Marketing Festival 2016

1. How Retail And E-Commerce Will
Become More Like Professional Sports
Kevin Hillstrom
President, MineThatData

2. Why Listen To Kevin?
Analyzed 200+ Retail, E-Commerce, and Catalog
Brands In The Past 10 Years.
Wrote Approximately 1,000,000 Lines Of Computer
Code To Analyze Customer Behavior.
Processed About 10,000,000,000 Purchase
Transactions.

3. Why Listen To Kevin?
The data I analyze, actual customer transactions
(billions of transactions), suggest that all of the
gains in channels and optimal marketing strategies
and the introduction of social media and mobile are
not causing customers to spend more.
This is disappointing. We’ve been sold a bill of
goods.

4. Let’s Compare How Professional Sports
Generate Success To How Commerce Brands
Plod Along!

5. Sports
The best customers pay the most for the best
seats. They pay in advance.

6. Commerce
The best customers are given discounts and
promotions and savings via loyalty programs.
Customers are not generally asked to pay in
advance (though Amazon Prime gets customers to
pay in advance).

7. Sports
The biggest events have expensive tickets and
limited seats. Few can participate.

8. Commerce
The biggest events (Thanksgiving, Cyber Monday,
Christmas in the United States) have the biggest
discounts and promotions. Huge inventory levels
mean that everybody can participate.

9. Sports
In the English Premier League, there is a big match
each week. This generates anticipation and
excitement and buildup to the match.

10. Commerce
Here’s a quote from an Executive I work with: “It is
July, and we’ve been saying the same thing for five
months. We have nothing left to say until the new
merchandise assortment is available in
September.”

11. Nordstrom
Anniversary Event = The Big Annual Event!
Customers who spent $750+ in the past year
earned special benefits.

12. Sports / Promotions
The Seattle Mariners played seven home games in seven days
in September. Six of the games aligned with special
promotions.
September 2 = Girls Night Out!
September 3 = Guys Night Out!
September 4 = Run Around The Bases After The Game.
September 5 = Family Day.
September 6 = Bring Your Dog To The Ballpark Day.
September 7 = Grand Slam Family Package Day.
September 8 = No Promotion.

13. E-Commerce: Promotions

14. E-Commerce: Promotions

15. Sports
Teams practice frequently. As a result, the players
are well trained and their performance is optimized.

16. Commerce
When is the last time you practiced anything at
work? Do you practice? Do you have a simulation
environment? Or are you asked to “do your job”?

17. Sports
Players are developed across many different
leagues. By the time a player is signed by Sparta
Prague or the Czech National Team, the player has
performed in hundreds of games.

18. Commerce
What is the development process you employ with
new merchandise? Do you leverage email
marketing to identify new items that have potential,
or do new items just go up on the website and then
you simply hope for the best?

19. Sports
Many matches are broadcast on television, for free.
Television networks pay to televise the matches.
Advertisers pay Television networks. Customers
pay Advertisers (in theory).

20. Commerce
Your store or website are open, and you are paying
the bills!

21. Sports
Free broadcasts do not hurt in-stadium attendance.
If anything, free broadcasts help generate interest.

22. Commerce
Your free-to-view website generally cannibalizes in-
store sales, making it hard to run a profitable retail
channel.

23. Sports
Analytics are designed to measure how players
(merchandise) perform. Values are assigned to
each player, so that the team knows how much to
pay each player.

24. Commerce
Analytics are generally designed to measure how
marketing campaigns perform. Values are assigned
to each marketing campaign, so that the marketer
knows how much to spend on each campaign.

25. Commerce = Uncertainty
You acquire a customer from paid search. You lose
$4 profit acquiring the customer. You generate $20
of long-term profit. Do you acquire this customer?
You acquire a customer from Facebook. You lose
$15 profit acquiring the customer. You generate
$20 of long-term profit. Do you acquire this
customer?

26. Sports
Each team has a philosophy on how to build a
winning team. Each team applies different
strategies to out-compete other teams.

27. Commerce
“Brands” are told to follow “Best Practices” and are
encouraged to perform the same promotions the
same way.

28. Sports
Content is designed to create interest, interest
drives customers to purchase from an expensive
and limited ticket assortment in-stadium.

29. Commerce
Content is generally designed to “engage” the
customer, keeping the customer sitting on his/her
couch. Outside of “Fast Fashion”, there is no
urgency or need to visit a store.

