Better Development of a Category - Pants

Since I bring up Duluth Trading Company a lot, here's an Instagram Post.

Remember my Macy's example from yesterday? The brand marketers wanted you to buy bedding because a cute dog was sitting on a bed.

There are plenty of elements of brand marketing at play in this attempt at selling. They're clearly telling you who their target customer is, and the target customer isn't messing around with beakers in a laboratory. Then they tell you why this pair of pants matters. They're Developing their Pants category. The merchant loves the product (or they wouldn't tell you that they've registered trademarks for this product), and the marketer is clearly communicating the type of customer who will love this product.

In my work, it isn't difficult to see the merchant/marketing partnership at work. There will be specific products that sell well-above-average in specific channels. You'll learn that those items, within categories, are being developed by the fusion of a merchant who loves his/her products and a marketer who loves sharing the products with customers and prospects.

Brand Marketing vs. Direct Marketing vs. Category Development

Brand Marketers and Direct Marketers both want to sell something.

• The Brand Marketer wants to sell an aesthetic.
• The Direct Marketer wants to sell merchandise.

Category Development aligns more with Direct Marketing than Brand Marketing. Oh sure, Category Development aligns with Brand Marketing (think about Duluth Trading Company commercials for an example), but the goal in Category Development is to teach the customer that a product must be purchased, thereby building the Category as if it were almost an independent business.

Here's an Instagram post from Macy's. Does this align with Brand Marketing, or with Direct Marketing?

They're selling an aesthetic.

It's hard to develop a Category via brand marketing. It is possible to develop a "brand" this way, of course. Not likely, but possible.

If you want to Develop a Category (say, Bedding within Home) you'll likely need a merchant who loves what s/he is selling, partnered with a marketer who cares deeply about exposing the category to existing customers and prospects. Paired together with a marketing budget and a plan, the two work together to Develop the Category via exposure which leads to customers who buy the product.

What you see above is not part of Category Development.

Google Messes Up New Items Within A Category

In Category Development, it is common for Google to play a disproportionate role in what sells ... especially for brands with strong search programs.

Let's assume you have two items.

Item #1 has been a best seller for three years.

Item #2 is a new item you introduced here in January.

Which item is Google going to steer customers to? The algorithm will steer customers to the item it knows, it has indexed, and it has history of customers searching about.

Think I'm wrong? See if you can easily find Kevin Hillstrom in an incognito mode search of the term Category Development (click here).

This means your merchandising team and your marketing team have to do some heavy lifting ... the two teams MUST WORK TOGETHER to TEACH THE CUSTOMER why various new items within a category matter ... must inform the customer why these items are important. It's a team effort. Neither side can do the work alone.

In the 1990s your merchants sold via catalogs, so the format, the channel (catalogs) did the heavy lifting. Life was easy.

In 2023, life is hard. Instead of a tepid Instagram post saying "WE LOVE OUR NEW WIDGETS", try teaching your customer why the customer must have new widgets. Who is the merchandising expert who cannot stop talking about widgets? Who is the marketing expert who gets that message out in front of customers? How are these two working together to promote new items within a category? Discuss.

Order Starters

This analysis requires an assumption that may / may not be valid.

Say a customer puts three items in his/her shopping cart. Is the first item what "started" the order? We don't truly know, but if you assume the first item is the item the customer wanted and then added on other items, well, you have the basis for an order starter analysis.

You code each item based on the order the item was placed in the shopping cart. Then you analyze all items, averaging the "order" out ... eventually you will see that some items appear 1st or 2nd in a shopping cart and other items appear 2nd or 3rd in a shopping cart. The former item starts orders, the latter item complements orders.

Order starters eventually become the items that the marketer features ... which creates a problem because the order starters eventually appear to be order starters because of marketing strategy and not because they actually start orders.

But for the most part ... the analysis is enlightening. It's one you should perform. At some companies, you'll see womens apparel early in the order starting process and mens apparel later ... it tells you that the woman is buying for the man, for instance. You'll see other categories (stuff like Home, for instance) added on. You'll see those "Featured on TV" items at the top of the order starter process ... this tells you that marketing is playing a key role in the order starter process.

Perform the analysis - it's enlightening!

Evaluating Categories

I was in a meeting and the CEO raised a valid question:

• "We're a masculine, outdoor brand. Why are we selling Women's Dresses?"

The answer was equally compelling:

• "Because the category is our best selling category."

Eventually the best selling category was discontinued, and the brand dealt with the collateral damage associated with the discontinuation of a category.

In 2023 we're going to evaluate our categories. What purpose does a category play in our assortment? If a category doesn't play a role, what could we do with the people and effort associated with making that category work?

Variable Expenses

I recall a decade ago when I was trying to sell a catalog optimization project to an existing client. This client worked with a vendor, and the client showed me the annual invoice from the vendor.

• $120,000.

My cost was $45,000. I asked the client why they pay this vendor $10,000 a month when they could pay me $45,000 once and be done and have essentially the same outcome. Their answer:

• "They just make everything easy so we don't have to think about it."

The vendor told me a comparable story.

• "We love the client. And it is easy, recurring revenue for us."

You have a good pairing when each side uses the word "easy" ... even if for very different reasons.

The $10,000 a month was based on the size of the customer file ... in other words, it was a "variable expense". The expense grew when the customer file grew, the expense shrunk when the business contracted.

When it becomes difficult to acquire new customers, the ad budget goes first ... and that's a tough one, because you cut out the ad dollars and you cut back on sales/customers and that's the problem you are trying to avoid. So you go after fixed costs next ... stuff like your job, unproductive stores if you are Macy's, that kind of thing. You can only go so far with fixed costs.

That's when variable costs come into play.

If I had to predict, 2023 is going to be a year where variable costs are on the table. Are you tired of paying Shopify a percentage of everything you sell? That's a variable cost. How about your email service provider? That's a variable cost. 

All of these expenses are going to be explored in detail in 2023.

An Example of a Customer Acquisition Strategy

When I get emails asking for examples of Customer Acquisition programs that meaningfully grew a brand (heck, defined a brand) I'll bring up Duluth Trading Company (click here).

That's when people start HOWLING at me.

"That's an advertising campaign, not a customer acquisition campaign." (hint - if you do advertising well, you get new customers ... duh!).

"I don't want to hear about a man needing underwear, their campaigns are stupid and relate to the lowest-common denominator. Be better, Kevin." (hint - they are speaking to their target audience, what kind of tepid speech do you use with your customer audience).

Here's the problem. The salad years are over. The days of putting together tepid creative and saying "Google, Facebook (and for catalogers the catalog co-ops), get me bulk names at a bulk price" are over. They were ending prior to COVID, then stores were shut down and customers "had" to buy from you and we were on the gravy train ... now we're picking up where we left off with additional difficulties.

I'm not saying you have to do what Duluth Trading Company did. I'm not saying you have to do what Progressive does with Dr. Rick.

I'm saying you have to do more than this: