McDonalds

Have you read this beauty? Click here to learn about McDonalds.

I've been doing consulting work for almost nine years now - on top of nearly two decades prior in retail / e-commerce / cataloging (and a brief stint in the hybrid corn industry). I've learned, repeatedly, just how important merchandise is. Merchandise means everything.

Well, let me restate that a bit. Merchandise means everything, as long as it is folded into a story that is congruent with the merchandise.

Think about it this way. Wal-Mart can sell groceries, but Wal-Mart cannot do what Whole Foods does, because Whole Foods merchandise cannot be folded into a story compatible with Wal-Mart merchandise.

This puts McDonalds into a very difficult position - albeit one they've fully earned and one they deserve. As younger customers change behavior (Chipotle, Panera Bread), you cannot just slap that style experience into the McDonalds environment - the story is not compatible with the brand, is it? Even if McDonalds sold exactly what Panera Bread sold, the story falls apart. McDonalds cannot replicate the in-store Panera Bread experience, nor should it. As a result, any effort to replicate/copy what the competition does fails on two fronts - you miss out on the experience that allows Panera Bread to succeed - and you mess up the experience for your existing customer base who is still loyal to you.

I get so frustrated with our modern marketing world - especially the horrific advice catalogers and e-commerce brands and retailers get from so-called experts. It's easy to tell somebody to be "omnichannel or die". It's terribly hard to be in the shoes of the company that is struggling. Ask any cataloger. The advice catalogers have been given over the past fifteen years, from well-meaning experts no less, is nothing short of awful. The comparisons between McDonalds and catalogers are myriad.

• McDonalds and Catalogers built empires on the backs of Baby Boomer customers.
• Dietary interests (McDonalds) and channel preferences (Catalogers) cut each off of a younger customer base.
• Both were told to "do everything", thereby diluting the experience for existing customers while not appealing to a new generation of customers.

Thirty years of this nonsense leads me to believe that we're better off riding the core brand with the core audience ... but then we diversify our portfolio by creating new brands that appeal to new audiences, placing bets, hoping that one-in-ten or two-in-ten of the new experiments work. Heck, McDonalds used to own Chipotle, think about that one for a moment.

Instead, we have a tendency to "integrate", to "create efficiencies". We fold everything together. When Sears folded Lands' End into a Sears store, the advantage of brand separation disappears ("yes, but you create a great omnichannel experience for the core customer"). 

The experts keep telling us to create efficiencies, make the experience the same across all channels ... they tell us that we have to be in all channels, that we have to "do everything" and do it all the same. Boring. That just creates a homogeneous experience that looks a lot like McDonalds.

Maybe it is time to be unique, different, to provide clever and thrilling experiences that are not fully integrated. Maybe it is time for each experience to align with unique audiences, instead of aligning boring experiences with core customers.

Thoughts?

A New Product: The MineThatData Elite Program - Featuring The MineThatData Elite Productivity Index!

I've run comp segment analytics on more than 50 companies. It's pretty easy to spot when/where productivity challenges begin. Then two comments tend to arise ...

1. The reason our business isn't performing well is because of the economy - it's not our fault.
2. Can you tell me how other companies are performing?

Those who aren't existing clients also offer a frequent / common comment:

• Do you have an inexpensive starter product that gives a lot of value? 

It's time to solve this problem.

Today, I am announcing a new program, and the first product from the new program.

• Program = The MineThatData Elite Program.
• 1st Product = The MineThatData Elite Productivity Index (MEPI).

The MineThatData Elite Program is a subscription-based program designed to give you valuable merchandise productivity information about your business, while offering a view of how all Elite Program participants are performing, on average.

What is the MineThatData Elite Program, and how does it work?

First, you get a comp segment analysis, by month, for each of the past two years. I will clearly communicate your "Merchandise Productivity" ... by measuring customers with exactly two purchases (omitting the impact of recently acquired customers and the impact of loyal buyers who are influenced by loyalty initiatives). This analysis has been run for over fifty brands during the past three years - the methodology determines overall merchandise health. If your merchandise isn't productive, your marketing will not be productive. Your merchandise assortment is the reason you are successful. Merchandise productivity is the least understood concept across our industry - almost nobody understands the role merchandise plays in marketing productivity. That is going to change. 

The analysis will look something like this:

You can clearly see when the business struggled (beginning March 1 of this year), and when the business thrived (January of 2014 through February of 2015). It will be your job to figure out what happened (or you can hire me for a Merchandise Forensics project, and we'll drill down further).

You will also receive a count of New + Reactivated buyers by month (i.e. no prior purchase in the past twelve months, but a purchase in the current month). This will tell you how you are managing the New + Reactivated side of your business. New+Reactivated buyer metrics are the second most important activity to track.

