Gliebers Dresses: Cyber Monday

Welcome to this week's Executive Meeting.

Glenn Glieber (Owner): "And honestly, this past week was the best sales week we've had in several years. Oh, it feels so good to actually celebrate for once."

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

Kevin: "Yup, it is me."

Lois Gladstone (Chief Financial Officer): "We're just celebrating our big Cyber Monday promotion, which helped contribute to one of the biggest sales weeks we've had in a half-decade."

Kevin: "Great! How did you do it?"

Roger Morgan (Chief Operations Officer): "Actually, it was my idea! We needed to do something to really stand out. So we implemented a radical promotion across all channels ... Free Shipping Plus 20% Off From Thanksgiving Through December 3, and Free Shipping Plus 35% Off On Cyber Monday."

Lois Gladstone: "And you should have seen how customers responded. The promotion went viral on Twitter. Sales were 40% better than last year on Cyber Monday. Now we're moving some inventory, folks!"

Kevin: "So Pepper, which customers took advantage of the promotion?"

Roger Morgan: "Who cares who took advantage of the promotion?"

Lois Gladstone: "Yeah, who cares?"

Pepper Morgan (Chief Marketing Officer): "Boris Feldman tells me that half of the customers were first time buyers ..."

Roger Morgan: "Yes!!! We introduced a large number of new customers to the brand!"

Pepper Morgan: "... and of the half that were existing customers, half were previously full-price customers who we converted to promotional buyers, half were previous promotional buyers."

Kevin: "Pepper, do promotional buyers purchase full-price merchandise in the future?"

Pepper Morgan: "Boris looked at this. Last year's Cyber Monday promotional buyers had a 19% repurchase rate, while all other customers had a 55% repurchase rate."

Kevin: "Did Gliebers Dresses make money on last year's Cyber Monday promotional buyers?"

Pepper Morgan: "Actually, no, we lost money, because those customers didn't respond to our marketing efforts. We spent catalog dollars and did not get a sufficient return on investment."

Lois Gladstone: "But this is a customer management issue, right? Let's just not market to Cyber Monday buyers. That way, we reap the benefits of our Cyber Monday promotion, we generate profit, and then who cares if the customer ever comes back, right? We don't ever have to mail catalogs to those discount-hungry shoppers. Let's just collect our $4 of profit and head home."

Roger Morgan: "Yes, who cares if the customer ever comes back?"

Meredith Thompson: "Well, I kinda care. The only reason we are in business is to profitably sell dresses, right?"

Lois Gladstone: "And you did that, Meredith. The average order value for a Cyber Monday promotional buyer was $120. Our gross margin is about 50%. So we generate $60 of margin, then we subtract $42 for the promotion, we subtract $14 to pick/pack/ship the item, and we're left with $4 of glorious profit. You moved merchandise, and you made $4 of profit per order, assuming items aren't returned."

Kevin: "What did Anna Carter do on Cyber Monday?"

Pepper Morgan: "They did not run a single promotion. Everything was at full price. This means that on a $120 order, they generated $60 of gross margin, offset by $14 of pick/pack/ship expense, and then they got shipping and handling revenue. They probably made $55 of profit per order."

Kevin: "This means that Gliebers Dresses has to generate fourteen orders for every one order that Anna Carter generated, in order to be more profitable than Anna Carter. Do you think that your business was fourteen times better than Anna Carter on Monday?"

Lois Gladstone: "We probably did three times as well as Anna Carter on Monday. That's huge!"

Roger Morgan: "But what about market share, Kevin? We absolutely dominated on Monday. We gained market share. That means something. That means we stole orders that would have gone to our competition. We hurt our competition on Monday, we put a dagger in their heart. Isn't market share worth something? I mean, everybody is contracting. On Cyber Monday, we grew. Neptune Research says that the companies that succeed in a recession are those who gain market share."

Kevin: "Sure it is worth something. But so is profit. Your business model was responsible for 3,000 orders at $4 profit per order, for a total of $12,000 profit. Anna Carter probably generated only 1,000 orders, at $55 profit per order, for a total of $55,000 profit. So, yes, you stole market share from Anna Carter. And Anna Carter has an additional $43,000 profit to invest in order entry systems or marketing activities or employee bonuses. Now, granted, maybe you stole 1,000 orders from Anna Carter, hurting them a bit, giving you an additional $4,000 profit. But if Boris is right, only 19% of Cyber Monday buyers repurchase, so you haven't impacted long-term market share, you just bought a bunch of orders for a few dollars of short-term profit. You haven't built something that is lasting. The entire history of Gliebers Dresses has been of a business model that was built to last. Now you are trying to prop-up a psuedo Holiday, and for what?"

