These are new customers that are acquired via low price points. In this simulation, we acquire 10, customers per year at low price points. Next, enter the value "10," in cell B These are new customers that are acquired via higher price points. Look at how your new business evolves in a manner that is quite different than when you are exclusively acquiring customers from cell B Direct marketing has become a game of promotions and discounts. These two simulations illustrate how these "empty calories" impact the business, over time.
We're much better off putting veggies in our bodies than snack foods and cookies. Buy the book, Online Marketing Simulations, on Amazon. A Decade of Free Candy. In January , I prepared a presentation for the marketing management teams at Eddie Bauer and Spiegel our parent company. Our annual online demand totals for the prior three years were as follows: In the next decade, our job is to "sample free candy".
We don't overeat, like the pundits suggest. And we don't starve ourselves, returning to our roots we won't be in business in if we do that. December 22, Change In Metrics: Online Marketing Simulations are designed to illustrate to the marketer the long-term impact of short-term decisions. So, let's open up our spreadsheets e-mail me for your own copy. Take a look at cells G10 - G This is the forecast for the business in Year 5, given current projections. Let's look at a few key cells. December 21, Customer Acquisition: Let's run another simulation, one similar to the one we ran last week when evaluating customer loyalty.
Open your spreadsheets e-mail me for your own copy. There are many solutions that get you to the same answer. Share your simulated results in the comments section of this post. And if you want to purchase the book, click here! The First 20 Pages. Walk down to your Business Intelligence department this morning, and ask them to demonstrate to you how the first twenty pages of your most important Holiday catalog performed, compared with the rest of the catalog. You are probably familiar with the concept of "order starters", the items that are most often listed first in the order a customer places, right?
Well, catalogs that perform well are frequently populated with a lot of "order starters" in the first twenty pages. So this week, please take a walk down to your Business Intelligence team, and ask them to demonstrate how each item in your catalog performed as an "order starter". Please consider paginating your catalog based on the items most likely to "start" an order, using the first twenty pages of the catalog to your advantage! Or give me a holler, and I'll help you complete this analysis. December 19, Analyst Spotlight: Which Personality Type Are You?
Click here to take the quiz , and use the comments section to tell us what kind of Analyst you are. December 17, Gliebers Dresses: Anna Carter's Sarah Wheldon.
Sometimes, when you are a consultant, you enter into unusual situations. Now, from what I heard, Roger lost a sock in the dryer and basically voted you off the island, right?
Gliebers Dresses: Catalogs on Trial eBook: Kevin Hillstrom: tapusapy.tk: Kindle Store
I heard that their business was down something like ten percent to plan, and that the only way they boosted sales was via crazy levels of discounting. Though you don't have to be a rocket scientist to know that many folks are discounting at levels previously unheard of. I mean, from what people tell me, it's literally a state of chaos. I heard that Lois is running the business into the ground with her stupid loyalty program, and I heard that Roger's office is piled a mile high with research white papers on how to be excellent.
How the heck did you pull that off? As long as you know how much you are likely to sell at the start of the year, you don't need to clear everything at a discount. You were going to discontinue mailing it in early , but it looks like you started early.
How the heck did you accomplish this transition without putting a huge amount of inventory at risk? We did not mail one single catalog between February 1 and April 15, not one. We measured how customers behaved during this "paper vacation". And we learned a ton. It turns out that catalog mailings cannibalize the living daylights out of e-mail marketing. Well, that, and the fact that so many e-mail orders were being inaccurately matched back to catalogs by ResponseShop's 'ChannelMAX' algorithm". It is something that you never know happens unless you do testing, or in your case, shut a channel down for a bit.
Customers in urban and suburban zip codes began visiting the website much more often, and began ordering 'on their own', if you will. Now what they bought was different than what was purchased when catalogs were mailed.
Subscribe Via E-Mail (I publish 5 Days A Week)
The customers purchased fashion products more often, basics less often. But still, we could accurately forecast based off of what we saw happening. This allowed us to project that we could spend a fortune in each of those advertising channels, generating incremental demand and customers that we wouldn't normally acquire. Now, that being said, we projected what size business we would have without catalog advertising.
But, our EBIT, earnings before interest and taxes, was projected to double. Kevin, you know that you don't take empty calories to the bank, you take profit dollars to the bank. We will be able to invest the increase in profit in online marketing, in website development, in a user review platform, in website personalization, in cross-sell algorithms, in social media activities, and in other forms of offline advertising. Listen, we've been blasted by our contemporaries. Every vendor in the industry called to tell me what a moron I was.
