Saks and Flash Discounters: A Micro Channel

The majority of the comments I get when I talk about how one might use flash business models (Gilt Groupe, Rue-La-La) are negative. Those of you who share your thoughts tell me that I don't understand how your business works, or that this style of shopping is nothing more than a short-term fad, or that your core customer isn't interested in daily unannounced clearance items at deep discounts.

On Thursday, Saks decided to jump in to the fray (article via SmartBrief via Wall St. Journal).

On Wednesday, Rue La La was sold for a paltry $350,000,000. And by the way, Rue La La promotes another micro-channel via an iPhone or iPod Touch app.

Granted, SmartBargains was part of the deal, but even if it is half of the deal, you're still looking at $175,000,000 for Rue La La. I will be the first to concede that companies have been known to dramatically overpay for a business that fails shortly thereafter. And I will also concede that mobile marketing has largely been all hype and no substance, from a commerce standpoint.

That being said, might it be worth testing your own flash sales micro-channel, just to see if it is something your customer is interested in? Just a test? You'll quickly learn, from a segmentation standpoint, who your discount-focused customers are, and that knowledge alone will help you promote your full-priced business better, won't it? And that iPhone app? That, too, is a data point that allows you to understand which customers are unlikely to respond to traditional direcxt marketing. Isn't that knowledge valuable to your business?

The world is changing.

Ok, your turn. Use the comments section to describe the reasons why this style of liquidation selling is either good or bad.

Gliebers Dresses: Decomposing Item Performance

Welcome to this week's Executive Meeting:

Glenn Glieber (Owner): "... needless to say, reaction to my comments at the conference has been highly negative in the blogosphere and on Twitter, but was very favorable among other catalog CEOs."

Meredith Thompson (Chief Merchandising Officer): "Kevin, is that you?"

Kevin: "Yup, it is me."

Meredith Thompson: "We're trying to understand how productive our new strapless tube dress is, Kevin".

Pepper Morgan (Chief Marketing Officer): "In the old days, it was easy to measure the profitability of merchandise, and it was hard to measure the profitability of a customer. But these days, it seems like the situation is reversed."

Roger Morgan (Chief Operations Officer): "Absolutely. This item has never been featured in an e-mail marketing message, and yet, it seems like the item sells really well during the twenty-four hours following an e-mail blast."

Lois Gladstone (Chief Financial Officer): "I want to install a discipline around here, one where we make formal decisions about the merchandise we choose to invest marketing dollars in, vs. letting items be featured online without the need for expensive catalog support."

Roger Morgan: "But that's hard to do, Lois. I mean, we know that when we mail a catalog, we get $1 offline for every $1 generated over the telephone. But that relationship is an average, right? The relationship doesn't hold for every single item."

Pepper Morgan: "And the relationships are confounded by marketing strategy. When we bump up our paid search efforts, we notice that we capture more new customers in our catalog marketing activities, but the new customers are skewed toward items featured in the paid search ads."

Kevin: "Since we're about to select customers for the January catalog, let's try something. Randomly sample 16,000 customers, and assign them to one of four treatments for the first six months of the year. Group One = Receive All Catalogs, Receive All E-Mail Campaigns. Group Two = Receive All Catalogs, Receive No E-Mail Campaigns. Group Three = Receive No Catalogs, Receive All E-Mail Campaigns. Group Four = Receive No Catalogs, Receive No E-Mail Campaigns." Lois Gladstone: "Six months?" Kevin: "Yes. This test will allow us to do a few things. First, we get to see how customer behavior changes over time. Second, we get to see if there is a multiplicative impact between catalog marketing and e-mail marketing. Third, we get to see how paid search is influenced by catalog marketing and e-mail marketing. Fourth, we should be able to measure, at a merchandise division level, if there is a difference in the $1 offline = $1 online relationship."

Lois Gladstone: "Can we afford to do a test of this magnitude?"

Kevin: "I don't think that catalogers can afford not to do this style of testing anymore. Your online brethren are doing this type of testing, they call it 'optimization', in real time, all of the time. The only way we, as an industry, are going to profitably navigate our way to the future is to truly measure how customers behave, with and without advertising."

Roger Morgan: "But we do those things, what are the called, 'matchbacks', right? Doesn't a matchback give us the answer we're looking for, without the need to do testing?"

Kevin: "Matchbacks are good, you're far better off doing them than not. Unfortunately, matchback programs are built off of rules, rules determined by humans, not by customers. For instance, you'll use a 60 day window to match online orders back to catalogs. That's a rule. If a customer clicks through an e-mail campaign two days after receiving a catalog, you allocate 90% of the order to the catalog and 10% to the e-mail campaign. How do you know that? You really cannot get into the mind of the customer to understand if 10% of her thought process was influenced by the e-mail campaign, can you?"

Lois Gladstone: "Isn't that what the online marketing folks do, too? They call it 'attribution', don't they? If they're doing it, we should be doing it too, right?"

Kevin: "Yes, online folks are concerned about allocating orders based on first-touch or last-touch or blended-touches. They are dealing with the exact same problem you are dealing with. And they are making the same mistakes you are making."

Meredith Thompson: "So are things hopeless? Can we not properly measure merchandise profitability?"

Kevin: "Hopeless? No. Harder? Yes, much harder. We can no longer prove what caused a customer to order merchandise. Fifteen years ago, it was easy. If you send an e-mail to a customer offering a Thanksgiving dress and she instead goes online and likes your strapless tube dress, you're kind of sunk. Does that mean you should offer the Thanksgiving dress next year, or a strapless tube dress? Merchandise profitability becomes an inexact science, blending more and more with marketing strategy. At least with the tests you'll execute, you can get a directional idea how profitable various merchandise divisions are, and then you'll apply rules, something I criticized earlier, and you'll get as close as you can get. But by and large, merchandise profitability is harder to measure than customer profitability, and will continue to be harder to measure."

Glenn Glieber: "In some ways, folks, I'm glad this is harder to measure. If it is harder to measure, then it requires more art, more inference, more gut feel. And honestly, we all get a rush from making correct decisions without good information. Nobody likes to have all of the answers on a dashboard, robotically driving where the business is headed. Honestly, I think a golden age of merchandise leaders can emerge from this. Don't use this as a crutch for indecision. Use this as an opportunity to allow your genius to shine through. Now, let's move on to the next topic. Tomorrow is Halloween, and I want to make sure this place doesn't look like a pit on Monday. So all decorations need to be down by 4:00pm."

Dear E-Mail Marketers: E-Mail Is Dead, Huh?

Dear E-Mail Marketers:

You represent a fun niche. The leading pundits have declared your medium "dead", less than two decades after being formally launched. You now join catalog marketers in the direct marketing graveyard.

Sure, your niche is still highly profitable. Pundits, however, don't care about profitability. They care about "what's next".

Companies, however, care an awful lot about profitability. It turns out that companies cannot stay in business unless they generate a lot of profit.

Maybe it is time for e-mail marketers to finally prove that e-mail marketing generates long-term profit.

Carefully review your Online Marketing Simulations (buy the book here on Amazon.com, the 9,500th best selling book on Amazon yesterday!), paying specific attention to what customers who purchase from the e-mail advertising micro-channel "do next".

Often, you'll find that e-mail drives future sales increases in other channels. You'll notice that e-mail customers become paid search buyers, or respond to offline ads, or become so loyal that they no longer require advertising to purchase in the future. Heck, in a lot of my projects, I can prove that Google absolutely loves e-mail marketing --- e-mail causes a purchase to happen, and then customer behavior changes, resulting in future paid searches. In other words, your e-mail marketing activities fuel future success for Google.

Use your simulations to analyze the long-term value of the social media shopper, and compare it with the simulated long-term value of the e-mail customer. Seriously. Do it! Tell the world what you find!

E-Mail marketers, once you have the data to defend your channel, defend it!!! It's not going to be good enough to say that e-mail is a relationship builder, or is the glue that holds marketing together, or is the tactic that feeds social media activities. Prove the value of your channel, demonstrating the value via long-term sales and profit. Show what happens to a business if e-mail marketing doesn't exist. This is one of the best applications of an Online Marketing Simulation.

Dear e-mail marketers. Buy the book. Apply the techniques outlined in the book. And then prove to people the profit your discipline contributes to your business.

Amazon.com Is Now Offering Online Marketing Simulations!!

Well, that happened 10 days faster than it was supposed to happen.

You can now purchase Online Marketing Simulations at Amazon.com --- click here for more details.

Click here to search inside the book, to see the table of contents and a few tidbits.

And if you're waiting for the Kindle version of the book, it will be ready shortly, available for $4.99.

Read the book. Create your own spreadsheet. Apply the concepts to your business. Be a sage, be one of the only people in your company who knows whether your business is forecast to grow indefinitely, or is heading toward a problem.

If you are particularly "geeky", you'll enjoy the 50-ish pages of computer code at the back of the book.

If you're a CEO, you must have this information. Every CEO must know where business is heading, and must be ready to mitigate negative outcomes.

If you are a Marketing Executive, you will be light years ahead of your competition by having the outcome of an Online Marketing Simulation.

These are the projects that CEOs are hiring me to perform these days, so buy the book, and get busy on your own OMS project!!

This Week In Business: Twitter And Database Marketing

You aren't likely to find many folks doing this yet. But it is coming.

Let's pretend that MineThatData.com is an e-commerce business with $100,000,000 in annual sales, big enough to have people saying things about the business on Twitter.

Let's assume that you are a loyal customer. As you go through the checkout process, I ask you to volunteer your Twitter ID ... it isn't necessary to complete checkout, mind you, but I do ask for it, and you volunteer it.

