It's A Rule For A Reason

When my CEO required I attend Dale Carnegie sales training classes in 1993, I learned quickly that you should ask questions that the audience will respond to with an important word ... "yes". He encouraged getting the "other side" to start saying "yes" immediately.

Which brings me to this subject line from Best Buy.

I'm not sure I've told you the Dale Carnegie story. I think I have. It was 1993, I've been an analyst for three years at Lands' End, and my salary is stagnant. I'm walking down the hall and I hear a conversation between my boss and the CEO. Like a good gossiper, I stop walking and listen. I hear the CEO say, and I'm paraphrasing here, "Kevin will never be a Manager, he doesn't have a Master's Degree and he's not a good communicator and he doesn't sell his message well."

Yeah, that comment corked me off!

The CEO recommended I take Dale Carnegie sales training ... it's a lot cheaper than trying to earn a Master's Degree at night. He'd pay for it. Sounds good.

There were three things that really stood out in the class.

1. Always smile.
2. Always ask people about themselves.
3. Ask questions or frame comments that cause somebody to say "yes".

It probably took me 20 years to figure out how to smile regularly.

The last point was really important. On the surface it sounds like a simple concept. In practice, it requires a very different style of communication. It requires the presenter to build a story, starting simply and then leading to a conclusion. If you start simple, and earn a "yes", then lead to a more complicated concept and earn a "yes", it's easier to earn a final "yes" when you get to the key point you want to make.

In five years without this information, my salary and bonus increased by about 45% ... not bad.

In the seven years after knowing this formula, my salary and bonus increased by a factor of 8 ... yeah, eight ... and I went from Analyst to Manager to Director to Vice President ... one significant promotion approximately every-other-year.

Turns out I didn't need a Master's Degree.

I just needed to figure out how to frame issues in a way where the audience would say "yes" if I asked the audience if the audience agreed with me.

So, when I see your email subject lines and how awful they position issues, I can't help but wonder why so many of you tell me that email is an old-school technique that doesn't work. If you're asking me if I've been looking for a freezer, you're going to get a NO as a response. Correct, the discipline doesn't work ... as currently being executed.

How Discounts Are Administered/Analyzed Matters

Yeah, typical feedback after my post yesterday (click here).

• "Kevin, you bought those items because HeadAmp offered you discounts and promotions. Discounts and promotions work"

Discounts and promotions can work, yes, absolutely.

The secret for a discount/promotion to work is incrementality ... did the action cause something to happen that wouldn't have happened otherwise? It's hard to measure this stuff ... you kind of need A/B tests to know for sure, but it can be inferred in many instances. Sadly, most discounts/promotions do not add enough incrementality to create a profitable outcome.

If you analyze the discount from an incremental standpoint, you get a different result. Here's an example where the promotion was 40% incremental instead of the 100% incremental that almost every marketer assumes in their analytical work.

Most of us would evaluate the promotion and say "it worked". On an incremental basis, only 40% of what we think happened was caused by the promotion ... that 40% was not profitable.

We have to offer discounts/promotions that actually cause a customer to do something the customer wouldn't otherwise do. If you can prove you're doing that on an incremental basis, by all means, have fun!

This Happens in Your Business, Too

A month ago I started a relationship with HeadAmp. I was looking to purchase the Meze 109 Pro headphones, but I didn't want to pay $799. Fortunately, HeadAmp had an open box unit for $649, and a first-time buyer incentive for $20, so I paid $629.

From a Merchandise Dynamics standpoint, there are several things we want to record here.

• Kevin purchased via a discount ($20).
• Kevin didn't pay $799 for the item, bought an open-box version cheaper than the average historical price point for this item.
• Kevin bought one (1) item, not a multi-line order, not a multi-category order.
• Even at $629, this is a high-price-point headphone. I will behave differently than a person purchasing a $49 in-ear monitor.
• Kevin is a new customer ... need to convert Kevin quickly to a second purchase.

Next, HeadAmp promises me $50 if I write a review of the item. Ok. I already planned to purchase an dac/amp. Done. I write the review. The promo is sent to me via email.

