Kevin Hillstrom: MineThatData

Draft and Develop

2013-05-16T20:15:00.000-07:00

In 2005, the Green Bay Packers had a quarterback named Brett Favre. You might remember him. Three MVP awards, two NFC Championships, one Super Bowl Title. Future Hall of Famer. He would play for six more seasons (2005 - 2010).

And yet, Ted Thompson drafted a Quarterback named Aaron Rodgers. At the time, the decision was kind of a head scratcher. In retrospect, it was a wise, wise decision. Via a "draft and develop" philosophy, Mr. Rodgers was groomed to become the starting quarterback.

What does this have to do with talent in e-commerce / retail / cataloging?

You keep telling me you cannot find talent. Especially at the Manager / Director level.

Well, I've prepared a brief quiz for you. If the answer to each question is "no", it is time for you to consider a "draft and develop" program for your marketing team.

Question #1: Are the salaries paid by your company consistently in the top 35% of your industry?

Question #2: Is your company considered a leader in mobile or social?

Question #3: If you made an offer to a prospective employee, and Google/Facebook made the same offer to a prospective employee, would the employee choose your brand?

Question #4: Is your company headquartered in a major metropolitan area that is considered a trendy place to live/work?

Question #5: When you have a job opening, is the position filled within 2-3 weeks, due to an ample quantity of highly qualified candidates?

If you answered "no" to each question, it is time for a "draft and develop" program.

Key Elements of a "Draft and Develop" Program.

Hire talent right out of college. Unemployment rates among Jasmine's generation are terribly high, and yet, these graduates have unprecedented tech / mobile / social skills.
Pay 20% or more above industry average, and use this as part of your advertising/recruiting strategy.
Clearly communicate to the prospective employee that they are being trained and developed, and will possess highly marketable skills in twenty-four to thirty-six months.
Develop a "plug and play" process ... new employees go through a rapid training process ... make it so that your "program" can be quickly learned and mastered.
Hire each candidate on a 90 day conditional basis ... promise to pay six month's of salary/benefits, but give yourself the ability to separate from the employee if skills aren't a good match.
Give a significant salary increase at six months, to reward those who make good progress.
After eighteen months, create a "Sr. Analyst" tier, and ask those in the "Sr. Tier" train new employees.
Identify the rare, gifted employee. Fast track this individual into Management.

I know, this is the opposite of what you are used to doing. But everything you've been doing for thirty years is leading you astray!

First, organizations have "flattened out" ... you no longer see 1 VP and 3 Directors and 6 Managers and 14 Analysts ... with a clear and achievable career path. These days, you get 1 VP and 2 Directors and 4 Analysts ... with remaining skills outsourced to vendors.

Why not evolve to 1 VP and 11 Analysts, with the occasional Director/Manager position reserved for the rare, gifted employee? You'll spend the same amount on salary/benefits, but you'll keep knowledge in-house (as opposed to outsourcing all of the knowledge of your business to vendors). You'll be able to identify talent and reward it over time. You'll be able to remove poorly performing employees quickly. And you'll tap into a big market of tech / social / mobile savvy employees who can help you evolve into future marketing strategies.

Draft and Develop.

If what you're currently doing is not getting the job done, why not consider Draft and Develop?

Discuss.

40% Off

2013-05-15T20:15:00.000-07:00

This is pretty much the limit, as far as pushing the peanut on percentage off promotions.

I suppose you could go to 49% off plus free shipping.

Once you get to 50% off, you're in the realm of clearance, and that sets off a whole different customer mindset.

There are at least four theories, surrounding discounts and markup.

The first theory is that you are able to charge a high markup as a premium for offering highly desired merchandise. The most successful companies I work with tend to earn gross margin rates that are in the low 60% range. In other words, the $49.99 item that we purchase costs the business $20. This business model works really well in fashion, and for proprietary merchandise (i.e. items that others cannot easily replicate/duplicate).

The second theory is that you charge a high markup, so that you can stimulate demand by marking down the item. The $49.99 item that costs the business $20 is manipulated ... take 40% off ... so that the customer perceives that a $29.99 item that costs the business $20 is a great deal. This is the JCP model. Once you go down this path, you cannot reverse-engineer it. You can't. You've built a customer file that loves playing the game ... take the game away, and you take the customer away. For this model to work, you need (in my example) three times as many customers to purchase the item to generate the same amount of profit. This model can work well when merchandise is a commodity. This model almost becomes the default when competition is stiff.

The third theory is that you charge a small markup, so that you can stimulate demand by offering everyday low prices. The $24.99 item that costs the business $20 yields $4.99 profit ... you need to sell six times as many items to generate the profit you generate at $49.99 ... however, you change the marketplace by offering low prices, and this change drives out the businesses that offer comparable items at $49.99. This is congruent with Wal-Mart, or Amazon. This model results in what the pundits like to call "scale", and offers significant competitive advantages. Of course, it's terribly hard to "scale", isn't it?

The fourth theory is desperation. Business is not meeting expectations, so you simply start discounting. 10% off. Sales increase. Wow! Next year, 10% off doesn't get you anything. 15% off. Sales increase. Wow! Then sales flatten again. Then it is 20% off. 25% off. 30% off. 35% off plus free shipping. 40% off plus free shipping. You can pretty much take this model to 49% off plus free shipping before customer perceptions change.

The first three theories are viable business strategies.

The fourth theory aligns with what most of us do, and there are unintended consequences that offset the short-term sales increase you get from discounting. Just analyze your customer file, and you'll see the unintended consequences, when viewed over time.

Decoupling: The iPad

2013-05-14T20:15:00.000-07:00

Here's what I want you to try:

Select every customer from your database who purchased via an iPad in the past year.
Measure the percentage that purchase via an iPad on the very next purchase.

If the percentage is greater than 50%, your mobile business is in the process of decoupling from the e-commerce experience. You've got excitement, and you've got challenges. Both will make coming to work worthwhile.

If the percentage is less than 20%, your mobile business is not being embraced by your customers ... on a subsequent purchase, the customer migrates away from the iPad.

Or lump the iPad and iPhone and all Android devices and Blackberry devices and Windows Mobile together ... and run the same metrics above.

Increasingly, I am analyzing businesses where the customer is in the process of decoupling from e-commerce. If this is your business, then you need to stay on top of it. You need to be all over it!!

Decoupling is interesting - it works opposite of what the experts tell us. The customer makes a decision, and changes behavior. When this happens, we sub-optimize the customer experience by forcing the customer to tether herself to old-school channels.

Decoupling: Email Marketing

2013-05-13T20:15:00.000-07:00

Leave your desk right now, and have your analytics guru run a query for you:

From May 14, 2012 to May 13, 2013, calculate the average price point purchased by marketing channel.
Compare email marketing to every channel.

