Customer Acquisition: The Story of 2016 - 2020

Customer Acquisition Is The Story
Of 2016 - 2020
Kevin Hillstrom
President, MineThatData

Lizard Logic: A term created by Dave Johnson (a current
Executive at Orchard Brands) in the early 1990s, when he
worked at Lands’ End. Simply put, “Lizard Logic” is marketing
talk that sound seductive, rational, and well thought out … but
is in fact illogical and bad for your business.

Engagement
If we say crazy
things, more
people engage
with our content! You will damage
your brand if you
do that!
But that doesn’t
mean you sell
more
merchandise.
Merchandise pays
your salary.
#OhBoy.
We tried to
produce great
content, nobody
read it. Say
something crazy,
and people will
pay attention!
I get a bonus when
engagement
increases by 30%.
Lies and crazy
content pay my
salary!

Customer Loyalty
It costs nine times
as much to
acquire a
customer as it
costs to retain a
customer.
Our annual
repurchase rate
among twelve-
month buyers is
37%. Without new
customers, we
don’t have any
customers!
How much has our
loyalty program
lost over the past
five years? And
did our annual
repurchase rate
change at all?
#OhBoy.
If we calibrate our
loyalty program
properly, we can
tickle the buying
bone. We just
haven’t cracked
the code yet.
You have to spend
money to make
money. Wait, that
contradicts my
original statement.

Omnichannel
Everybody knows
that customers
who purchase in
multiple channels
are worth nine
times as much as
are single channel
buyers.
If that is true, then
why is it that we
expanded by
dozens of
channels in the
past twenty years
and yet, our
repurchase rate is
still 37%?
Woodside
Research loves
Macy’s. But the
more Macy’s
embraces
Omnichannel, the
more their
business fails.
Explain that one.
#OhBoy.
Woodside
Research says
that brands who
do not embrace
channels are
destined for the
scrap heap of
commerce history.
Think how bad
their business
would be if they
hadn’t embraced
omnichannel!

Net Promoter Score
Our net promoter
score has
increased for each
of the past six
quarters. Our
marketing strategy
is working!
why is it that our
repurchase rate is
still 37%?
If we generate
more profit, we
win. Our Net
Promoter Score is
not correlated with
company
profitability.
Without profit, you
don’t get paid.
#OhBoy.
But it makes
logical sense. If
more customers
like you than
dislike you, you
are winning. Don’t
you want to win?
You are a silly
bean counter.

Mobile
We invested
millions in a
sound mobile
strategy. Mobile
first or die, right?
And our strategy
is working. Our
best customers
love mobile.
why is it that our
repurchase rate is
still 37%?
Our core customer
is 63 years old.
She cannot even
read the small text
on a mobile
device, much less
transact with the
device.
#OhBoy.
Millennials adore
mobile. They don’t
care about our
website or offline
marketing. Don’t
you want more
Millennial
shoppers? I do!
I’ll make sure our
app has large
fonts. Then our
mobile strategy
will driven
increased
engagement.

Print
Look, when we
matched catalog
mailings to online
orders, we learned
that catalogs were
responsible for
every order. Print
drives a ton of
customer loyalty.
why is it that our
repurchase rate is
still 37%?
I thought she
purchased
because she was
given 60% off plus
free shipping on
catalog orders?
#OhBoy.
My 18 year old
daughter bought a
dog collar from a
catalog I gave her.
Young shoppers
love catalogs.
Yup, print works
when you offer
60% off plus free
shipping!

The Organic Percentage
Our matchbacks,
our keycode
analytics, and the
three attribution
vendors we
employ all proved
that marketing
drives customer
orders.
why did 50% of
our demand still
exist when we
tested not mailing
catalogs and
emails during
2015?
The results were
statistically
significant!
#OhBoy.
You cannot trust
tests. The sample
sizes aren’t big
enough, and you
lose sales if you
withhold
marketing from
customers.
Meh! I don’t
believe the
results. You can
manipulate tests
to say anything.

Catalog Co-Ops
More competition
will do nothing but
sharpen the
models used by all
of the co-ops. We
will reap the
rewards!
How many new
customers did we
acquire per ad $
spent in 2015?
How about in
2010? And how
old is the
customer we
acquire?
We’ve had twenty
years to crack the
model!
#OhBoy.
I wouldn’t worry
about acquiring
30% fewer 63 year
old customers
over the past five
years. We just
haven’t cracked
the proper model
yet.
I heard that
increased
competition will
improve the
models. Let’s just
wait and see what
happens.