Now that you've volunteered your Twitter ID, I give your ID to my contact center staff, and I ask them to research what you have to say about my business online. It is their job to ascertain whether you say positive things about my business, or negative things. I ask them to enter a value in the order entry system --- an "A" if you say nice things and evangelize my brand, a "B" if you've ever said anything nice, a "C" if you never say anything, a "D" if you criticized my brand once, and an "F" if you are out there bashing my brand.

Get the picture? I've just scored you based on your sentiment toward my brand.

So now it is November 15. We're planning our wonderful Cyber Monday e-mail campaign.

My team decides to look at your "Sentiment Grade". They segment you into different e-mail campaigns:

• Grade of "A" = "Take 20% Off And Get Free Shipping".
• Grade of "B" = "Take 10% Off And Get Free Shipping".
• Grade of "C" = "Enjoy Free Shipping".
• Grade of "D" = "Have Any Concerns, Please DM (Direct Message US) For Help".
• Grade of "F" = Not targeted for an e-mail campaign.

It is just a matter of time before this happens. You will see text mining algorithms, vendors with sentiment solutions, and contact center staff all combing through everything you say, rewarding customers who are complimentary to your brand.

What are your thoughts? Is it acceptable for brands to comb through your social media commentary, tabulating positive and negative sentiments into their customer database, rewarding customers who are "brand advocates"? When is it acceptable to do this ... when you volunteer your Twitter ID to the brand, or can the brand just go out and proactively research your behaviors without you knowing about it?

Thoughts?

The Pre-Release of Online Marketing Simulations!!!

I am so excited!!

Click here to purchase my new book, Online Marketing Simulations. The book is being pre-released via my publishing platform --- so if you are dying to have the book, you can buy it today via Createspace for the same $19.95 fee that you'll be able to purchase it for on Amazon.com in two weeks, plus a shipping/handling fee.

Because you are a loyal blog reader, you get access to the content two weeks before the general public!

About fifteen years of intense customer research have gone into the creation of this industry-leading methodology.

This handbook walks you through an e-commerce online marketing simulation. You'll get to explore the ways that customers of different levels of quality, merchandise preference, and online advertising micro-channels (Affiliates, Offline Ads, E-Mail, Social Media, Print Ads, Search, No Attributed Source) all interact with each other. You will clearly see the "MVP", or "Most Valuable Path" that a customer takes as the customer migrates from first purchase to loyal shopper.

Most important, you will learn how to optimize your online business for long-term success. Current web analytics software applications fail to provide you with a five year sales forecast by advertising micro-channel / merchandise division. The Online Marketing Simulation allows you to play "what-if" games, identifying the optimal strategy for long-term success.

And if you don't think you'll be in your job 24 months from now, then Online Marketing Simulations allow you to optimize your business for the next twelve months, so that you can earn a nice bonus!

Here's what you get when you purchase this book. There are plenty of geeky details, and plenty of high-level strategy appropriate for a CEO, CMO, or CFO.

• 106 pages of examples that illustrate how to execute Online Marketing Simulations.
• A companion spreadsheet to work through examples and use in your projects.
• 51 examples and accompanying tables.
• More than 50 pages of programming code, so that you can populate your own spreadsheet.
• 162 pages, total.

Who should buy this book?

• CEOs looking to predict where e-commerce sales are headed over the next five years.
• CMOs trying to allocate marketing dollars across advertising channels.
• Vendors looking to add important functionality to their software suite.
• Online Marketing Executives trying to demonstrate the value of each advertising channel.
• Web Analytics Experts, especially those looking to obtain skills necessary to analyze the entire business, not just the online channel.
• Business Intelligence mavens with an interest in simulating future activity.

I'm so excited that it is finally available!!!!!!! Help spread the word!

Coremetrics Offer Exclusively For Omniture Users

Coremetrics and Omniture are leading web analytics providers. Omniture was recently acquired by Adobe, creating quite a buzz in the business intelligence and web analytics arena.

Today, I received the following offer from Coremetrics and Chief Marketer. Here is a link to the offer in the e-mail message. You can click on the image above to see the offer as well.

Since you are all marketers or analytics experts, think about how you would answer the following questions, as they relate to your business.

Question #1: Chief Marketer did not rent my e-mail address, sending the message on behalf of Coremetrics because of a previous opt-in / opt-out preference of mine. Is this an e-mail marketing strategy that is appropriate for your business? Describe why it is or is not appropriate.

Question #2: I am not an Omniture customer. The offer in the e-mail marketing message only applies to Omniture customers. In your opinion, what benefits are obtained by the recipient in an instance where the offer cannot be redeemed by the recipient?

Dear Catalog CEOs: Much Smaller Catalogs

Dear Catalog CEOs,

Some of you ask me to do a unique analysis, one I call a "filtering" analysis.

Others might refer to this analysis "segmentation" or "persona development". The objective, honestly, is the same.

And for catalogers, it has never been more important.

I'm not talking about traditional RFM segmentation. Instead, I am talking about creating a series of "strategic segments", segments with unique characteristics.

In the example I have here (click to enlarge the image), there are three merchandise divisions. This catalog company sends a 144 page catalog to each customer, with equal page counts attributed to each merchandise division. In this case, about 60% of the customer file only buys from one merchandise division.

So instead of sending a 144 page general merchandise catalog, let's create four small versions. Each version has 48 pages instead of 144. Version #1 only has merchandise from division #1. Version #2 only has merchandise from division #2. Version #3 only has merchandise from division #3. Version #4 is small, and has a sampling of each merchandise division for customers who buy from multiple merchandise divisions.

We target each smaller version to the audience that enjoys it. Your job is to create each 48 page version just like you normally would.

Take a look at the profit and loss statement in the image above. Clearly, customers spend less because they are receiving fewer pages. But even if the smaller catalogs cost $0.60 each (vs. $1.30 each for a large catalog in the example), it is more profitable to send the four smaller versions, one version per customer, than to send the general catalog to each customer.

Honestly, it is easier to send the general catalog to each customer. It will always be easier. The inertia within your organization will demand the easier solution.

But we're in a position where profit dollars are what are needed, right?

So when you're looking for new strategies for the second half of 2010, give this strategy a try, as a test, and see what happens!

Thanks,
Kevin

Gliebers Dresses: A Panel Discussion

This week, we take a peek at a panel discussion at a popular direct marketing conference. The panel discussion is hosted by Chip Cayman, a popular industry marketing consultant. The room is filled with maybe 300 online and catalog marketers. Here we go.


Chip Cayman (Moderator, A Popular Industry Marketing Consultant): "Welcome everybody to the 10:25am session titled 'Best Practices in Customer Engagement'. Today we have four industry experts who will offer bold insights into the future of customer relationships. First up, we have Glenn Glieber, Owner of Gliebers Dresses, a New England based purveyor of fashion apparel. Next, we have Dolly Pickens, CEO of Zuppie, a customer evangelism consultancy. To Dolly's left we have Greg Markham, Online Marketing Director at Boosky.com, and finally, we have Sarah Wheldon, Chief Marketing Officer at Anna Carter, a fashion dress brand. Ok, let's get started. Dolly, the first question is for you. How has the consumer changed over the past two years?"

Dolly Pickens (CEO of Zuppie): "Great question, Chip. The customer has literally been transformed. You all remember how Motrin angered their audience, right? Well, 'Motrin Moms', as they were known, fought back using social media. The repercussions reverberated through the Executive team at Motrin. Brands simply have to understand that an engaged customer is a loyal customer. I like to look at what Booksy.com is doing, they are using social media to foster deep relationships with brand advocates. And then you factor in the economy. Families are hurting. Brands that foster deep relationships will have a competitive advantage for decades to come."

Chip Cayman: "Glenn, how about you? How has your customer changed?"

Glenn Glieber (Owner, Gliebers Dresses): "Like everybody else, we saw a spending sea change happen last fall. This is the 'new normal', as I like to call it. We responded by re-vamping our catalog contact strategy, and by adding a new loyalty program --- buy four dresses, and get free shipping for the rest of the year."

Chip Cayman: "Fascinating. Greg, how does Boosky.com respond to changes in customer behavior?"

Greg Markham (Online Marketing Director, Boosky.com): "We really focus on the customer experience. We did a multivariate test, comparing Microsoft Sans Serif to Verdana to Times New Roman as the preferred font on our homepage, and found that Verdana increased conversion rates by 8.4%. We're always looking for ways to leverage improvements in campaign response."
Chip Cayman: "Did you catch that one, folks? Write that down. Verdana improved conversion rates by 8.4%. Your conference fees have already been reimbursed with that tidbit alone! Ok, Sarah, how has Anna Carter responded to changes in customer behavior?"

Sarah Wheldon (Chief Marketing Officer, Anna Carter): "First of all, Chip, thanks for asking me to be on this panel! As you may already know, we are discontinuing our catalog marketing program on January 1, 2010. We have found that catalog mailings are bad for the planet, and we learned that prospects don't want their mailboxes spammed with catalogs they didn't ask to receive. We received a lot of feedback via social media, and we learned that customers hate to have their names rented to other companies. So we're going in a different direction. We listened to our customers, and going forward, we will provide them with the best possible online shopping experience."

Dolly Pickens: "Sarah, are you saying that catalog companies actually rent names and addresses? That's a terrible customer experience, terrible. For shame, catalogers. You rape the planet with your misguided use of old growth forests, and you violate consumer rights by forcing them to receive catalogs in the mail. My goodness. No wonder the catalog industry is fighting for survival."

Sarah Wheldon: "Yes Dolly, catalogers have actively practiced list rental strategies for decades."

Dolly Pickens: "Glenn, is that something you do?"

Glenn Glieber: "I think the broader question we're asking is, how do you get your brand out in front of a million or two million prospects if you don't rent names from your competitors? Does anybody on the panel have any solutions to this issue?"