What do you see?

There's a high probability that the average price point purchased via email marketing is lower, significantly lower, than all other channels.

This happens when you hyper-optimize a marketing channel.

Email marketers hyper-optimized their channel. 20% off. Free shipping. Gotta get open rates up, who cares about the profit and loss statement, right?

Over time, the email customer file was built, and it became fundamentally different than the rest of the business. It's not uncommon to observe an email customer file that purchases items 20% cheaper than those purchased by the rest of the business. It's not uncommon to observe an email customer file that buys 75% of items via discounts/promotions, whereas 20% of the remainder of the customer file purchases via discounts/promotions.

Once this happens, the email customer file has been decoupled from the rest of the business. Integration with the rest of the business becomes sub-optimal, and for good reason ... you're dealing with a fundamentally different customer. It's a lot like JCP abandoning discounts/promos and being thumped over the head with a bag of oranges, to the tune of a -25% to -30% comp store sales performance.

When you decouple the email customer file from the rest of the business, you actually have freedom to make changes, to reverse the process of multichannel/omnichannel integration. Use email marketing to play to the strengths of customers who buy from email marketing ... those customers receive versions tailored to their interests.

Dear Catalog CEOs: Decoupling of Demand

2013-05-12T20:15:00.000-07:00

Dear Catalog CEOs:

It's happening ... and it's happening largely opposite of what you were told.

I remember being at Eddie Bauer, way back in 1998. Our e-commerce business went from a million in 1996 to something like five million in 1997 to about fifteen million in 1998. We observed a funny thing about that fifteen million in demand in 1998.

It was heavily skewed to male-gender merchandise.

In other words, the demand generated online reflected the audience that was using the internet in 1998. And when demand launched toward sixty million in 1999, well, those thoughts went out the window. Demand was more reflective of total direct channel demand, and the concept of "multi-channel integration" was born.

That's what folks focused on. Integrate the business. Make everything the same, same merchandise, same offers, same creative ... same same same.

This made sense (to some) as the baton was handed from old-school cataloging to modern e-commerce.

But once the baton was formally passed, a funny thing happened.

The trends that we observed at Eddie Bauer, way back in 1998, have reappeared ... in reverse.

E-commerce now dominates the share of demand generated by the vast majority of catalogers. But go take a look at the items that customers shopping your call center purchase.

You remember your call center, right? It's the building with old-school corded phones that took in 90% of orders in 1996 ... that same building that now captures 2% to 22% of orders today (unless your customer is June, of course).

Rank-order all items that sell at your contact center ... first to number one hundred. Then compare those items against the top-selling items from your pay-per-click program, or the top-selling items from your email marketing program.

Yup, they're different.

In other words, we're in the process of decoupling demand. All of the integration activity of the past ten or fifteen years is becoming much less important, as small tribes of like-minded customers pick and choose the channel that they prefer.

This is our future ... it's opposite of what we were told. Small tribes of customers, with unique preferences, shopping the way they want to shop, buying the merchandise they want to purchase. Our job, of course, is to respond to this trend in the most profitable way possible.

Sameness seldom results in the most profit.

It's time to get busy serving unique cohorts of customers.

Customer Acquisition - Via Gilt

2013-05-09T20:20:00.000-07:00

There are many ways to acquire customers.

Many, many ways.

Catalogers are generally locked-in to co-ops.

Online marketers, for the better part of a decade, were generally locked-in to Google.

And, of course, you can use your own customers to do the work for you, like in this example from Gilt.

In this example, you do the work via social media ... and when your friends use you link, you get $25.

I'm not saying this will "scale" like renting 5,000,000 names from your favorite co-op at $0.06 each scales, but it's at least something worth thinking about. And that's what I'm encouraging here!

Are Customers Moving Into Your Target Demographic?

2013-05-09T20:15:00.000-07:00

The topic comes up nearly every week.

"We're excited, because our core customer is 60 years old, and the last half of the Baby Boomer generation is moving into our target demographic!!"

You know what? You might be 100% right!

How do you know if you are right? Follow these three steps:

Find out the average age of your 12-month buyer, back in 2008.
Find out the average age of your 12-month buyer, today, in 2013.
Calculate (2) - (1) = Age Change.

What value do you get for "Age Change"?

An example.

Five years ago, your customer was 57 years old. Today, your customer is 60 years old. Age Change, therefore, is calculated as 60 - 57 = 3. In the past five years, your core customer file aged three years.

When "Age Change" = 0, you are 100% right, demographics are working in your favor. You serve a need at a point in a customer's life. On average, this is a good situation to be in.

When "Age Change" = 3, you have a different situation to resolve. You are not serving the needs of a customer at a point in life. Instead, you are following a demographic cohort into retirement. This isn't good or bad, it's just different.

Most catalogers today live in the "Age Change = 3" situation, for two reasons.

A strict adherence to a multi-channel philosophy, where the online experience must be driven by the catalog, not grown organically via online marketing tactics.
An unquenchable thirst for new names, sourced via catalogs, obtained from the co-ops.

When you tether website traffic to a combination of catalogs mailed to housefile buyers, and catalogs mailed to co-op prospects, you accelerate the age of your average customer.

I observe this problem every single day. It's getting tiring!

Don't believe me? Ask Experian or Epsilon to perform the average age analysis listed above.

I have several clients who manage a business with an "Age Change = 0". In these cases, the client has a very strong online marketing team, and/or possesses a merchant/creative team that finds (and presents) new products that appeal to customers 1-3 years younger than today's core audience. The majority of catalogers I've worked with, in comparison to retail/e-commerce brands, have weaker online marketing teams, given the obsession with driving e-commerce through catalogs.

The key, folks, is to focus on acquiring customers 1-3 years younger than today's core audience. Keep that metric in mind. Not 25 years younger. 1-3 years younger. You can build a bridge to the future doing this. Look at the merchandise slightly younger customers purchase, and factor that information into your product development strategy.

Most importantly, do the analysis! It's simple, it's cheap, and it's critical to the strategic direction of your business.

Direct Gardening Association Summer Conference, Burlington, VT

2013-05-08T20:15:00.001-07:00

What are you doing July 22 - 24?

How about attending the Direct Gardening Association Summer Conference in Burlington (click here please)? I'll be giving a keynote on Wednesday, July 24 at 10:30am titled "How Demographics Are Impacting The Future Of Marketing".

In other words, the talk builds upon the concepts of Judy / Jennifer / Jasmine that are outlined in our Personas book from April 2012 (click here to purchase on Amazon).

