Discounts / Promotions / Clicks / Channels: The "Local Maxima"

Let's go back to your homework assignment from last week (click here). Read the green section (Resilient Base of New Customer Contribution $ Via Owned and Organic Traffic) and the red section (% of Revenue on Discount). In particular, focus on the red row ... read the comment in the column titled "The Realization That You Need To Change".

• "The marketing calendar is built around discount events as much as it is around new product launches. Seems like a necessary evil in order to keep growing revenue."

One of my favorite quotes from my time at Eddie Bauer was our CEO saying that we couldn't add a 34th promotional week to the calendar because we had to maintain the integrity of the promotional calendar. Via analysis or gut feel, the hill to die on was at 33 weeks. Imagine being at 31 weeks and somebody says, "yeah, let's add another week, no integrity issue there."

There's this bowl of promotional soup that interacts with direct response ... it always, always works for awhile (ask Macy's). Always. And then, it doesn't work. Years of trying to "make it work again" lead to one of those comments from marketers:

• "Facebook and Google are too expensive and the clicks they send us don't convert as well as they used to convert."

Blame is placed on Facebook and Google ... and oh yeah, they deserve blame.

The brand deserves more blame.

• It shifted from "what" it sells to "how" to sell it (discounts, promos, clicks, channels). This is a familiar transition, one that always looks good in the short term and is harmful in the long term.

This shift maroons a brand on what in math is called a "local maxima".

Look at the peak next to the arrow. That's what happens when a brand shifts to discounts / promos / clicks / channels. Any movement in any direction away from what is "optimal" (which, by the way, is most certainly not optimal) yields a sub-optimal solution, paralyzing the brand.

Where is your business on The Brand Lifecycle image? I have a feeling I know where it is, or you wouldn't be emailing me about the higher costs and lower performance of paid search.

I spent considerable time working on a framework for thinking about "what comes next". On LinkedIn I floated the framework to readers and a thousand people quickly read the argument. What comes next is already here ... I call it "Customer Media Marketing".

Via One of Our Intrepid Readers!

Every once in awhile you run across something compelling. One of our loyal readers forwarded this post on LinkedIn from the Co-Founder of Chubbies (click here). Heck, the writing style is reminiscent of the my days of writing Gliebers Dresses episodes (click here for the Shark Tank edition).

In the post, he references a document called "The Brand Lifecycle". Your homework assignment? Please review this link, we'll talk about it next week, ok?

Wanting to Belong

Below is what I originally wrote for today ... then I saw this story and thought that it is important you see the importance of community, of belonging (all of which your company already provides, either formally or most likely informally). Click here for the video from CBS Sunday Morning.

Ok, time for the original post.

The emailer told me he couldn't get access to magazine lists anymore (his magazine lists he rented stopped publishing via print a few years ago) and he told me that Google had become "too expensive". I privately wondered if his customers believed in his business? Did his customers want to belong to the ecosystem his brand was part of? Could his own customers share his story?

I suppose it's always been this way, but for many of you, your customers want to belong to something.

I was at the NASCAR Cup race in Phoenix two months ago. There was a long line at the Busch Light beer stand. I'd frequently hear patrons say how they won't drink Bud Light ("they don't get my money anymore") ... think about that, they won't give their money to one brand but will give their money to a sister brand, which means the customer wants to belong to something and Capitalism wins regardless. Welcome to 2025.

It's no different with the Costco / Target stuff that is going on. You'll harm Target if you don't feel like you belong to their overarching messaging ... if you don't feel like you are welcome anymore. Except there the money isn't flowing to the same parent company ... it's truly going to the competition.

There are, of course, the obvious financial implications of "not belonging". Ask Bud Light and Target.

There are the non-obvious financial implications. In a recent project (numbers dummied up here to protect the innocent), each website visit that didn't deliver a conversion added precisely one dollar to the future value of the customer. Five percent of the 0-48 month file visited the website in a given month, so this $30,000,000 brand generated $200,000 per month ... $2,400,000 per year (8% of annual sales) by simply "engaging" the customer.

Yes, there's a difference between the phony "engagement" created by gimmicks and the community building that causes a customer to want to belong, thereby visiting your website and adding $2.4 million per year because the customer feels like s/he belongs.

Maybe your customer wants to belong to something meaningful.

You likely provide something meaningful to the customer.

Connect the two.

When You Run Out Of Lists And Clicks ...

There's two trends happening ... have been happening for quite some time:

• Old-School brands lamenting that "lists don't work" or that "lists aren't available anymore".
• Ecommerce brands lamenting that "clicks don't work like they used to" ... via Facebook or Google.
  