Dolly Pickens: "Oh Glenn. Look at what Boosky.com does. They use social media to advocate on behalf of their brand, they use paid search to acquire new customers, and they have maybe the biggest affiliate marketing program on the planet, second only to Amazon. You don't need to rent 2,000,000 names every month if you create a great customer experience."

Glenn Glieber: "Greg, how exactly do you get your brand out in front of several million prospects, over and over and over again?"

Dolly Pickens: "I can take that one. Greg's team partnered with my team on a social media brand advocacy campaign that increased Twitter followers by 32%. And then Boosky.com created an iPhone app that resulted in 1.4% of total net sales coming from mobile marketing programs."

Chip Cayman: "WOW! Did you get that one, folks? Boosky.com leveraged a social media brand advocacy campaign that increased Twitter followers by 32%. And now a significant minority of sales are being generated by mobile marketing. That's fantastic!"

Glenn Glieber: "But how many Twitter followers did you have, before and after the program?"

Dolly Pickens: "I'll take that one. I think Boosky.com had 20,000 before the program, and about 26,400 after."

Greg Markham: "And during the campaign, the conversion rate from customers coming from Twitter improved from 9.3% to 9.8%."

Chip Cayman: "OUTSTANDING! Did you write that one down, folks? By using a social media brand advocacy strategy, Boosky.com improved the conversion rate of Twitter followers from 9.3% to 9.8%. You guys are really leveraging new media to improve brand relevancy, aren't you?"

Dolly Pickens: "Well, it is all about being there for the customer during these trying economic times, isn't it?"

Sarah Wheldon: "That's so true, isn't it, Dolly? I mean, you want to provide a great experience for the customer, like we do at Anna Carter. We don't use promotional gimmicks, and starting January 1, we're not going to spam the customer with unwanted catalogs anymore. We will treat our customer with honesty and integrity. You won't see any phony loyalty programs from Anna Carter. We trust that if we treat the customer right, we will be paid back down the road."

Glenn Glieber: "Let me ask a question. Sarah, how do you plan on making up for the sales you will lose when you stop mailing catalogs to customers?"

Dolly Pickens: "Who cares? I'll bet Anna Carter, with such a strong brand name, has loyal customers who will keep shopping. I'd support a forward thinking brand like Anna Carter. And the positive buzz around the brand should more than make up for the loss in sales."

Glenn Glieber: "But that's not a real answer. I want a real answer. Sarah, would you be willing to share with this audience how you plan on recouping the sales that you will lose when you stop mailing catalogs? And what about all of the employees who supported catalog marketing for decades? Will they even have a job? Do you have any loyalty to those individuals, the very folks who helped make your brand what it is?"

Greg Markham: "At Boosky.com, we found that global website conversion increased from 6.13% to 6.34% when we downsized customer service reps, and replaced them with information technology experts who could improve the performance of the website. So maybe Anna Carter will also go through a similar transition."

Chip Cayman: "AMAZING! Did you get that one, folks? Website conversion at Boosky.com improved from 6.13% to 6.34% by transitioning staff from a customer service model to one where the information technology team is better staffed. Folks, write these things down, what we're learning here is important."

Glenn Glieber: "Sarah, I still don't have an answer to my question. I'm going to guess that you will lose $50,000,000 in sales by not having a catalog. How will you meet merchandise/inventory minimums with such a sales loss? Will you generate enough profit to cover your fixed costs? What are you going to do to recoup the sales you lose, send more e-mail campaigns, that won't work. And you can never spend enough money in search to reach a critical mass that enables your business to thrive. So, Sarah, would you be willing to answer my question?"

Greg Markham: "At Boosky.com, we learned that using the phrase 'Trust Us' in paid search copy caused paid search conversion rates to improve from 5.44% to 5.62%, and increased traffic from clicks by 37%."

Dolly Pickens: "See you don't need to rent names to have success. Use technology, and real, genuine, authentic customer relationships. The rest will take care of itself."

Chip Cayman: "You folks at Boosky.com are just amazing!"

Glenn Glieber: "Does anybody in the audience want to see my question answered by Ms. Wheldon?"

Sarah Wheldon: "Glenn, you know I cannot publicly answer that question, that's proprietary knowledge. But rest assured, we've analyzed the issue thoroughly, we understand the consequences, and we believe the knowledge we've gained gives us a competitive advantage over other dress purveyors."

Dolly Pickens: "And you won't be violating customer rights like you do when you rent names. That's what really matters, here."

Glenn Glieber: "What really matters here is how you create traffic and interest. Anna Carter is essentially eliminating the primary vehicle for creating traffic and interest."

Sarah Wheldon: "That's wrong, our primary vehicle for creating traffic and interest is our website. Glenn, you go ahead and keep generating traffic and interest with your catalogs. You spend the money to rent a name and to put a catalog in the hand of the prospect. The prospect goes to Google, does a search, and because we at Anna Carter execute online marketing well, we'll intercept the demand you generate. That's one way to make up sales, and quite honestly, I'm thankful there are other marketers out there willing to use offline marketing to create demand that I can intercept and convert on my website. You represent free marketing for my business."

Glenn Glieber: "I love free marketing! But what you just said sounds unethical."

Sarah Wheldon: "It's not unethical. It's competitive. You spend money on offline marketing. You create demand. The liberated customer that Dolly celebrates goes to Google, and Google does the damage ... Google decides the websites that the customer sees, not me. If you have an issue, take up your issue with Google. In the meantime, I am going to intercept your customers via Google, and re-direct their demand from Gliebers Dresses to Anna Carter. Keep mailing catalogs, Glenn! We at Anna Carter applaud your efforts!"

(the audience roars with laughter).

Dolly Pickens: "This is exactly why you must have a personal, authentic, warm, one-to-one relationship with every customer. If you are Gliebers Dresses, you don't want your customers to go to Google and then be re-directed to Anna Carter. I'd be worrying about that, Glenn, I really would. Google will doom you."

Glenn Glieber: "Do you know what I worry about when I wake up in the morning? I worry about how to keep 250 people employed. I know every one of my 250 employees, by name. I know their kids. I know that my catalog sent kids to college, in fact, my scholarships paid for the education of close to 100 students. I know that my catalog created Doctors, and Lawyers, and County Clerks, and Electricians. My business generated a profit in 39 out of 42 years. I know that my catalog was successful enough to pay close to $12,000,000 in federal taxes. The federal tax contributions, caused by outstanding production on behalf of my employees protect third-party opt-out services like Catalog Select, businesses structured as .org's from paying any taxes, funding their ability to publicly bash me and my business practices. I can look at I-93 and realize that my employees and I paid for the concrete that allows people to go up to Lake Winnipesaukee for an extended vacation."

Chip Cayman: "Ok, Glenn, why don't we ..."

Glenn Glieber: "What I don't understand is the lack of respect, folks. Look at this panel today. I thought we were here to talk about best practices in customer engagement. Instead, we have panelists who decide to criticize me and my business model. When did that become acceptable? Dolly, you talk about being a customer advocate. And yet, you criticize Motrin, you did it here again today, and in my hand I have the output from every blog article and tweet that you ever wrote about Motrin, because Google remembers, Dolly. If you say enough bad things, Google will doom you, too. It is so easy to criticize people when they aren't standing in front of you, when they cannot defend themselves. By criticizing Motrin, you violate your own social media best practices. Why would Motrin ever want to hire you? Isn't Motrin a potential customer of yours? You offended your own potential customer. Do you think I would ever hire you? Why would I ever hire somebody who purposely criticizes others in an effort to build their own brand portfolio? If that is what social media and customer advocacy is all about, I don't want to have anything to do with it. I'd rather stick to my old fashioned business model, one that truly cares about customers, one that puts kids through college, gives men and women the money to make a living or to lift themselves from the lower class to the middle class, one that gives Ms. Wheldon the opportunty to have a different viewpoint than mine. Dolly, have you ever been in your distribution center? Have you ever watched 55 employees working hard at 2:00am on December 22, just so you can get a package delivered to your home on the 24th? I'd rather sink with those people than swim with those who have a platform to criticize the rest of us. I'd rather sink with those people than use Google as a weapon to destroy my competition. Maybe that will result in the death of my business. But at least I'll be able to sleep at night."

Greg Markham: "We learned that customers who visit our site from competing websites have conversion rates that are 27% greater than the average customer."

Chip Cayman: "We're going to have to end our panel discussion right there, with yet another amazing tidbit courtesy of Greg Markham at Boosky.com. Panelists, thank you for your time, I sincerely appreciate all of your points of view. Next up is the 11:05am session, titled 'Twenty-Nine Reasons Why E-Mail Marketing Will Still Be Relevant In 2029."

OMS: Compound Interest

Please send me an e-mail message if you'd like a copy of the spreadsheet to follow along with.

Old-school direct marketers like to explore the concept of Lifetime Value.

In online marketing, however, the focus is generally on conversion rate, on getting customers to purchase something today, now!

So go ahead and obtain every single conversion you can. You can't argue that it generates sales today!

Now that you have a bunch of new customers, let's try something. Enter "0.00" in cells D6 - G6. Then enter "0.00" in cells B101 - B340. In this situation, you are acquiring new customers in year one, and then you're following them (and only them) for the next four years.

What did you learn?

Well, these customers generated $13.3 million in the year you acquired the customer.

But now take a look at the compound interest you earned ... $6.7 million in year two, $5.9 million in year three, $4.8 million in year four, and $3.9 million in year five.

You could roll this out into infinity if you wanted to.

In the subsequent four years, these customers generated $21.3 million.

Customers acquired in one year don't act like compound interest. But when you keep acquiring new customers, year after year after year, the result is like compound interest.

You think about your conversion activities differently when you realize that the customers you acquire today will spend 1.6 times as much over the next four years. By balancing short-term and long-term profit, you optimize your online business for long-term success.

This Week In Business: Integration

There are two directions that the world is heading in.