Ok, the dac/amp. It's normally $89, but they have an open-box version for $84, and I have $50 off, so I'm paying $34 for an $89 item. 

• Kevin purchased via a discount ($50).
• Kevin didn't pay $89 for the item, instead buying an open-box version cheaper than the average historical price point for the item.
• Kevin bought one (1) item, not a multi-line order, not a multi-category order.
• Kevin has now purchased from a low-middle price point band and a high price point band.
• Kevin is an existing customer.

We already know a lot about Kevin. He doesn't pay full price, he only purchases when something is discounted, he only buys one item, he buys from multiple categories but not in the same order, he purchases high-price-point items and medium-price-point items, he purchased items about 30 days apart (i.e. high velocity ... you measure purchase velocity, right?).

These are the attributes I look at when measuring future value for somebody like Kevin.

I also apply these attributes to each item, and measure "who" buys the item and I measure something called "Merchandise Residual Value". You've heard me talk about it previously, haven't you? The concept here is simple ... if a customer buys an item that causes the customer to buy more merchandise in the future, then the item has positive MRV. If the customer buys an item that causes the customer to stop spending in the future, then the item has negative MRV.

Every one of us manages a business that sells items that have negative MRV. My business operates this way. Clients who craft ad-hoc projects outside of my product offering tend to not come back very often ... the ad-hoc project has negative MRV ... my Elite Program projects have high positive MRV because they bring in brands who then upgrade to more expensive projects. Maybe you are a gift brand ... you sell a gift to a customer in the 2nd week of December at 40% off and free express shipping and the customer never comes back ... that gift has negative MRV.

In my example above, two things happen.

• The Headphones have positive MRV - I purchased an amp a few weeks later.
• The Amp has negative MRV - I'm done buying from HeadAmp for the forseable future.

An item with negative MRV is an acceptable item. But it is important to understand the role that item plays in your assortment. In the case of HeadAmp, they're more than familiar with the Headphone/Amp/Dormant cycle.

Next step for HeadAmp? Since (if they perform Merchandise Dynamics analysis) they know that I'm headed for a dormant period, it's important to not spend valuable marketing dollars on me, but instead use free channels like email and videos to encourage me to do one of three things.

1. Upgrade to more expensive headphones (which people do all the time).
2. Cross-Shop into a different branded headphone with a different sound signature. This is where marketing matters ... it takes marketing chops to convince me to buy something I don't need. Marketing isn't setting up a retargeting program, marketing is convincing me to do something I don't need to do.
3. Migrate me into iems (in-ear monitors), which are a different category and are considerably cheaper, a category where I could easily purchase six or seven iems that cost the same (in total) as my $629 headphone.

Please tell me you think this way with your products/merchandise.

That's how you use Merchandise Dynamics findings and Merchandise Residual Value at your brand. You have countless examples of items with positive and negative MRV. How often are you using MRV to make better marketing decisions?

If the answer is "we're not using it", contact me right now and we'll get busy (kevinh@minethatdata.com).

P.S.:  If you are a traditional catalog brand reading this stuff, this is your future. As your catalog discipline becomes too expensive to execute, you'll have to apply these concepts in a digital realm to maintain relationships with customers.

Special Offer For Readers: An Amazon / PLA / Search / Paid Social Customer/Product Evaluation

Yesterday's posting about where the catalog industry has been and where it's likely to head was about as popular as anything I've written in the past three years (click here). Yes, a little LinkedIn promotion didn't hurt.

Non-vendors have a very different set of questions/comments from what the service provider community has to say. Non-vendors want to know about the customers who buy from digital channels and the products purchased from digital channels ... specifically, "are the products purchased in, say, paid social, different than the projects purchased through print"? Yeah, that's a good question, because it speaks to how a brand might merchandise a "future world". Good question, smart readers!

Let's do something, given what is happening to so many of you right now, and what so many of you are asking about.

I'll create a new product just for my readers (that's you), people who have been loyal for as long as nearly twenty years now ... and offer it at a highly significant discount for a short period of time to help you out. I won't publish it on my pricing page, it's something just for you.