Our paper rep said I'd be out of business in two years. Our co-op rep told me that she'd join me in the unemployment line if more companies did what we did. We were mocked at the annual Direct Marketing Alliance conference by a dozen different speakers. Everybody is an expert, Kevin. It's a shame that everybody isn't held accountable for their foolish predictions. That level of accountability would cause Twitter to shut down for a month!
You should read the hate mail. All of it on stationary, written with ball point pens, with the script appearing to be just a little bit unstable. That tells you that the customers we angered are generally sixty years old, or older. We received a few e-mail complaints. We barely got any complaints via Facebook or Twitter. It's pretty easy to infer who the audience was that purchased from catalogs.
They can buy from Gliebers Dresses if they want. We aren't about market share. We are about profit. And honestly, we're not telling those customers they cannot buy from us. They can come to our website and purchase. I got to see what happens when leadership is passionate about merchandise. At Gliebers Dresses, outside of Meredith Thompson, they only care about catalogs, discounts, and promotions. This company loves the connection between merchandise and customers. For all of the marketing expertise out there, it is amazing how few marketing leaders talk about the connection between merchandise and customers.
It was nice seeing you. If you don't mind me asking, would you have any interest in meeting with the management team for a few days? We'd like to pick your brain about some of the strategies we're employing. I doubt you signed a non-compete with Gliebers Dresses. December 16, Customer Loyalty: Here's one for those of you who have been following along with your own spreadsheet e-mail me for your copy. Use the comments section of this post to outline your solution. There are many different solutions that get you to the same answer. Buy the book here, if you are so inclined!
Those of you in the audience who spent all but the last few years being wined and dined by vendors at the Catalog Conference may enjoy one final glass of champagne this evening Catalog marketers paid close attention to the name change, opting instead for Internet Retailer and Shop. A decade from now, it is not hard to envision an environment where Shop. You can only imagine the session titles at the old-school conferences You can imagine the rhetoric Catalogers, what are your favorite memories of the Catalog Conference?
This Week In Business: Not the most read, of course, by our core audience, but most read due to the viral nature of Twitter. In my case, I had about new individuals click-through some place in Twitter and read the article. Of the new individuals, about 30 chose to follow me on Twitter, with a third un-following me within a few days. And of the new individuals, about five or six chose to subscribe to my blog, where all of the in-depth discussion and analysis happens. I need about 75 new subscribers to yield one new consulting project.
Therefore, we can calculate the estimated consulting revenue that will be generated by a blockbuster article that is re-tweeted around the globe: December 14, Inefficiency. The best reason to dig into Online Marketing Simulations buy the book , purchase via Kindle , or buy a digital download is to find inefficiencies in your business.
The vast majority of online marketing focuses on "easy conversions". SEO close to free. E-Mail via batch-based campaigns close to free. Paid Search expensive, but better when coupled with a promotion. Financial Weapons of Mass Destruction. Last week, I was asked the following question by an experienced catalog advocate: Are they selling product or promotions? Last week, I received the following e-mail marketing messages wording isn't exact, promotions are.
Categorize customers into one of four buckets. Historical customer who buys using a mix of full-price, sale, discounts, and promos. Historical customer who only buys using a mix of sale items, discounts, and promotions, never purchasing full-price merchandise. December 10, Gliebers Dresses: Today, I am visiting the offices of ResponseShop, the co-op that Gliebers Dresses does most of their customer acquisition work with, meeting with account VP Rob Clarke. This happens to all Gleibers Dresses consultants. Eventually, they say something that ticks off Roger Morgan, and they're banned from the building until they are willing to play ball again.
Why do you think Chip Cayman only shows up there three or four times a year? My job is to support Mr. Anyway, what did you come all the way here to ask me about? We have this thing called a 'harmony model', and it selects the absolute best names available anywhere. Can you describe for me the demographic composition of the names? See, these are names that are in 'harmony' with your business. They have similar buying habits and merchandise preferences across other companies. They are customers who are in 'harmony' with Gliebers Dresses customers.
A complex set of equations dictate who scores high in a harmony model. Our statisticians are among the best in the industry, doctorate degree holders and entry-level statisticians who really focus on complex math. There are some very interesting trends.
