Kevin Hillstrom: MineThatData

Unlocking Customer Value

Over on LinkedIn a Trade Journalist (#thoughtleader) assembled a white board argument illustrating the demise of Sears. The individual concluded that Sears focused on Real Estate when they should have focused on Unlocking Customer Value.

A former Sears employee chimed in that the company focused on unlocking customer value every single day.

I worked at Lands' End in the early 90s ... that company was likely the best I'd seen at "unlocking customer value" during that era.

I worked at Eddie Bauer in the late 90s ... a company that didn't perform well. That company worked every single day to "unlock customer value" via marketing tactics.

I worked at Nordstrom in the first two-thirds of the 00s ... a company that performed incredibly well. That company worked every single day to "unlock customer value" via merchandising strategy. Hint - you can unlock a crap-ton of customer value when customers love your merchandise and your merchandise is expensive.

I've worked with 300+ clients since founding my consultancy. I've yet to see a client fail to "unlock customer value". They're all trying. Hard. Of course these "brands" fail, everybody fails. But it's not for a lack of effort. The dumbest of companies still work hard to unlock customer value.

"Unlocking Customer Value" is something that outsiders say. Trade Journalists. Consultants. Agencies. Professors. They'll point to Starbucks or Target or Apple ... which only further demonstrates their inexperience with actual work at an actual brand. The rules for Starbucks, Target, and Apple are fundamentally different than are the rules at Wally's Widgets.

Retail is HARD WORK. And newsflash ... the people working in retail are not mindless zombies who somehow haven't conceived the idea of "Unlocking Customer Value".

There are two situations where "Unlocking Customer Value" becomes incredibly hard.

When merchandise productivity is in decline.
When your industry is being structurally disrupted.

Both situations are ugly.

When customers don't like what you sell (think Lands' End in 2015-2016 when, as the kids say, "things happened"), "unlocking customer value" is terribly difficult. If anything, your customer base "unlocks value" by purchasing overstocked liquidation junk at 70% off, bailing you out of a catastrophic inventory dilemma.
When you are being structurally disrupted (as retailers and catalogers were in the past quarter century), you are "unlocking customer value" by pushing customers online. The problem is that there are consequences. As you (smartly) pushed your customers online, you emptied out the store. Once the store is emptied out, why is it there? It shouldn't be there, it's unprofitable! That's the point in time when Real Estate has value. You can slow-play that one for decades if you like, you can potentially go bankrupt, restructure everything, and move forward. You can just slog through for a half-decade or decade and not be terribly profitable. You can find a buyer, go private, and do the hard work in secret. Either way, there are consequences. There are always consequences. Same thing in catalog marketing. You (smartly) move your customers online, then the variable cost of the catalog becomes an encumbrance to your profit and loss statement. You either cut the cord, you slow-play it for ten or fifteen years and contract, or you ride it into the sunset. There are always consequences.

If you "observe" or "write" about the industry, you don't have to "deal" with actual challenges. This means you get to assign blame, but you're never in a situation where you are assigned accountability.

We can argue "how" well "brands" managed structural disruption.

It's quite another thing to suggest that "brands" didn't "unlock customer value".

Handing Off The Baton

That final scene in Stranger Things, where the baton was handed off from the kids who became adults to the next generation of kids, that's some good stuff.

I've watched my new subscribers and unsubs post-COVID. There are more unsubs than new subscribers. Not a big shift, but more. I recognize many of the unsubs ... some have been reading this blog for two decades. There's a clear trend.

Many (most) unsubs are people either no longer working at catalog brands or are people who have likely retired from catalog brands.
New subs largely represent a new generation of marketers, and their interests are "different" ... which is reflected in the different direction I've taken my writing post-COVID.

The baton is being handed off.

In track and field, when the baton is handed off, the next runner gets to run that leg. The influence of the prior runner is only reflected by the position the new runner possesses in relation to other competitors.

A year ago (ish) a catalog professional reached out to me, commenting on how this person wanted the "new generation" to "embrace catalogs". This professional mentioned that he was trying to teach younger professionals about the art and science of catalog marketing, but "they just don't seem to care".

Correct. They don't care. They don't care about merge/purge theory. The don't care about wrongly matching social orders to a catalog. They don't care about co-ops/lists. They don't think that #printisback. They don't care about the "fact" that 77% of Gen-Z prefers print. They don't care about postal discounts. They don't care about postal advocacy in politics. They don't care about order curves. They don't care about QR codes printed on page 128. They don't care about page 128. They don't care about remails. They don't care about RFM segmentation.

They don't care. You handed the baton off to them. It's their race now. You can cheer them on. You can't tell them how to run. It's out of your control.

And I get it, for many readers that is frustrating. But it was that way when you were young. When you were a young professional, you played a role in shifting retail from downtowns to suburban malls ... you played a role in moving catalogs from big books to monthly small books. Somebody wanted you to embrace tradition. You didn't care. They handed the baton off to you, you ran with it. You ran your own race.

In 2026, we're increasingly handing off the baton. It's a good thing!

More important - over the next five years, the ecommerce generation hands the baton off to the AI generation. That's gonna be something to watch.

Retention vs. Acquisition Budget

On LinkedIn, an intrepid reader asked a question.