Buzzwords
I think our
problem is that we
haven’t found a
relevant content
strategy that
engages loyal
buyers.
Wut?
Do you even
believe in the
words you just
uttered?
#OhBoy.
If we personalize
campaigns and
optimize results
and get the right
message in front
of the right
customer at the
right time, we will
engage the buyer.
It’s a quote from a
$795 report I
purchased from
Woodside
Research, so the
quote must be
meaningful.

What Did Lizard Logic Buy Us?
We believed the stories told by vendors, trade journalists
(paid by vendors), conference organizers (who are paid by
vendors), research brands (paid by vendors), and industry
pundits.
We distracted ourselves. Instead of diving head-first into new
merchandise and new customers, we dove head-first into new
buzzwords. Our results (predictably) have been tepid. That’s
our fault.

It Is Time To
Challenge Our
Assumptions.

No More Lizard
Logic. No More.

The Three Mega-Trends
Trend #1 = Merchandise Productivity
Trend #2 = How Will We Acquire A New Customer In 2020?
Trend #3 = How Will We Avoid Paying Tolls?

Merchandise Productivity is Killing Us!
I have performed a Merchandise Forensics analysis on
approximately 50 catalog brands in the past three years.
In 80% of the cases, there is a decline in merchandise
productivity that can easily be explained and reversed.
In most cases, the decline in merchandise productivity is
explained by the inability of a cataloger to generate productive
new items to replace dying existing items.

Merchandise Productivity & E-Commerce
My e-commerce clients relentlessly seek to improve merchandise
productivity.
Personalization – making sure that customers see the
merchandise they are most likely to purchase.
Optimization – constantly changing the home page, landing
pages, email campaigns, apps – via non-stop testing.
Print-based brands do not approach commerce this way, and as a
consequence, merchandise productivity suffers.

Merchandise Productivity Erodes Circ Depth

Merchandise Productivity: 2x Buyers

Older Items Grow Stale – New Items Are Needed

Estimate The Number of New Items Needed

Watch How Quickly A Business Is
Consumed By The Customer Acquisition
Channel It Prefers

Catalog Customer Acq. via Co-Ops: Year 1

Customer Acquisition via Co-Ops: Year 2

Within Two Years – The File Is Already Consumed
The average catalog brand (with a 37% annual repurchase
rate and 85% of new customers from co-ops) evolves quickly.
If no historical names came from the co-ops … it only takes 2
years … 2 YEARS … for 60% of the customer file to be
sourced from co-ops.

For Most Catalogers …
… business is what it is because the majority of the twelve-
month buyer file has been sourced from co-ops.
Repurchase Rates … Purchase Frequency … Price Points
Purchased From … Merchandise Item Success … Profitability
… all are +/- 70% determined not by you, the Executive at
your company … but by Jr. Level employees at four
companies who build statistical equations that you are not
allowed to see and/or understand and/or influence.

Your Customer Acquisition Sources
Define What Your Brand Will Become
It should not be a surprise to anybody that four major co-ops
use algorithmic techniques to send sixty year old customers
to catalogers.
It should not be a surprise to anybody that Google / Facebook
dominate online/mobile customer acquisition, sending Gen-X /
Millennial traffic to the brands that leverage these platforms.
Consequently, your merchandise assortment shifts in
response to the customers you acquire, & vice versa!

Worse, Customers Are Acquired In December.
Those Customers Have Low Lifetime Value

And The Trend Holds As The Customer
Migrates Through The Life Cycle

To Recap:
Non-Employees Determine
Who Our New Customers Are
Our New Customers Are
Disproportionately Sourced At Christmas
Christmas Customers Have Low Lifetime Value (And Christmas Orders
Are Generated Via Discounts/Promotions, Lowering Profit)
We Wonder Why Customer Loyalty Is Lousy?
Our Customer Files Are Consumed By Outside Forces

Re-Focus
1 – Plant Seeds In Jan-Aug
2 – Harvest Your Bumper Crop Through October
3 – Generate Profit Next Year

Tolls Are Killing Print-Centric Marketers

Different Tolls
20% Off = A Major Toll.
Free Shipping = A Major Toll (maybe 10% of sales).
Paper Costs (pushing to bigger page counts that benefit a printer
… pushing to deeper circ levels that benefit a paper rep).
Postage.
Co-Op Rental Fees (repeatedly paying $0.06 for the same name
12x a year).

