My plan3 (pre-COVID) lands minutes before a severe thunderstorm absolutely pummels the area. I sat the storm out in a Culver's Restaurant (pork tenderloin sandwich and cheese curds), browsing Customer Development notes for the meeting I would have the ...

 

Kevin Hillstrom: MineThatData - 5 new articles

Frictionless

My plan3 (pre-COVID) lands minutes before a severe thunderstorm absolutely pummels the area. I sat the storm out in a Culver's Restaurant (pork tenderloin sandwich and cheese curds), browsing Customer Development notes for the meeting I would have the next day.

This company had a beautiful lobby. Heck, everything was perfect. And for good reason. This company was (and still is) thriving. I was hired to solve a Customer Development problem, a problem that didn't exist. Annual repurchase rates were north of 70%. Customers loved the retail experience so much that online penetration was sub-standard. This company wanted me to help the move customers from a wonderful in-store experience to an online experience.

The Marketing Executive sits me down, and then approaches the grease board.

With effect, he pulls out a black grease board sharpie and writes one word.

"Frictionless".

For effect, he underlines the word a few times.

Frictionless.

There is a belief that if you just remove "friction" you'll convert customers and as a result you'll be great at Customer Development.

"Friction" becomes a math issue in Customer Development. Which customer would you prefer to have?

  1. A customer who visits your site six times in six days before purchasing.
  2. A customer who visits your site three times in six days before purchasing.
Hint - you don't care which customer you have, because both customers purchased.

One of the things we don't measure when creating a "frictionless" experience is incrementality. If you remove a step that makes it easier for the customer to purchase but doesn't cause an increase in the number of purchasers, your "frictionless" initiatives are pointless. You improved the customer experience, but you did nothing in terms of Customer Development.

Given the choice, always pick Customer Development over the Customer Experience. You can do a ton of things that don't add up to any incremental purchases.

         
 
 

It Was Cyber Monday

I'm sitting in on the Monday Morning Executive Meeting, on Cyber Monday.

Can I tell you a secret? I detest Cyber Monday.

Cyber Monday is a day where less-qualified professionals cheat at Customer Development. They slap 50% off promotions, watch the sales roll in (regardless whether the sales are profitable or unprofitable), and then battle for the next year as they wonder why so many customers won't purchase unless they're offered 50% off. If Customer Development is the realm of the gifted, Cyber Monday is the realm of the metrics manipulator.

You can tell if a company cares about Customer Development based on how the company behaves on Cyber Monday. As I sat in front of a room full of Executives earning an average of a half-million dollars a year, a meek woman walked into the room and approached the CEO with a slip of paper.

The room became quiet.

The CEO read the slip of paper.

Then the CEO said, "GET GAIL IN HERE".

Poor Gail.

It turns out that a competitor topped the 50% off promo this brand had for Cyber Monday by offering 55% off. The CEO would have none of this nonsense. None of it.

Poor Gail walks into the room a few seconds later, and was micromanaged into changing email creative within the next ten minutes before launching the promo to the masses. This brand would be at 55% off on Cyber Monday.

Clients that are excellent at Customer Development HAVE A PLAN. They don't act like a child who just ate a Snickers bar only to see another kid with a bag of Kit Kats. They don't deviate in the face of adversity. They persevere. They work hard on their plan. They're not intimidated. Instead, they Lead.

Your Cyber Monday plan tells all of us a lot about how good you are at Customer Development.

         
 
 

They Had A Model

Consultants (pre-COVID) get to see a lot of corporate offices. The legendary Don Libey always said that you could judge a company by how well they maintained the bathroom. I'd argue you can judge a company by what the lobby looks like.

On one visit, the lobby looked awful. Worn out. Tired. A sixty-five year old woman named Paulette (not her name) guarded the company secrets from outsiders. Like at many companies, she determined who got in, and who wasn't so lucky. Though the lobby was warn out, it was littered with beautiful catalogs. Current catalogs, older catalogs. Pictures of catalogs from the 1990s on the wall. J. Peterman would have been proud. Clearly the company cared more about catalogs than infrastructure.

The infrastructure issue became obvious once Paulette gave me a laminated photo ID and allowed me to enter the building. It wasn't only the lobby that was run down. The merchandise was run down. Creative was run down. Everything was just laying in ruins. A consultant is hired to solve a specific problem, and the problem I was hired to solve wouldn't make a dent in the core issue. This company had a Customer Development problem, but the problem wasn't the problem the company thought it was.

I interviewed the marketing executive, the CEO, and the lead merchant.

All three told me something interesting. All three told me that they had an analyst, and the analyst created a "model", a model to determine who would receive the catalogs. They were all thrilled that this "model" would solve their business woes.

You can only imagine how wounded these professionals were when I told them that the "model" was irrelevant.

You can only imagine how wounded these professionals were when I sat down with the analyst and realized that the analyst didn't understand the very business he was "modeling". Why should he understand the business? Absolutely nobody was mentoring him, and quite honestly, he was too pigheaded to accept mentorship if offered.

Creative was broken.

Merchandise was broken.

The lobby was broken.

With so much broken, Leadership put their faith in an analyst who built a "model" to select customers for catalog mailings.

Customer Development is an integrated process. You need great merchandise. You need great creative. You need brilliant marketing. You need an operations team that is second to none. You need talent recruitment. You need employee development. You need to pay some people money.

What you don't need are AI or Machine Learning or a "model". Will that help? Of course. But you're looking at a small gain. And you haven't fixed anything.

The best Customer Development companies fix things. They fix run down lobbies. They fix merchandising issues. They fix creative issues. They get you your merchandise in two days. They do all of the little things.

         
 
 

They Go In Two Different Directions

I took twelve-month buyers who purchased exactly four times, historically. I built a model to predict how likely the customers were to purchase again next year. Twelve months later, I applied the same model to customers, based on their current status. Finally, I divided the "next year" prediction by the prediction "one year ago", giving me a performance index.

Below is a histogram of the performance index. Tell me what you observe.


There are two peaks, aren't there?

There is a peak at about 0.60 ... meaning that one group of customers saw their chances of purchasing again slump by about 40%. These customers (obviously) did not purchase in the past year.

There is another peak, at about 1.20 ... meaning that another group of customers saw their chances of purchasing again increase by about 20%. These customers (obviously) purchased again the past year. Most of those customers became more valuable.

The average index for 4x buyers is (in this case) 0.89, meaning that on average this cohort of buyers saw their future chances of buying again slump by about 11%. The cohort (on average) becomes less valuable, with some customers becoming more valuable.

What was the index by 12 month buyer x frequency segment?

  • 1x Buyers = 0.75.
  • 2x Buyers = 0.83.
  • 3x Buyers = 0.86.
  • 4x Buyers = 0.89.
  • 5x Buyers = 0.90.
  • 6x-10x Buyers = 0.92.
  • 11x-15x Buyers = 0.94.
  • 16x-25x Buyers = 0.97.
  • 26x+ Buyers = 1.00.
On average, nearly ALL frequency cohorts saw decreased odds of buying again after a year passed.

If you are wondering, yes, this is happening at your business as well.

If you want more loyal buyers, you'll likely have to acquire more new buyers, because the degradation process is real and it is spectacular.



         
 
 

A Special Offer for Blog Subscribers!!

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You have one (1) week to take me up on this offer. In many cases, you have a boatload of customers from COVID that you may not be managing at peak effectiveness. Let's learn what your opportunity is, ok??

One week. Contact me (kevinh@minethatdata.com). Click here for the file format (called File #1) you'll need to send me.

         
 
 
 

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