The first direction is being taken by the customer. Twenty years ago, she was one of a million similar customers. Today, she is going in a million different directions, using search and mobile and traditional media and social media to do whatever she wants, whenever she wants.

The second direction is being taken by the vendor community. The vendor community is telling us that we need to take a million customers moving in a million different directions, and herd them in a brand-friendly direction with integrated data from all sources.

This message is coming from a lot of different disciplines, and the message is typically prescribed to us when a disruptive technology displaces an incumbant technology. Long-time blog readers know that the catalog industry went through this in the first half of the decade, as e-commerce displaced catalog marketing.

Now we see e-mail being displaced by social media, we see Web Analytics and Business Intelligence racing to the middle ground of multichannel database support and analytics, and we see online folks promoting mobile marketing as part of an integrated e-commerce strategy.

In 2015, e-commerce gurus will tell us how e-commerce is a vital part of a multichannel hologram marketing strategy. It's simply the way that humans deal with technological transformation.

The challenge, of course, is to go beyond the message.

We need to find a middle ground, one of data integration and customer understanding, one that does not necessarily support campaign integration that does not yield increased profit or increased annual retention rates.

Of course, knowledge about integrated data existed since the days of Snedecor and Cochrane, if not earlier. Statisticians have always used a measure called "R-Squared" to explain how much of the variability in a dataset is explained by different combinations of variables.

The graph at the top of this post is the result of a model that ranks customers from best to worst, based on integrated data across channels. The x-axis represents each variable added to the model, the y-axis represents the percentage of variability explained by the variables in the model. This model was built off of actual multi-channel customer data.

Notice that when you add the first piece of data, you make a huge leap. Then you add a second piece of data, and you make a smaller leap.

After adding the fifth piece of data (i.e. channel), you stop making significant improvements. In other words, you're just as well off with five pieces of customer information as you are with fifty pieces of customer information. This concept is known as "parsimony", or "less is better".

This is the piece of the puzzle that isn't always explained.

The reality is that, by having a few key data points from each channel, you get 98% of the benefit from 10% of the work.

Focus on getting a few key data points from each of your channels, and focus on how your organization can make decisions on a small number of customer attributes. You'll find it is a lot harder to get people to work together than it is to integrate data ... and you'll find that nobody has a solution for getting people to work together!

The New OMS Book: One Week Away!

We're closing in on the release of my new book on OMS, aptly titled 'Online Marketing Simulations'!

This book is written for CEOs, CMOs, Online Marketing Directors, Online Marketing Managers, and Web Analytics Experts looking to understand how to optimize the long-term health of a business.

This book is paired with a companion spreadsheet (the url for the spreadsheet is listed in the book). The spreadsheet outlines an online business with the following advertising micro-channels:

• Affiliates.
• Offline Advertisements.
• E-Mail Campaigns.
• Social Media.
• Print Ads.
• Search.
• No Attributed Source.

The spreadsheet also contains five merchandise divisions. Think of these as being similar to the tabs running across the top of an e-commerce website. In total, there are five customer grades (A, B, C, D, and F) with eight online advertising micro-channels (all channels + multiple channels) and six merchandising divisions (five + multiple merchandise divisions) yielding 240 segment combinations.

Most important, you will get to see how you can identify a "MVP", or "Most Valuable Path", the route that customers take from acquisition to loyalty. It is my opinion that identification of the "MVP" is more important to the long-term health of your business than is optimization of conversion rate.

The book walks you through an analysis of a business, helping you understand what steps you can take to make sure that, in five years, your business is growing at the rate you want for it to grow. If you are a CEO or CMO, you need to know how your actions impact the future of your business.

If you are an SPSS/SAS programmer, or you use another programming language, then you'll appreciate the 50+ pages of programming code in the appendix. With this information and the spreadsheet, you will be able to create your own Online Marketing Simulation.

I am self-publishing this book via Amazon, and am offering the book at a reasonable $19.95 price point. The book is clean and simple, no fancy colors or fonts or graphics, it simply offers a soup-to-nuts approach to conducting an Online Marketing Simulation.

I sincerely believe that Online Marketing Simulations should be part of any web analytics software package. After you purchase the book (or read the posts on this blog), if you feel the same way, let our web analytics software provider know that you want to see Online Marketing Simulations incorporated in their software offering.

OMS projects and Multichannel Forensics work will be the focus of my consulting work over the course of the next year --- these are things that CEOs are asking me to do for them. So give the book a chance when it becomes available next week!

OMS: You Shape The Direction Of Your Brand

Please send me an e-mail message if you'd like for me to send you a copy of the OMS spreadsheet to follow along with our posts.

Do you ever feel like you don't make a difference?

Maybe you are the humble paid search analyst at your company, and your CEO wonders what you're doing with all of those confusing keywords.

Maybe you just had a breakthrough --- you've found one set of keywords that, coupled with outstanding merchandise, cause a breakthrough in conversion rate.

Can you prove your worth to your CEO?

Go to the OMS spreadsheet. Take a look at cells N15 - N27. These are the annual demand totals for each merchandise division five years from now.

Now try this. Go to cell B39, and instead of the value 3,599 that is in that cell, change the cell to "6,599". In other words, you are adding 3,000 new customers, over each of the next five years, to the business, because you did such a great job of finding a set of keywords that, coupled with outstanding merchandise, cause a breakthrough in conversion rate.

Now look at cells N15 - N27. How did the cells differ?

Well, you've increased the value of your business over time, haven't you? Look at merchandise divisions 14 and 21.

• Division 14 Old Value = $8.9 million. New Value = $9.3 million.
• Division 21 Old Value = $1.17 million. New Value = $1.23 million.

Each division experienced increases of more than 4%, just from a subtle change in keyword strategy across a few merchandise divisions. Also notice that all merchandise divisions generated some benefit, as customers spilled-over, during the course of five years, from divisions 14 and 21 into other divisions. In year five, the business is $800,000 bigger because of the efforts of one individual, making one or two subtle changes today.

Every online marketing professional is making small improvements, improvements that have long-term consequences. As an industry, we do a terrible job of demonstrating our value, on a long-term basis.

The CEO uses the Online Marketing Simulation environment to understand the value all employees bring to the table. Once we get to see that value, illustrated over time, we make different decisions in the short-term to capitalize on it. Online marketing is taken in a new direction, a more productive direction.

Dear Catalog CEOs: Conflicting Messages

Dear Catalog CEOs:

Have you ever received conflicting messages from the marketing community?

Here's an example:

• The Twitter headline from @eMarketer is "Why marketers should never, ever send direct mail".
• The Twitter headline from @IMCS_Team is "Print working harder -after testing Ford rolls out more relevant direct mail strategy - DMNews".
• Wall St. Journal: Why E-Mail No Longer Rules.
• Chief Marketer / Direct / Multichannel Merchant: E-Mail Gone Viral.

Who is right?

Who cares!!

Our job is to sell merchandise, to provide a compelling offering that results in a customer desiring to have merchandise delivered to her home.

We are one decade into the "Multichannel Era", a never-ending foray into an abyss of channels that have yet to genuinely increase long-term customer productivity or profitability (notice the use of the phrase 'long-term' ... you can prove that everything works on a campaign or conversion basis).

Oh, sure, this sounds like something you might hear from Don Libey, and it does for good reason, because in his comments are embedded fundamental truths.

Seriously, go do a "comp segment analysis", comparing customer behavior in 1999 and 2009. I've done this work for my clients. Customers are not more productive today than they were in 1999. You'll see something that looks like this (comparing 2x $180 - $220 annual buyers in this example, click to enlarge):

Notice that annual repurchase rates, in spite of a dramatic proliferation of marketing channels, have not budged in fifteen years (in this example --- your mileage will vary). And after you adjust spending levels for inflation, you don't see increased spend, either. In fact, after adjusting for inflation, you often see a decrease in spend. Oh oh.

Run this analysis for your business.

My Multichannel Forensics and Online Marketing Simulation projects continually reveal four strategies that lead to success.

1. You have customers who crave or need the merchandise you sell.
2. You do an exceptional and cost-effective job of acquiring new customers.
3. You do a better-than-average job of using human beings to interact with customers.
4. You exhibit outstanding operational management, not letting pennies leak out of the profit and loss statement.

Master these four things, and you have something! Channels and campaigns are almost meaningless in this context, rendering irrelevant discussions about whether print is dead or about e-mail being dead or about social media being a savior.

Gliebers Dresses: Whack A Mole

Welcome to this week's Executive Meeting.

Glenn Glieber (Owner): "... but is business really coming back? I keep hearing that some folks are up 5% over last year, but so what? Last year was a catastrophe. And then I hear that other folks are 5% down vs. last year, like we are. I'm optimistic for 2010. Of course, back in April, I was optimistic for Fall 2009, so who knows. Maybe I'm running out of optimism. And then I hear that Guilt Groupe will sell something like eighteen trillion in merchandise this year, from $0 a few years ago, so maybe the problem is us, maybe our industry is the problem maybe ..."

Meredith Thompson (Chief Merchandising Officer): "Kevin, is that you?"

Kevin: "Yup, it's me".

Roger Morgan (Chief Operations Officer): "What do you think of integrated marketing campaigns, Kevin?"

Kevin: "What do you think of them, Roger?"

Roger Morgan: "Aren't we supposed to integrate all of our campaigns? That's what the marketing literature tells us, right? If we don't integrate the catalog and the website and e-mail campaigns and social media and everything else, customers will abandon us. We have to be multichannel, and we have to make sure everything syncs up perfectly."

Pepper Morgan (Chief Marketing Officer): "And yet, we don't integrate anything, really, and it doesn't seem to hurt us."

Lois Gladstone (Chief Financial Officer): "Or is it the entire reason our business is struggling? We've never integrated anything around here, maybe that's why we're not doing so well."

