Marketing Statistics and Alternate Facts

We are all familiar (or you should be) with Captain Renault’s famous line in the movie Casablanca, that he is “shocked, shocked to find that gambling is going on in here”, at which point a croupier hands him a wad of money and says “…Your winnings, sir.”

I’m going to share with you some insight I received via an email recently from a longtime reader of this blog, and longtime friend in the catalog industry. His comments and concerns are a perfect encapsulation of an issue which I hear too few of you discuss, and echo Captain Renault’s famous line.

His email was one of several I received from readers regarding a posting I wrote a few weeks back on the death of the catalog media, and the independent voice which publications like Catalog Age used to bring to our industry. I will share several of the other comments I received from readers over the next few weeks. They all had a common theme, and surprisingly, it was not a wistful, nostalgic yearning for cataloging’s Golden Days. Rather, they all acknowledged that the industry has lost a great deal of knowledge, and basic common sense.

My friend wrote that he was “shocked, shocked” that there could be such a thing as ‘fake news’. He felt that “the people who value this drivel do so because it either reinforces what they already believe or they don’t have a framework for evaluating the ‘facts’ in the story.”

“Which brings me to marketing statistics. Every email service provider, personalized shopping experience vendor, cloud web service seller, total marketing integration service seller with whom I’ve talked has an easy to install, comprehensive reporting suite that will produce pretty graphs showing how effective their product is. How else can I get email, affiliate and PPC services claiming to produce 121% of my total revenue?”

“Without a business strategy the numbers are hard to evaluate and can be used to tell stories that don’t reflect reality. Our company likes to make a profit so we look at order contribution at a business level. If we are not making money on the orders we take in it doesn’t matter what the “reports” say. We also do an analysis by channel but that is secondary. I often wonder whether people who are looking for ‘good marketing statistics’ have a framework for evaluating fake news. That’s really the issue. Without a framework and context numbers don’t matter.”

Mark Twain used to say there were lies, damn lies and statistics. Today he might say there is fake news, alternate facts, and marketing statistics. They all sort of fit together.

My friend’s email reminded me how much I enjoy his wisdom, and his ability to see and state the obvious to which so many other marketers are blind. He is the Sage of Spokane.

His comments reminded me of a speech that a VP of Sales for one of the co-ops gave at NEMOA a few years ago. She was presenting a talk on new customer acquisition, and she used projections from the DMA to show that direct mail was trending to grow in the next 3 years. I remember thinking to myself – now, who is better qualified to project where catalog volume is going? Who would you put your money on? The co-op, a company that has millions of transactions from thousands of catalogs, and who knows every catalog’s mailing trend for the past 20 years? Or, would you put your money on projections from the DMA, a trade lobbying group which has access to no company mailing information, only self-reported survey data? Hmmm…., why would the co-op use the DMA’s projections, and not their own? Maybe because the DMA’s projections are always overly optimistic, and were a better fit for her narrative that day.

How many others in the room came to that conclusion? How many were “shocked, shocked” that she would cite so shallow a source as the DMA, when her own company was sitting on more data about the catalog industry than any other source available?

The issue is not so much being able to evaluate fake “marketing” news. The issue is the brain drain and experience drain our industry has suffered. There are very few people left in our industry that can even execute a really good direct mail campaign. When was the last time you received a piece of mail at work – not an email, but something that went through a postage meter or that had a stamp? No one does it anymore, because they have been lead to believe it no longer works. In their rush to show that they are not email and social media Luddites, and that they can embrace “Millennial marketing”, catalog marketers have dismissed efforts to make their base books stronger and more appealing. In my opinion, catalog marketers today are not creative, they are lemmings.

Yes, I believe that consumer behavior has changed, and is shifting ever more toward mobile – I see it on an individual level when I watch my wife shop from her iPhone. Yes, I believe that websites need to be stronger than catalogs.