Did you know that the names you give Gliebers Dresses disproportionately prefer telephone transactions over online transactions? We really care about simply finding customers who buy something from Gliebers Dresses. This is important, because those names are the easiest to track, meaning that ResponseShop gets more credit for these names, making ResponseShop performance look best, causing Gleibers Dresses to allocate more of their customer acquisition budget to ResponseShop. We have our new matchback tool, called 'ChannelMAX'.
It clearly points out who buys online or in any other channel. We'll find those online buyers, and allocate them back to the catalog mailing that drove the order. In fact, any order within sixty days of a mailing is matched back to the original catalog. We did a test at Gliebers Dresses. We purposely chose not to put 50, harmony model names in the mail. Then we looked at the results via ChannelMAX. This means that ChannelMAX is over-stating results, which means that your clients unprofitably over-mail customers, causing your profit and loss statement to look really good.
We just hope you use the tool as designed. Your clients will learn that they are over-mailing customers, often significantly. Your clients will become much more profitable. Don't you want your clients to be more profitable? We fully believe in our matchback strategy. We're using leading-edge technology to match harmony model purchasers back to the catalog that drove the order. The same thing happens online, but I don't hear anybody complaining about Google cannibalizing orders.
You charge Gliebers Dresses six cents per name, but you charge other clients five cents per name, or even less in some instances, correct? We strongly believe that each client receives maximum value for their investment with ResponseShop. Gliebers Dresses can only mail 33, names. So, ultimately, Gliebers Dresses is paying eighteen cents per name, correct? They can do what they want with the information. You cannot put a dollar value on that type of information.
Wouldn't it make sense to develop a relationship that is more equitable for Gliebers Dresses, so that they can mail more of your names? Eighteen cents per name is insane, given that they pay Google maybe fifty cents per click, and that potential customer has raised her hand, demonstrating interest in a specific item. Couldn't there be some sort of sliding payment scale, based on how deep the client mails, coupled with the names that net out of the merge? The merchandise is skewed toward 'basics', skewed away from 'fashion'. It turns out that, as ResponseShop becomes a larger and larger contributor of names to Gliebers Dresses, that the business skews more and more toward customers who like 'basics'.
And basics have a lower profit margin, making it increasingly harder for Gliebers Dresses to sell high-margin fashion items in the future. Can your harmony model account for this, and instead focus on finding buyers that buy high-margin fashion items? We just want the names to perform the best. Hopefully you'll get out of the Roger Morgan doghouse soon. We've been with Gliebers Dresses since , I think we know how to take care of Roger.
We feed him a lot of white papers and research articles. When we give him 'food for thought', he tends to stay out of our way. December 09, Social Media Snake Oil? One of our loyal Twitter followers click here to follow the action on Twitter asked me to speak about the retailer gold rush into Social Media.
This individual wanted to know if this was a broader trend worth paying attention to, or if this was the outcome of the Snake Oil being sold to businesses. The answer, of course, is "yes". Yes, this is a broader trend worth paying attention to. And yes, this is the outcome of an unbelievable amount of less-than-optimal information being shared by a small number of individuals. The broader trend is that social media is infiltrating daily life for those who choose to let it in. In five years, you'll view the communication tools i. Twitter much like you view your telephone in your office.
Did you know that your telephone is an old-school version of social media? It allows you to communicate with other people. Did you know that e-mail is an old-school version of social media? It allows you to have communications with multiple people at the same time. Both telephone and e-mail simply become part of the fabric of your daily life. Social Media, for those who want to invite it into their lives, will become another tool, like the telephone or e-mail.
That's pretty boring, isn't it? Now for the snake oil. This fact is tweeted once a minute. On an annual basis, Twitter accounts for less than 0. Let that fact sink in for a moment. This is where the snake oil comes in. I've experienced this phenomenon. Many folks said that I " had to be on Twitter ".
More free facts and information than you could throw a stick at. Now let's look at what is important. I analyzed where every consulting dollar I earned from - was sourced from. Source can be double-counted This is the target audience I seek, the folks who are most likely to hire me. These folks can follow me anonymously.
These folks are never going to hire me, they follow me for competitive reasons.
Gliebers Dresses: Catalogs on Trial
These folks usually have to identify themselves in order to follow me , thereby limiting the non-vendor-based audience considerably. December 08, Analyst Spotlight: One of the most important skills you can acquire is the gift of "anticipation". This isn't an easy skill to obtain, and it requires you to spend a lot of time listening to what others say. In late , our ability to forecast new store performance at Nordstrom wasn't as good as we wanted for it to be. My Business Intelligence Director, without being specifically asked to do so by management, created a new real estate model, one that we could backtest against prior store openings.