Meredith Thompson: "I'm not always one to defend marketing, but customers buy from us because I do a good job, not because of some mythical integrated marketing campaign. Customers don't buy because our website and e-mail campaigns and Twitter presence all feature our signature olive color, right?"

Roger Morgan: "Well now, wait a minute. Neptune Research recently did a study and found that e-mail click through rates were 22% higher if print and e-mail and social media campaigns echoed the same marketing themes. That alone tells us that this stuff works."

Lois Gladstone: "Why wouldn't we do a test? Why wouldn't we fully integrate a campaign, like our Thanksgiving Dress Extravaganza on November 9? What would it take to fully integrate a campaign?"

Roger Morgan: "It should be easy. What's the e-mail theme for November 9?"

Meredith Thompson: "That's a clearance e-mail. We need that one to liquidate merchandise."

Roger Morgan: "Let's add a new e-mail campaign on November 10, one that is fully integrated with the Thanksgiving Dress Extravaganza."

Pepper Morgan: "Our customers opt-out at high rates if we go from two to three campaigns a week, so we're not going to do that."

Lois Gladstone: "Ok. Then maybe we could devote the first eight pages of the Thanksgiving catalog to the campaign."

Pepper Morgan: "We already have a dot on the cover of the catalog, and the homepage will reflect the campaign. And we cannot change out the creative of the catalog, that was shot back in July."

Lois Gladstone: "Why didn't we coordinate all of this stuff back in June?"

Meredith Thompson: "Our Thanksgiving campaign last year was just awful, remember? So we elected to go with a dot on the catalog, but focus creative on what worked two years ago."

Roger Morgan: "So this is really a website campaign with a dot on the catalog. There's really no integration to speak of. What kind of message does this send the customer? She gets a catalog with creative from two years ago, a clearance e-mail, and a website that promotes a Thanksgiving Extravaganza. Imagine how confused the customer is? What a terrible customer experience."

Meredith Thompson: "Did we ask Candi Layton back into these meetings? Who says that this is a terrible customer experience?"

Pepper Morgan: "We pay close attention to this stuff because we are marketers. Quick, everybody, tell me right now what Best Buy did last month? What was their marketing theme? How were their campaigns integrated?"

Lois Gladstone: "I have no idea."

Pepper Morgan: "Exactly. Those who demand that everything be integrated are those who are selling solutions that depend upon integration. If we are marketers, and we cannot even remember one single thing about what a behemouth like Best Buy did just last month, then why do we think that our customers are having such a terrible customer experience because we're sending a clearance e-mail on Monday at a time when the website is promoting Thanksgiving?

Lois Gladstone: "But doesn't it make common sense to be more tightly integrated? I think with a little pre-planning and coordination between all of us, everything could be integrated, right?"

Meredith Thompson: "Why is it that Operations and Finance always think they know what the best Marketing and Merchandising strategy is? I mean, so what if e-mail click-through rates are 22% higher in integrated campaigns? Somebody needs to show me that a company, over the course of one or two years, is more profitable because all campaigns are integrated. Until I see that, I'm not signing up for integration. Roger, in everything you have read, all of those case studies, have you found one instance where a company went from 5% pre-tax profit to 10% pre-tax profit only because they perfected this mythological art known as multichannel integration?"

Roger Morgan: "No. But maybe that's because everybody fails so miserably."

Lois Gladstone: "Why, Meredith, are you so against this?"

Pepper Morgan: "I can take that one. The more you integrate a business, the more you squelch innovation and testing and alternative strategies. You integrate campaigns, and you are stuck with a clearance issue. If you integrate campaigns across channels, you ruin the inherent productivity of each campaign. If you integrate campaigns, you have to pre-plan everything a year in advance, so that your least flexible channel, in our case, catalogs, can accommodate integration. And when you do that, you lose the ability to act nimbly in channels like e-mail and paid search and banner ads and social media, because those channels must support the catalog that you planned a year earlier. Maybe that's the problem. Maybe multichannel advocates are clinging to catalog marketing, trying to keep the dream alive, trying to integrate all the upstart channels around the time-honored catalog."

Meredith Thompson: "If you truly pursue an integrated multichannel strategy, you become a slave to the channel that is least able to adapt in a timely manner. At Gliebers Dresses, that channel is the catalog channel. I want to be able to be nimble, to use e-mail and paid search to surgically attack various issues I have. I want to use e-mail to capitalize on the merchandise that is working, or not working, and to not be a slave to a marketing campaign that the former CFO conceived a year earlier that now appears in print."

Roger Morgan: "Kevin, help us, you have to agree with my thesis on multichannel campaigns, right?"

Meredith Thompson: "Impossible, he supports the need to market merchandise in a flexible manner."

Kevin: "I support all of you. Honestly. Multichannel marketing integration is a giant game of whack a mole. On the one hand, you have real-time analytics telling you how to optimize your digital environment at this moment! On the other hand, you have a catalog channel that requires planning six to nine months in advance, and those who have a retail channel face similar long-term planning obstacles. Let me make this very clear. You can never achieve true integration when social media requires real-time decisions, e-mail marketing requires weekly decisions, and cataloging and retailing require six month or greater planning cycles. Any time you try to integrate in one channel, you pound down the mole, only to see a problem arise in another channel."

Meredith Thompson: "Told you, folks!"

Kevin: "No, Meredith. Whack a mole doesn't mean that you don't get hit with the mallet! I think it is the job of the marketing team to have integrated themes, not integrated campaigns. In other words, you support Thanksgiving from November 1 to November 25, let's say. Merchandising, Marketing, Operations, and yes, even Finance work together to make the Thanksgiving season a success. But this means everybody must work together. So Roger, this means all of your call center employees must be 100% behind Thanksgiving, selling it, exciting customers, not acting like drones taking calls. And Lois, this means you have to financially support efforts that are profitable above and beyond the budget, not imposing your will on people to adhere to a budget when people discover profitable strategies at the last minute. You see, multichannel integration has nothing to do with campaigns. Multichannel integration has everything to do with people. And we don't want to talk about getting people, human beings if you will, to work together, so the vendor community uses campaigns as a platform to force integration, forcing us to buy solutions that they offer. And when we do that, all we do is play a big game of whack a mole, always trying to figure out how to put out a fire, never ever achieving perfection. You don't want to achieve perfection via integrated multichannel campaigns. You want to sell dresses profitably. I'd go with integrated themes, and I'd get all employees to be on the same page for each theme."

Glenn Glieber: "Good topic, but again, I don't think we made a single decision that helps us sell a dress in November. I want to challenge every single person in this room to find a 2% solution that helps us increase dress sales by 2% in November. If everybody does this, our business improves by somewhere around 10%. That's what I'm talking about. Now get busy!"

New Homepage And Logo

Please visit http://minethatdata.com for new information and zippy new logo!

OMS: Cross-Selling and Up-Selling

Please send me an e-mail message if you'd like to follow along with your own copy of a sample OMS spreadsheet, or if you're looking to work with me on an OMS project.

We read a lot about cross-selling and up-selling merchandise, and for good reason. There's nothing more fun, from the standpoint of a merchant, than adding another item to an order, generating an additional $20 of profit for almost no additional work.

Now, let me ask you a question: Does customer value increase if a customer adds a cross-sell or up-sell item to their order?

Go into the OMS spreadsheet, and type the value "1.05" into cell C7. Look at the demand values for the next five years:

• Year 1 = $79.7 million.
• Year 2 = $70.5 million.
• Year 3 = $66.7 million.
• Year 4 = $64.4 million.
• Year 5 = $62.9 million.

Next, type "1.00" into cell C7. Next, type the number "1.05" into cells C5 and C6. Look at the demand values for the next five years:

• Year 1 = $79.7 million.
• Year 2 = $72.3 million.
• Year 3 = $68.1 million.
• Year 4 = $65.3 million.
• Year 5 = $63.6 million.

Do you notice the difference?

Getting customers to spend 5% more in one year has the potential to benefit one year.

Increasing customer response by 5% pays us downstream benefits ... in this case, an additional $4.8 million over the next four years.

Carefully analyze the customers who purchase cross-sell and up-sell items, comparing them against customers who have identical characteristics but have not been swayed by cross-sell and up-sell items. Measure the long-term benefit your programs deliver ... are you fundamentally changing customer behavior, or are you enjoying the benefits of short-term profit generation?

This Week In Business: New Product Analysis, And Free Code

We tend to focus on marketing concepts that have nothing to do with merchandise ... things like strategic use of the word "new", or "free shipping today only", or the colors and fonts and links and placement thereof on our homepage.

And there's no arguing that you can improve conversion rates by focusing on this stuff. It works. All of it.

I'm here to tell you that you can generate far more profit by focusing on two things.

1. Understand customer behavior over time, not just within campaigns.
2. Understand the merchandise that different segments of customers prefer.

This viewpoint is considered heresy by many in marketing. And that's amazing, because the job of a marketer is to get a customer to purchase merchandise, right? It's not the job of the marketer to manipulate the customer into a complex web of conditions and criteria surrounding a free shipping promotion that extracts short-term profit at the expense of a long-term customer relationship.

Allow me to ask you two simple questions.

1. Do your best customers prefer the same merchandise they've always purchased, or do they love to purchase new merchandise?
2. Do your prospects, customers who have never purchased from you, trust merchandise you've always offered, or do prospects buy merchandise from you that you haven't previously offered to customers?

If you can honestly answer each question, based on data you've mined from your customer database, then you are well down the path of dominating the competition.

It turns out that every company is different, and that every company has a new/existing product "DNA" that dictates their success.

I worked with an established brand. This business had a loyal customer base that only wanted to purchase the same product, over and over and over. This company would not use "new" in an e-mail subject line, it would be pointless, the customer loved the same stuff they bought ten years ago. Every time this company tried to "modernize the brand", the customer rebelled.