30. Sports
The in-stadium experience couldn’t be more
different than watching a match at home.

31. Commerce
The in-store experience is designed to “integrate”
with the online experience (called ‘omnichannel’),
eliminating excitement and unique points of view.
Omnichannel = Boring.

32. This Is Not Boring – Or “Omnichannel”

33. Why Will Commerce Become More Like Sports?
A dire need for new customers (fans).
A dire need for new merchandise (new players) to
better compete with Amazon.
A need for entertainment, especially in stores,
which creates a reason for the customer to visit a
store (to better compete with Amazon).

34. For My Average Client …
The annual repurchase rate (% of those who purchased last year
buying again this year) is …
37%.

35. For My Average Client …
If 100 customers purchased last year, we have to find this
quantity of new + reactivated buyers just to keep the customer
file flat:
63.

36. If My Average Client Has To Replace 63 Out Of
Every 100 Customers Every Year, Where
Should The Vast Majority Of Your Energy,
Effort, And Marketing Spend Occur?

37. Customer Acquisition!

38. For Most Businesses, New Customers Matter

39. Point of View = Customer Acquisition Strategy

40. Inventory = Customer Acquisition Strategy

41. Merch/Offer = Customer Acquisition Strategy

42. Odd Merch = Customer Acquisition Strategy

43. Merchandise = Customer Acquisition Strategy
Zara has achieved global success with almost zero advertising, which the
founder calls a ‘pointless distraction’.
Speed and disposability are the new black.
Nearly 2,000 stores in 77 countries.
Staff churn out 30,000 designs per year – near carbon copies of fashion’s big names.
Lightning fast, locally targeted designs.
Vertically integrated business model limits outsourcing, making most of carbon copy merchandise in-house, guaranteeing quality
levels.
Garments hit floors within three weeks of design, vs. six month industry average.
Fashion used to be sold in four seasons. Zara wants you to buy in 104 seasons (2x per week).
Styles arrive in stores twice a week, days known by customers as “Z” days, or “zed days”. This fuels the need to turn over your
wardrobe.

44. Merchandise = Customer Acquisition Strategy
Zara has achieved global success with almost zero advertising, which the
founder calls a ‘pointless distraction’.
Items are ironed, and price tags are affixed prior to shipping to a store, saving store staff time so that they can sell.
Records are kept of any item tried on but not purchased.
Customers visit the store six times as often as customers visit competing brand stores.
When Zara opened a store in Sidney AU last April, 80% of the stock was snapped up within three minutes.
“We spend a fortune researching and working up ideas, and then Zara comes along and walks off with them for nothing.”
Zara has achieved global success with almost zero advertising, which the founder calls a ‘pointless distraction’.
A business built for speed, designed for addiction.
http://kottke.org/15/11/the-secret-to-zaras-success

45. Social = Customer Acquisition Strategy
Think of social as your “prospecting list” … you expect to convert a tiny
percentage of your prospects over time. This list is not monetized in the short
term (if ever).

46. Send More = Customer Acquisition Strategy
Ariana Bee ♥ @amosborne
How does @EvilSupplyCo
make any money I just got twice
as much as I ordered AND
maybe a friendly ghost
houseguest.

47. Software = Customer Acquisition Strategy
Personalization of merchandise typically leads to 15% - 50% increases in sales per visit / conversion,
and consequently, more new customers. And it isn’t hard – vendors are ready to help. Just do it!!

48. Personalization = Customer Acquisition Strategy

49. Personalization = Customer Acquisition Strategy
The question of how to provide personalized shopping experiences to
consumers is one that has long puzzled digital retailers. But Stitch Fix, an
online personal styling service for women, thinks it has the answer.
According to Chief Operating Officer Julie Bornstein, “the founder of Stitch
Fix, Katrina Lake, had the theory that there is probably someone out there
better at shopping for me” than me.
So how do they do it? A new client fills out an online quiz where she
provides her “size, her fit, her budget and her style preferences.”
Stitch Fix then looks to its team of personal stylists — assisted by an
algorithm — to select five items that will fit the client’s needs. Once
the client receives her stylist’s picks, she keeps the things she likes and
returns the rest, along with feedback explaining why she did or didn’t like
the items.
As the company comes to fully understand the client’s style and needs,
Stitch Fix becomes an indispensable part of the client’s shopping
experience. And it shows: “80 percent of our first-time clients come back
within 90 days to have a second fix,” Bornstein said.