Oh, I know. The popular topics out there are mobile, multi-channel, omni-channel. But every topic that's trendy right now is fueled by demographics ... mobile doesn't work with Judy ... catalogs don't work with Jasmine ... and Jennifer is tethered to Amazon. Know your demographics, and you'll know the path to the most profitable future you can achieve. There's plenty of profit to be had marketing to Judy, or Jennifer, or Jasmine.

Come join us! What's not to like about Vermont in July?

And by the way ... since I'll be in New England that week ... why not reserve time to meet with me? In recent years, I've made a pilgrimage to New England ... the slots fill up terribly fast, so please reserve your slot early, ok? (click here to email me).

Email Marketers - A Different Breed Of Marketer

2013-05-07T20:15:00.001-07:00

In the past six months, my best selling booklet is this one ... Hillstrom's Email Marketing Excellence (click here for your copy from Amazon).

The book is selling extremely well.

How many Email Forensics projects do you think I've conducted in the past three months?

Zero.

Catalog PhD and Merchandise Forensics projects are running neck-and-neck in 2013, with Merchandise Forensics projects surging, of late.

Email marketers are just different, aren't they? Not good or bad, just different.

It's been my experience that email marketers love their own set of metrics ... opens / clicks / conversions. By and large, email marketers ignore many aspects of the overall business, focusing instead on real-time measurement of email campaigns.

Email marketers, like most disciplines, have their own language, and their own community. And they deliver a disproportionate amount of profit to the bottom line ... without even knowing just how effective they are!

I can't tell you how many meetings I've been in ... executives from many departments dotting the room ... the email marketers huddled in a tiny corner. When it's time for the email team to communicate results, the buzzwords fly ... opens/clicks/conversions/heat maps/opt-outs ... speaking a different language than everybody else in the room. The email marketer has done more to deliver company profit than just about everybody else in the room ... but nobody knows this, because few people ever put the results into a format that the CFO can embrace and evangelize. If the CFO knew that 20% of her annual bonus happened solely because of the email marketing team, what kind of investments might the CFO be willing to make, on behalf of the email marketing team?

Since the booklet is the best selling booklet of the past six months, I know the concepts resonate with email marketers.

But the lack of project work tells me that there are cultural barriers between email marketers and other folks ... I get to see these cultural barriers in the meetings I attend. With the significant amount of profit that email marketers deliver to the bottom line, email marketers should be held in higher esteem.

What do we have to do to help this "different breed of marketer" be held in higher esteem? Discuss.

How Results Of The Catalog PhD Are Changing Over Time

2013-05-06T20:15:00.001-07:00

We're nearly three years into running Catalog PhD projects (click here for your own copy of the original text from Amazon).

My, how times have changed.

When the catalog division was shut down at Nordstrom, way back in 2005, customers would distribute along a fairly even axis.

Grade A (Mail 20+ Times A Year) = 10%.
Grade B (Mail 10-20 Times A Year) = 15%.
Grade C (Mail 4-9 Times A Year) = 20%.
Grade D (Mail 1-3 Times A Year) = 25%.
Grade F (Mail 0-1 Time A Year) = 30%.

Sure, there were more marginal customers than outstanding customers, but the distribution was somewhat even.

In late 2010, when the Catalog PhD was created, the distribution looked something like this:

Grade A (Mail 20+ Times A Year) = 5%.
Grade B (Mail 10-20 Times A Year) = 10%.
Grade C (Mail 4-9 Times A Year) = 20%.
Grade D (Mail 1-3 Times A Year) = 30%.
Grade F (Mail 0-1 Time A Year) = 35%.

In other words, customers were moving "downstream". With e-commerce and the myriad channels associated with e-commerce driving sales (hint - Google), catalogs were less important. By mailing fewer catalogs, profit could easily be generated. The theme of all of my work was "mail less often". By and large, catalogers did not like this message - so in spite of the opportunity to be far more profitable, catalogers turned to the co-ops, looking to turbocharge sales.

Now, in mid 2013, the results have evolved again, this time fueled by demographics and mobile.

Grade A (Mail 20+ Times A Year) = 10%.
Grade B (Mail 10-20 Times A Year) = 3%.
Grade C (Mail 4-9 Times A Year) = 15%.
Grade D (Mail 1-3 Times A Year) = 22%.
Grade F (Mail 0-1 Time A Year) = 50%.

There are two significant changes. Can you spot them?

The number of customers to mail 0-1 times a year is growing, rapidly. This is fueled by three unique issues ... first, the economy never recovered, so there are far more marginal customers today than in the past ... second, mobile is changing the world, with mobile customers tied to apps and engaging content, catalogs have less importance ... and third, demographics - with Jasmine having little interest in catalogs.
The number of customers to mail 20+ times a year is growing, rapidly. This is fully fueled by Judy making choices - she is moving to catalog (more than in the past five years), and is not participating in the mobile ecosystem. Sure, she uses mobile devices, then transacts because of catalogs.

What does this mean for the profitability opportunity identified by Catalog PhD projects?

In late 2010, more than 70% of the profit opportunity comes from mailing fewer catalogs to the bottom of the file.
In mid 2013, more than 50% of the profit opportunity comes from mailing more catalogs to the top of the file.

In other words, your customer file is splitting apart.

The majority of the customer file (Jennifer / Jasmine ... ages 18 - 51) needs dramatically fewer catalogs.

A portion of the customer file (Judy ... age 52 - 68) actually needs MORE CATALOGS. More. We don't have enough catalogs in the contact strategy stream to meet her needs.

We've been told, for ages, to be multi-channel / omni-channel ... to be all things to all customers across all channels.

The data is telling us something fundamentally different.

The data is telling us that customers are moving in opposite directions ... by appealing to all of them, we potentially satisfy none of them.

The data tells me that we are going to have to become much smarter at managing unique customer segments.

Ready for your own Catalog PhD project? I'd think so, given the dramatic changes I'm seeing due to demographics, fueled by mobile (and Google). Click here to contact me, right now!

Dear Catalog CEOs: The Distraction Advantage

2013-05-05T20:15:00.000-07:00

Dear Catalog CEOs:

Your competitors are being seriously distracted. This gives you a major advantage, the first time you've had a significant advantage over the competition since the late 1990s.

Retail: Retail executives are being told that they must digitize the physical store experience. Oh boy. Do you honestly think there is one clear, easy path to accomplishing that? Vendors/Management Consultants will say "yes, it's called omnichannel!!!" You could spend a decade trying to do this, with a low probability of success. Retailers will spend a decade trying to do this. Channels will trump merchandise for the near future, based on what we are reading.