Different Tolls
Paid Search / Google = Pay a toll for access to a name that you
already paid a series of tolls to obtain access to via co-ops and
printers and merge/purge houses and paper reps and the USPS.
Retargeting = Pay a toll for access to a name that you already
paid a series of tolls to … hoping to stalk the customer online.
Pinterest = Pay a toll to get a customer to purchase using
creative you gave to Pinterest to free – creative that Pinterest will
now use to charge you a toll that helps Pinterest.

Different Tolls
Free Shipping = A toll caused by not having merchandise that is
sufficiently differentiated from the competition.
Television / Radio / Print / Magazines = Rampant tolls.
The smartest companies identify low-cost customer acquisition
programs that bypass the toll collecting process.

Measure Your Marketing Toll Rate
Sum discounts, promotions, free shipping, catalog paper
expense, catalog postage expense, catalog printing expense, list
rental and co-op fees, merge/purge fees, online marketing
expense, housefile vendor modeling expense,
TV/Radio/Magazine/Print expenses. Call this sum “tolls paid”.
Calculation: Toll Rate = Tolls Paid / Demand Generated.
If your Toll Rate > 30%, you have problems.
If your Toll Rate > 50%, you are in trouble!!

Where Are Print-Based Brands Headed?

The Modern Print-Based Ecosystem
Minimal
Tolls (Low Ad $)
Teamwork
(Chemistry)
Merchandise
Productivity
Your
Strategy
Customer
Acquisition
Golden Gate Bridge
Catalog Cul-de-sac
Ranch-Style Remodel
Abandoned Warehouse

My Thesis: Four Paths
Golden Gate Bridge
Catalog Cul-de-sac
Ranch-Style Remodel
Abandoned Warehouse

Golden Gate Bridge
Direct Marketers with a < 50 year old customer base have the
option to “Cross The Bridge” and become fully-fledged e-
commerce brands.
These businesses will fully adopt low-cost customer acquisition
programs designed to fuel online/mobile traffic.
Expect these businesses to leverage print as a support vehicle for
the overall online/mobile brand experience.
Example: Duluth Trading Company.

Catalog Cul-de-sac
Direct Mailers with a 50-70 year old customer base love print, and
love working with co-ops and lists.
Many businesses in this segment do not want to change.
The only way to make this strategy work is to have a
neighborhood of great homes in a cul-de-sac, making it a great
destination.
Great Homes = Great Merchandise.

Ranch-Style Remodel
Another set of direct mailers with 50-70 year old customers will
pursue hyper-targeted print-based strategies.
Larger print pieces will become smaller print pieces with the best
merchandise at the best prices.
Smaller print pieces will become even smaller print pieces with a
personalized merchandise offering for segments of customers, or
individual customers.

Abandoned Warehouse
This is where print-based brands will go to die.
My guess … there will be +/- 12 “Holding Companies”. Think
“Potpourri Group” without a soul.
The Holding Company will attempt to get to the “Magic 8,000,000”
level … they will buy brands that help them get to the 8,000,000
catalog households that love shopping via direct mail. This allows
the Holding Company to bypass the co-ops and encourage cross-
shopping to grow each individual brand.

Which Business Do You Want To Be?
Golden Gate Bridge = Crossing over to e-commerce with a low-
cost customer acquisition program.
Catalog Cul-de-sac = Traditional print-based business with
improved merchandise productivity.
Ranch-Style Remodel = Optimization & Personalization to drive
marketing efficiency, which increases circ depth & new names.
Abandoned Warehouse = Sell to a Holding Company in the
future, generate profit & names, then disband.

Teamwork / Chemistry
Missing from most catalog-centric brands.
In-fighting between merchants & creative, marketing and
merchandising, online and offline. IT thinks they can and should
be performing all analytics. Operations think they can be
marketers. Marketers hate the CFO and would rather spend time
with vendors than with in-house co-workers (happens all the
time).
Lack of teamwork / chemistry leads to hopelessly futile channel-
centric tactics.

The Problem With Channels
Channels speak to “best customers”. When catalogers utilize
“multi-channel” strategies and retailers leverage
“omnichannel”, both theories focus on the existing, core (best)
customer who uses multiple channels. What about everybody
else? Good question!
Over the course of five years – we lose most of our “multi-
channel” and “omnichannel” customers … it’s simple retention
math. Then, we’re forced to find new customers. How do we
do that when we only understand disconnected tactics?