But to ensure catalog survival, we must separate fad from trend, statistical fact from marketing fantasy. To my friend’s specific point about every vendor supplying an easy solution, I encounter this phenomenon frequently with clients that are being told by other vendors how easy it should be to “dial up their marketing”. But, these same vendors never ask the client to provide all costs associated with the marketing – the way I do and the way most list brokers would do – to calculate the marketing program’s profitability (or as the my friend stated, “order contribution at a business level”).

Sadly, I still encounter mailers for whom the concept of calculating profitability on a mailing is a new concept. The thought of assigning profitability to other, less tangible marketing is out of the question. (Errors committed by the new generation of catalog mailers will be the topic of a future posting).

The irony of all this is the second part of that famous scene from Casablanca. Renault is shocked, but then he turns around and accepts the cash from the croupier. In the catalog world, many of us know how to detect when data is wrong/ missing/ misleading/ fake, but we smile, accept the report and say “thank you very much”. We don’t push back enough and say “Your data is crap, and your assumptions are misleading.” Although, I have no doubt that some of you tell your internal analysts that, and especially tell it to your vendors, not enough of you do, because you lack the insight to know what is real and what is fake.

Wisdom is an asset that often comes only with time and maturity. Don’t overlook it, and don’t under value it. As Lord Tennyson wrote “Knowledge comes, but wisdom lingers.”

PS: In case you are interested, Casablanca’s Captain Renault has a connection to New Hampshire, where I live. Claude Rains, the actor that played Captain Renault, is buried in Moultonborough, NH. Bet you didn’t know that.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

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Only $200, What A Deal!

Last fall, I gave you a detailed explanation of what Kevin Hillstrom would be speaking about at the Datamann catalog seminar, which we host for the VT/NH Marketing Group, on March 30th. (Click here if you missed it – “What Is Missing Is Not Metrics, But How We React To Metrics”)

Yesterday, Kevin’s blog gave a description in his own words of what he will be presenting (VT/NH On March 30 – A New Way To Foster Growth).

There are very few seminars or conferences left that focus on catalog and merchandise issues. Our seminar is one of them, and at only $200, you won’t find a more cost effective and affordable option.

If you are debating how to spend your limited Conference T&E budget, and you are looking for the most value ($200, what a steal!) coupled with the best content and great speakers – the choice is easy….

Join Frank Oliver, Kevin Hillstrom and me on Match 30th in Concord, NH for Reacting To Catalog and Ecommerce Metrics to Change Your Business.

Our seminar last year sold out a full month before the event, so please plan on registering early. Seating will again be limited. Our host hotel, The Marriott Courtyard/Grappone Conference Center, is almost sold out. But there are plenty of other hotels in Concord.

To register for the seminar, click here to visit the VT/NH Marketing Group’s website.

Registration costs for this all day event:

  • $135 for VT/NH Marketing Group members
  • $200 for non-members
  • Registrations are accepted until March 28, 2017

Our host hotel is almost sold out! The Marriott Courtyard/Grappone Conference Center, Concord, NH is located at 70 Constitution Ave in Concord, NH – just north of the intersection of I-89 and I-93. Special room rates of $119 are available for attendees of the seminar for the night of March 29, if you book your room with the Marriott by March 1, 2017. You must mention your attendance at the seminar to receive the special rates, or reserve your room directly at this special link: http://cwp.marriott.com/mhtcn/vtnhmarketinggroup/

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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No One Follows Through

I conducted a merchandise analysis earlier this year for a client on their Holiday 2015 catalogs. Response to their spring and summer books this year was soft. The marketing manager immediately said “We need to do another catalog merchandise analysis.”

My response was, “Why? I already gave you all the tools you need to determine if productivity is up or down. As a matter of fact, I gave you three specific measurements that either you or your merchants can apply to every book to tell if merchandise is getting better. Did you measure those on the Spring and Summer books?”

“Well, no we haven’t.”