He was able to demonstrate that his model was much more accurate than anything that had been done. And even though his model was scrutinized by management, it was implemented. Future forecasts were much closer to actual performance. This person, the Business Intelligence Director, had no prior experience in new store forecasting.
This person, however, could anticipate what the company needed. This person anticipated what the biggest "pain point" was By anticipating what was needed a new forecasting model and by anticipating what the pain point was accuracy , this person became an important part of an expensive capital investment process at Nordstrom. This is the opportunity that is available to you, dear analyst. You, too, can make a difference, in fact, you already make a difference. But you can expand your sphere of influence by listening to what leadership is actually saying, by anticipating needs and building solutions to those needs before leadership specifically asks somebody to solve a problem for them.
By now you are using Online Marketing Simulations book , kindle , digital download , contact me for a free spreadsheet , or hire me to understand how customer behavior evolves over time. You are probably excited about some of the unique ways that customers behave, and you probably know a lot more about how to grow your business for long-term success.
Now, you probably want to know how much you should invest, in order to maximize your opportunity, right? Here's where "Ad Curves" come into play. Click here for a brief article about Ad Curves. If you are managing e-mail marketing, paid search, or print marketing campaigns, you'll appreciate the insights gained by combining Online Marketing Simulations with Ad Curves! December 06, Webinar! I'll be sharing information on Tuesday about multichannel data integration, including a few tidbits about how retail brands can learn how website visits are combined with store purchases for a complete view of customer behavior.
Birst is hosting the free webinar click on this link to attend! An interesting trend is emerging in catalog marketing. Back in the day, we'd measure how fast "catalog" customers were migrating to the "online" channel. Multichannel Forensics were invented, in large part, to determine how fast this transition was happening, helping us understand how to deal with the transition.
In the past eighteen months, I'd say that the word "transition" no longer applies to our business. It appears that the transition online is, for the most part, complete. Trending, over time, illustrates a fundamental change.
For instance, one might see the following migration probability indices, over time. Phone To Online Index: Online To Phone Index: As always, I am here to support you! December 03, Gliebers Dresses: Welcome to this week's Executive Meeting. Oh, it feels so good to actually celebrate for once.
How did you do it? We needed to do something to really stand out. So we implemented a radical promotion across all channels The promotion went viral on Twitter. Now we're moving some inventory, folks! We introduced a large number of new customers to the brand! We spent catalog dollars and did not get a sufficient return on investment. Let's just not market to Cyber Monday buyers. That way, we reap the benefits of our Cyber Monday promotion, we generate profit, and then who cares if the customer ever comes back, right?
We don't ever have to mail catalogs to those discount-hungry shoppers. The only reason we are in business is to profitably sell dresses, right? Everything was at full price. Do you think that your business was fourteen times better than Anna Carter on Monday? We absolutely dominated on Monday.
We gained market share. That means we stole orders that would have gone to our competition. We hurt our competition on Monday, we put a dagger in their heart. Isn't market share worth something? I mean, everybody is contracting.
On Cyber Monday, we grew. Neptune Research says that the companies that succeed in a recession are those who gain market share. But so is profit. So, yes, you stole market share from Anna Carter. You haven't built something that is lasting. The entire history of Gliebers Dresses has been of a business model that was built to last.
Now you are trying to prop-up a psuedo Holiday, and for what? If we're more profitable for doing this, and Anna Carter is less profitable, then we won, right? I don't get it. Am I missing something? This is a simple profit and loss and marketshare game, and we won. What would have happened if you only offered free shipping? What would have happened if you didn't offer a single promotion, like what Anna Carter did? The Executive Team at Gliebers Dresses is required to put catalog marketing "on trial". If the team can defend the practice of mailing catalogs to customers, the brand will continue the catalog business model.
- Taken or Left?;
- GUERILLA REAL-ESTATE INVESTING.
- Mut zum Träumen (German Edition);
But if catalog marketing is declared as being "dead", well, big changes are in store! In this novella, newly appointed CEO Roger Morgan is struggling with a floundering catalog business model that did not achieve the lofty expectations of experts who predicted that a multi-channel business model would produce unfettered success. Morgan orders that catalog marketing be "put on trial". Chip Cayman, well-known new media consultant, will play the role of the prosecuting attorney. Faith Kelley, executive administrative assistant, will defend catalog marketing. Morgan will be the Judge. The Executive Team will be witnesses.