Avoid Lizard Logic. Focus On What Matters
Merchandise Productivity.
Stop Paying Tolls.
Teamwork / Chemistry.
Low Cost Customer Acquisition & New Customers.
Brand Response Marketing.

Low-Cost Customer Acquisition Programs Via
Our Own Platforms Are Very Important

5 Companies Earned 50% Of Black Friday Online
Sales In 2015. Makes It Hard To Compete!
http://techcrunch.com/2015/12/01/amazon-dominated-36-of-online-black-friday-sales-says-slice/

Lands’ End Struggles With Tactics – But
Understands The Overarching Story
http://seekingalpha.com/article/3731336-lands-ends-le-ceo-federica-marchionni-on-q3-2015-results-earnings-call-transcript?all=true&find=lands%2Bend
“In our catalog business, we see a significant opportunity to improve
productivity. We would use our catalog circulation and shift investment
away from lapsed and less profitable customers to marketing initiatives
designed to capture new customers. While this resulted in a reduction in
sales, we achieved meaningful cost savings that are being reinvested in
marketing initiatives designed to drive new customer acquisition and
increase brand awareness over time”.

New Channels Pluck Customers From Old Ones

In Old Channels – The Audience Becomes … Old

Time To Get Busy Fixing The Problem, And If
We Cannot Fix The Problem, It’s Time To Take
Market Share From The Competition.

Read A Book – How Brands Grow
This book goes against “conventional
wisdom” … strongly suggesting that the
secret to business success lies in recruiting
the infrequent shopper, while ignoring
customer loyalty initiatives.
The book argues for “brand advertising” that
is not immediately ROI-centric.
I know, I know, you don’t like either topic!!

Loyalty Didn’t Save A Video Store In Portland
If you love retail, customer loyalty initiatives,
or both, go read this article about the
closure of a video store.
http://www.vox.com/2015/11/20/9757186/ne
tflix-video-rental-store
Convenience (omnichannel) kills retail, but
thrives in the digital realm.
Loyal customer efforts cannot offset
declines in customer acquisition activities.
Customer acquisition is the secret to
success (or the signal that something is
structurally wrong).

Most Of My Clients = Infrequent Shopper Base
Turns out that, for most of
us, loyalty is vastly
overrated.
Over time, some demand
comes from a small slice
of customers …
everybody else =
infrequent / low volume
customers.

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

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.

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?

For Most Businesses, New Customers Matter

How Do I Know If I Have A New Customer
Acquisition Problem? (See The Red Numbers)

Catalogers Went Way, Way, Way Too Far
Typical Cataloger New Customer Acquisition Mix:
35% = Co-Op #1.
24% = Co-Op #2.
16% = Co-Op #3.
10% = Co-Op #4.
15% = Online Marketing.
Would you manage your 401k by investing in Apple, Google,
Facebook, and Twitter, or would you diversify your portfolio?

Other Companies (Amazon) Think Differently

Your Tactics Dictate Who Your Customer Is

It Is Tough To Trust 3rd Party Channels
http://digiday.com/publishers/facebooks-traffic-top-publishers-fell-32-percent-since-January/

Take Control – Leverage Your Platform

Customer Acquisition Tactics
Marketing Executive: “We believe that nearly every one of our
purchasers in 2014 saw at least one retargeting ad.”
What did prospects who know nothing about the brand see?
How does a prospect learn about what you sell and how you
sell it if the prospect has no idea who you are?

Customer Acquisition Tactics
High Cost Customer Acquisition = New York Yankees, Boston
Red Sox, McDonalds, Geico, Progressive.
Low Cost Customer Acquisition = Kansas City Royals, Tampa
Bay Rays, Oakland As, MailChimp, Betabrand.
Most of us no longer know how to approach low-cost
customer acquisition. We only know easy (and expensive)
channel-centric tactics that require minimal co-operation
with employees from non-marketing departments.

