Solving Two Problems At Once

I get two types of feedback these days.

• We need tariffs to even the playing field and not be taken advantage of anymore.
• My business is about to be clobbered for no good reason, my own Government is killing us.

Somewhere between those two comments ... surely ... must exist a reasonable solution. Right?

I mean, I've been to Tucumcari, New Mexico. Have you? Any reasonable solution must solve the "Tucumcari Problem".

This city is equidistant between Albuquerque and Amarillo ... cities north of 500,000 people and 200,000 people, respectively. Two hours east and two hours west, that's where the jobs are.

As you can see in the image/map above, the town is bypassed by I-40. If you're whistling by with a half-tank of gas, you don't need to stop at the "interchange commerce" resources (gas stations, hotels, fast food) at each exit.

Any reasonable solution should allow the residents of Tucumcari to earn an honorable wage, making a living doing something the residents want to do. Residents shouldn't have to move to Amarillo or Albuquerque because that's where the money is.

Of course, plenty of people do move, they do what they have to do ... which is why the population of Tucumcari is in decline.

I don't expect you to come up with a solution.

I do expect you to have some compassion for a town that was largely abandoned by the modern world the minute Route 66 was replaced by I-40. Somewhere between what we've done the past "x" years and the path we're taking is a reasonable solution.

P.S.:  If you want an example of how one town can be impacted by leadership and industry, allow me to present you with Green Bay, Wisconsin. Green Bay is hosting the NFL draft this weekend. Green Bay is a city of 107,000 people. That's it. The financial impact of having an NFL team in such a small town is felt region-wide. I grew up in Manitowoc ... any town from Sturgeon Bay to Manitowoc to Sheboygan to Fond du Lac to Oshkosh to Appleton to Shawano to Marinette/Menomonee ... any town in that region is impacted. Dollars come "in" to that region. In Tucumcari? Outside of interchange commerce, dollars go "out" of that community. We need to solve the problem of money leaving communities. Ok. I'm done now.

A Couple of Scenarios - Stop Wasting Marketing Variable Costs

When customers become less productive (as happened in April), decisions need to be made. Especially among lapsed buyers. These customers are, by definition ... lapsed ... and therefore are not terribly responsive.

When a customer is not terribly responsive, the last thing you want to do is spend a ton of money on the customer. It's just dumb. You can spend the money elsewhere ... find a new customer, make the best video about widgets ever.

Here's an example.

You could send a direct mail piece to the customer (assuming the customer is 60+ years old). Or, you could send an email campaign to the customer. One tool creates a good amount of lift, one tool creates very little lift. Take a look.

It's common for outsiders to look at the lift observed in print and say "Look at that, you moved the needle!" And you did ... the customer (in the example above) would have averaged $1.60 in the two weeks after the piece was mailed ... but instead spends $2.40. You did move the needle ... a lot.

Outsiders will look at the $0.23 profit generated by the audience mailed and say, "see, that's a lot of profit". And they are right. But they are measuring things wrong. Compare the mailed group to the holdout group ... $0.23 (mailed) vs. $0.69 (not mailed). Which strategy yields more profit? NOT MAILING THE CUSTOMER!!

Now look at email marketing ... it barely moves the needle ($1.70 vs. $1.60). But ... but ... the end result is MORE PROFIT.

In 2025, it is FOOLISH to waste marketing dollars on customers not likely to respond. Go ahead and spend $$$ on customers who are responsive ... if the lapsed customer just visited your website, have at it, because the customer is temporarily responsive.

In 2025, you don't spend marketing dollars ... you spend marketing effort. Sure, pay for that silly click because the customer is responsive. Otherwise, leverage your YouTube presence, your social media presence, and your email marketing program to teach customers why they should buy from you at minimal/no variable cost.

We're not wasting variable costs anymore, got it?

And Away We Go!

 

File Power is Not Impacted By Your Decision to Hunker Down ... For Awhile, At Least

So you've decided to cut back on the marketing budget by 35% in an effort to conserve cash and "get through" 2025.

What's interesting, of course, is that as of today, you don't lose file power. Your customer file is still capable of generating volume, you're the one constraining the ability of your customers to deliver volume.

You can see the "File Power" section at the bottom of the table ... this is what your twelve-month buyer file is capable of (sales in thousands).

• $29.2 million through today.
• $29.5 million through the next year.
• $29.4 million for the year after.

If you decide to take a hatchet to the marketing budget, you impact the size/quality of the customer file a year from now ... which means your customer file has less "File Power".

Notice how File Power changes for the period of 1-2 years from now?

• $29.2 million through today.
• $29.5 million through the next year.
• $27.5 million for the year after.

The top-line contracts by eight million in the next year because the marketer and CFO decided to conserve cash. Then, the business contracts by another $1.9 million the following year solely because of reduced "File Power".

You'll want to be very, very careful about how you approach conserving money in upcoming months.

What Happens When You Sell 100 Items And You Can't Fulfill 40 Of Them?

A few days ago I shared with you how many of my items in my "shopping list" on Amazon are no longer available ... the logical outcome of tariffs ... some items will be more expensive, and when tariffs are too high other items simply aren't available anymore.

Hopefully you aren't exposed to China. Some of you are woefully exposed.

In my project work, I'm sometimes asked to demonstrate what might happen if items are simply no longer available. If a brand had 100 items and our geopolitical environment took 40 of those items away, would sales drop by 40%?

Probably not. There's a lot of product overlap.