E-Commerce: E-commerce executives are being told that mobile will revolutionize their business. Well, that's partially true. If your core customer is 45, no, mobile will not revolutionize the business in the short term. Long-term, mobile will create the same problem for e-commerce that e-commerce caused for catalogers. It's the way the world works. Either way, some Vendor/Management Consultant will tell you they have the solution, and e-commerce folks will be distracted/frightened. eBay mentioned mobile 127 times in the Annual Report (click here), they mentioned omnichannel 0 times. Mobile is going to obliterate e-commerce (among customers age 18-40) in the way that e-commerce obliterated catalog marketing. It's going to be interesting to watch, no doubt about it. It's going to be a distraction.

Any time your competitors are distracted, you have a major advantage.

Catalogers, you have a major advantage today.

You already know that you have to make a choice.

Double-down on the Baby Boomer customer, and ride the gravy train into retirement.
Make strategic changes to migrate the business model, over the next five years, from Judy (age 60) to Jennifer (age 44).

You get to spend the next five years implementing either choice.

Your competitors get to think about how to "digitize" the omnichannel experience.

Take advantage of this opportunity.

Merchandise Forensics: Styles And Demand

2013-05-02T20:15:00.000-07:00

Let's look at my business for a moment.

Three years ago, I offered two products ... Multichannel Forensics and Ad-Hoc Projects. My income was "x".

Today, I offer eight products ... Online Marketing Simulations, Catalog PhD, Omnichannel Forensics, Merchandise Forensics, Email Forensics, Price Elasticity, Sales Forecasting, and Ad-Hoc Projects. My income is "2x" what it was three years ago.

In other words, I offer 4x as many styles/skus ... and I get 2x as much, in sales.

Does that relationship make sense to you?

Similarly, if I cut back from 8 project types to 4, I would not expect sales to be cut in half ... they might be cut by 25% or 30%.

The same thing happens in your business.

Here's what I have observed. The explosion in channels over the past decade distracted us from being able to understand how merchandise strategy impacts our businesses.

When I offered the Catalog PhD project late in 2010, business exploded. Without product innovation, my salary would have stalled. Last year, without a breakthrough new product, sales didn't explode. This year, with Merchandise Forensics becoming more and more popular, sales are moving along nicely.

The same thing happens in your business.

Look at Apple. You watched the product line grow from iPod to iPhone to iPad, and the business exploded. With no new products (realistically) for the past two years, we're seeing the business plateau. Granted, any of us would like to sit on $155,000,000,000 in cash, but regardless, without new product innovation, we're seeing a change in the trajectory of the business.

Our obsession with channels blinded us to what really matters.

What really matters is how we manage merchandise. New products. Existing products. Growing skus profitably. Managing inventory appropriately. This is where business success largely happens. For the most part, we've ignored this dynamic.

In the next five years, retailers and e-commerce brands are going to obsess about mobile ... they're going to throw a disproportionate amount of resources at the digitization of the business. This is your opportunity to take advantage of a focus on omnichannel, by focusing on merchandise strategy.

Why Must The Marketer Measure The Merchant?

2013-05-01T20:15:00.000-07:00

I want to expand upon a comment I received yesterday. I don't get many comments ... social media experts would blame me in some way for not meeting their expectations ... but some of the comments end up provoking subsequent thought.

Here's the comment:

"As a marketer, why do we owe it to our merchandising team to tell them, in a changing environment, how items are performing? Shouldn't it be their job?"

There are so many thoughts that come to mind. Let's address the thoughts. Leave a comment at the end of the post, and offer your thoughts.

Aptitude: This concept is so poorly understood that it deserves a blog post. Marketers who analyze must pick up a broom, and analyze issues for others. What is a merchant good at? Merchandise! This means that the merchant is unlikely to possess the talent to analyze issues properly. And because the merchant is unlikely to possess the talent to analyze issues properly, the systems that support the merchant are likely to be poorly designed. And when systems are poorly designed, the quality of analysis is likely to suffer. Those who have aptitude must pick up a broom, and clean up messes created by those who do not possess aptitude.

Leadership: I learned this early in my career. Those who analyze marketing issues have influence in the marketing department. Those who analyze business issues have influence across the company. We have a responsibility to "connect the dots" ... there is an interplay between marketing, creative, and merchandising that is simply not well understood. By only focusing on marketing, we miss 2/3 of the reason why success/failure happens. We need to lead, to help all of our co-workers understand how all the pieces of the puzzle fit together.

Accountability: This happens, all the time. Business stinks. Fingers are pointed. And they're pointed right at you ... the marketer! It's your fault! Your pay-per-click campaign is attracting the wrong kind of buyer. Accountability is shared, of course. Business stinks because nobody wants to buy merchandise the way we are creatively presenting it, via the marketing channels currently utilized. By analyzing merchandise productivity and creative strategy, we help foster an environment of shared accountability.

Finance: If you don't measure something, Finance will. You don't want to let Finance measure things. Not because Finance folks measure things poorly, but because their worldview leads to Finance-centric conclusions. When you work in partnership with Finance, Merchandise, Marketing, and Creative, you move toward customer-centric solutions.

Perspective: When you are measuring merchandising issues, you learn about different perspectives. This is important. Not everything in life is about optimization or advertising. You learn why a merchant introduced new items. You learn why outstanding inventory management is directly linked to company profitability. You learn why the creative team is moving away from proven creative treatments. In other words, you learn how to run a business.

Performance: So often, marketing fails because of merchandise productivity. When customers like merchandise at 90% of the rate of the prior year, marketing activities will perform 10% worse. Our instinct is to dive in and measure marketing performance. This is opposite of what we should do. We should dive in and measure merchandise productivity.

Career Advancement: There's a reason why so few marketers and analytics experts run companies. When you gain the perspective earned by analyzing merchandising issues, you become a well rounded individual. Eventually, you'll get career opportunities outside of marketing/analytics. Those career opportunities are invaluable, if you want to lead a company or a division of a company.

Change: It's really hard to enact change if all you do is count the number of visitors from affiliate websites. Change happens when a marketer, creative expert, and a merchant forge a shared vision.

Merchandise Forensics (click here please) now comprise nearly half of my projects. Clearly, we're on to something ... it is becoming obvious that we can't enable change simply by adding channels and hoping that an omnichannel future leads to riches. Obviously, the merchandise we sell, presented creatively, makes a big difference.

Time for your thoughts. Please leave a comment.

Merchandise Forensics: Growing/Shrinking Businesses Standardization

2013-04-30T20:15:00.000-07:00

Let's say that your business is on the upswing.

Last year, you had 100,000 customers, and you sold $12,000 of a certain item.

This year, you had 150,000 customers, and you sold $16,000 of a certain item.

Clearly, your merchandising team is doing a great job with this item, right?