How We Display Products And How We Tell
Stories Dictates How We Convert Customers
Who Have Yet To Purchase

Zulily = 130 Product Images On Home Page

No $$ = Customer Acquisition Strategy
https://www.internetretailer.com/2015/11/04/how-scanmyphotoscom-builds-its-business-without-advertising

Health Signaling = Customer Acquisition Strategy

Point of View = Customer Acquisition Strategy

New Genre = Customer Acquisition Strategy …
36,000,000 Watched Finals Online

Old Genre Reimagined
= Customer Acquisition Strategy …

Heartache = Customer Acquisition Strategy

Inventory = Customer Acquisition Strategy

An eBook = Customer Acquisition Strategy

Movies = Customer Acquisition Strategy

Poaching = Customer Acquisition Strategy

Media = Customer Acquisition Strategy

Media + Shop = Customer Acquisition Strategy

Guest Curator = Customer Acquisition Strategy

Social Anger = Customer Acquisition Strategy

Google Branding =
Customer Acquisition Strategy

Merch/Offer = Customer Acquisition Strategy

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.

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

Be Different = Customer Acquisition Strategy
Cards Against Humanity ran this Black Friday promotion … you give them $5 …
they give you nothing in return. > $63,000 raised. Needless to say, the “trade
press” ran with this promotion, giving Cards Against Humanity “free marketing”.
Free Marketing leads to new customers.

Then Tell People How You Spent Their $

Switching = Customer Acquisition Strategy
$200 to switch from Sprint to T-Mobile. I know, I know, you sell Widgets and
cannot do this because you cannot lock a customer in to your brand. Fine. How
about thinking about what you could offer that would lock your customer in to
your brand?

Free Guns = Customer Acquisition Strategy

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).

Product Review = Customer Acquisition Strategy
Example From Evil Supply Company

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.

Price = Customer Acquisition Strategy
https://www.retaildive.com/news/why-the-relationship-between-department-stores-and-luxury-brands-is-changin-/408703/

Packaging = Customer Acquisition Strategy
Frostbeard Studios in Minneapolis – Based on Stories.

Word of Mouth = Customer Acquisition Strategy
If we fail to acquire new customers, or fail to do so in a cost- effective manner, we may not be able to
increase net revenue per active customer or achieve profitability.
Our success depends on our ability to acquire customers in a cost effective manner.
In order to expand our customer base, we must appeal to and acquire customers who have historically
used other means of commerce to purchase home goods and may prefer alternatives to our offerings,
such as traditional brick and mortar retailers, the websites of our competitors or our suppliers’ own
websites. We have made significant investments related to customer acquisition and expect to continue
to spend significant amounts to acquire additional customers. For example, we have continued to expand
our national U.S. television branding and advertising campaigns. Such campaigns are expensive and
may not result in the cost effective acquisition of customers.
We believe that many of our new customers originate from word-of-mouth and other non-paid
referrals from existing customers.
Wayfair Fiscal 2014 10-K Statement

Language Designer =
Customer Acquisition Strategy

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!!

Personalization = Customer Acquisition Strategy

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.

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?

Annual Report = Customer Acquisition Strategy

Personal Stylist = Customer Acquisition Strategy

Commitment = Customer Acquisition Strategy

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?

People = Customer Acquisition
Strategy (Enjoy.com)

People = Customer Acquisition Strategy

Call Center Employee in 1996 =
Personal Stylist in 2016

TV = Customer Acquisition Strategy
http://recode.net/2015/11/11/draftkings-and-fanduel-look-wobbly-and-so-do-220-million-in-tv-ads/

TV = Customer Acquisition Strategy

Defective Merch Is Not A Good Strategy

TV + Omnichannel = Cust. Acquisition Strategy

TV + ???? = Customer Acquisition Strategy

More TV = Customer Acquisition Strategy

TV + PR + Stores = Customer Acquisition
Strategy

Read What Duluth Trading Said In Their S-1
Statement (24 Consecutive Quarters Of Growth)
Building Brand Awareness to Continue Customer Acquisition. We are a rapidly growing lifestyle brand, have built strong brand
awareness and have successfully acquired customers over the past five years. As a relatively young brand, we believe that we
have a significant opportunity to build even greater brand awareness. According to IRI, once we bring customers to our brand, they
are more satisfied with Duluth Trading than any other brand in our competitive set. We intend to leverage our unique and compelling
marketing strategy, retail expansion and continued catalog prospecting to capture potential new customers.
Humorous and Distinctive Marketing: We make shopping for our products fun by using attention-grabbing advertisements that are
humorous, irreverent and quirky. Our national advertising campaigns that feature characters such as our Giant Angry Beaver, Buck
Naked Guy and Grab-Happy Grizzly continue to increase our brand awareness and drive customers to our brand. We use
storytelling to differentiate our products in the marketplace and create emotional connections with our customers. For
example, we inspire our female customers by featuring women of “grit and substance” whose professions range from ranching to
horse training to dog sled racing to landscape design. We believe our approach to marketing gives our products a distinct identity,
enhances our brand and helps us stand out in the market.
We have a long history of product innovation. We have introduced a number of solution-based products.
+/-10% Pre-Tax Profit, > 30% Growth. Catalog-Centric Company That Is Evolving Outside Of Catalogs