On one recent dataset, the relationship was noisy. By product category, I measured total annual sales and total skus sold that accounted for 90% of total sales in the category (to eliminate onesey-twosey issues) ... the relationship looked like this:

It's not a perfect relationship by any stretch of the imagination (an R-Squared of about 0.50). But the relationship suggests the following:

• If you could only sell 20% of your skus, you'd generate 32% of sales.
• If you could only sell 40% of your skus, you'd generate 53% of sales.
• If you could only sell 60% of your skus, you'd generate 70% of sales.
• If you could only sell 80% of your skus, you'd generate 86% of sales.

If you worked for this brand, you'd have a reasonable idea what would happen if your exposure to China created a nightmare for you.

Of course, your mileage will vary. That's why you'll contact me (kevinh@minethatdata.com) and have me run an inexpensive pricing/forecasting project for you.

What I'm Hearing

From your emails and comments from various professionals, in early April business took a -5% to -10% (ish) turn. Some are hopeful the shift in the Easter Holiday played a role, most of you tell me a different story.

Fortunately, nothing is permanent. Things could get worse, they could get better.

Last week we discussed the impact of increased prices. Would you like to see what your next issue could be?

On Amazon, I maintain a "Hobbies" shopping list ... stuff I'd like to purchase someday. Here's a portion of my shopping list. Do you see prices next to each item?

I've wanted that aune Flamingo DAC/Amp for a half-year! When I click on it, here's what I see.

Currently unavailable!

Many favorites are not available ... the stuff from China simply disappeared. That means containers on ships are going to disappear as well. Which means what if you are driving trucks on I-10 or I-40?

Here's another one a reader sent to me (by the way, notice the "community" link at the top of the page #justsaying).

Have you given any consideration to what happens when you sell 1,000 items ... and you can't sell 350 of them because you can't get access to those items anymore? Or you sell an item that is the composition of thirty-eight parts and you can't get access to seven of the parts anymore?

You're going to make interesting decisions ... some of you might be in a situation where you cannot sell a third of your assortment. You'll probably want to know what impact that has on your business.

Or, everything will turn out just fine. We don't know what will happen.

But we have to plan on two things happening.

1. Prices are likely to increase.
2. Items may not be available, limiting your product assortment, constraining your ability to meet your sales/profit goals.

My guess is you'd rather have answer to those questions, right?

Believe it or not, I have to spend time reading about freight these days. Yeah ... freight.

I mean, read through this guy's timeline (click here). That's some fun stuff. Bookmark freightwaves.com for more details.

Other fun stuff is on the horizon ... some of you are telling me that you are "hunkering down". This is what "hunkering down" looks like.

You probably have many people working through potential challenges.

You probably have statistics folks analyzing how the customer is going to respond, right? I mean, that's what I do for a living. You are undoubtedly crunching every conceivable number right now, correct? You kind of have to be doing this, right?

What are your thoughts? (kevinh@minethatdata.com).  Do you have a different perspective?

Saturday Semi-Off-Topic: Pickleball!!

This post will come back to marketing in a moment ... I'm nudging you in a direction here.

Pickleball!

Can I show you a few things? Just watch a few points from a 2016 pro women's bronze medal match (click here) ... watch up to maybe 60 seconds. It's a slow-motion low-skill train wreck. At that time, this was pickleball at the highest level. My wife and I play close to this level today. Now, if you were "born" into the pickleball community from 2010 - 2018ish, this was the "best practice" ... you hit a soft third-shot drop, you ran up to the kitchen, and you tried to out-dink each other. Notice the low camera angle to capture all of the dinking "action".

Something happened in 2019 that lurched the game in a completely different direction. That thing? A precocious twelve-year old woman who won a National Championship with her Mom as partner. What did they do different? Watch a few points here ... what shot are they attempting on their third shot? They're blasting their third shots ... hitting drives until the opponent makes a mistake. You don't see them doing a lot of "soft" play unless they are forced into it ... otherwise it is bombs away.

It shouldn't surprise you that "everybody" took notice. Within a year, the style of pickleball changed. Yes, players adhered to the "old style" ... those players lost games. An awful lot of players told those employing the new style that they were "doing it wrong".

Do me a favor here. Watch just this one point from a pro match a few weeks ago (click here). I mean, the game isn't even recognizable from a few years ago, is it? Hands are fast, there are extended gunfights, you have to be able to execute soft play, you have to be able to execute power, you have to be able to play excellent defense in the transition zone, and you have to have a ton of strategy. Also - the twelve-year-old from the second video is playing in this match as an eighteen year old ... and ultimately loses!

Did you notice something across the three videos?

One of the players is playing in each video ... Catherine Parenteau. She's playing at the highest level in each year, and her playing style in 2025 looks NOTHING like the tepid, gentle, unrefined style she leveraged in 2016. As the game changed, she changed.

By now you're probably saying to yourself "What in God's name does this have to do with marketing and e-commerce?"

Plenty.

Look at how the game evolved over just nine (9) years.

Your business is likely to be "evolved" over the next nine (9) months. This means you get to be Catherine Parenteau in the videos above (constantly growing, changing, improving, evolving). If you don't evolve through the challenges coming our way, you'll look like the video of game play in 2016. During COVID, we re-invented how we work. During tariffs, we'll re-invent how we merchandise our brands. This isn't something we "hunker down and get through". Nope. Not at all. Hopefully I'm proven wrong. If proven right?