I've yet to find one of either brand making these statements who have a strong community presence.

Here's an example from drop.com:

I can't express more clearly how much people dislike hearing about communities ... maybe 2 in 3 that I speak with or email with just get grumpy about the topic.

I can't fix the list issue ... those days are over.

I can't fix the click issue ... that entire world/ecosystem is changing.

I can recommend partnering with your own customers and your own visitors.

The Greatest Marketing Analytics Equation of All Time

It's 1992 at Lands' End, and I'm responsible for analyzing mail/holdout tests ... you execute email and/or print mail/holdout tests in 2025, right?

Here's the results of a mail/holdout test.

An average professional doesn't bother with mail/holdout tests.

A smart professional measures profit via the "Increment" line in the table above. The smart professional doesn't overstate results via matchbacks, they leverage the incremental contribution (which likely means they'll spend fewer marketing dollars).

The curious professional notices a relationship.

• 0/3 mailings = $0.
• 2/3 mailings = $8.40.
• 3/3 mailings = $10.50.

The curious professional adjusts the relationship, converting both sides of the relationship to fractions.

• 0.000 mailings = 0.000 spent.
• 0.667 mailings = 0.800 spent.
• 1.000 mailings = 1.000 spent.

The curious professional plots the relationship, then fits a line through the relationship.

The relationship above is fit via what I call a "Power Function". I use CurveExpert software (click here) if you are interested in fitting the equation.

What is the structure of a Power Function?

• Fraction of Demand = a*(Fraction of Mailings) ^ b.

The equation above?

• Fraction of Demand = 1.00 * (Fraction of Mailings) ^ 0.583.

In marketing, your ROAS relationships and/or investment decisions follow a Power Function. Once you see it, you cannot unsee it. In fact, the Power Function is everywhere.

• Price Elasticity.
• The Difference in Customer Segment Performance.
• Paid Social Advertising.
• Product Listing Ad Spend.
• Catalog Mailing Frequency.
• Email Marketing Weekly Contact Frequency.
• Merchandise Assortment Size.
• Creative "Winners" vs. "Experimental Photography".
• Winners vs. Contenders vs. Others within your Assortment.

I could go on and on, for hours.

Power Functions explain most of your investment decisions in marketing. The functions are different ... your Paid Social "b" coefficient is different from your Email Weekly Contact Frequency "b" coefficient.

This is the point in the post where the curious marketer will take the topic further. You're free to email me (kevinh@minethatdata.com) and ask questions. The Power Function is the greatest marketing analytics equation of all time! The equation unlocks the secrets of your business.

Raising Cane's

Have you ever eaten there?

Unless you are trying to feed 1,243 people, they realistically have five (5) items on the menu. Five.

Now, did I enjoy eating this styrofoam-infused pile of mediocrity? Not really. But somebody enjoys eating it. According to Google, an average Raising Cane's franchise might pull in $4,000,000 to $6,000,000 a year.

Meanwhile, a Burger King franchise might pull in $1,500,000 a year.

Burger King has nine burgers you can order, not counting chicken / fish / salads & veggies / breakfasts / sides / dessert ... and other choices. A much broader assortment, one that doesn't sell anything compared to Raising Cane's.

Why am I sharing this information?

Some of you are going to have problems sourcing products this fall, and the stuff you do have could potentially cost more. Your Government caused this problem, not you. Regardless, it's your job to overcome challenges. The challenge should not stop you, the brilliant marketer, from selling the heck out of what you DO have available. If Raising Cane's can outsell Burger King three-to-one with only five flippin' items on the menu, there's hope for you. A LOT of hope!

It's time to laser-focus your customers on the stuff you sell that matters. Sure, you used to have 800 styles / 5,000 skus available to the customer ... you might only have 350 styles and 2,200 skus available come November. The customer doesn't know what struggles you are having, the customer wants to know your point of view on what you have available.

Take full advantage of what you have available. You are a Marketer. Start marketing to the customer.

Oh, Kohl's

Right out of a soap opera (click here).

A few years ago a Vice President told me that she could not longer hire "the best people" ... "they just won't work in a dying industry".

There are stupid people everywhere. Two situations seem to attract an altogether different animal ... the amoral clown.

• New Industries (think crypto, AI, pickleball).
• Dying Industries (think retail, politics).

Amoral clowns like to break rules, eliminate rules, and prioritize power.

Things go in cycles ... the past decade has been a celebration of the amoral clown cycle. Better times are coming.