#16 Seed Upsets the #1 Seed

It's NCAA tournament time, women and men. Sixty-eight teams are whittled down to just one, one heartbreaking moment at a time.

You have a veritable plethora of new products. What stops you from creating a tournament bracket of sixteen new items, and then for fifteen days you pit those items against each other via email marketing ... rank order them based on predicted volume or just assign random seeds, whatever you want. Schedule the matchups, one per day, on March 24 / 25 / 26 / 27 / 28 / 29 / 30 / 31.

• Day 1 = #16 vs. #1.
• Day 2 = #9 vs. #8.
• Day 3 = #13 vs. #4.
• Day 4 = #12 vs. #5.
• Day 5 = #15 vs. #2.
• Day 6 = #10 vs. #7.
• Day 7 = #14 vs. #3.
• Day 8 = #11 vs. #6.

There's your first round. The items that generate the most sales for that day advance to the next round. Schedule these matchups on April 1 / 2 / 3 / 4

• Day 9 = Day 1 Winner vs. Day 2 Winner.
• Day 10 = Day 3 Winner vs. Day 4 Winner.
• Day 11 = Day 5 Winner vs. Day 6 Winner.
• Day 12 = Day 7 Winner vs. Day 8 Winner.

After Day 12 you have whittled the field down to the Final Four! It's time for the semi-finals. Schedule these matchups on April 5 and April 6.

• Day 13 = Day 9 Winner vs. Day 10 Winner.
• Day 14 = Day 11 Winner vs. Day 12 Winner.

Now we're down to the Championship! Schedule it on April 7, the day of the actual Men's National Championship Game.

• Day 15 = Day 13 Winner vs. Day 14 Winner.

The whole thing will last you two weeks. During those two weeks, you feature sixteen new items, with the best sellers being featured three or four times. Maybe the #16 seed will upset the #1 seed, who knows? Your customers will decide.

What is the downside of doing this?

P.S.: I'm told one of the downsides is "telling the competition how many units you are selling". My goodness. Nonsense. Have you ever performed a search on Amazon? Try this one for the Sennheiser HD600. They tell the world they sold at least 400 of 'em in the past month. They also sold more than a thousand of the lower cost (but still good sounding) HD560S according to the search. The company pounding you into submission gladly shares how many units they sell.

P.P.S.:  Somebody will tell you not to do this ... "people will just buy items and return them to game the outcome." Yeah, there probably are five customers who will do this. Now you have a data attribute to append to your "customer data lake" to make sure you never spend money marketing to those customers again.

She Said She Liked AI Because "It Worked"

Her company hired a vendor, and the vendor did a really nice job of building a model to determine which customers they should target.

I asked her, "What are the attributes of the customers that the model preferred?"

She said, "I don't know and I don't care, it worked."

With every advance in technology, we gain something and we lose something.

In this case, her company gained profit.

Of course, she lost knowledge.

There is going to be an opportunity over the next five years to be the person who "knows things". As we embark on a mission to transfer knowledge from employees to computers, the employee who "knows things" will be able to solve problems. For instance, what happens when AI tells you that you should reactivate a specific cohort of customers, and eighteen months later those customers have no future value? Do you blame AI? Or does the employee who "knows things" protect the company?

Be the person who "knows things".

An Offer For Blog Readers: Pricing Analysis

I've had several inquiries in the past two weeks about the impact of prices on customer behavior.

Specifically, you are asking what happens to customer behavior if prices increase by 10% to 20%, through no fault of your own.

We have a lot of data from 2021-2022 to guide us in this endeavor. Here's the process I went through three years ago to address the issue.

1. Let's say you have 15 merchandise categories. When you send me five years of purchase history, I have four years of year-over-year pricing comparisons times fifteen merchandise categories, for sixty (60) data points. That's enough for me to do some damage.
2. I'll compare year-over-year impact of prices (say, +10%) on rebuy rates (say, -5%), annual orders per buyer (maybe flat), annual items per order (say -2%) ... which leads us to what I call demand per inventory (-7%). If prices increase by 10% and customer productivity decreases by 7%, you know that the top-line won't be hurt, but you'll have 5% fewer customers repurchasing, which means you'll have a contracting business.
3. I'll perform the same analyses on new/reactivated buyers. Pricing issues typically hurt new/reactivated customers more than they hurt existing buyers.
4. Given what I observe, I'll forecast the next few years as a consequence. You'll have a good/directional idea whether price increases will hurt your business.

The core part of the analysis that informs the work I perform is in orange-ish cells below.

Let's try something ... I'll do this for $4,990 as a test, prepaid. This is likely going to be way too little to charge for something like this and I'm going to feel like I ripped myself off. It's not a typical $15,000 pricing project, of course, but for nearly free you get to learn the likely impact pricing increases would have in your business, should they come to fruition.

Contact me now (kevinh@minethatdata.com) ... offer ends on Friday.

Burn It Down!

I'm reminded of JCP about fifteen years ago. Was the company ill? Absolutely. Did Management understand what the problem actually was, much less the solution? Nope. As a result, they burned the brand down to the ground, taking eighteen billion in net sales and turning it into thirteen billion in net sales. The five billion in sales never came back.