Last Year's Demand per Thousand Customers = ($12,000 / 100,000) * 1,000 = $120.00.
This Year's Demand per Thousand Customers = ($16,000 / 150,000) * 1,000 = $106.67.

Now, I get it ... if you featured the item in catalogs more/less frequently, or in email campaigns, then the metrics will be impacted. But for most items, this isn't the case. Consequently, you can get a directional view of merchandise productivity by controlling for the number of customers who purchased in the past year.

This metric can be adjusted - for great customers, for average customers, for marginal customers, for new customers ... your choice.

But you owe it to your merchandising team to tell them, in a changing environment, how items are performing, correct?

Contact me (click here) for your own, customized merchandise forensics project.

Netflix

2013-04-29T20:15:00.000-07:00

Sounds like Netflix is doing pretty well these days (click here).

Remember when Netflix changed DVD and Streaming pricing strategies, back in 2011? The change was considered a social media disaster.

What did we learn?

You can commit the most shocking social media disaster of the year, and it has no impact on sales and profit in the long-term.
A small and passionate group of social media zealots should not stall business decisions you believe in.

Focus on merchandise presented creatively. Focus on the future of your business.

Proceed.

J. Peterman

2013-04-29T16:34:00.000-07:00

The mid-1990s were the zenith of the catalog marketing industry. And no cataloger flew closer to the sun than J. Peterman, spoofed on Seinfeld:

That's what we know. Nearly twenty years ago, J. Peterman was the toast of the town.

Why was J. Peterman, a $75,000,000 business back in the day, popular in the first place? Was it omnichannel? Heck no, the prior version of omnichannel, called multichannel, bankrupted the company.

Go ahead - read this little ditty (click here) and think about what Mr. Peterman says about running a business.

"I didn't know how to set up a warehouse."
"I didn't know how to set up a distribution system."
Pretty soon, he opened 15 retail stores. The faster it grew, the more cash he needed, and before he know it, the company was bankrupt.

Why I am referring to something that happened nearly 20 years ago?

Because it is happening again, today. You're getting the same kind of advice. "Be social, be authentic". "Brands that don't embrace digital will surely die". "Let your customers do the marketing for you." "Trust the cloud." "Omnichannel customers transact everywhere, and are worth 29 times as much as average customers."

If you aren't going to have the lowest prices and the best customer service (hint - Amazon), then you need a different approach.

Unique Merchandise.
Creative Presentation.
Sound Operational Fundamentals.

J. Peterman sold oxford shirts, just like everybody else. But the creative presentation was so over the top that you purchased because of it.

Instead of focusing on the next big idea, why not focus on selling merchandise in a creative manner? Instead of channels, why not tell a story?

And then, when sales take off, make sure the fundamentals of the business are well taken care of. With all of the profit you earn, you can invest in a dreamy, omnichannel solution.

Dear Catalog CEOs: Online Education

2013-04-28T20:15:00.000-07:00

Dear Catalog CEOs:

I recently viewed a roundtable discussion about the future of education, six people, all over the age of 50, predicting the future. The core of the discussion was this:

Online education is the future.
Online education, and simulations, are fun!
We're embracing the future of education.
Nothing replaces the experience of a campus-based experience.
Nothing replaces in-person discussions with a professor.
In a blended model, with online and on-campus, the results (high grades) are potentially much higher.
You need a teacher to generate the motivation factor for students.
Great teachers are necessary, they must inspire the student.
The future is the integration of online education with the teacher, and the campus experience.

What does this sound like?

OMNICHANNEL!!!

Catalogers, of course, went through this evolution ... ten years ago ... then called multichannel. Just integrate the online experience with the offline experience, and the customer will reward you with riches.

Did it work? The winner was Amazon. No catalog.

If you are the incumbent, you seemingly have no choice but to sell a vision of the future that tethers old-school tactics to new technology.

There are many great things about being a cataloger in 2013. I'd much rather be a cataloger in 2013 than in 2003. A decade ago, there were no rules, so every expert under the sun was telling you what the "new rules" were. Today, there aren't many people telling you what you have to do. You have a ton of latitude to be creative. What a blessing!

In the roundtable discussion, Tom Friedman said that the panel was selling "Altavista" in the late 1990s. In other words, the panel was discussing a solution, while the real solution (Google) would eventually arrive, and be different.

This is what is great about cataloging today. In e-commerce/retail, omnichannel is Altavista. E-commerce/retail is being distracted, strategically.

In cataloging, you've been through this transition ... so you get to focus on merchandise and demographics, the stuff that is important. The payoff of this strategic focus is coming. Get ready!

Macy's

2013-04-24T20:15:00.000-07:00

Click here to read their 2012 annual report.

They now call themselves "America's Omnichannel Store". You'll have to come up with a different slogan, sorry. This slogan, however, comes with a price. Now we're watching. If you claim you're the best at something, we're going to compare your progress to the progress of others who aren't quite as boastful. And for being "America's Omnichannel Store", Macy's did not post comp store sales gains as strong as Nordstrom, a company that does not mention the word Omnichannel once in their 2012 10-K.

In fact, the word "omnichannel" appears 30 times in the report. Thirty. The word "profit" or "profitability" appears 9 times. Nine.

Profit should be called out, because EBITDA is closing in on 14% of net sales. In retail, that's some sweet action.

Comp store sales were +5.3% in 2011, and dropped to +3.7% in 2012. Oh oh.

Let's think about a key omnichannel strategy - the ability to fulfill items from other stores or the online channel should boost sales, right? Macy's went from 23 stores in 2011 to 292 stores executing this key omnichannel strategy in 2012. So why are comp store sales falling, when this key omnichannel initiative should cause sales to increase? Give that some thought.

Macy's 10-K talks about marketing to Millenials ... those age 13-30, suggesting that this is a key marketing initiative. Pay attention, folks.

Macy's generated $422,000,000 in co-op advertising ... in other words, brands paid Macy's $422,000,000 to advertise their products. Catalogers - pay attention!!!

Macy's has $6.8 billion ($6,800,000,000) in long-term debt, and paid $425,000,000 in interest payments in 2012. This is common in retail. It also illustrates why retailers jump all over omnichannel initiatives ... when sales struggle, it hurts to make $425,000,000 in interest payments, payments that accomplish virtually nothing.

Think about this ... Macy's has 800ish stores, suggesting that each store generates somewhere in the range of $3,000,000 to $4,000,000 in profit. It takes 100 stores, generating average levels of profit, just to pay the interest on long-term debt.

Worded differently - the sole purpose of 100 of the 800+ stores is to generate enough profit to only pay interest on long-term debt. Did anybody tell you how important a heavy debt load was, when thinking about accomplishing a brilliant omnichannel strategy? Macy's has +/- 30% of annual net sales tied up in long-term debt, and it must be paid off. We're only talking interest here. And when you do pay it off at a faster than expected rate, Wall St. hammers your stock price. So there. Omichannel. Fun stuff! Just don't let sales decrease, you've got interest payments to make.