I worked with another established brand. This business had a loyal customer base that craved new product. The more loyal the customer was, the more likely the customer was to deviate from the "same old same old", always desiring the latest and greatest innovations from the brand. Conversely, the new customer, the prospect, the customer who had not purchased before, would only buy the most conservative, best selling items. Clearly, the prospect only "trusted" a small subset of merchandise that the brand had offered for more than a decade. It's not hard to envision a marketing strategy that immediately boosts productivity, based on this knowledge, is it?

Identifying this Customer x Product x DNA issue is critically important. Success in e-mail marketing to existing customers is entirely dependent upon understanding this phenomenon. Success in paid search marketing is entirely dependent upon knowing if new or existing customers use paid search, coupled with merchandise preference (new or existing product), resulting in a properly merchandised landing page. Catalog marketing is entirely dependent upon putting new/existing merchandise in the first twenty pages of the product based on customer preferences.

A fundamental knowledge of these issues allow you to generate more profit than does a mastery of subject line headers, for instance. In fact, anytime you thoroughly understand how customer segments interact with merchandise, you are in a position to dominate the competition. The past decade saw us walk away from this fundamental understanding of our businesses, as we searched for mechanical e-commerce tweaks that didn't increase customer loyalty.

Now it's time for the free (and very simplistic) code. If you want to do a quick-and-dirty analysis to see if new or existing customers prefer new or existing product, then convert the simple SPSS code below to whatever software tool you use. The dataset I'm using has one row for every item the customer purchased over the past ten years. I'm simply analyzing the average "age" of an item the customer purchases (if the item has been available for 10 years, then the item is assigned a value of "10", if it was only available in 2009, it is assigned a value of "1"), by customer spending levels over the past twelve months.

Or send your data to me, and I'll run the analysis for you. Either way, you get the information you need to understand this dynamic!

get file = 'c:\datasets\Kevin_Hillstrom_MineThatData_ItemDetail.sav'.
select if (demand gt 0).
select if (quantity gt 0).
aggregate outfile = *
/break = item_no year
/demand = sum(demand).
aggregate outfile = *
/presorted
/break = item_no
/year = max(year)
/years = n.
select if (year = 2009).
save outfile = 'c:\datasets\dummy.sav'.
execute.
get file = 'c:\datasets\Kevin_Hillstrom_MineThatData_ItemDetail.sav'.
select if (demand gt 0).
select if (quantity gt 0).
sort cases by item_no.
match files file = *
/table = 'c:\datasets\dummy.sav'
/by = item_no.
compute hst_demd = 0.
compute fut_demd = 0.
if (year ne 2009) hst_demd = demand.
if (year eq 2009) fut_demd = demand.
compute yrs_2009 = $sysmis.
if (year = 2009) yrs_2009 = years.
aggregate outfile = *
/break = household_id
/hst_demd = sum(hst_demd)
/fut_demd = sum(fut_demd)
/yrs_2009 = mean(yrs_2009).
if (hst_demd gt 0) hst_demd = 1.
if (fut_demd gt 0000) and (fut_demd le 0100) fut_demd = 0100.
if (fut_demd gt 0100) and (fut_demd le 0250) fut_demd = 0250.
if (fut_demd gt 0250) and (fut_demd le 0500) fut_demd = 0500.
if (fut_demd gt 0500) fut_demd = 0999.
formats hst_demd(f1.0) fut_demd(f4.0).
aggregate outfile = *
/break = fut_demd hst_demd
/cases = n
/years = mean(yrs_2009).
list.
execute.

Breaking News: A New Book!!!!

In just a few weeks, you will be among the first to have the opportunity to purchase a new book:

Online Marketing Simulations: The Definitive Methodology For Predicting The Future Of Your Online Business

The book walks you through an example of an e-commerce business with the following characteristics:

• Seven Advertising Micro-Channels, including Affiliates, E-Mail, Offline Advertising, Print Ads, Paid Search, Social Media, No Defined Source.
• Five Merchandise Divisions.
• 240 Analysis Segments.
• Free Spreadsheet, downloadable from http://minethatdata.com/, to use as you walk through the exercises in the book.
• SPSS Computer Code required to build the spreadsheet from scratch --- more than 4,000 lines of programming code will be available. If you're an enterprising coder, you'll be able to recognize what I'm doing, allowing you to code the entire simulation in the programming language of your choice.

Within this framework, you will explore all of the ways that Online Marketing Simulations can be used to learn which customers have the best long-term value, allowing you to optimize your marketing campaigns in the short-term for better results. You will also get to see how a business can be calibrated for long-term growth.

The book will be available on Amazon.com. And I listened to you, I heard your concerns about how much a business book should cost. So this time, the price is tentatively set for $19.90. You will be hard-pressed to find content of this nature available anywhere else, much less at that price. Management Consultants might charge a hundred thousand dollars or more for this kind of information. Research organizations would charge $1,495. Seriously. Ask both audiences.

Online Marketing Simulations will be one of my two key consulting project focuses over the next twelve months (the other project focus, of course, is Multichannel Forensics). This topic isn't going away. I'll be happy when I have plenty of consulting projects and the leading web analytics vendors incorporate this methodology into their software offering, so that all of us can easily access this information. I would like to politely ask you to help make that happen, that you ask your software providers to help arm you with the tools necessary to make good long-term decisions. Our industry simply lacks tools that allow really talented analysts to optimize conversion rates in a way that guarantees long-term success.

Dear Catalog CEOs: Filtering and The Death of the Mailbox

Dear Catalog CEOs:

My most enjoyable Multichannel Forensics projects have two components.

1. Predict the future.
2. Filter the audience into actionable segments that increase the amount of profit you generate.

When I filter the audience into actionable segments, I receive interesting feedback.

• "You're telling me I shouldn't mail 12,000 of my best customers? That's crazy!'
• "If I reduce contact frequency, I'll reduce sales. My business needs to grow, not shrink!"

We live in interesting times. Never before have we had to deal with something like "The Death of the Mailbox".

This week, do an experiment. Take every piece of mail you receive, and divide it into three piles.

• Pile #1 = Bills.
• Pile #2 = Stuff You Don't Want Or Didn't Ask To Receive.
• Pile #3 = Communications You Asked For Or Wanted To Receive.

At the end of the week, count every piece in each pile. Divide the quantity in Pile #3 by the total quantity of mail you received. What is the percentage of mailbox content that you want to receive, that you are excited to receive?

We fight battles on three fronts.

• Customers increasingly communicate digitally, first via e-mail and SMS/text, then via social networks, and increasingly to the real-time web.
• Customers increasingly purchase digitally, via e-commerce, and eventually, purchasing via emerging three-dimensional trends like hologram marketing ... heck, 3-D television is here next year. Just think about a 3-D web experience that integrates holograms in a Twitter/Facebook kind of way. Oh boy.
• The signal-to-noise ratio in the mailbox degrades as customers continue to shift habits online.

Strategically, we have to have a response to The Death of the Mailbox.

Tactically, we can become more profitable, starting tomorrow, by finding ways to reduce the number of catalogs to customers who have moved beyond the mailbox. We do this by keeping track of the following (what I call 'filtering'):

• Telephone Orders (skew to catalog).
• Online orders in the first seven days after catalog in-home date (skew to catalog).
• Online orders on days farthest away from in-home dates (skew to online).
• Source of acquisition = Abacus, other co-ops (skew to catalog).
• Paid/Organic Search on days away from in-home dates (skew to online).
• Clicks on e-mail campaigns (skew to online).
• Non-catalog merchandise purchased (skew to online).
• Uses discount code to purchase, obtained online (skew to online).
• Urban customer (skew to retail).
• Referring URLs from social media sites, Twitter, Facebook (skew to the future).
• Uses your mobile website (skew to the future).

There are an endless number of attributes to focus on. In my projects, I model these attributes, and create a score (called the "organic percentage" ... the percentage of demand not generated by catalog marketing activities).

This helps us solve The Death of the Mailbox. We get to have our cake, and we get to eat it, too. For the audience that loves catalog marketing, we get to keep doing what we've always done. For the ever-increasing audience that has moved online, or is moving in an endless combination of unpredictable micro-channels, we mail far less often, saving our company a bunch of expense and generating a lot of profit, profit that we re-invest in new customers or in new products or the development of micro-channels.

My average client generates between seven and one-hundred times more profit than the cost of a typical Multichannel Forensics project, just on the filtering component of the project alone. In other words, a $15,000 project yields $100,000 to $1,500,000 profit ... most often around $500,000 profit for a $15,000 project, depending upon the targeting strategies already employed by the client.

In other words, filtering works. And your team can do the filtering on your own, the tools are available!

The Death of the Mailbox doesn't have to be a bad thing. We just have to be strategic about it ... keeping our existing strategies in place for the customers who like this style of relationship --- using filtering strategies to cut back on mailings to the audience that is moving away from the mailbox, while employing online micro-channels that truly increase profit.

We'll get through this transition!

Gliebers Dresses: The DMA Edition

Welcome to the weekly Executive Meeting.

Glenn Glieber (Owner): "All I have to say is that you don't do anything inappropriate with your employees. You're responsible for their well-being, you're paying them, their lives are in your hands. You don't use employees as your own private dating service."

Meredith Thompson (Chief Merchandising Officer): "Kevin, is that you?"

Kevin: "Yup, it's me."

Lois Gladstone (Chief Financial Officer): "Have you heard about the kerfuffle within the Direct Mailing Association?"

Roger Morgan (Chief Operations Officer): "You know, the civil war between the ousted board member and the CEO?"

Pepper Morgan (Chief Marketing Officer): "It's shameful on both sides, considering they keep spamming our inboxes with their infighting. Aren't they supposed to be offering us best practices in e-mail communications? Doesn't the DMA jack up annual dues and then offer us these white papers on how to treat customers via e-mail marketing?"