My merchandise analyses are very detailed, documenting over 20 key variables at the product and category level (contact me if you would like more information). I try to leave no stone unturned with regards to measuring and interpreting profitability, margin, units sold, new vs repeat products, space allocations, price points, return rates and pure demand.

But the three factors I rely on the most – and which I have written about before in this space – are the following:

Sales/Books/Products (S/B/P). It allows comparison of product performance across titles, and across seasons, regardless of page count and circulation changes. SBP is based on pure demand – does your customer like what you are offering? I use this number to compare performance across clients/mailers.

Here is how it is calculated: if your catalog generates $20,000,000 in sales, and you mailed 4,000,000 catalogs, and had 400 products, then ($20,000,000 / 4,000,000 / 400) = 0.0125.  That number may seem insignificant by itself, but you can use it to compare performance across time, across mailings.  It is one more tool in your arsenal of determining whether you are improving.

The other two factors are Margin/Books/Products and Profit/Books/Products. They work in the same way as the S/B/P factor, measuring margin generated and profit generated as a function of circulation and the number of products.

Once you get used to using these factors at the overall book level, you’ll get hooked. You will want to apply them to product categories as well, and measure how each product category is doing over time.

But here is the main thing to remember. These factors are obviously not hard to calculate. You only need five numbers – total sales, total gross margin, total profits, total circulation and number of products.  What is so hard about that? So why don’t companies routinely track these factors?

Here is what I see with most companies that don’t have “built-in” reporting to generate these factors automatically. First, most companies have a hard time agreeing on what are the total sales for a catalog. There are a hundred variables that go into this. Datamann produces sales reports for clients – all of which tie out to the data the client supplies us, but we often hear that our reports don’t tie out to their internal reports. Why? There are a ton of reasons: we may be reporting on data received through Saturday, and internally they report on sales through Sunday, or they don’t send us POS system data, or they are reporting on more updated returns data, etc.

Second, merchants don’t want to be measured in a quantified manner. So, they never respond when you ask them how many products are in the catalog. Or they include all products “for sale” at the time of the catalog, including all the web products not in the book. Again, there are many variables that go into this number.

But the biggest problem is that no one simply wants to take ownership of the process. The merchants don’t care. “Hey, do you want me to go find 30% new products for the Spring catalog, or spend my time counting SKUs?”  Marketing doesn’t want to do it because it is one more thing they can get blamed for. Since Marketing is usually responsible for measuring the response rate to the catalog – because they know how many catalogs were mailed – when the response rate falls below plan, everyone turns to Marketing and demands an answer as to why. “You measure it, so you must be responsible for it.”

The reason that clients always want to do another full-blown merchandise analysis is because they have not taken the time to follow any of the recommendations from the prior analysis, and they hope that my new recommendations for changes this time around will be easier to implement. It’s like going to the doctor for your physical each year, not doing anything the doctor recommends – and going back the next year hoping the doctor is going to pronounce you in top shape. Come on folks, there is some work involved here.

My advice – Marketing should be the ones responsible for monitoring merchandise performance.  And the data/reporting should be reviewed in a formal post mortem setting, on an on-going basis. No one ever cancels a catalog “product turn –in” meeting, when the next catalog’s new products are initially presented. If it was cancelled, the book would never get done. Conversely, the post mortem should never be canceled and attendance should be mandatory.

This is not that hard folks – it just takes discipline.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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Things That Matter

OK – summer is almost over.  There’s one more holiday weekend coming up before we get down to the serious business of Fall and Holiday sales, and the Presidential election.  Oh, what a fun 12 weeks lay ahead.

So indulge me this chance to go off track a little.

This week marks my five year anniversary with Datamann and I have to say the time has flown by. I love my job. After having been a client of Datamann for nearly 10 years, and having referred clients here for 15 more years, it was a great move for me to join Datamann in 2011.

I commented to one of our clients the other day that I’d been here 5 years, and his response surprised me. “One of the things that has amazed me about Datamann is that we still have all the same people on our account – including you. At our last vendor, our account team changed weekly.” This is one of those things that matters.