Roger Morgan: "But what is wrong with that, Kevin? If we're more profitable for doing this, and Anna Carter is less profitable, then we won, right? I don't get it. Am I missing something? This is a simple profit and loss and marketshare game, and we won."

Kevin: "I don't think Gliebers Dresses is asking the right question. What would have happened if you offered 20% off plus free shipping? What would have happened if you offered 10% off plus free shipping? What would have happened if you only offered free shipping? What would have happened if you didn't offer a single promotion, like what Anna Carter did? Had you executed a multivariate test with different promotional levels as test cells, you could have known specifically which level of promotional activity yielded the best outcome. You reacted to the marketplace, competing not on profit, but on who can offer the most glorious promotion. You weren't selling dresses on Cyber Monday, you were selling the best promotion available. Customers will always, always be able to find a better promotion."

Roger Morgan: "You know what, Kevin, you're a downer. You are always telling us what we should be doing, always pointing out our flaws. You're a consultant, you aren't in the trenches with us. It is so easy for consultants to point out flaws. You go on Twitter and tell everybody what they should be doing. Who cares what pundits and gurus on Twitter think, they aren't running real businesses like we are. Down here, in the trenches, we're fighting for every order we get. We have to remain competitive, heck, everybody is out there on Cyber Monday giving away the house in order to keep customers. You try to sit in this room and explain to your Owner why we didn't run a promotion on Cyber Monday and generated only 1,000 orders instead of 3,000 orders. You then try to liquidate 2,000 orders worth of merchandise at a significant discount in January, completely cannibalizing your full-price business. Things aren't all cut and dried, like marketing pundits make them seem. As far as I am concerned, you can offer us some encouragement, or you can just keep quiet over there. I'm tired of being beat up by experts, I like being encouraged by research organizations who are promoting growth strategies."

Lois Gladstone: "Yeah Roger, I'm with you. It's one thing to offer pithy advice. It's another thing to be in the trenches, actually trying to keep a business afloat. You never supported our loyalty program, Kevin, you criticized us for giving away shipping and handling dollars there, too. What is your problem? Why do you hate promotions?"

Kevin: "I don't hate promotions. I fully support discounting and promotions when you have to clear inventory --- you cannot sit there and let inventory pile up. I get that. But, I am FAR more interested in the reason WHY promotions happen. Glenn, has the Monday after Thanksgiving always been one of the busiest days of the year at Gliebers Dresses?"

Glenn Glieber: "Ever since the 1980s, Kevin."

Kevin: "And when did you start offering discounts and promotions for Cyber Monday?"

Meredith Thompson: "We started offering Cyber Monday promotions in 2003."

Kevin: "And why did you start offering Cyber Monday promotions?"

Roger Morgan: "Woodside Research told us that Cyber Monday was a huge opportunity for online marketers to gain market share by offering promotions to eager holiday shoppers. They said that by 2005, 85% of online marketers would be offering sales and promotions to customers on Cyber Monday. And guess what, they were right."

Kevin: "So ever since the 1980s, this was a huge day. But in the last ten years, trade organizations and research organizations told you that you had to run your business in a different way, they told you that you had to offer discounts and promotions to lure bargain shoppers. Businesses listened. Now we have a big event that the media created and actively promotes ... they make money off of it via advertising, but at Gliebers Dresses, you compromise $55 of profit per order so that you can be competitive, competing for orders that generate $4 of profit. Basically, a combination of research organizations and media outlets hijacked one of the busiest days of the year for their own purposes, and you are left clawing for three times more orders than you would otherwise get, in theory, orders that generate 90% less profit. If pointing out this fact to you is a bad thing, then I'll gladly not participate in your meetings if you don't want me here. I am not going to come to these meetings and tell you a quaint bedtime story that makes you feel good. My job is to encourage you to think about the profitable decisions you make. And in the case of Cyber Monday, the logic doesn't support the level of discounting you've authored."

Lois Gladstone: "But this is the problem with your advice, Kevin. It doesn't matter that you think research organizations and trade organizations created this holiday. Now, everybody participates. We have no choice but to participate, or we lose out on market share and orders, we end up with an inventory problem."