Roger Morgan: "How much do we spend a year on annual dues with the Direct Mailing Association?"

Pepper Morgan: "We spent $13,500 in 2006, $15,000 in 2007, $16,500 in 2008, and we'll spend $19,000 in 2009."

Lois Gladstone: "That's $64,000 that could have been spent acquiring new customers, or better yet, spent on loyalty programs to keep our existing customers. Can somebody tell me what the ROI is, I mean, how much profit have we made as a result of this $64,000 investment?"

Roger Morgan: "Oh heavens, that's nearly impossible to calculate, isn't it? I mean, my team attended close to a dozen Direct Mailing Association conferences over the past four years, and we learned so much at those conferences while saving hundreds of dollars per conference because we are a member. So right there alone, we've made up some of the investment."

Meredith Thompson: "Actually, it's easy to calculate, isn't it? We lost $64,000, and then we spent another, what, maybe $15,000 on DMA conferences, so we're out $79,000, and then they charged us maybe $3,000 less than non-DMA members to attend the conferences, so we're out $76,000 total. Then we subtract the profit we made because we learned something at the conferences. Did we learn anything that we applied to our business? I don't know, it is hard to say, isn't it?"

Roger Morgan: "No, I don't buy that logic. The DMA advocates on our behalf. Who knows how much profit we would have lost if they weren't actively lobbying for us in Washington? And I love having access to their white papers, that really expands our thought leadership. You cannot put a price on that. We're trying to assign ROI to things that aren't easily measurable."

Lois Gladstone: "In the time when the DMA advocated on our behalf, we've had telemarketing legislation that basically killed that channel, we've had CAN-SPAM that essentially crippled classic e-mail marketing, and we've had a 35% postage increase --- heck, we haven't been profitable since the postage increase have we? Hmmmm."

Pepper Morgan: "And doesn't the Direct Mailing Association help all mailers, not just catalogers? I mean, what do they do when the banking industry demands concessions, concessions that cost us more money? How do they advocate in a way that helps one set of organizations but penalizes catalogers? I say we get out of the DMA, save our pennies, and spend our own money on our own customers."

Lois Gladstone: "I agree. We should not give up gross margin dollars to a trade organization that doesn't deliver a return on investment."

Pepper Morgan: "We should switch to the upstart Alliance of Catalog Merchants Association. I think their dues are only a few thousand dollars a year."

Roger Morgan: "Come on, people, nobody joined that organization. How many members do they have, eighty or maybe ninety? The DMA is where the critical mass is, that's where we need to be, we need to have a unified voice. If the catalog industry is so angry with the DMA, then why wouldn't the entire catalog industry just leave the DMA and support the Alliance of Catalog Merchants Association? Nobody in the catalog industry is really upset or angry, if they were, they'd do something about it. Don't you think the DMA would change if every cataloger left? To be honest, I'd be perfectly comfortable funding both groups. But let's not give up on the DMA."

Lois Gladstone: "I heard the President of the DMA earns something like a half-million dollars a year salary, and has health care benefits. Isn't that insane? Nobody here earns anything over $350,000 a year. They're simply out of touch. And didn't they let go of something like half of their employees when the economy collapsed? How do you do that? It's bad signalling, I'll tell you that. It's gross!"

Roger Morgan: "Lois, you did the same thing. You came in here with a gaudy salary when compared with what I pay a person to work in our distribution center, and you demanded that we shed twenty percent of the workforce to stay alive. How is that any different? And then you buy a new BMW and park it right in front of the front door of the building for all to see. What kind of message does that send to a distribution center employee?"

Meredith Thompson: "Who's side are you on, Roger?"

Roger Morgan: "I'm not on the side of hypocrisy, I'll tell you that. Our industry loves the argument, the gossip, the grumbling, the blasting of the big salary. All of it distracts us from the core issues we're facing. Heck, I'd rather gossip about a huge salary than to strategize about what the death of the mailbox truly means."

Meredith Thompson: "Somebody should give Roger a happy pill. Kevin, what do you think?"

Kevin: "Maybe the hardest thing for an industry to do is to change from within. Change from outside doesn't look right, it seems foreign and unfamiliar, so it isn't embraced. And change from within sometimes focuses on solutions that are congruent with the thought process generated from within, making that style of change less likely to be successful. I think Roger makes an interesting point ... it isn't fun to spend time thinking about the real issue here, the death of the mailbox. Maybe that's what the Direct Mailers Association is doing. Maybe they are trying to find a path into the future, while protecting the past --- and the past includes a nice salary. I don't know, I don't have inside information."

Glenn Glieber: "I think I've had enough of this talk for one day. We're wasting too much thought on an issue that doesn't really matter. The DMA isn't going to help me sell dresses in November. I want to know what we're doing to sell dresses in November? Anybody have any bright ideas for how we're going to sell dresses in November? Now let's get back to the agenda. We need to decide what color we're going to paint the lunchroom. Who wants to go with taupe?"

OMS: Price Points

It's trendy in online marketing to entice customers to purchase with low price points, discounts, and promotions.

But is it healthy for you business, in the long-term?

Let's look at an example from the OMS Spreadsheet (e-mail me if you wish to follow along, I'll send you a copy).

Zero out cells D6 - G6.

Zero out cells B101 - B580.

Now we're going to compare the evolution of two segments of new customers.

Go to cell B419, and enter the number "1,000". Now go up to the top of the spreadsheet, and look at cells C17 - G18. In the future, these customers like to purchase 3-4 items per order, spending $30 to $40 per item. In the year the customers were acquired, they spent $159,000. These customers basically stay stuck in department 11.

Next, zero out cell B419, and instead enter "1,000 into cell B421. Now go up to the top of the spreadsheet, and look at cells C17 - G18. In the future, these customers like to purchase much more expensive items. In the year the customers were acquired, they spent $147,000 ... but these customers are likely to migrate to expensive items in department 15. These customers hold much more potential than do other customers.

Online Marketers have the opportunity to carefully link the micro-channel the customer purchases from with the merchandise the customer purchases and the price point of the merchandise purchased. The combination of micro-channel, merchandise, and price point yield a customer that has outstanding potential, or limited potential.

This is an important area for online marketers to provide attention to!!

This Week In Business: Zappos Twitter Strategy

Well, you can't throw a Pottery Barn catalog without hitting somebody who promises business success on Twitter.

I find the whole Twitter thing vexing. My own presence (follow me here) finally found a groove ... more than 1,000 followers discussing various questions I ask on a daily basis.

But enough about me. You frequently ask me how you might use Twitter to increase sales.

So why don't we look to the leader, Zappos, to see how their folks use Twitter.

As you may already know, Zappos gives considerable flexibility to employees using social media, and allows you to see what all employees are currently talking about. So let's take a brief look at a few employee comments.


Customer Service --- Click Here For More: @Zappos_Service

• @jefframone Thank you for shopping with us! I hope you enjoy your shoes =)
• @hevipetter Did you know that we also carry handbags to go with your cute boots? http://www.zappos.com/bags
• @trappedinabay Please let us know if you need any assistance! We are here for you 24/7 by calling 1-800-927-7671.
• @kooskoos Did you know that we also sell clothing to go along with your shoes? http://www.zappos.com/clothing
• @Delirium7 I'm sorry the heels didn't work out for you. Please give us a call at 1-800-927-7671 if you need further assistance.
• @kastner We apologize for any inconvenience. That site was just a test and we decided not to go forward with it at this time.
• @drudy We love you too! Thanks for shopping with us!
• @_cyndi I love these shoes! I have the same ones in the White/Carbon/Orchid. Enjoy!
• @denimmafia Actually here is the real link to our sale section :-) http://www.zappos.com/sale
• @marysam I'm sorry that we are currently out of stock in your size. Please DM (direct message) me your email address and I will be happy to help!
• @tenaciouscb We apologize for any inconvenience. Please DM me if you are still experiencing any problems with your account or the site.
• This is Josh signing off and wishing you all a good night! We'll be back here to WoW tomorrow morning!
• Goodmorning Everyone! Tasha here, ready to WoW you this am!

Learn anything from the thirteen tweets outlined here?

Honestly, read the comments. There is nothing magical here. This isn't about Twitter. This isn't about Social Media. This is 100% about human beings offering customer service, about human beings being humble, about human beings selling merchandise. Remember selling? That's our job, as marketers. We are supposed to sell stuff.

And yet, it is the human element of this, it's the service element that may be judged by some to be magical --- not the social media marketing channel. How many of the businesses we work for would be willing to publicly apologize for being out of stock on an item? How many of the businesses we work for would be willing to publicly apologize for testing a new site out and disappointing a customer in the process?

The human element will cause some problems, too. Read a few of the tweets from Zappos employees, tweets that take on a different tone:

• @bassred says "Hey T-Mobile. Now on day five without data service. your live chat is unavailable. thinking customer service is not very important to you."
• @seanyboysp says "At tropical smoothie cafe with the wifey and baby boy.. maverick just loves smoothies haha"
• @graves says "Note to self... don't try to buy Rolo's again from the vending machine"

Oh, you'll read about politics and boyfriends and kids soccer photos and Brett Favre and wars while going through employee tweets. Maybe you are more than happy to allow your employees to share their lives with your customers. Maybe this is shocking to you, and represents the absolute last thing you'd ever do, maybe you think this represents a branding catastrophe.

Remember what we talked about on Monday? When I run Multichannel Forensics and OMS analyses for clients, I continually see that interaction with humans leads to customers with increased long-term value.

Clearly, we focus on channels, like Twitter. But this has nothing to do with Twitter or Social Media or marketing channels. It has everything to do with human beings pleasing customers. What can we learn from their style of human interaction that we might be able to leverage?

OMS: Merchandise Mix

If you'd like to follow along, please send me a message via e-mail, and I'll send you a copy of the spreadsheet.

