Hillstroms Total Package
A Marketing Management System Designed to
Identify Problems and Grow Sales
Kevin Hillstrom
Acknowledgements
Thanks to my blog readers who helped me, over the
course of twelve years, identify techniques
that led to the text of this booklet.
Copyright 2018 by Kevin Hillstrom
All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, email, Internet, or any information storage and retrieval system now known or to be invented, without permission in writing from the author.
13 Digit ISBN: 978-1728707396
Published in the United States of America by Kevin Hillstrom
Available from Amazon.com and other retailers.
Manufactured in the United States of America
First Edition
Cover Design: Kevin Hillstrom and Createspace.com
Cover Art: Kevin Hillstrom
Table of Contents
?
A Marketing Management System
My first job in retail was at Lands End. I was hired in 1990, at a time when catalog marketing was the dominant direct-to-consumer channel. E-commerce wouldnt become a credible channel for nearly a decade.
I worked for a Marketing Director. This person was a force of nature. She wasnt terribly popular, in fact, she was widely disliked by many of my co-workers. She was disliked for a good reason. She had her own way of doing things!
Today, I call her way of doing things a Marketing Management System . She had a system that she followed. Her system determined how she made decisions. Her decisions were consistent. Once you figured out how her system worked and how her decisions were made, you could influence her with facts that either supported her system or contradicted her system. Most important, her system allowed her entire team to influence the direction of the company. In fact, her system fostered a marketing team that ultimately became too powerful.
The Marketing Director was previously employed as an accountant. This benefited her system in many ways. She was numbers-focused, a precursor to the data-driven ideology that permeates some corners of the modern marketing world. The former accountant was able to take a dry, boring, mundane process called circulation planning and turn it into a strategic weapon. Predicting how much a customer segment would spend on a catalog next year became something much more interesting. The Marketing Director would point out that the segment was profitable in 1990 and was profitable in 1991 and was not profitable in 1992. She would isolate the fact that the only way the segment could no longer be profitable was for just two reasons either costs increased or the productivity of the merchandise being sold decreased.
By isolating the latter (the productivity of the merchandise being sold was decreasing), our Marketing Director was able to zero in on the core issue holding the business back customers didnt like what the merchandising team was selling (or didnt like the creative presentation of what was being sold).
Do you understand what happens when you identify that customers dont like what the merchandising team is/was selling?
First, you capture the attention of your Finance Team. If you are a former Accountant, you earn credibility that wouldnt normally be earned. In other words, the Marketing Director earned an ally, a powerful one at that. She wasnt fighting by herself, she had a team of numbers-oriented individuals arguing from the same playbook.
Second, you capture the attention of the Merchandising Team. Thats a different animal altogether. When you tell a Merchant that the merchandise the Merchant believes in isnt appreciated by the customer, you put yourself in a dangerous situation.
Somehow, our Marketing Director got herself invited to catalog reviews, meetings where Inventory Leaders, Creative Staffers, Merchants, Marketers, and Finance leaders discussed why catalogs succeeded or failed. In these meetings, each catalog spread (i.e. pages 6-7 or pages 126-127) was illustrated on poster board on the walls of the meeting room. The board were colored Gold (30% or better variable profit), Green (20% - 29% variable profit), Blue (10% - 19% variable profit), and Red (below 10% variable profit). When you looked at each board taped to the wall, you could quickly see patterns. When catalogs didnt work, it was common to see a lot of Blue/Red spreads at the front of the catalog. Catalogs that performed well had a lot of Gold/Green spreads at the front of the catalog.
Our Marketing Director found an interesting quirk in the spreads. She was able to identify cases where certain products (turtlenecks, for instance) performed well over and over again, and then would not perform well. She noticed that creative presentation of merchandise made a big difference. If merchandise was featured a certain way, spreads changed from Gold/Green to Blue/Red. She was able to demonstrate that how merchandise was presented impacted profitability. I distinctly remember her comparing two presentation styles one featuring a marketing employee, one featuring a model. The presentation style featuring the model performed 30% better. My boss was able to discourage the creative team from experimenting using employees as models. As she said, this stuff is just too important to mess around with .
Needless to say, this didnt cause our Marketing Director to be very popular with the Creative Team.
Our Marketing Director was able to fuse merchandising performance, creative performance, and profitability analysis to determine corporate strategy. Shed get advanced notice of the merchandising strategy for the next year. If the product didnt align with what worked, shed bake that fact into her profitability analysis at a segment level, demonstrating that the catalog would be less profitable and therefore shed be forced to mail fewer catalogs and therefore sales would decline. The Finance Team didnt like it when sales were forecast to decline. As a result, the Finance Team would take up the argument for a different strategy on her behalf. If the creative strategy was going to change, our Marketing Director simply reduced productivity for next year by five percent, reduced circulation correspondingly because she couldnt mail unprofitable segments, and then frustrated the Finance Team because sales were not forecast to grow. Shed argue that This isnt my fault, I just adjusted the productivity of the catalog down by five percent because when weve done this in the past the catalog performed five percent worse. If you dont like it, take it up with the merchandising team.
In my five years at Lands End, our Marketing Director became a force of nature. She perfected her Marketing Management System. She used her system to generate tens of millions of dollars of annual profit. Her methodology allowed me to pay off my student loans because of the bonus payments that happened because the company was so much more profitable due to her Marketing Management System.
What was her Marketing Management System?
First, she used her Accounting background to build relationships with Finance. Since she was responsible for determining who to mail, she used profit-and-loss analysis to determine corporate growth strategy while leveraging the Finance Team as an ally in any corporate arguments.
Second, she used Merchandise Productivity as a strategic weapon. If the Merchandising Team planned on running a bunch of new products that wouldnt perform well, and they planned on stuffing the front of the catalog with new merchandise, shed reduce the predicted productivity of the catalog, reduce circulation quantities, and then when Finance complained that sales were likely to decrease shed point the finger at the Merchandising Team and say it was their fault.
