Remember Last Week?

Last week I shared information about a larger-sized brand that many of you shop from, illustrating the subject lines used in their email marketing campaigns over a multi-week period (click here).

In my Category Development projects (click here for pricing), I run models based on the percentage of sales generated by a customer on items selling below their historical average price point. The equation might look something like this:

• Future Gross Margin Dollars = $10.00 + 0.25*(Dollars Spent on Items At/Above Their Historical Average Price Point) + 0.20*(Dollars Spent on Items Below Their Historical Average Price Point).

Pretend you have a customer who spent $100 last year on items at/above their historical average price point:  Future Gross Margin Dollars = $10.00 + 0.25*(100) = $35.

Pretend you have a customer who spent $100 last year on items below their historical average price point:  Future Gross Margin Dollars = $10.00 + 0.20*($100) = $30.

Discount a lot this year, cost yourself $5 profit next year.

This is the reason why I used the "above" / "below" designation. Some brands discount everything. Well, this still means that a $49.99 item which usually sells at 30% off ($34.99) can be sold at 60% off ($19.99) meaning the $19.99 item is sold below the historical average price point.

I realize there are business situations that require significant discounting. I'm trying to help you avoid problems where customers become trained to expect the discount, costing you profit. I want you to be more profitable.

Walmart

So yeah, Walmart is printing high margin money by asking "brands" to hawk Walmart customers through Walmart stores or all across the internet. It's a modern twist on the old-school catalog method of generating list revenue in the 80s and 90s by renting the twelve-month buyer file to competitors or frienemies.

Walmart's advertising solutions page is a marketing word salad designed to inspire middle managers to embrace the customer journey, paying $$$ in the process to get the customer to "BUY SUPPLEMENTS" (click here).

Can I tell you a story?

I was at Walmart tonight, picking up prescriptions. As I sat on an unsteady plastic chair awaiting my fate, a gentleman somewhere around 70 years old waltzes over to me, smiling.

CUSTOMER:  Have you ever bought milk here?

KEVIN: No.

CUSTOMER:  Do you want to know a secret?

KEVIN: Ok.

CUSTOMER: This store sells milk for $1.48 a gallon. I've shopped other Walmart stores in the West Valley. Milk is anywhere between $3.48 and $3.98 a gallon elsewhere. But here it is $1.48. Why do you think that is? It's always the case. It cannot be a mistake. Somebody somewhere thinks this is the right thing to do.

KEVIN: Wow.

CUSTOMER: I drive fifteen miles just to come to this store to buy milk.

KEVIN: You what?

CUSTOMER: Yeah, fifteen miles. I have to. It's $1.48 a gallon.

........... twelve minutes later, I'm still sitting on a wobbly plastic chair, and the customer walks up with one (1) gallon of milk:

CUSTOMER: What did I tell you?

KEVIN: It's $1.48?

CUSTOMER: Exactly! And I don't get it.

........... five minutes later, I'm standing in line to buy my prescriptions ... here comes the milk man.

CUSTOMER (twirling the lone gallon of milk in his hand via the handle): A buck-forty-eight.

KEVIN (offers customer a thumbs-up).

Do you understand the moral of the story?

This guy, call him "milk man", drives 30 miles round trip to purchase one (1) gallon of milk. He spends $4 in gas to save $2.50 on milk. And he's happy about it.

Meanwhile, some marketing professional misinterprets this behavior as a sign of a seamless, frictionless omnichannel experience and sells the behavior to a middle manager who then targets string cheese to the customer. The customer gets meaningless ads, the middle manager feels strategic, and Walmart counts money.

So much of this omnichannel nonsense is actually price-fueled merchandise experiences. The behavior has nothing to do with channels, and has very little to do with marketing (unless you view pricing strategy as part of marketing ... or in this case, maybe a computer mistake).

But by using a language that marketers understand, Walmart aligns these "experiences" with the desires of a marketer desperate to sell string cheese "at scale", and prints money in the process.

The "milk man" doesn't care. He found milk fifteen miles from his home Walmart for just $1.48 a gallon.

Bed Bath & Beyond

Read this jargon-infused love-letter about Bed Bath & Beyond from two years ago (click here).

Did any of this ... any of this ... make a difference? The brand defaulted on January 13 (click here) and is cruising toward bankruptcy.

My goodness.

It does not matter if you reduce friction by cutting down the number of purchase steps from seven to three if the customer doesn't want to buy what you are selling.

It does not matter that you can buy online and pickup in a store if the customer does not want to buy the item in the first place.

It does not matter if you are digital-first if the customer does not want to buy the merchandise you offer.

It does not matter if you self-proclaim that you "established a digital-first, agile, creative customer experience organization" if the customer does not want to buy the merchandise you offer. What does the sentence fragment even mean? Be honest.

I've been harping on this for a decade, and some of you are likely tired of hearing me say it ... and the rest of you simply disagree with me ... but you HAVE to sell something that the customer wants to buy, or must buy to survive. Notice that the article doesn't say anything about what they sell ... the trade journalist and the PR person from Bed Bath & Beyond who got the article printed are assuming that the hurdle separating profitability and the customer was ... wait for it ... "omnichannel".

Wrong.