I will produce a special analysis of customers who shop what I'll call "alternate channels" ... channels that are not really within your control or who buy from email marketing.

• Amazon.
• Other Marketplaces.
• PLA Customers.
• Search Customers.
• Paid Social Customers.
• Email Marketing Buyers.

I will measure how much "less loyal" these customers are, moving forward.

More importantly, I will evaluate the products these customers purchase, comparing them to your core e-commerce shopper or email buyer. In most of my projects, these customers buy "something different" and it impacts how these customers behave in the future when you present them with your full assortment. This will include a portion of my Merchandise Dynamics work ($15,000).

Finally, I will take a modest slice of my Marketing Budget Experiments work ($20,000) to see how these customers evolve and change over time compared to your core buyer.

As long as you respond by May 24, I will only charge you $9,900 for this analysis. If we have demand, I will build this into a full-fledged project, potentially including a new booklet to pair with the project. And yes, if it becomes a full-fledged project, it's going to cost close to double what I'm offering here. 

So act, now.

You have until May 24 to take me up on this $9,900 offer. Click here for other projects and file layouts. Contact me immediately (kevinh@minethatdata.com / 206-853-8278) and secure your spot before my bandwidth is consumed, because I expect this offer to be VERY POPULAR given what you're all telling me right now. My legacy clients simply cannot sustain the paper / printing / postage inflation they've experienced in recent years, going forward.

The Catalog Industry: A Thirty Year View And Then Looking Forward

This article was forwarded to me this weekend by one of our intrepid and now retired advocates (click here).

Plow & Hearth going away (old news) should cause catalog professionals to go ... hmmm?

Let's step back for a moment. Here's what an awful lot of you in the catalog world are experiencing. This is what net sales look like over time.

Click on the image for a bit more resolution. Notice the COVID bump in 2020, and the dramatic deflation of the COVID bump in 2021-2022. On October 29, 2020, I told you to SELL (click here), to take full advantage of that gigantic peak in the image. Remember that?

Did you listen?

On August 2, 2021, I told you about the evaporation of your COVID bump via my forecasting methodology (click here). I told you what was coming ... and did so repeatedly since. 

Did you listen?

Look at the image above ... notice that sales generally stalled after 2014, and if you remove the COVID bump from the image you see a general trend happening ... and it isn't positive.

Now let's adjust the image above for inflation. Tell me what you observe.

You see constant decline from 2006 forward. Remember 2006? 2006-2007 was when the list industry consolidated. The trend, after factoring inflation into the mix, is a consistent downturn ... from 2006 forward. A mature industry hit "retirement age" in 2006, and has been contracting ever since.

Since then, you handed the keys over to the co-ops, who squeezed your data for every penny they could and optimized their algorithm to the point where the algorithm shoveled every 70 year old name they could at you at the very time when you needed 35 year old customers. This further accelerated the inflation-adjusted demise.

Behind the scenes, your trusted partners ... paper folks and printers ... they were contracting in response to declining demand for their products. Sure, publicly, they told you all was well. They demanded you continue to put paper in the mail as part of a vibrant "omnichannel" strategy. They had to tell you this. They had to stay in business. As a paper rep told me in 2019 ... "I'm not going to let you take food off of my table, even if you are right."

The contraction of the paper/printing world was revealed in late 2020 and 2021 when catalogers suddenly had twelve-month buyer files that were anywhere between 20% and 100% bigger than they were a year prior. Catalogers needed paper. Paper didn't exist. Printers couldn't handle the increase in workload even if paper did exist. From a customer standpoint, being locked in your home for two months will fundamentally disrupt an industry. Supply exceeded Demand. 

Paper/Printing costs increased, paper availability decreased. Tack the USPS increase on top of that, and yeah, there's trouble brewing.

Subsequent inflation and industry dynamics yield a world where paper/printing/postage costs are +15% per year, every year, for several years. This doesn't work in a contracting industry with old (70 year old) customers.