"If cash is tight, how do I decide the percentage of my marketing budget to spend on acquisition vs. retention?"

This is not a Lemonheaded question ... this is an earnest question, one we'll answer every day of the week. What would a Lemonheaded question look like?

"Should I even bother to spend money on acquisition when cash is tight and we all know that loyal buyers are nine times as profitable as are customers we're trying to acquire?"

Notice the difference?

Your marketing budget should not be divided between acquisition and retention. Your marketing budget should self-determine itself based on the profitability of your marketing efforts.

If an acquisition activity generates profit, you should continue to execute the tactic.
If an acquisition activity is unprofitable, you should continue to execute the tactic if the acquired customer makes up the loss within "x" months, with twelve (12) months being a common limit.

From here, your acquisition marketing budget self-calculates. You know exactly how much to spend.

If you don't have enough money to spend on acquisition activities, sit down with your Chief Financial Officer, do your homework, and state your case. If most cases, your CFO will be willing to spend the money because you were able to demonstrate adequate return on investment.

Year of Acquisition

In some projects, I'll look at the year loyal customers were acquired. The results are always fun to analyze!

10% from 2021 - 2025.
40% from 2016 - 2020.
25% from 2011 - 2015.
15% from 2006 - 2010:
12% from 2001 - 2005:
8% from 2000 and earlier.

65% of loyal buyers (in this instance) were acquired 6-15 years ago.

Which means the success of the Retention Marketer came from the success of the Acquisition Marketer (who doesn't even work at your brand anymore) 6-15 years ago. If the Acquisition Marketer doesn't do her job 10 years ago, the Retention Marketer doesn't have work to do.

Am I saying that Retention Marketing is worthless?

No.

I am saying that Retention Marketing is dependent upon Acquisition Marketing. I am saying that the vast majority of readers should spend FAR MORE time focusing on acquiring customer than keeping customers.

The health of your business depends upon it.

Their Rules Do Not Apply To You

A lot of Thought Leadership on LinkedIn about the final days of Stranger Things on Netflix over the past few days.

LinkedIn Thought Leadership Thesis (#LTLT):

Stranger Things is a Success.
Netflix Marketers are Brilliant.
Making The Customer Wait Three Years For Season Five Creates Excitement, Interest.
Spreading The Final Season Out Across Five Weeks Is Smart.
FOMO, Fear of Missing Out, Creates Shared Experiences.
Build Anticipation, Then Have A Massive Payoff.
Retention Marketing (Catering To Your Best Customers) Is Much More Profitable Than Acquisition Marketing. Stranger Things Proves This Fact To Be True.
The Reason Your Brand Struggles Is Because You Don't Focus On Retention Marketing And Your Marketing Team Isn't As Smart As The Team At Netflix Is.
Do What Netflix Does.

I don't have enough hours in the day to respond to this drivel.

First of all, Netflix is selling Stranger Things Season 5. You are selling Widgets. Who has a harder job? You do! It's not even close.

Stranger Things Season 5 is not proof of anything, much less the myriad brilliance of Retention Marketing. Well, let me take that back. If anything, Stranger Things Season 5 is proof of the importance of acquiring customers to the Stranger Things franchise in 2016. Yeah, think about it. How many people watched Stranger Things in 2015? None, it didn't exist. The franchise had to acquire viewers in 2016, those viewers spread the word organically, and the marketers at Netflix did a ton of very challenging viewer acquisition work in 2016 that pays off today. If the franchise stunk (i.e. bad merchandise), it would not exist today. The product had to be compelling, viewers had to try it out, viewers had to tell friends how wonderful the series was, and from there viewer acquisition led to a success story. It was viewer acquisition from nine years ago that #LTLT should be talking about, because without the hard work done by creative/marketing people nine years ago, retention tactics are meaningless today.

Every customer you love marketing to today had to be acquired yesterday.

By the way, do you have $400,000,000 to $480,000,000 of petty cash lying around to spend on Season 5 of a decade-long franchise? Retention Marketing is easier when you have the GDP of Tunisia at your disposal. You don't have those resources at your disposal, do you?

Another fundamental difference between Stranger Things and your Widgets business?

Stranger Things Ends on Wednesday.
Your Business Is a Going Concern ... You Sell Every Day Forever As Long As Profit Allows You To Sell.

It is easy to prime the pump for something that fifty million or a hundred million people have watched, something that will end in a few days.

It is amazingly, terrifyingly hard to show up for work every day and somehow convince people that they should buy a widget and then they should pick you over every other widget provider for said widget. Honestly, Stranger Things marketers are working in Hawkings, the widget marketer is working in the Upside Down, trying to stave off Vecna. Every day.

It is easy to talk about Retention Marketing, which is why so many people put us on blast mode about it.

It is not hard to convince a Starbucks customer to purchase five drinks a week instead of four drinks a week.

It is hard to Acquire customers. Very hard.

It is VERY hard to convince a coffee drinker who has said "no" to buying from Starbucks for two decades to try Starbucks for the first time.

Content-based Retention Marketing rules do not apply to your business. Your job is so much more difficult. Which is why some people talk about retention marketing on LinkedIn while you work so darn hard to keep the wheels on the widget bus.