merchandise. I have data to prove that you are starving your customer of new merchandise. So how is my idea a bad idea?

Craig: Because our merchandising team knows that our customers love trend-right merchandise.

Kevin: What does that even mean?

Craig: See, you just cannot accept constructive criticism.

Kevin: I'm trying to help you.

Craig: Try harder!

Kevin: You could save money by mailing online buyers less often.

Craig: That's silly. We're a cataloger. We send catalogs. Period. Bad idea.

Kevin: With the money you save you could find new customers using other tactics.

Craig: We're not going to be like 4imprint and advertise on SiriusXM. That's a dumb idea.

Kevin: I didn't tell you to do that.

Craig: Again, you cannot accept criticism. It's a bad idea.

Kevin: Saving money so that you can spend more money acquiring customers, even via catalogs, that's a bad idea?

Craig: Um.

Kevin: Your vendors would love to help you spend more money elsewhere. They'd love to track your website visitors and then have you put a postcard into the mail instead of a catalog while saving money and then using the money to spend with the catalog co-ops. You win, your vendors win. 

Craig: Bad idea, nobody is going to respond to a postcard.

Kevin: Then send a 48 page catalog with only winning items.

Craig: Bad idea, as pages increase postage is free.

Kevin: But paper and printing aren't free.

Craig: Nevertheless.

Kevin: Ok, then send an 80 page catalog with a personalized assortment based on what the customer viewed online.

Craig: Then we aren't saving any money and worse, nobody can forecast inventory levels properly if everybody is receiving a different merchandise assortment.

Kevin: And yet e-commerce brands somehow forecast inventory well and they don't have catalogs and square inches to use as a planning tool, do they?

Craig: E-commerce brands have nothing to do with us. It's clear from this discussion that our business is too complicated for a simpleton consultant like yourself to offer any valuable insights.

Kevin: Are you kidding me?

Craig: See, you don't accept criticism well, do you?

Tactic: Catalog Effectiveness

The typical New England Catalog-Centric Brand behaves different than other catalogers behave ... not better, not worse, just different. They like to hear ideas, buckets-full of ideas, and they like to accept-reject ideas as they are being presented. It's just different than what you run across in other areas of the country.

So today I'm going to offer a series of tactics tailored to the New-England-Based Catalog Brand. Based on my Principles, if I were CEO, here's a series of tactics I'd implement, tactics that fit in with the 67 year old consumer that the New-England-Based Cataloger craves.

Tactic:  The company would become the market share leader of rural 67 year old consumers. Embrace the market that shops from catalogs, period. Own it. Having a website does not make a cataloger an e-commerce brand. You are catalogers. Period. Be a cataloger. Or abandon catalogs and move fully into the 37 year old demographic and move into the future. But that's not going to happen. So be who you are. 

Tactic:  The company would become the Awareness Leader among rural 67 year old consumers. If eight 67 year olds gather at a Farmer's Market in Bennington, my brand would be right there with 'em. We'd sponsor every single activity that aligns with a rural 67 year old consumer. Period.

Tactic:  The goal of the Awareness Program is to get the customer to sign up for email marketing and/or Instagram. Via Email and Instagram, my Awareness Team would tell a story. Think about this like Days of Our Lives or General Hospital. Those are old-school "Serials" ... daily stories. In fact, my Awareness Program would partner with Days of Our Lives and General Hospital (and Jeopardy and Wheel of Fortune and Every Darn Aurora Teagarden airing on Hallmark). The Email Awareness Program would be separate from the Existing Customer Email Program.

Tactic:  The Awareness Program would saturate every single Over 55 community in the United States. If a theater in Sun City AZ was performing CATS, I'd underwrite the performance. If the Abba cover band is performing, I'm underwriting it. I'd underwrite golf carts so that my brand was on every single golf cart at the Pickleball court ... like the Eddie Bauer Ford Explorer of 25 years ago. I would start by hiring a half-dozen employees and task them with "owning" this community of prospects.

Tactic:  When a prospect clicks through an Awareness Email Campaign for the second time, kick out a Hotline Catalog that features 32 pages of the BEST WINNING ITEMS available.