Duluth Trading S-1 Marketing Tactics
We pursue our marketing strategy through multiple forms of media, which gives our products an identity and
enhances our brand.
Television: We advertise on cable and broadcast television networks to build brand awareness for both men’s and
women’s products and to reach a large, national audience. These advertisements feature our animated characters and
are intended to be humorous, irreverent and quirky in order to grab the viewer’s attention, while highlighting the
particularly innovative, solution-based features of our core products and the Duluth Trading name.
Catalogs: Our catalogs are an important part of our heritage and represent a tangible vehicle for our authentic and
humorous storytelling. In fiscal 2014, we published 35 issues and distributed over 43 million catalogs, approximately
19 million of which were mailed to prospective customers. Our catalogs support both sales channels, and we believe
they serve as an important customer acquisition tool by driving visits to our website and retail stores.
Other Tactics: Digital and Email Marketing (display, digital video, search, targeted email), Social Media, Radio,
Collateral Print, Outdoor Marketing, Event Sponsorships.

I Know, I Know.
“You Are Unique.”
“You Are Different.”
“Their Success Doesn’t Apply To Your Business.”
But They Are Growing. Your Business??

YouTube Celeb = Customer Acquisition Strategy

Celebrity = Customer Acquisition Strategy

Mobile/Podcast = Customer Acquisition Strategy

Tours/Performances = Customer Acq. Strategy

Events = Customer Acquisition Strategy

Industry News = Customer Acquisition Strategy

Expensive Stuff = Customer Acquisition Strategy

This, Too, Is A Customer Acquisition Strategy

Hats = Customer Acquisition Strategy

Headphones = Customer Acquisition Strategy

Lies = Customer Acquisition Strategy

Knowledge = Customer Acquisition Strategy
Going Pro
Beginning in 2014, Threadless A/B tested every single campaign they sent for a year and a half: subject
lines, from names, send times, the works. This summer, when we launched MailChimp Pro, Lance jumped at the
chance to learn even more using the new Multivariate Testing features.
Since upgrading, they’ve been able to get even more granular, testing the placement and length of content
modules, the number and size of images, and the effectiveness of underlined links versus linked buttons.
Sometimes, the results are inconclusive (for instance, their subscribers didn’t strongly respond to one type of link
over another), which gives their email designers room to play with visuals without worrying about negatively
impacting engagement.
Other times, test results are more nuanced. “The tests with promotion-based subject lines versus non-promotion
subject lines have resulted in the most learning,” Lance says. “In our tests, a bigger percentage of
people open the non-promotion subject lines—which you would suspect. But there’s something interesting once
you look at clicks. Far more people click the promotion-based subject lines. That’s resulted in creating 2
segments: people that care about promotions, and people that might not.”

Sponsorship = Customer Acquisition Strategy

Billboards = Customer Acquisition Strategy

Humor = Customer Acquisition Strategy

Video = Customer Acquisition Strategy

Arby’s Meat Bus = Customer Acquisition Strategy
http://www.adweek.com/news/advertising-branding/arbys-rolled-out-meat-bus-tour-nyc-promote-its-new-times-square-location-168428

New Business = Customer Acquisition Strategy

Access = Customer Acquisition Strategy

Help = Customer Acquisition Strategy

Creative = Customer Acquisition Strategy

Copy = Customer Acquisition Strategy

Silliness = Customer Acquisition Strategy

Creative
Brands For Millennials = Imagery, Fun
Brands For Baby Boomers = Text / Links / Information

Baby Boomer site conversion rates are mostly
similar to Millennial brand conversion rates.
Therefore, we can conclude that creative doesn’t
dictate conversion rates.
Yet, put Millennial creative in a Baby Boomer brand,
and it “won’t work” – it will be viewed as “wasteful
branding”. Similarly, Boomer creative in a Millennial
brand won’t work – it will be viewed as “antiquated”.
Creative aligns with demographics. Use
appropriately.