We're going to pay attention to Macy's, going forward. If you claim to be "America's Omnichannel Store", we're going to measure you against alternative strategies.

Omnichannel: Are #Omnichannel Customers Truly More Valuable?

2013-04-23T20:15:00.000-07:00

The most popular meme in retail is "omnichannel". The theory posits that by aligning all channels around the customer, by creating a consistent experience across all channels, by tearing down silos inside organizations, by integrating a digital experience in-stores and online, by fully integrating mobile into the customer process, retailers get to reap the rewards of a customer demanding a fully holistic purchase experience.

You'll have to look hard to find any researcher or vendor who has proof that this strategy leads to a dramatic increase in profitability.

Here's how the argument begins. We're told that omnichannel buyers, those who purchase from many, many channels, are much more valuable than single channel buyers. Researchers cite this table as proof - here's what the data typically looks like:

This is where the research ends. A simplistic query is run, and of course, there's clear proof that customers who shop many channels spend much more than customers who only shop a small number of channels. In this query, 0-3 month buyers were chosen. Then we measure historical channels purchased from, and we measure how much customers spent, historically.

Clearly, omnichannel matters.

Or does it?

Researchers need to go one step further, don't they? Given that a customer is an omnichannel customer and has the same frequency as a single-channel customer, can we prove that omnichannel leads to increased future spend?

This table measures repurchase rates in the next month, after controlling for historical frequency, and for historical number of channels purchased from. We're still evaluating 0-3 month buyers.

What do you observe, in this table?

Look at a customer with 6 life-to-date orders. Read across the table ... these are customers who purchased from 1, 2, 3, 4, and 5 historical channels. The customer buying from 5 historical channels should be much more valuable than the customer buying from 1 historical channel, correct?

But that's not what we observe.

In fact, you have to get to 10 historical orders, and 5 historical channels, before you start to see an increase in future repurchase rate.

Let's look at future spend, not future repurchase rate.

Average spend (no repurchase = $0, averaged with those who do repurchase) illustrates that there is some incremental value to getting a customer to purchase from multiple channels. Read across the Life-To-Date Orders = 6 row. You see that four channels are better than 1-3 channels ... mind you, only 20% better, but it's still better.

But there are quirks, aren't there? Read across the Life-To-Date Orders = 3 row. Here, buying from one channel is better than buying from three channels. Read across the Life-To-Date Orders = 2 row. Here, buying from one channel is better than buying from two channels.

For this retail brand, when a customer is early in the life cycle, omnichannel behavior is counter-productive.

For this retail brand, when a customer is deep in the life cycle, omnichannel behavior is more productive, but only 15% - 25% more productive, not 7 times more productive as is commonly published.

Run these queries for your business. Seriously, go run them. You'll see similar results. Of course, your mileage will vary.

If your results look something like what I've illustrated above (hint - they will look similar to this), then there are a whole bunch of interesting strategic questions that need to be asked.

Strategic Question: If most of my customers have 1-3 historical purchases, and the gains promised from omnichannel come from customers with 10+ historical purchases and 3+ historical channels, and the gains are in the 15% - 30% range (not 700% or 800% as promised in omnichannel literature), then of what benefit is an omnichannel strategy?

Strategic Question: If the gains are in the 15% to 30% range, wouldn't I be better off investing in 1 new customer, so that I have 2 customers, than to re-arrange every process in my company so that I have 1 customer spending 15% to 30% more - only if the customer makes it deep into the life cycle?

Strategic Question: If the payback of an omnichannel strategy is 15% to 30%, only among the 5% of customers who ever make it deep into the customer life cycle, then why should I tear down all silos in my company and work terribly hard to integrate all of my processes around digital channels?

Strategic Question: What do Forrester Research, IBM, HP, and any other vendor promoting omnichannel integration have to gain by getting you to reinvent your entire business around a concept that only pays back 15% to 30% among the 5% of your customer audience that is deep into the customer life cycle?

Use the comments section to offer your thoughts. Provide links to research that complements or refutes the information presented here.

And if you're looking for help determining if omnichannel is right for your retail brand, click here to email me, now!!

Picking The Wrong Side Of A Fight

2013-04-22T20:15:00.000-07:00

Yesterday, I wrote about the two topics that are buzzing around the catalog vendor community this week (click here to read the blog post).

Possible USPS postage increases.
Possible requirement to collect sales tax.

Feedback on this article was distributed as follows:

100% of the feedback came from vendors in the catalog industry, and it was largely opposite of my point of view.
0% of the feedback came from actual catalogers.

Let's address the feedback I received, in the Frequently Asked Questions (FAQ) format.

If catalogers are required to collect sales tax, annual sales will be hurt, that's a no-brainer, correct?

Maybe. Maybe not. Time will tell. I have measured the phenomenon for many retailers. Retail brands open new stores in new markets all the time. They will open a store in Omaha, and as a result, be forced to collect sales tax in all of Nebraska. In the vast majority of cases (in fact, I cannot remember a case where this didn't happen), the e-commerce side of the business takes a brief sales hit, then sales recover within a short period of time (often 60-90 days), and return to prior levels. In other words, there is no long-term impact on e-commerce sales. Your mileage may vary.
Remember, 85% of most sales still happen in stores ... where customers willing pay sales tax. Please keep that fact in mind - we're in a world where you can get free shipping and no sales tax, and yet, 85% of sales still happen in retail stores, where you have to pay for gas, invest time, and then pay sales tax.
Did you stop purchasing MP3s from the iTunes store when Apple opened a store in your market? Did you switch to Amazon, who offered the same item at the same price with no sales tax, or did you continue to purchase music through the iTunes store? Be honest!

But if catalogers have to collect sales tax, at scale (i.e. everybody), then the result is different, correct? When everybody has to do it, won't annual sales take a 5% or 10% hit?

Maybe, maybe not. When the depression started, back in Q4-2007, weak businesses were literally pushed out of business, while strong businesses (hint, Amazon) steamrolled along. Issues do not hit all companies evenly. If we assume that collecting sales tax will result in a dire outcome (retailers have suggesting the result is not dire), why will it happen evenly, across the board? Might the issue push a weak business into the ground, re-distributing the demand from the weak business among strong business, thereby having no impact on strong businesses? That's what happened during the depression of late 2007 - mid 2009, right? Weak businesses ceased to exist, strong businesses re-calibrated and moved on.

But sales tax collection is currently illegal, we can't just let our laws change, we'll damage society and hurt the consumer, right?