50. Ship Something = Customer Acquisition Strategy
Sure, your return rates might be 65% … but that also means that 35% of the
folks you shipped something to became new customers … that’s a bit higher
than the 0.4% response rate on a co-op mailed catalog, don’t you think?

51. Annual Report = Customer Acquisition Strategy

52. 60 Data Scientists =
Customer Acquisition Strategy

53. Employees = Customer Acquisition Strategy
Nordstrom pays retail employees a commission, often close to 7% of the sale.
The most successful employees earn in excess of $100,000 per year.
Competing retailers pay employees $10.00 per hour.
Which business model is going to attract highly motivated employees who love
to “sell” merchandise, and consequently, which business model is able to
generate new customers easier?

54. Pop Up Store = Customer Acquisition Strategy
Source = Shopify Blog

55. Pop Up Store = Customer Acquisition Strategy
Source = Shopify Blog

56. Secret Menu = Customer Acquisition Strategy

57. Creativity = Customer Acquisition Strategy

58. Stickers = Customer Acquisition Strategy
Source = Shopify Blog

59. Stickers = Customer Acquisition Strategy

60. What Do New Customers Purchase?

61. Merchandise!!!!

62. And How Do We End Up With Great
Merchandise?
By Constantly Searching For New Merchandise
That Eventually Becomes Best-Selling
Merchandise!

63. Excluding Fashion, it typically takes 18-24
months for new merchandise productivity to
peak.
This means we must have a program in place to
give new merchandise a chance to succeed.

64. E-Commerce: Developing New Items

65. Amazon Uses Merchandise To Attract Visitors

66. Where Is The New Merchandise?

67. Where Is The New Merchandise?

68. Where Is The New Merchandise?

69. Where Is The New Merchandise?

70. Focus on New Merchandise

71. Linking Merchandise To New Customers
Company = Speakaboos

72. Linking Merchandise To New Customers
Company = Speakaboos

73. Linking Merchandise To New Customers
Company = Speakaboos

74. Linking Merchandise To New Customers
Company = Speakaboos

75. Linking Merchandise To New Customers
Company = Speakaboos

76. Linking Merchandise To New Customers
Company = Speakaboos

77. Linking Merchandise To New Customers
Company = Speakaboos

78. Linking Merchandise To New Customers
Company = Speakaboos

79. Linking Merchandise To New Customers
Company = Speakaboos

80. Linking Merchandise To New Customers
Company = Lime Crime

81. Linking Merchandise To New Customers
Company = Lime Crime

82. Linking Merchandise To New Customers
Company = Lime Crime

83. Linking Merchandise To New Customers
Company = Lime Crime

84. Linking Merchandise To New Customers
Company = Lime Crime

85. Linking Merchandise To New Customers
Company = Lime Crime

86. Linking Merchandise To New Customers
Company = Lime Crime

87. Linking Merchandise To New Customers
Company = Lime Crime

88. Linking Merchandise To New Customers
Company = Lime Crime

89. Sponsorship at MailChimp

90. Employee Development at MailChimp

91. L.L. Bean Outdoor Discovery School

92. Thuggies

93. Rapha - Cycling

94. Rapha - Cycling

95. Rapha - Cycling

96. Rapha - Cycling

97. Linking Merchandise To New Customers

98. Betabrand

99. Betabrand

100. Betabrand

101. Betabrand

102. Betabrand

103. Betabrand

104. Betabrand

105. Linking Merchandise To New Customers

106. Tillys
Retail brand.
90% of sales happen in stores.
Marketing activities must be calibrated to motivate a customer
to purchase in a store.
Sales challenges (I find that the best companies and desperate
companies try hardest in Customer Acquisition and New
Merchandise Development.

107. Tillys

108. Tillys

109. Tillys

110. Tillys

111. Tillys

112. Tillys

113. Tillys

114. Tillys

115. Tillys

116. Tillys

117. Tillys

118. Tillys

119. Process
Focus on finding low-cost or no-cost tactics that generate first-
time buyers.
Focus on promoting new items, moving the new items to
winning item status.
Fuse customer acquisition, new items, and events/fun … much
like a sports franchise does.

120. Questions
Kevin Hillstrom
President, MineThatData
http://blog.minethatdata.com
kevinh@minethatdata.com
Twitter = @minethatdata
Soundcloud = http://soundcloud.com/minethatdata