It doesn't take a rocket scientist to correlate contracting businesses with increasing costs and a very old customer base ... you correlate it and you get Plow & Hearth. They said it to you, using actual words, in the link above. Read it.

Unless you are a strong digital marketer catering to a 35 - 55 year old customer (which many of you are, fortunately), your future may well include an exit strategy or becoming a third-party seller on various marketplaces. It's survival, yes, but it is a lot less work than figuring out how to get a Google customer to click through a PLA and trust your website via multiple visits to finally purchase and then send catalogs or emails or SMS messages to beg the customer to come back and buy again before finally paying Google/Facebook another set of tolls so you can get another customer.

Think carefully, folks. This is a major inflection point in the trajectory of your brand. I advised you for (literally) decades at no cost. I wouldn't say what I'm saying if this weren't a major inflection point. And I wouldn't lead you astray.

There's nothing wrong with adapting, changing, and moving forward. Get busy moving forward. I have faith in you to move your brand forward. Let's go!

WLS - Chicago

My wife told me about the history of WLS in Chicago following attendance at a quilting retreat, which I didn't know about (the history of WLS - I knew about the quilting retreat), so I had to look it up. Now you get to look it up as well (click here).

Wow.

WLS = World's Largest Store (which was Sears in 1924). By creating a radio station, Sears could sell radios in the catalog, providing "engaging content" for people to listen to on their new radio. 

They were doing Amazon Prime stuff a hundred years ago.

Then Sears sold the station and moved on. What might have happened had they taken a different direction?

My Dad would try to pull in WLS from a 140 miles away on his radio, and often had success ... he liked to listen to Larry Lujack (click here). Wow. Radio changed from 1924 to 1982 ... and changed from 1982 to today, don't you think?

Sears also did other quilting stuff ... setting records that still haven't been beaten (click here).

Side Note:  WGN came from "World's Greatest Newspaper" (click here). Those folks in Chicago had a high opinion of themselves, didn't they?

What's the point of this?

Sears was Amazon a hundred years ago ... bringing us to Ecclesiastes 3:1-8 ... everything has a season. How in the heck could Sears be so innovative, so ahead of the curve ... and end up like ... well ... Sears? I mean, will somebody look back in 30 years and say "I remember when Amazon Prime broadcast original programming, NFL games, NASCAR, and Pickleball.tv? Yeah, probably.

Which brings me to your business.

All of our businesses are in a constant state of dying. Mine too. If there isn't something new, clever, innovative ... something that gives the existing audience a reason to continue while attracting a new (and younger) audience, then you know where we're headed, right?

It might seem inconceivable that Amazon could end up like Sears. But Sears ended up like Sears. It's coming for all of us unless we find ways to resonate with the customer in new and interesting ways.

Late Stages Of Omnichannelism

Retail Dive really derives pleasure/clicks out of bankruptcies.

Over 45,000 retail stores may close in the next five years?

There have been many stages of omnichannel theory.

• 2000 - 2005:  You had to send catalogs to grow your e-commerce business and drive customers to the store.
• 2005 - 2010:  You had to align every product and promotion and price across all channels, no exceptions.
• 2010 - 2015:  40% of catalog circulation disappeared because, it turns out, older technology bolted on to newer technology does not protect older technology ... while at the same time the experts promoted that the way you compete with Amazon is to bolt your stores on to e-commerce and use digital to drive customers into stores.
• 2015 - 2020:  Stores begin closing.
• 2020 - 2025:  Stores keep on closing ... catalog marketing is eaten alive by cost increases passed on by the paper / printing / postage industry after a nasty combination of consolidation and increased demand due to customers shopping at home during COVID.
• 2025 - 2030:  45,000 stores close, turned into indoor pickleball courts and server farms designed to mine bitcoin.

We're in the late stages of omnichannelism. Oh, retail will be fine once all that mall and strip mall square footage is converted into warehouses, pickleball courts, and server farms. There will be innovation. But the concept of bolting old technology on to new technology to protect old technology ... that concept will find a new host to attach to.

Meanwhile - how are you looking at what you sell (instead of looking at how you sell it)?