Should we find ourselves in a recession in the next few months, somebody within your company will want to "burn it down". Not on purpose. They'll think they are helping. "We need to conserve money, let's reduce the marketing budget by 40% and figure out how to be more efficient, yeah, that's the idea, and let's cut back on new product development by 30%, that'll save some money and we'll create an efficiency director position to facilitate our transformation during these economic headwinds." They're not helping. They're burning it down.

The people who burn things down are not the people who build things. You don't hire the people who blew up the Kingdome to build T-Mobile Park, do you?

Back in the dot.com implosion I was asked to downsize my team by the CFO. We were losing $30,000,000 a year on net sales of $300,000,000 so you can't really argue with the logic, but I did challenge the individual to demonstrate that my staff were the reason we weren't profitable ... I could prove my entire team was generating profit. That line of reasoning didn't go well, but the CFO did demonstrate to me that he wasn't trying to burn it down. One of the people I fired, as her final sentence as an employee, said to me ... "I used to believe in you". The sentence haunts me to this day, and for good reason.

If recession arrives tomorrow or in a few months, make sure the decisions you make align with "building something". There's no reason to burn it down ... if burning it down was the right decision, there was nothing to stop you from burning it down six months ago when the economy was humming along, right?

Hunt Brothers Pizza

An appropriate topic for pi day (3/14).

Are they retail experts? Absolutely! 9,500 locations, nine-figure sales. You can't toss a wind-blown tumbleweed without hitting a Hunt Brothers Pizza location in the Southern Plains, Central Plains, Midwest, and Ohio Valley. Here's a video about the company (click here). Locations in rural communities with minimal competition. Meanwhile you're competing against (checks notes) Amazon.

Seriously, watch the video. So many of you talk about your "Product Listing Ad Strategy" ... that's not a strategy, that's a tactic, and a small one at that. The video clearly tells you what an actual "strategy" looks like.

If Hunt Brothers can pull off what they pulled off, you can certainly take lessons from what they did and apply the lessons to e-commerce ... right?

Recession

It's time for you to be a Leader.

It's not time to hunker down. It's time to start thinking.

Every one of you should have your Comp New/Reactivated customer count reporting and your Comp Segment reporting at your disposal ... monthly at minimum, weekly if necessary. If you don't have the reporting available to you, send me a message (kevinh@minethatdata.com) and I'll produce a special run for you ... just $1,800 for first-time participants, $1,000 per run thereafter.

If a recession comes to fruition, what will it look like? Let's look at Comp New/Reactivated Customers.

Look at January/February in the table above. That's what a real recession looks like assuming comparable year-over-year marketing spend. If you cut back on marketing spend, you just make it that much worse. I realize you've been taught to cut back on marketing spend during an economic downturn. You're just amplifying the problem if you do that (though you might be more profitable in the short-term ... you harm yourself in the long-term).

Recessions show up first among the customers least likely to embrace your brand ... new/reactivated customers, to be specific. Those are the customers (prospects) who ignore you first when times get tough. You'll know right away if a recession is going to impact you, and you'll have an indication of the depth of the potential recession immediately. What you see above is a catastrophe. This business generated tepid increases in new/reactivated customers for nearly two years ... then? Womp womp. 

• A Mild Recession?  -3% to -8% compared to your baseline. If you were already -10%? Then expect to be -13% to -18%.
• A Banger of a Recession? -15% to -25% compared to your baseline.
• Then you make it worse by cutting back on marketing spend, which is typically the "best practice" and is almost universally the wrong thing to do. Spend the marketing money to clear out products without discounts/promotions, and you acquire a customer in the process.

New/Reactivated customers are the canary in the recession coal mine. Measure the living daylights out of Comp New/Reactivated Customers and Comp Segment Customers (measuring those with exactly two purchases in the past year, quantifying how much those customers spend in the next month).

From there? Be a Leader. Smart companies find ways to not hunker down ... they figure out how to keep new customers flowing while everybody else hunkers down, giving them a huge advantage when the recession ends. We saw this in 2002, we saw it in 2010.

P.S.:  Well run business frequently evade recessions. I say this to offer you hope. You're smart, you're well prepared. There's few things more gratifying than posting a +2% on comp new/reactivated customers while everybody else is -14% ... and then continuing to post a +2% comp when everybody else cuts back on marketing spend and -14% becomes -29%.

Hillstrom's Action Streams Is Available on Amazon!

Finally!

I had some free time to get this little 48 page booklet processed via Amazon. The booklet summarizes my thought process over the past two months ... specifically the need to create community (replacing the renting of lists in old-school marketing and complementing Google/Facebook in e-commerce), the need to capture community engagement and then link it to your customer database, and finally the opportunity to leverage Action Streams to either stop a customer from further response decline or to convert the customer to a purchase following online engagement.

As always, you have two choices.

• Print via Amazon:  $9.99 (I make about $2.50 per book sold, Amazon gets $7.49).
• Amazon Kindle:  $2.99 (I make about $2.00 per unit, Amazon gets $0.99).

Looking at the pricing above, it's obvious what happens when you depend upon third parties. Is there a parallel for your business? 

Project Opportunities:

• A Full Action Stream Analysis and Attribute Development Project = $20,000.
• Action Stream Attribute Development Only = $10,000.
• Monthly Update of Your Action Stream File = $5,000 (Annual Fee).
• Action Stream Consulting? Contact me (kevinh@minethatdata.com).