Here, we can see that this business is offsetting comp segment declines with increases in New + Reactivated buyer counts. In essence, this business is papering over productivity declines by finding new customers.

Ok, that's how you are performing.

Now, you tell me that you want to know how other companies are performing. Here's what I will do. I will average the percentage change columns for the two tables above, across MineThatData Elite participants. This will give us a sense of how you are performing against the overall Elite population. The overall average will be called "MEPI", or the "MineThatData Elite Productivity Index".

This is telling, isn't it? Elite participants are exhibiting performance that is, quite honestly, opposite of how the brand above performed. This would tell us that the brand above is having unique challenges that need to be addressed.

We can see that the "MEPI" for housefile is +3.0%, and in recent months has trended positive. We can see that the "MEPI" for New + Reactivated buyers is flat in the past year, and has not trended well in recent months.

Here's the best part:

• Only those who participate in the Elite Program get to see the results. No sharing with anybody else.
• Every participant gets to see the Overall MEPI Participant Average outcome, by month.
• Nobody gets to see specifics regarding how other brands perform. You only get your results, and overall averaged results.

Many of you want to know how you stack up against the competition. As we build the client base, you'll have a robust comparison ... and if we really bulk up the client base, then I will be able to split the results by business type (Apparel, Home, Gifts, B2B, B2C, etc.).

Data Requirements?

I want only bare-bones data, folks. The dataset you send me will have just four columns. The dataset must be in .csv format, or the data will be rejected. The data must be formatted as follows.

• Column 1 = Household_ID or Customer_ID, the id you use to track customer behavior.
• Column 2 = Order Date ... must be in YYYYMMDD format (i.e. 20150809). This is the only acceptable format, for the purposes of this inexpensive product.
• Column 3 = Demand Total in the Order ... formatted in numeric format (i.e. 24.99 for an item that the customer paid 24.99 for). The column should represent what the customer paid for the item.
• Column 4 = Items in the Order ... formatted in numeric format (i.e. 3 for three items). The column should represent the number of items the customer purchased.

The dataset / .csv file should have one row for all demand spent by a customer on a given date ... in other words, if the customer purchased 3 items for $14.99 each on August 9, 2015 ... then I need to have one row in the dataset for that order, and that row has a value of $44.97 in the demand column.

The file should look exactly like this:

Make sense?

How much does this cost?

Any existing client or loyal blog reader who joins on or before August 20 will pay $1,000 three time a year ($3,000 per year). Everybody who joins after August 20 will pay more ... $2,000 three times per year ($6,000 per year). Everybody who joins after January 31, 2016 will pay $2,500 three times per year ($7,500 per year). 

In other words, make sure you participate immediately. You can opt-out at any time and hop back in at any time ... this is a handshake agreement, you're not forced to participate.

I plan on having three analysis windows per year, loosely mirroring business seasons.

• Analysis Window #1 = June 1 to September 30 (Summer). Send three years of purchase data and payment prior to October 15. Analysis complete on or before October 31.
• Analysis Window #2 = October 1 to January 31 (Christmas). Send three years of purchase data and payment prior to February 15. Analysis complete on or before February 28.
• Analysis Window #3 = February 1 to May 31 (Spring). Send three years of purchase data and payment prior to June 15. Analysis complete on or before June 30.

Only DIRECT CHANNEL transactions are to be included. No retail. Retail transactions are heavily influenced by in-store capture rates. This is meant to be an index that measures DIRECT CHANNEL (call center + e-commerce + mobile) merchandise productivity.

I know, you want to understand the small print. For you, I present "Large Print".

Large Print:

• I reserve the right to partner with one (1) vendor to complete the work, should the amount of work become onerous. For instance, if we had 500 companies sign up to participate, I'll need help. You need to know this ahead of time, and I will announce selection of the vendor chosen to sponsor the process, should the workload become too great. 
• I also reserve the right to terminate the program at any time, or to sell the program at any time. 
• $1,000 once-every-four months, pre-paid, for all subscribers joining prior to or on 8/20/2015.
• $2,000 once-every-four months, pre-paid, for all subscribers joining after 8/20/2015 but prior to 2/1/2016.
• $2,500 once-every-four months, pre-paid, for all subscribers joining after on or after 2/1/2016.
• If your brand is part of a holding company, standard pricing will apply to the first four brands that participate. If you have 20 brands, then your fees will be capped at four brands, though all twenty brands will be analyzed.
• File format must conform to the file structure illustrated above, and must include only direct-channel transactions. No exceptions.
• The three tables outlined above are the minimum deliverable. I reserve the right to add additional tables, charts, analytics, and written thoughts at no additional charge.
• In the event the workload becomes overwhelming and I have to work with an outside vendor, the outside vendor will see the results, but will not be allowed to share the results.
• In the event that I sell the program and/or retire, the rules of the program may be changed by the organization who takes over the program.
• All data must be received on or before the 10/15, 2/15, and 6/15 deadlines, and must contain exactly three years of data through 10/1, 2/1, and 6/1, or your information will not be included in the analysis.
• I will sign a confidentiality / non-disclosure agreement only on the condition that the agreement only pertains to this single product, and that all text outlined in the large print section is included in your confidentiality / non-disclosure agreement.
• I reserve the right to sub-divide / segment the data, in the event that a sufficient Elite membership base exists. For instance, if there were 200 participants, and 50 of the participants were Apparel businesses, the Apparel businesses may want their own index. I reserve the right to sub-divide / segment the data accordingly.