How One Brand Uses Low-Cost Advertising
And Viral Techniques And Website/Mobile To
Clearly Communicate A Customer Acquisition
Focus

Here Is Where The Reader Begins To Complain

“Our brand is unique.”
“Our brand is different.”
“These tactics won’t work for us, we sell
Widgets. We tried this stuff and it didn’t work.
Where are the good ideas that work?”
“Do you have any free ideas we can borrow
from your client base? What do they do?”

No Wonder Omnichannel Theory Is Trendy
Among Publicly Traded Retailers Who Are Out
Of Customer Acquisition Ideas
1 – Digital = Cheaper.
2 – Stores Will Close = More Cash Available.
3 – Cash Goes To Ownership Via Stock
Buybacks And Dividends

Turn Your Company Into An ATM For Ownership

ATM For Ownership Example = Lowes

Think About Managing Your Customer
Database Differently.

Three Steps To Customer Management
1 = Low Cost Customer Acquisition.
2 = Care/Feeding Of 0-3 Month 1x / 2x Buyers
To Help Them Move To Frequent Status Faster.
3 = Harvest Profit From Loyal Buyers.

Care/Feeding of 0-3 Month 1x/2x Buyers
Customer Profit = Loyal Buyers.

Care/Feeding of 0-3 Month 1x/2x Buyers
Corporate Profit = 0-3 Month 1x/2x Buyers.

Three Steps To Customer Management
We focus our efforts on loyal buyers. But there
aren’t enough loyal buyers to “push the
peanut”.
The bulk of profit comes from recent, low
frequency buyers. The key is to acquire many
customers at a low cost, and then rapidly move
those customers along the life-cycle.

What Is Holding Us Back?
Decreasing Merchandise Productivity makes all
marketing efforts less productive.
Tolls drive up the cost per new customer, drive down
the number of new customers we can acquire.
Teamwork / Chemistry is, in so many cases, non-
existent. Makes it hard to do new/interesting things.

New Concept =
Brand Response Marketing Team
A cross-functional team comprised of Marketers,
Merchants, Creative Staffers, and Online Experts.
The team has one job, and one job only … Increase
The Number Of New Customers On An Annual Basis
At An Ever-Decreasing Cost Per New Customer.

The cross-functional team is given authority to
change the website, change catalog creative and
catalog format, and is given authority to invest in
new areas that will lead to an increase in new
customers at a decrease in cost per new customer.
Without the authority to make changes, change will
not happen.

The team is comprised of 30-39 year old
professionals. Once you are 40 years old, you are
out. We want new ideas for improvement.
The team earns a 50% salary bonus if New Customer
and Cost Per New Customer goals are exceeded. All
other employees earn a 20% bonus (shared
responsibility).

Success is measured annually, not (I repeat, NOT) on
a campaign-by-campaign basis. Who cares if an
individual campaign works or not? This team plants
seeds in April that are part of a bumper crop harvest
in October. This team is not measured like Direct
Marketers. This team is far more accountable than
are Brand Marketers. Hence, the term “Brand
Response Marketing”.

If goals are not exceeded, new marketing /
merchandising / creative members are brought in.
If goals are exceeded, Brand Response Marketing
Team members are promoted to Executive roles.
This is your “AAA” Farm System, if you will … this is
the place you develop future Executives.

Do you have the courage to give a team of 4-8
Director-Level professionals accountability for
New Customer Acquisition counts at a lower
Cost per New Customer?

Are you willing to pay these employees a 50%
annual salary bonus when they exceed your
goals and objectives?
Are you willing to pay all other employees a
20% annual salary bonus to encourage them to
support the Brand Response Marketing Team?

Are you willing to go beyond simplistic
channel-centric tactics that yield tepid results,
focusing instead on the slides in this
presentation, slides that illustrate how other
Brand Response Marketers approach Customer
Acquisition?

Do you agree that Customer Acquisition is the
most important issue we face in the next five
years?
No? Then let’s have a discussion, right now,
about what is more important. Because what
we’ve always done & how we’ve always done it
is not working. It’s time for change.

Need Help Determining If You Have A Customer
Acquisition Problem??
Kevin Hillstrom
President, MineThatData
Blog - http://blog.minethatdata.com
http://minethatdata.com
kevinh@minethatdata.com
Twitter - @minethatdata
Podcast – http://soundcloud.com/minethatdata

Customer Acquisition: The Story of 2016 - 2020

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