Today we're going to talk a little bit about the role that merchandise mix plays in a business. Our online businesses are often managed by campaigns and landing pages. We execute offline campaigns (catalogs or direct mail or whatever works for you), and we execute a ton of online campaigns.

On average, we don't care what sells nearly as much as we care about the campaigns that work. We optimize our business based on the campaigns that deliver an acceptable return on investment.

But what happens when we cause customers to buy a different set of merchandise? In other words, does the future of the business change if I influence the merchandise that a customer purchases?

Give this a try. Zero out cells C5 - G5. Zero out cells B101 - B340. Enter "1,000" into cell B130.

Notice that these customers love Merchandise Department 11. After five years, they still spend more than half of their money in this department. After five years, the customers who stay active purchase 2.6 times a year, purchasing 2.9 items per order at $80 per item.

Now zero out cell B130, and type "1,000" into cell B136. These customers love Merchandise Department 14, but these customers are at least a little bit more willing to shift their money across other departments. After five years, the customers who keep active purchase 2.6 times a year, purchasing 2.6 items per order at $105 per item.

This is a tame example, one where the customer is fundamentally different, but the outcome after five years is not dramatically different.

That being said, it's a good thing for you to pay attention to this trend. Are your keywords causing you to acquire customers who have a preference for only a specific item or set of items, causing you to not achieve the long-term potential you'd like to achieve? Do your e-mail campaigns influence the merchandise preferences of your customers?

Dear Catalog CEOs: Dominate The Competition

Dear Catalog CEOs:

It's October. This is the time of year when I get a lot of Multichannel Forensics project requests from CEOs asking to see where sales are headed over the next two or three years. Based on the analysis, online marketing budgets and catalog marketing budgets are adjusted accordingly.

When we do this type of work, we sometimes step out of strategy, and into a discussion about tactics.

• "What happens if we go from 148 pages to 140 pages per catalog?"
• "What happens if we pay only for branded keywords?"
• "Can we increase sales by 10% by using Social Media?"
• "Will our customers be angry if we go from one e-mail campaign per week to two?"
• "What can we do to immediately improve our conversion rate from 5% to 6%?"
• "Should our standard 20% off promotion be changed to 25% off?"
• "If we do free shipping all year, will we be out of business?"
• "How can we motivate Abacus to get us a better list of prospects?"

Across all of my projects, two things consistently rise to the top among high-performing companies, two things that allow companies to dominate the competition:

1. A disproportionate focus on merchandise. The companies that succeed have a passion for offering customers outstanding merchandise. This passion spills over into marketing --- the focus isn't on the promotion or the channel, but rather, the key items that a prospect might love, or the merchandise that loyal customers crave. You'll hear more talk about merchandising events than about free shipping events, more talk about launching new products than about launching a new Twitter presence.
2. An appreciation for human beings.

Let's focus on #2, an appreciation for human beings, because #1 is self-evident.

I've yet to work on one project where any customer segment that interacted with a live human being didn't experience increased long-term value.

Allow me to repeat the statement. I've yet to work on one project where any customer segment that interacted with a live human being didn't experience increased long-term value.

Customers who use the telephone to place an order outperform customers who use your website to place an order.

Customers who interact with live chat outperform those who simply enter their items into the website and complete their order.

Customers who interact with store associates outperform those who interact with technology.

Customers who work with a talented sales force outperform those who simply order from an e-mail campaign or a catalog.

If we truly want to dominate our competition, or at minimum become more profitable, we might want to focus more effort on how our customers interact with human beings.

Increasingly, it appears that by embracing the internet, we removed humans from the merchandise/customer relationship. Each time we removed a human, we lowered long-term value. And as long-term value declined, we added discounts and promotions to make up for lost sales, which further eroded gross margin and profitability. And as profitability declined, we added additional automated channels (search, affiliates, e-mail), further removing the customer from human contact. It becomes a cycle that's hard to get out of.

In no way am I saying we shouldn't do search or affiliate marketing or e-mail marketing or catalog marketing.

What I am saying is that we need to find a way to inject human beings back into the equation. If we want to dominate the competition, we can simply add helpful and pleasant people back into the purchase process. A mechanical free-shipping offer from a computer is nice. A phone call or personalized e-mail message from an actual employee telling the customer that the new merchandise assortment will be available on Monday online and via catalog, but the actual employee will help you pre-shop the assortment via a micro-site on the Friday before it is available to the public will provide a completely different level of loyalty.

If you want to dominate the competition, give human beings a chance!

Gliebers Dresses: Jewel Tones

Time for our weekly peek into the world of Gliebers Dresses.

Glenn Glieber (Owner): "... no, I don't want real cheese and meat and scallions and sour cream and salsa on my nachos. Nachos are all about fake cheese, in fact, those who serve nachos must offer a bonus serving of fake cheese on the side. The right way to make nachos is to generously drizzle a scalding hot ladle of fake nacho cheese on the chips, and then offer a side of fake nacho cheese in a small plastic container. No other toppings are necessary, folks, the chips and fake cheese should stand on their own merits."

Meredith Thompson (Chief Merchandising Officer): "Kevin, is that you?"

Kevin: "Yup, it is me."

Meredith Thompson: "Kevin, here's our question. Does creative matter?"

Kevin: "Define what 'creative' means to you?"

Meredith Thompson: "The way that merchandise is presented to the customer."

Pepper Morgan (Chief Marketing Officer): "We all watching 'Dancing With The Stars', I mean, not only us here at Gliebers Dresses, but at home, too ... Sonora and Sedona hold up their scoring paddles along with the judges while hubby burns the midnight oil at work. Anyway, you probably noticed how jewel tones recently took over the show. I'm looking through the catalog, and I realize that we missed the trend. We offer the product, but we missed the entire fall color palette in print. So I want to re-shoot everything online to reflect what's hot. We need to re-merchandise our landing pages in order to make a statement that is congruent with what they're doing on 'Dancing With The Stars'."

Lois Gladstone (Chief Financial Officer): "And I'm saying we don't have the money to re-shoot everything. We have a profit and loss statement to protect. Our scarce resources are funding our loyalty program right now. I'd rather fund customer loyalty than the whim of a Creative expert who thinks we missed the color palette."

Pepper Morgan: "Merchandise and our color palette create customer loyalty. If we don't have the merchandise, and we don't present it right, we don't have a business. This isn't a whim, this is my expert opinion."

Roger Morgan (Chief Operations Officer): "I was at work late a few nights ago going through every single white paper and research document I've ever purchased. You know what? I've yet to find a single research company, blogger, or industry conference that is willing to say anything about creative, so it must not matter much, or somebody would be trying to make money off of it, right? From what I heard, Facebook and Twitter and Personalization were the big topics at Shop.org, not the dress color that is likely to turbocharge conversion rates. We need to focus on strategy."

Meredith Thompson: "Here's the thing. Chip Cayman blasted us at Shop.org last week for being, if I recall the quote, 'lumbering fools at the tar pit of extinction'. Well, we're trying to be nimble here, like those online folks, and we're going to say we cannot spend money re-shooting product?"

Lois Gladstone: "Isn't it both of your jobs to know what the fashion trends are before the season starts? I trust you to do that, and you need to trust me with our budgetary constraints. The customer doesn't care what color we depict online or in catalogs, as long as all colors are available. I sure don't care."

Kevin: "Let's not focus on the things that divide us. Can we all agree that we want to make more profit? Can we all agree that we need to be responsive to changes in customer preference? Can we all agree that we need to minimize expense? Can we all agree we need to be nimble and flexible? Can we all agree that we'd prefer it if all marketing strategies were free?"

Glenn Glieber: "I love free marketing!"

Kevin: "But this doesn't have to be an all-or-nothing issue. Pepper, identify the twelve best selling styles that you perceive we have a color palette issue with. Randomly choose six of the items to be re-shot. The other six items are not re-shot, this represents your control group. Now put the test images up on the website for a week, and measure clicks, conversion rate, and sales for the test and control group. After a week, compare the two sets of items, and see which set worked best. Jewel tone items must outperform existing creative, and if they do outperform existing creative, Lois can run a profit and loss statement to see if it pays to re-shoot everything."

Roger Morgan: "That's complete garbage. You cannot tell anything from twelve items. And in the catalog, we've already depicted the items a certain way. So the test is not valid, we'd have to test the color palette in the catalog as well in order for this to be a fair test, and we simply cannot react that fast --- we could impact the February catalog at earliest. So your test design fails to measure anything."

Lois Gladstone: "And I don't think you have a big enough sample size, either. One week isn't long enough to run the test."

Pepper Morgan: "Lois, could you volunteer a test design and measurement strategy that would meet your needs, and oh, by the way, can you back up your opinions with actual statistical theory? What is the math that supports your disenchantment with the test design?"

Lois Gladstone: "I don't need to back up my opinions with math, I just think the test design stinks. I don't agree with it, and I don't want to waste money re-shooting any items."

Pepper Morgan: "It'll cost us less than a couple thousand dollars to re-shoot this stuff. It's a cheap test. Isn't this what web analytics and website optimization is all about? Everybody was talking about this style of testing at Shop.org last week, heck, Amazon is doing optimization testing every time you refresh your browser."

Lois Gladstone: "We're not Amazon, Pepper, their executional strategies won't work at a leading fashion apparel brand."

Kevin: "Glenn, I laid out a test design that answers the strategic question for very little cost. It's been my experience that creative treatment can have a plus or minus twenty percent impact on items sales, so I think this is worth testing. Your thoughts?"

Glenn Glieber: "Run the test, we're not at the tar pit of extinction around here, we're a learning organization! Now let's move on to the next topic. If you're really interested in good nachos, the Shell station on 27th Ave. has a great deal, just $2.99 and you get to pump all the free fake cheese you want onto your heaping serving of chips."