Tactic:  My traditional co-op catalog program, search program, and Facebook programs are all calibrated to converting a Prospect to an Acquired Customer. Focus on BEST WINNING ITEMS anytime you are spending money.

Tactic:  When a prospect purchases for the first time, the prospect is entered into a Welcome Program. The next eight (8) weeks are CRITICAL to the development of this customer.

Tactic:  The Welcome Program includes an Email Program that cross-shops the customer into adjacent product categories ... since we all know that customers buying from multiple product categories are more valuable than customers buying from a single product category after controlling for recency, frequency, and monetary value.

Tactic:  The Welcome Program includes a special Hotline Catalog Program with customized catalogs. Based on what you purchased, Hotline Catalogs are kicked-out ... 32 (personalized) pages with BEST WINNING ITEMS in adjacent categories and HOT NEW ITEMS that the customer should consider. Marketing and Merchandising would partner on the HOT NEW ITEMS to feature. Each catalog would be different, based on the first purchase and prior clickstream activity. Your printer and analytics partners can handle this task. Your printer WANTS to handle this task.

Tactic:  The Welcome Program assembles clickstream data and combines it with purchase data to personalize the Email Welcome Program eight week stream.

Tactic:  The Welcome Program offers and OUTBOUND CALL to all customers who purchase via the call center. This call happens 10 days after a first purchase, and the call center employee is tasked with making sure that the first order was executed perfectly. The call center employee is given a list of 10 items that your vendor cross-sell algorithms think the customer would love. If the call center employee gets the customer to purchase an item, the call center employee gets 25% of the value of the item in cash. If the item is $60 with a $30 gross margin, the company gets $15 and the employee gets $15. I've got a hunch that the call center employee is going to care (deeply) about earning $15 every 15 minutes.

Tactic:  Loyal Customers move into my traditional catalog cadence. 24 mailings a year to call-center buyers and 8 mailings a year to online buyers. Every dollar I save via Online Buyer Optimization (i.e. fewer catalogs to online buyers) funds my Awareness Program. The Awareness Program fuels Customer Acquisition, and Customer Acquisition fuels the Welcome Program. The Welcome Program feeds my Loyalty Program, where I earn all of my profit.

Tactic:  All Email Marketing to Loyal Customers focuses on NEW MERCHANDISE. Period. These customers need to be dazzled, and they don't need to be dazzled with 30% off and free shipping. How else are you going to get New Items to become Winning Items?

Tactic:  Loyal customers get a quarterly mailing of 32 pages focusing ONLY on NEW MERCHANDISE. Your creative team is tasked with telling a compelling story that causes the customer to have to buy new merchandise.

Tactic:  Bring together all of your vendor partners, and task them with working together to create 100 actionable "persona" segments based on External Data, In-House Clickstream Data, and Purchase Data. Based on the 100 "persona" segments, ask your vendor partners to adjust their solutions to your Awareness / Acquisition / Welcome / Loyal / Lapsed framework. Demand that your printer and paper rep and social media agency and merge/purge house and boutique agency that features clickstream solutions all work together on your Loyal Customer and Lapsed Customer initiatives. Given them some flexibility so that they can test ideas that you wouldn't normally author, and reward them financially for the ideas that generate incremental sales/profit.

Tactic:  All salaried employees are paid bonuses when they exceed NEW CUSTOMER and NEW WINNING MERCHANDISE goals. These are the two goals that matter most, so reward all salaried employees for exceeding the goals, ok?

Tactic:  Give a small category to a team of < 30 year old marketers, merchants, inventory managers, and creative professionals. Give them a budget and tell them to do whatever they think is right to grow the category. Given them two years to achieve great results. If their ideas work, expand the program while promoting these individuals into positions of greater responsibility.

That's where I'd start.

If you are a New-England-Based Catalog Brand, how many of these tactics are you going to adopt? Again, this is just a start. Get 100 salaried professionals aligned under this framework and you're gonna have a thousand different ideas that yield fifteen things that succeed and the momentum takes your brand in a whole new direction.