P.S.:  This is where I receive emails from omnichannel advocates. They'll say "A shift to omnichannel strategy happened too late. Had they done this a decade ago, who knows where they would be?" Yeah, who knows? Would they be limping to the finish line like Macy's? Would they be out of business like Circuit City, who pioneered "buy online and pickup in store"? I understand it is fun to sell eight-figure operational systems designed to allow the customer to bathe in an omnichannel bath of delight. But that's not why the customer purchases from you. Spend your time and energy selling something the customer wants to buy. And if you are in marketing, get to know every darn item your brand sells and how well every darn item performs ... then feature those winners in your marketing efforts (with nudges to try new products as well).

Judy / Jennifer / Jasmine

Eleven years ago I spoke at NEMOA about the importance of Judy / Jennifer / Jasmine as key shoppers within a traditional catalog brand (hint ... Judy was a Baby Boomer, Jennifer was Gen-X, and Jasmine was a Millenial).

The audience, evenly split between catalogers and vendors, absolutely groaned when I discussed Jennifer. They HATED her. Hated her. I recall one attendee telling me afterwards "I don't like anything about her. Shopping via email or social. Always online with a phone in her hand. She's not my customer."

She is now.

A reader sent me this PR-inspired link from CNN about Lands' End catering to Gen-X (i.e. Jennifer) ... click here.

If you built your business from the 80s through the early 00s via Baby Boomers, your next logical pivot is to a generation you simply do not like. Analyze your assortment, and identify the products that Gen-X buys vs. the products that Baby Boomers buy. I've done this, and there is a difference.

Build your assortment around these items ... you'll see stylistic differences. You might not like the differences, but the differences represent your future.

In the next seven years Baby Boomers will completely leave the workforce. Their need for your products will not exist. If a Baby Boomer is your core customer, you will have no choice but to pivot.

P.S.: I get it - you're about to email me telling me why you hate this. You've been filling my email box for a decade-and-a-half telling me you hate this. Your dislike for changing demographics (and we're not even talking about addressing Millennials or Gen-Z) cannot be stopped. Demographics are going to change. Are you willing to change?

Kevin, You Don't Get It

We'll see the body of an email that looks like this ...

... and I get grumpy. Fed up. Tired of the non-stop discounting.

That's when you, the avid reader, elect to send me a message.

• "Kevin, you don't get it. This brand never intended to sell that item for $100. Cost of goods are just $30, so it is their intention to sell the item for anywhere between $50 and $70 and they're still making between $20 and $40 of profit. They're the smart ones, Kevin. You just don't get it."

Do you honestly think "I don't get it?"

Oh, I get it.

There are many different ways to sell something.

In this case, there are two really clear choices.

1. Convince the customer that what you sell is better than anything else so that the customer is willing to pay a premium, allowing you to maximize profit.
2. Gamify the system because you now that what you sell is average or lousy. Create a game. Attract customers who love games.

In (1) you end up with customers who are passionate about the products your brand sells.

In (2) you end up with customers who are passionate about games.

Which customer would you prefer?

I'll take customer (1) every day of the week.

I get it.

Using Email To ... Not ... Develop Categories

Can I show you the recent subject lines from a large e-commerce brand many of you shop from?

• Up to 75% off your order starts TODAY!
• You don't want to miss up to 75% off your order.
• Just tonight! Up to 80% sale and clearance.
• Ends today! Up to 75% off your order.
• Today's exclusive deal! Up to 75% off outerwear (plus take 40% off everything else).
• Savings are thawing! Up to 75% off coats, jackets.
• STARTING NOW! Up to 70% off your order.
• Tonight Only! Nightgowns from $24.
• Save up to 70% off.
• Ends today! Up to 70% off your order
• Wow! 40%, 50%, or 60% off your order plus free shipping.
• Ends tomorrow! 40% to 60% off your order.
• Ends today! 40%, 50% or 60% off your order.
• Time's ticking! 40% to 60% off your order.
• Save up to 60% off your order!
• Ends tomorrow! Savings up to 60% off your order.
• Take an additional 60% off all other sale and clearance.
• Get it now! Extra 60% off sale & clearance + 30% off.

This brand is not developing categories.

This brand is ignoring merchants. You might think this brand has contempt for merchants given how little it cares about price integrity.

Companies who actively develop categories feature a category each week, for instance. Maybe it is Chino and Casual Pants week. Dive into the category. Teach the customer why you are the expert in this category. Are you gonna work with some mythical influencer? Here's a place to do just that. Have a plan.

Promote products, not percentages off.

Customer Acquisition Index

One of the tables in this version of the MineThatData Elite Program comes from our Category Development project. Here, we sum all sales in the past year from existing buyers, and we sum all sales from new buyers, then we calculate an index (Acquisition Sales / Existing Sales) / (Acquisition Total / Existing Total). This is all performed at a Merchandise Category level, and the table looks something like this:

There are brands that acquire customers across all categories at the same rate. These brands treat their customers as "one customer". This is a common scenario in the omnichannel thesis ... same merchandise in same channels promoted similarly in an allegedly seamless/frictionless manner.

The table above is not symbolic of the omnichannel thesis. This brand is marketing to customers and categories based on what is best for the customer and/or category. Outerwear has an index of 1.570 ... sales of outerwear to new customers are 57% higher than sales of outerwear are to existing customers. New customers prefer outerwear. Meanwhile, existing customers skew to Womens categories.

Either this brand migrates customers from Outerwear to Womens (this fact is verified or proven wrong in a Category Dynamics project), or the brand is essentially setting itself up for challenges because existing customers prefer fundamentally different merchandise than new customers prefer.

Either way, the Customer Acquisition Index (CAI) tells you what is happening.

What is happening with your customer base?