Kevin: "You don't end up with an inventory problem if you don't give the store away and you plan for appropriate inventory levels nine months in advance. Anna Carter didn't participate in Cyber Monday. And by the way, did you get an iPod Touch for half-off at the Apple Store? Their store was absolutely crowded on Black Friday, and they don't discount. Did the iTunes store discount all digital music today in order to participate in Cyber Monday? Heck no!!! Go to Zappos, they aren't giving the store away, they just jack up the price of all items by $3, and then tell you that you are getting free shipping all day every day, end of story, and the public believes they are getting free shipping when they aren't. Discounts and promotions are taxes placed upon a brand for having unremarkable product, and they are unsustainable in the long-term. Honestly, how do you beat 2009 performance in 2010? Do you offer 40% off plus free shipping? And then how do you beat 2010 performance in 2011, do you offer 50% off plus free shipping? Where does it end?"

Lois Gladstone: "Kevin, that's stupid. Everybody knows you have to make profit on every order, so you'd never offer 50% off plus free shipping. We'll do what we have to do in order to remain competitive."

Glenn Glieber: "Well, Kevin, you certainly gave us an opportunity to reflect upon our actions. But I don't think we have much of a choice, we have to remain competitive. And honestly, I think Roger brings up something interesting to think about regarding your participation in these meetings. Enough for today, we need to move on to other topics. On Monday, we begin our inter-faith Holiday exposition in the lobby. Employees of all faiths are encouraged to decorate their designated area as appropriate for their Holiday belief system."

Ripple Effects and Cyber Monday

One of the reasons we run Online Marketing Simulations (Book, Kindle, Digital Download, Hire Me) is because we want to understand what I call "Ripple Effects".

We're all familiar with Ripple Effects, right? Our economy collapsed based on the actions of a relatively small number of players, folks who did things that rippled through our economy, one domino at a time.

You'll use Online Marketing Simulations to understand, for instance, how Cyber Monday discounts and promotions ripple through your customer ecosystem.

Say you offered customers 15% off plus free shipping during Cyber Monday 2008. You now have one year of data to plug into your simulation. You'll get to see how customers who took advantage of this generous promotion behaved.

• Did these customers ever purchase full-price merchandise again?
• Did these customers ever pay for shipping and handling again?
• Did these customers ever purchase anything again?
• Did you convert full-price customers to discount hounds?
• Did you change the type of merchandise that the customer now prefers (i.e. low-price-point items)?

And you will get to see how changes in customer behavior ripple through your ecosystem. If your Cyber Monday promotions converted customers to low-price-point items in the future, then you'll see that high-price-point items are not selling as well, resulting in changes in merchandising strategy, changes that impact gross margin in the future, requiring more items to be sold, requiring more promotions to move items, further lowering gross margin ...

You get the picture!

You can simulate all of these things. You can plug in a smaller number of full-price buyers on Cyber Monday instead of a high number of promotional Cyber Monday buyers, and then see how this ripples through your business over the next five years. Pay close attention to the merchandise that sells in the future. Pay close attention to the discounts and promotions you'll have to give away in the future.

This is a great way to use an Online Marketing Simulation!

A Special Cyber Monday Opportunity Just For You!!!

Here's one for you, the loyal MineThatData reader, contact me now for more details.

Are you interested in learning more about who shopped your website on Cyber Monday or Black Friday, whether they are new customers or lapsed customers or loyal customers?

Do you want to learn whether those customers will ever shop your brand again on a day other than Cyber Monday or Black Friday?

Do you want to know how the long-term value of a Cyber Monday or Black Friday shopper compares to any other customer?

Do you want to learn more about the discount/promotional activity of Cyber Monday / Black Friday buyers, compared with buyers purchasing during the rest of the year?

Yeah, I'd want to know that information, too, if I were running a business. And I doubt your Web Analytics solution will easily provide you with these answers.

So here's a special promotion for you, the loyal MineThatData fan.

You send me your purchase transactions (one row for every item the customer ever purchased). I will answer the questions listed above for the low fee of just $2,999.

Now that's a Cyber Monday / Black Friday promotion you simply cannot refuse.

It's Cyber Monday. You're in a promotional frame of mind. Why not learn if your decisions pay off in the long-term?

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This Week In Business: Cyber Monday

In the movie "The Matrix", a "bluepill" was a person who was still connected to the Matrix. A "redpill" was a person who had been freed.

As you already know, "Cyber Monday" is just nineteen days away. One might think of Cyber Monday as falling into the bluepill category.

Over in reality, the redpill marketer knows that traffic is higher on the Monday following Thanksgiving ... in fact, traffic is always higher on Monday than on Sunday. The redpill marketer, like every other day of the year, is trying to link customer needs with products that solve customer needs.