It used to be illegal for women to vote.
Our response to change is more important than the change itself.
What will your response be?
Remember, you have a control group ... states like Oregon that you'll be able to measure results against.

If the USPS raises rates, won't that cause catalogers to go out of business?

The USPS raised rates in the past, correct? How did that impact your business? Did prior rate increases cripple your business?

I don't think you understand, Kevin. The combination of sales tax and catalog rate increases is like an additional 25% tax on catalogers. The impact will be fatal.

Is that a question?
This will not be fatal to catalogers.
This might be fatal to weak catalog businesses that sell merchandise that customers largely ignore.
Focus on merchandise excellence.
Identify channels that your target customer shops in, and take advantage of those channels.

Your blog is widely read, and you're spreading misinformation out there to a large audience. Why?

I am sharing actual project findings, based on actual customer behavior. I have mail/holdout tests on my side. I have e-commerce results from retail store brands forced to collect sales tax in markets where they previously did not have to collect sales tax. I participated in the shut-down of a catalog division among a Jennifer-focused customer audience, and watched annual net sales increase on a $36,000,000 catalog ad cost reduction - think about what that does to the profit and loss statement?
I care deeply about my clients, and the catalog industry. That's why I share actual facts, not memes.
Let's bring facts, based on actual purchase data from retailers, e-commerce brands, and catalogs, to the table.

Logically, it makes sense that these forces are going to destroy catalog marketers, right?

Since many of you are from New England, go talk to your friends at L.L. Bean (they are not a client of mine).
Ask L.L. Bean if their catalog business was crippled when they were forced to collect sales tax when they opened stores in new markets?
Ask L.L. Bean what impact the 294 prior USPS price hikes had on their catalog business?
Use L.L. Bean as a case study for how catalogers might respond to drastic changes. They were not pushed out of business. Give L.L. Bean Management a call, and have a discussion with them. Get facts from somebody who has lived with the consequences of a sales tax burden.

Doesn't the customer need catalogs to shop? Sales Tax + Postage Increases = Fewer Catalogs and Fewer Shoppers, Right?

Ask Amazon if their customer (hint - that's everybody) needs a catalog to shop?
Does Amazon's customer in Washington State, where Amazon must collect sales tax, spend so little that it devastates Amazon's profit and loss statement?
If your customer is June / Judy (age = 69-85, 52-69), yes, mail/holdout tests prove that this customer will shop less if you stop mailing her catalogs. For this customer, sales tax increases and USPS postage increases could cause problems.
If your customer is June/Judy, ask yourself why you aren't supporting the ACMA?
If your customer is Jennifer / Jasmine (age = 36-51, 20-35), mail/holdout tests prove that this customer will continue shopping with your brand, but at lower rates (Jennifer) or will be barely impacted at all (Jasmine) if you stop sending catalogs to her. If your customer is Jennifer / Jasmine, go tell the USPS what to do with proposed rate increases ... tell them you'll stop spending money with them and you'll reinvest your marketing dollars in the channels that Jennifer / Jasmine use.
If your customer is Jennifer / Jasmine, you are in a position of power with the USPS.
We need to stop acting out of fear. We need to use the power we have to make a statement. If the customer is Jennifer or Jasmine, we don't have to send catalogs to her.

I thought you were a defender of the ACMA?

I am!
If you are a cataloger who caters to June / Judy, I don't like the fact that you don't support the ACMA!!!!!
But if you are a cataloger who caters to Jennifer / Jasmine, the world has changed, and your customer changed. Print is no longer the driving force for Jennifer, and is close to irrelevant to Jasmine. And I have data to prove it, via mail/holdout tests.

I know, some of you think I picked the wrong side of a fight.

I picked the right side of the fight. I chose data, facts, analyses, and mail/holdout tests, to determine my position.

Ask yourself what happens to the co-ops if fewer catalogs are mailed, thanks to the USPS, thanks to having fewer current buyers due to sales tax increases?

Ask yourself what happens to printers if fewer catalogs are mailed, thanks to the USPS?

Ask yourself what happens to whatever is left of the list industry if fewer catalogs are mailed, thanks to the USPS and sales tax changes?

Now ask yourself how you will respond? You won't go out of business. You will make strategic changes. If your customer is June / Judy, you'll make one set of changes. If your customer is Jennifer / Jasmine, you are already making changes that the catalog vendor community is not thrilled about.

I'm just asking you to use data and facts to see issues more clearly.

Dear Catalog CEOs: Urgent Call To Action

2013-04-21T20:15:00.000-07:00

Dear Catalog CEOs:

It's a lazy Friday, and then, all of a sudden, the emails pour in from the vendor community.

Subject Line = "URGENT CALL TO ACTION: ACT NOW TO SAVE YOUR BUSINESS".
Comments: "POSTAL, TAX CRISES GO FROM BAD TO WORSE, CATALOGERS MUST BE HEARD FROM TODAY".

The original email message comes from the ACMA, an organization trying to protect your future via lobbying efforts.

Unfortunately for the ACMA, almost no catalogers pay the nominal fee to support the ACMA.

Let's tackle two problems.

Sales tax.

It's unimportant.

I worked at Eddie Bauer and Nordstrom - it was my job to analyze the impact of sales tax collection on e-commerce / catalog transactions when we opened a new store in a state where we previously did not have a store. Yup, you open a store in Omaha, and you have to collect sales tax on e-commerce transactions in Ogallala. Not Council Bluffs, just a mile away, mind you, unless you have a store in the Quad Cities, five or more hours to the east. Fun stuff!

After about 90 days, sales rebounded to normal levels, and did not change.

I've analyzed this issue under the MineThatData umbrella - no impact.

If retailers can collect sales tax and not experience a sales decline, so can you. It's not the end of the world to manage a table of 45,000 zip codes with unique sales tax rates.

In other words, don't listen to the hype and dire predictions. It's nonsense, validated by data ... Amazon doesn't struggle in Washington State, and your sales won't struggle, either. If you have data to counter this, please present a white paper to me (email me by clicking here), and if the math is credible (i.e. not a survey of 994 likely customers conducted by a research firm), I'll publish it for 3,000 blog subscribers and 4,600 twitter followers to evaluate.

Issue #2 - postage increases. Here's the thing - welcome them! When the increases come, you cut back on circulation among Jennifer/Jasmine, you barely lose any sales, you increase profit, and you reinvest the profit in the online future of your business. How is that a bad thing? Your vendors raise prices on you, and you deal with that without lobbying Congress. If the USPS jacks up rates, stick it to them - mail less - mail much less. Reinvest the money on Jennifer/Jasmine, and build the online future of your business.

Instead of acting out of fear, why not act out of a position of power?