What would stop you from spending $3,000 a year for all of this information?

If the program does well, then I anticipate setting up "MineThatData Elite" sessions from time to time - one-day conferences where Elite members only will gather and discuss important topics. Sound good?

You also get my phone number. Have a question about anything? Call me. Just as good, you get my thoughts on where all of this information is taking us, going forward. You are working with a person who possesses nearly thirty years of professional experience. That counts for something.

Most important?

As a charter member of The MineThatData Elite Program, you will receive the highly coveted MineThatData Pick Axe Pin!!

When you attend NEMOA or Internet Retailer or Shop.org, you'll wear your pin with pride ... and when somebody asks you what the heck you are wearing, you will let them know that this is an elite perk (worth all of $1.20, but don't share that fact with anybody) that separates you from the competition ... you will know more about how the industry is performing than your peers at other brands. You will be the expert - all because you participate in the MineThatData Elite Program.

Again, what would stop you from spending $3,000 a year for all of this information?

You have a one week invitation to get in at the introductory price. This price only applies to existing clients and long-time blog readers. The offer ends at 11:59pm PDT on August 20.

Contact me immediately (kevinh@minethatdata.com) to receive your invitation into The MineThatData Elite Program!!

The Reason My Merchandise Productivity Stinks Is Because Of Amazon

You've heard this one, right? You've probably thought it, yourself. You've thought to yourself, "the reason business stinks isn't my fault, it is because Amazon is an unprofitable monster that steals my business via a cost structure that I cannot match."

This is the very definition of merchandise productivity.

Merchandise Productivity is meant to measure, after equalizing for marketing strategy as much as possible (you can never fully account for marketing strategy), what impact customer preference for your merchandise is having on your business.

So if you sell the same (or similar) stuff as Amazon, well, you've got problems, don't you? When Amazon steals your business, your merchandise productivity is going to decline, because, quite simply, your customer perceives Amazon to be a better value.

In other words, it is our fault when Amazon steals our business. It's no different than being Chicos and having Ann Taylor steal business, right?

The goal of any comp segment analysis within the Merchandise Forensics framework is to understand how customer love of merchandise impacts the business. If we see negatives, well, that means one of two things.

1. We are struggling as merchant team.
2. Somebody is stealing our business.

Either way, the end result is the same. We need to address merchandise productivity, first and foremost, because marketing productivity (and company survival) is 100% dependent upon having great merchandise.

Mega Trend = New Customers

As you know, I've been telling you about three mega-trends that impact our businesses.

1. Merchandise Productivity
2. New Customer Acquisition Difficulty.
3. Avoiding Tolls.

This graph actually illustrates the power of marketing productivity. Catalogers only have one advantage over most e-commerce businesses. Catalogers have a paper-based relationship with customers - and this paper-based relationship allows the cataloger to greatly increase the likelihood of a second purchase.

Because e-commerce businesses don't have the marketing advantage of paper between a first and second purchase, new customer acquisition becomes even more critical. Annual repurchase rates for first-time buyers are low - requiring a constant flow of new customers to keep the business growing.

So when customer acquisition becomes a challenge for e-commerce brands, you can expect growth to slow, quickly, especially if annual repurchase rates are (on average) below 45%.

This is why new customer acquisition, especially in e-commerce, is so critically important. For most businesses, merchandise productivity gains allow more new customers to be acquired at a lower cost, helping the business avoid paying tolls to prop the business up.

It Will Change Your Life

Maybe their event will change your life, who knows?

I keep being spammed by hotels in the Boston area. They want me to purchase a discounted room when I attend the event (I am not attending the event). I ask the hotel marketers how they obtained my email address. They told me that the DMA gave them a list of exhibitors (vendors), and the list the DMA gave them had me as an exhibitor.