The bluepill marketer is connected to the Matrix. This is a blissful place, a never-ending maze of marketing enlightenment and discovery.

Offline marketing must be in-home two weeks prior to Cyber Monday, because you cannot be in-home the week before Thanksgiving, that's death. Offline marketing must be fully integrated with all digital Cyber Monday campaigns, and fortunately, there's no shortage of agencies who will help integrate marketing messages for you, messages like "Take 10% off and get free shipping, this Cyber Monday only!"

Messages need to be incorporated across all channels, because you cannot have inconsistent messaging, that would represent a bad customer experience. So the e-mail campaign you receive at midnight on Cyber Monday has a header saying "Take 10% off and get free shipping on Cyber Monday only!" Maybe there's even a few doorbuster items featured in the e-mail campaign, though you cannot really bust down a door online, but if you are a retailer, you want to use the term 'doorbuster' to integrate your online campaigns with your Black Friday 'doorbuster' retail campaign. Never mind that last year, a Wal-Mart worker died during a doorbuster promotion when the door actually busted down and customers trampled the employee, that was an unfortunate incident unrelated to the marketing phrase 'doorbuster', a phrase proven to help generate incremental sales.

The doorbuster items are featured via paid search with "Take 10% off and get free shipping on Cyber Monday only" copy that leads the customer to a landing page. Now this landing page had better be well-merchandised, because we don't want to lose the customer, no, we need the customer to migrate through the purchase funnel, sliding faster and faster toward that fabled hallmark of online marketing success ... the 'conversion'!

Should the customer mistakenly abandon a shopping cart, well, then we've all got a problem. Fortunately, the bluepills have a solution for this, and it is called a 'trigger-based e-mail marketing campaign'. Here, the customer is reminded that she left an item in her virtual shopping cart, but this time, she is offered a different subject line ... "Take 20% off and get free shipping on Cyber Monday only".

In a world of fully integrated multichannel marketing, the customer quickly races out to Twitter (on her mobile phone, of course), to see what other Cyber Monday shoppers are saying. Here, the customer finds a special promotion, only for Twitter followers ... "Take 25% off and get free shipping on Cyber Monday only".

It is this promotion that closes the deal! The customer, exhausted from her Cyber Monday prowl through Cyberspace, finally checks out, using a promo code from Twitter. Her $125 purchase with $14.95 shipping and handling only costs her $93.75.

Minutes later, nearly in real time, the Web Analytics professional is busy allocating this order to the marketing channels that drove the purchase. No actual tests were executed here, because you simply cannot afford to give away sales on Cyber Monday. Instead, a set of percentages based on established best practices will be used to allocate the order across marketing channels. No simplistic last-click allocation methodology will be allowed on Cyber Monday!!

• Offline Direct Marketing is credited with 15% of the order.
• The Midnight E-Mail marketing campaign is credited with 25% of the order.
• The Paid Search ad is credited with 15% of the order.
• The Shopping Cart Abandonment trigger-based e-mail marketing message is credited with 15% of the order.
• The Promo Code from Twitter is credited with 15% of the order.
• The Mobile Marketing department is credited with 15% of the order, too!

Internal fighting ensues, as marketing managers responsible for Twitter, triggered e-mail marketing, paid search, campaign e-mail marketing, mobile marketing, and offline direct marketing all argue that they deserve a greater share of this order. But we're measuring things in real-time, the company must know how every Cyber Monday order was generated no later than Tuesday at 7:00am when the information appears as a KPI on the corporate dashboard, so this allocation strategy will dictate the parsing of orders for now. Thank goodness that a new web analytics platform was installed, one that integrates offline and online data with budgeting decisions. But it is too bad that the offline data cannot be downloaded into the system for a week. The Web Analytics team will issue new reporting two weeks later, adjusting the allocation algorithm for the inclusion of offline orders. Hopefully somebody will pay attention to the adjusted results.

At midnight, Cyber Monday ends. Real-time reporting illustrates that this was the best Cyber Monday ever, with sales exceeding 2008 levels by 9%, closely mirroring predictions from Woodside Research. By 3:00am, it will be revealed that multichannel marketing campaigns were the most effective at driving Cyber Monday sales, and that social media discounts and promotions accounted for up to 30% of Cyber Monday sales, proving once again the importance of having an integrated marketing message across all channels, supported by real-time analytics that integrate data across all touchpoints.

