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  • Writer's pictureDennis Sullivan

The Art & Science of a Turnaround - The Answers to Your Toughest Challenges May Be in Your Data

Hard to believe but just a few years ago, the Duluth Trading Company's iconic brand was in trouble. What follows is a lesson that all brands could learn from using a simple but very powerful 3-step process.

By Dennis J. Sullivan

It’s hard to miss Duluth Trading Company’s iconic ads for Buck Naked Underwear for men.

With slogans such as, “No pinch, no stink, no sweat” and sketches of a pudgy, middle-aged construction worker twirling on a dance pole with the tagline, “It’s like wearing nothing at all,” they get your attention in a fun, but every effective way.

Today, Duluth Trading Company is a $580 million online catalog and brick-and-mortar retailer that is rapidly expanding as net sales increase 20% year-over-year. Not bad for a company that started selling the Bucket Boss so construction workers could cram their tools neatly into a five-gallon bucket. Yet, just a few years ago, Duluth’s sales were falling and the company was in trouble. The turnaround is an amazing success that can serve as a guide for any business that is serious about building an effective brand.

Flashback to 2007. The catalog company realized that it had become an aggregation of products as it raced to put out new catalogs to give customers more reasons to buy, founder Steve Schlecht freely admits in his book, The Art of Building a Brand: The story of Duluth Trading Company. There was no focus on its star products and product planning didn’t relate to a brand. They needed to regroup and transform from simply a catalog to something new as they developed a new strategy for the future.

“Why are meeting on the future, when the company is in survival mode?”

Not everyone was onboard, however. In fact, Schlecht’s own executives were asking, “Why are we meeting on the future, when the company is in survival mode?” This is a lesson I have had to learn the hard way and should serve as a warning for anyone trying to re-build a brand. While you may see the need to transform, others may see it as a risk.

Leadership is about transformation. Management is about maintaining the status quo. And sometimes they don’t always see eye-to-eye.

Schlecht pushed ahead and focused the team on 3 key strategic shifts:

Identify and get to know the “Active Best Customers” & let them show the way to profitability.Develop product lines around their best customers’ purchase behavior, needs & wants.Recognize that Duluth was a work apparel product brand.

The first strategy is critical. Avoid it at your own peril. The first question to always ask when building a brand is, “Who?” Who is your ideal target market segment?

Unfortunately, many executives ask the question, “What?” What is that we want to sell? What business can we get into that will be most profitable? That is a very difficult and very expensive path to take. To see some good examples, just watch the TV show, “Shark Tank.” Often, entrepreneurs and inventors will come up with an innovative new product and the first question the sharks ask is: “Who would want or need this?” The entrepreneur may have some ideas, but that is why they are in front of the sharks! They want the sharks to invest hundreds of thousands of dollars, if not millions, into their idea hoping they will figure out the answer to that very critical question.

Most companies don’t have millions of dollars to figure out that question, either. The first place to begin is to identify your ideal target market segment – and the more you can narrow your focus, the better! You can’t be all thing to all people. That too is very expensive.

A 3-step process to identify your ideal target market segment

So how can you identify your target market segment? Begin by looking at identifying your best customers now. You can define your best customers based on 3 primary criteria: recency, frequency and monetary.

1. Recency = Your most recent buyers over the last 3-5years. The market has likely changed compared to even 3 years ago.

2. Frequency = Your buyers who are most loyal and purchase the most often.

3. Monetary = Your buyers who are spending the most with you – and are your most profitable customers.

An RFM Analysis as described above can easily be done using the data in your QuickBooks or in your sales database. It is one of the first analyses we do with clients and it is often very enlightening. The results are also usually much different than what the leadership team predicted because they all have biases or they are still working under assumptions from when they worked more closely with customers 10 or 20 years ago. That’s dangerous!

You may also find that your best customers now, are not the customers you can continue to rely on as you build your brand for the future. In those cases, you need to identify new segments and begin to test your offerings. Start small and build it as you go and measure your results using similar metrics in the RFM Analysis.

For more about how to conduct an RFM Analysis and identify your best target market segment, contact us today for a FREE 30-Minute Quick-Start Consultation.

About Dennis J. Sullivan: Dennis is author of The Breakthrough One Page Marketing Plan and is an Associate Professor at CCBC. He is the recent recipient of the International Teaching Excellence Award from among 3,000 business colleges in the world. He is also Executive Director of the college’s Center for Business Innovation, a former Lecturer at Johns Hopkins University and is owner of Breakthrough Pros, a consulting company specializing in branding.

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