You have power, not the folks the ACMA is lobbying to.

You decide where to invest your marketing dollars.

Invest in the future of your business.

And if you believe in catalogs as your preferred marketing channel, then why the heck aren't you investing in the ACMA?

Mr. HiPPOman!!!

2013-04-18T20:15:00.000-07:00

Why not start the day with comedic fun ... it's time for Mr. Hippoman! He's the CEO of Hippoman's Big and Tall store, and as you might surmise, he's struggling with the future of marketing and retail. His devoted marketing executive, Samantha, walks him through different marketing topics (omnichannel, public relations, social media, mobile, you name it). The videos are in the tradition of Gliebers Dresses, for those of you who are fans of that series.

Yes, there's a hidden meaning in the name "Mr. HiPPOman"!

If you cannot see the videos in your reader - click here for a link to the permanent Mr. Hippoman page.

If you can see the videos below, enjoy ... they're about a minute long ... and while you're at it, why not share the videos with your co-workers, come on, participate in social media!!

Mr. Hippoman 001:

Mr. Hippoman 002:

Mr. Hippoman 003:

Mr. Hippoman 004:

Catalog Marketing - Profit Means Everything!

2013-04-17T20:15:00.001-07:00

You see it everywhere you go ... profit just laying on the ground ... with nobody motivated to bother to pick it up and stick it in their wallet!!

When a business is dysfunctional, profit leaks out, everywhere. From analysts choosing to measure "conversion" instead of profit to email wonks looking at opens/clicks/conversions to cloud-based catalog circulation folks, we barely bother to measure profit.

Internally, we lack discipline ... high return rates, high pick/pack/ship expenses, all of it hurts the p&l.

Look at this example ... the first company does a credible job of generating profit ... with 45% of demand flowing through to profit.

The second company lets profit leak, or they fail to measure profit accurately and just stick a "40%" factor into their decision-making processes.

The first company, with a 45% profit factor, can mail down to 1,800,000 circulation depth ... generating $4,024,922 demand.

The second company, with a 40% profit factor due to either a leaky profit bucket or an analyst making a random, arbitrary 40% profit designation, can only afford to mail 1,400,000 customers, generating $3,549,648 demand.

Which business would you rather be part of? I'd pick the first business ... the focus on profit allows the business to generate 13% more demand.

If the second business has a leaky bucket, then this is the true impact on the business.

Scenario #1 = $4,024,922 demand, 40,249 orders, $911,215 profit.
Scenario #2 = $3,549,648 demand, 35,496 orders, $719,859 profit.

If the second business is equally profitable to the first business, but the business has sloppy analysts who mis-estimate profit, then this is the impact:

Scenario #1 = $4,024,922 demand, 40,249 orders, $911,215 profit.
Scenario #2 = $3,549,648 demand, 35,496 orders, $897,342 profit.

The first example is the fault of every employee in the company, the penalty for being sloppy.

The second example is the fault of just one employee, making a bad decision estimating how much demand flows-through to profit. If this company sends 10 mailings a year, then one analyst, one individual, is costing the company $5,000,000 in annual demand - 50,000 orders (and likely, 40,000 customers who would generate incremental future profit), and $140,000 annual profit.

One analyst - acting alone, costing the business a 13% sales increase.

In catalog marketing, profit means EVERYTHING! There is no margin for error, there is a discipline that must be adhered to - without discipline, the business suffers - just because of one or two people.

And if you outsource your catalog circulation efforts, well, just how much attention to detail do you think you're getting vs. in-house resources? Your outsourcing efforts could easily harm your business by 10%, if you are not telling your cloud-based circulation experts how to execute every single aspect of circulation management.

Catalog Marketing - Profit Means Everything! Maybe business is in the tank because of a lack of discipline around measuring profit?

Weighting

2013-04-17T11:55:00.000-07:00

I can't stress the importance of weighting transactions. So many of the tactical mistakes we make come down to over-estimating the importance of prior customer activity.

Example: Customer spent $100 via phone 5 years ago, spent $100 online thirty months ago, and spent $100 via a tablet today.

Best Practice Thinking: This is an "omnichannel" customer, one that does everything, one that should be marketed to via old-school and modern techniques.

The reality is that the transaction from 5 years ago has almost no meaning. In many of my projects, there's a natural progression, one that goes something like this:

0-12 Months Ago --- Weight = 100%.
13-24 Months Ago --- Weight = 50%.
25-36 Months Ago --- Weight = 25%.
37-48 Months Ago --- Weight = 15%.
49+ Months Ago --- Weight = 10%.

Using this version of reality:

Tablet Transactions = $100 * 1.00 = $100.
Online Transaction = $100 * 0.25 = $25.
Phone Transaction = $100 * 0.10 = $10.

From a weighted perspective, this customer is 74% tablet-focused. Your marketing strategy for a customer 74% tablet focused is very different than your marketing strategy for a customer that is 33% tablet focused.

Thoughts?

Consequences of Tradition

2013-04-16T20:15:00.002-07:00

Traditions work in two directions.

In sports, you have The Masters, contested last week. It's "a tradition, unlike any other". In essence, each year, the tradition feeds off of itself, growing in importance, which further fuels the momentum of the tradition. This type of tradition works well, as long is it attracts "the best" golfers each and ever year.

Then there are other traditions, like the ones you deal with at work. Maybe you have a "spring sale", one that goes from April 28 - May 4. You've done this every year, for thirty years. In fact, you've done it for so long that your customers don't even care anymore. That's where you enter the picture ... the plucky, scrappy, hard-working employee who wants to change things.

You ask a simple question.

"Could we not have the spring sale next year, and instead try something different?"

You already know what the answer is, but you haven't been clubbed over the head enough to learn to not ask the question. Here's the answer.

"But that's what we've always done. It's a tradition. It's part of who we are."

Of course, you know this answer is flimsy. Terribly flimsy. It's funny. When your company has layoffs, nobody suggests the fact that you've worked for the company for eleven years represents "tradition", something that shouldn't be messed with. When your PC needs to be replaced, nobody suggests that your PC represents "tradition", and shouldn't be replaced.

A few years ago, an Executive told me "... our catalog is our heritage, it is our tradition, it is who we are ... it is not to be messed with".

A tradition must be special ... Thanksgiving, for instance.

A habit is something different. Habits can be good or bad. There is no inherent reason to continue a habit.

The next time somebody used the "T" word, perform a means test.

Is the activity special, truly unique, one of the top 2% or 3% of activities the company participates in?
If not, then the activity is not a Tradition, it is a Habit. Is there a new Habit that has better long-term potential than the existing Habit?

There are consequences for continuing Habits that cloak themselves as Traditions. Tepid business performance is, of course, the main consequence.