So, yes, this may change your life and it may ignite you career.

But also consider that the DMA makes the same mistakes we all make. Nobody is flawless. 

P.S.: A story. Back in 2003, it was time for me to pay my $30,000ish DMA dues. I was tired of paying $30,000 for nothing. So I did not send in payment. 

A month later, I get a call from a DMA sales rep. The call went something like this.

DMA: Kevin, Bill here from the DMA, how are you?

Kevin: Well, I hurt my back yesterday pushing a vacuum, but ...

DMA: That's great. Listen, you didn't make your annual payment. I just want to see when we will receive it?

Kevin: I'm not paying this year.

DMA: Wait, what? You're not paying?

Kevin: No.

DMA: Why?

Kevin: In order to make a return on investment, I need to generate about $105,000 of incremental sales to cover the $30,000 membership cost. Show me how your organization made me $105,000 last year?

DMA: Well, the discounts to conference sessions alone should pay for your fee.

Kevin: We don't go to your conferences.

DMA: Why?

Kevin: Because historically, my staff tell me that they don't learn anything when they attend DMA-sponsored events.

DMA: How is that possible?

Kevin: My staff are smart.

DMA: They should consider speaking at an upcoming event.

Kevin: So I should pay money so that my staff can miss time at work sharing what they know with my competition so that you can make more money?

DMA: That's not the right way to look at the issue.

Kevin: Until you can prove to me that we generate $105,000 in additional sales because we align with the Direct Marketing Association, I am not making the payment.

Two weeks later, +/-, the phone rings.

Kevin: Hello?

DMA: Kevin, this is Bill (not his real name). I have my department VP, Shari with me.

Kevin: Hi Shari (not her real name).

Shari: Listen, we want to know when we can expect payment?

Kevin: You'll get payment when you prove to me that you generated $105,000 in annual sales - enough money to cover your annual fee.

Shari: Our advocacy in Washington DC will more than cover your costs.

Kevin: Can you give me an example where your advocacy delivered millions in cost savings for the industry?

Shari: We recently helped the banking industry.

Kevin: I work in the apparel industry.

Shari: Nonetheless, your DMA membership is appreciated, and it delivers disproportionate value to your brand.

Kevin: When you prove to me that you generate $105,000 in annual sales, enough sales to cover the cost of membership, I will send you my payment.

Apparently that call didn't go over well with Shari/Bill ... because a few hours later, my boss received a call from the DMA ... and then my boss told me to make the payment. I explained that I needed to see a return on investment before I made the payment. My boss reminded me that she was my boss.

I made the payment.

MineThatData Radio #2: The Worst Mistake Of My Entire Career

Again - if you are a data-centric analyst/manager, then this podcast series is for you. And in today's podcast, you'll learn all about the worst mistake of my entire career!

FYI - I won't be posting most of the podcasts on the blog - if you are interested in the podcasts, I recommend you visit Soundcloud and subscribe (click here please). If you don't see the podcast player below, then click here and you'll be set up shortly.

Prices Go Up, Prices Go Down

Virtually every item in the image is on sale. 35% off. 40% off. 50% off!

When a business is climbing the ladder, the business often sells something new, innovative, clever. New designs. Something you cannot readily get elsewhere. This allows the brand to charge a premium. The brand charges $79 at a $29 cost of goods. That's $50 of gross margin, folks. And customers happily pay, because they are getting something that cannot readily be purchased elsewhere.

Then ... in two weeks or two months or two years, the competition comes after you. Hard. They knock off your item and sell it for $49 (at a $24 cost of goods ... #competition). Now the battle is on ... you're likely to match prices, and that costs you profit.

Eventually, everybody is selling the same thing, and one or two companies win the low-price battle. Now you've got problems. If you lower prices, you just set off a constant cycle of deflation that you cannot win ... the competition will always be able to offer something at a cheaper price and a lower cost of goods sold. This is where gamification comes into play. Rewards points. 35% to 50% off select (or all) items. Free shipping. 20% off plus free shipping. This always works. And this always destroys the business. In the short-term, the gamification crowd is attracted. In the long-term, all you have left is the gamification crowd, trapping you in the perils of gamification.

Maybe this is the way it has always been. In most of my projects over the past two years, I'm dealing with companies charging $79 at a $29 cost of goods sold ... or I'm dealing with companies selling the $79 item at 40% off. The audiences attracted to each proposition are fundamentally different. Unfortunately, we tend to call each audience "the customer". This is a mistake.

Once we're stuck in the $79 item at 40% off, we might want to consider a new line of business ... a new brand ... building a future audience not pre-destined to purchase at 40% off.

Prices go up in the early days of brand health. Prices go down as the health of the brand deteriorates.