The day after Cyber Monday is a day of satisfaction, a day to crunch numbers, a day to reflect. On Wednesday, the process begins anew, as peak shopping days before the Holiday season are just around the corner. It is time for more marketing, more campaigns, more measurement, more real-time analysis, more KPIs and dashboards, more promotions, more discounts, more landing page optimization, maybe even a few A/B tests tossed in for good measure.

For the bluepill, it is a non-stop rush, pure marketing bliss, resulting in $93.75 of revenue per customer. Sales were up 49% vs. not having any Cyber Monday support, resulting in $139.95 of volume.

For the redpill, Cyber Monday was a day when a customer spent $125, plus $14.95 shipping and handling, for a total of $139.95. Finance will tally the results at the end of the month.

Cyber Monday

You already know that I am not a fan of "Cyber Monday".

That being said, it is a hoot to use Twitter to follow what real human beings (not press releases) are saying about Cyber Monday. Pay close attention to the folks who are excited, and the folks who are frustrated with the contrived, artificial nature of the holiday. Also pay attention to all of the selling that is going on, my goodness. This, folks, is the definition of a micro-channel.

You can learn from actual humans that businesses like Gap, Victoria's Secret, Home Depot, CompUSA and Williams Sonoma experienced slowdowns.

A Record Cyber Monday!

At least it was a record "Cyber Monday" at The MineThatData Blog.

• Site visitors were up 150% over last year's Cyber Monday bonanza.
• RSS subscribers were up 700% over last year.
• There were no incentives, doorbusters, or "free" promotions of any kind required to drive this kind of traffic.
  

The Shop.org SmartBrief suggests that this was a record Cyber Monday. Some record. Shop.org and the National Retail Federation claim to have invented "Cyber Monday" in 2005. So, online sales on the Monday after Thanksgiving outperformed last year's sales, and those of 2005.

I'm willing to bet that most online retailers could make this claim for at least 325 different days during 2007 ... for instance, on October 22, 2007, online sales outperformed those of October 22, 2006, and outperformed those of October 22, 2005, suggesting record performance on October 22 of this year.

And you didn't need to offer special promotions to make magic happen on October 22.

And that's the sad part of all of this. By creating an online holiday that never really existed, business leaders believed the hype, and discounted their brand with %-off and free shipping promotions in an effort to "remain competitive". What a shame.


Update 11/28/2007, 6:00am PST: Another press release from Shop.org suggests that 72,000,000 Americans were planning to shop on Cyber Monday. Shop.org also estimated that $700,000,000 was spent online on Cyber Monday. Let's do some math ... $700,000,000 spent online divided by the 72,000,000 customers "planning" to shop online = between $9 and $10 spent per planned online shopper. We know that number isn't mathematically possible (average order sizes are often +/- $100), suggesting the online research is highly flawed. In reality, it is more likely that about 7,000,000 customers were planning to shop online on Cyber Monday. Ugh, endless hype.

Cyber Monday: Whoopie!

Having digested my turkey dinner, it is time to focus on where commerce is headed over the next few weeks.

Grizzled direct marketing veterans spent portions of the past ten decades forecasting sales volume between Thanksgiving and Christmas. It was an important job, because you had to have just the right staffing level to handle the call volume on "peak day". Every cataloger had to predict the day that would be the "peak day" between Thanksgiving and Christmas.

And then the internet channel came along. Suddenly, everything needed to be "re-discovered". You didn't walk down the hall to talk to the catalog forecasting manager to identify which day would be "peak day".

Nope, there would be a new term, called "Cyber Monday". It would be the Monday after "Black Friday", with Black Friday being the day when you woke at 2:00am so that you could stand in line for the opening of the Kohls store at 4:00am so that you could enjoy the myriad of benefits associated with a vintage "doorbuster" promotion.

Some people tried to do good with the term.

But for many others, it represents an opportunity to get attention. "Cyber Monday is the First Monday in December", or "Cyber Monday is the last Monday before Christmas", or "There are actually four Cyber Mondays", or "You better have discounts or promotions or you'll be left behind on Cyber Monday", or "You'll be dead without an e-mail strategy for Cyber Monday".

Most assuredly, you still have a peak day, dependent upon consumer demand and your catalog/e-mail/paid search/organic traffic/free shipping/last day for expedited shipping strategy.

Somebody in your company knows what day this is. Go ask that person what day really matters in your company.

Cyber Monday A Big Hit At The MineThatData Blog

FYI, Cyber Monday goes in the books as the second-best day for visits in the brief history of this blog. Thanks to you for making Cyber Monday memorable!