Datamann is not the biggest service bureau in the world. But we do have incredible client loyalty – some clients have been with us for almost 40 years. The same goes for our employees. When I first brought Brookstone to Datamann back in 1989, my two account managers were John Nadeau and Bill Mann, both of whom are still here. Though their roles are different today, both of them still work with clients daily.

We have hardly any overhead.  All our staff perform hands-on work for clients. We have a simple philosophy of providing the latest technologies in a way that is best for our clients. And I owe all of my success at Datamann to the incredible team of people we have working here.

Much has changed in these past five years, within the industry and at Datamann. Here are some of the significant highlights:

  • Of course I’m going to tell you that Datamann has continued to grow, adding new clients and new staff. What else would you expect me to say? We’ve added new services and new technologies. But, we’ve lost some clients too – either because they have gone out of business, ceased mailing a catalog, were purchased by some new corporate giant, etc. The industry has consolidated – you’ve all seen it, you’ve felt the impact and it is no different for us.
  • We’ve also lost one or two clients because they wanted to do the one thing all sports team do when they think they need greener pastures – they changed the coach/manager. Sales were down, response was trending down, so they did the one thing that they could actually control – they changed vendors because someone else promised they had the “secret sauce”. Then they discovered that the other guy did not have anything any different. The secret sauce of social media, or sales attribution, or leveraged synergy was all an illusion, and top of all that – their service stinks. Those are the clients we always gladly welcome back.
  • Datamann now sponsors and hosts, for the VT/NH Marketing Group, the largest single-day seminar for catalogs in the country. March 2017 will be our 5th year hosting this event, which continues to grow each year. Yes, it is an event for our clients, but is also open to all mailers, with the proceeds of registration going to the VT/NH Marketing Group. We expect over 300 mailers in 2017. This is one of those things that matters to the industry, because no other company or organization is filling this need.
  • In five years, I’ve built hundreds of catalog circulation plans, executed an equal number of merges, conducted numerous merchandise analyses and provided a ton of catalog critiques. And along the way, I’ve reminded myself what every consultant already knows, but no mailer wants to believe – almost all catalogs are the same. Yes, response rates are different, the dynamics of merchandise performance are different, but in general, the problems and opportunities are the same for all catalogers. And this goes for our UK and US clients alike.
  • This blog has become the biggest single source of new clients for Datamann. Think about that. We don’t advertise in any of what is left of the trade publications. We don’t exhibit anymore at the Catalog Conference because…well, it disappeared. We don’t have a dedicated sales staff. Instead, new clients find us through the postings I provide each week on what I see happening – both good and bad – in the catalog industry. And if you have been reading this blog a while, you know I can be critical – especially of myself when I make a mistake. I strive to be truthful and that is what catalogers want.
  • And here is a further incentive to become a Datamann client – I don’t usually write brutal assessments in the blog of our clients’ catalogs. I will give those assessments directly to the client – even when they don’t ask for one, but they don’t get broadcast to my thousands of readers.
  • Our industry is not doing well. You know it, and you know the reasons why, so let’s not dwell on the fact. But, man, let’s also not ignore it either. I’m always amused when some pure play or retailer decides to mail a catalog, and the catalog vendor community starts broadcasting the news, underscored with a steady drumbeat of “catalogs are not dead”. They are not dead yet, and the end may not yet be in sight, but you can see the trends, and you know you do have to change.
  • I’m going to close with a comment on change. Much of what I have written about and spoken about publically in my speeches and privately with my clients over the past 5 years is the need to change. You get it. But you want painless solutions on how to suddenly make that change happen. You argue about trivial things that have no impact on your long-term survival. You loved my series of postings earlier this year on the dangers of the co-ops, but how many of you specifically took money out of your co-op prospecting budget and put it into a completely different method of customer acquisition? How many of you instead joined yet another co-op, which is only going to hasten your demise?

I wrote a blog post a few weeks ago called “How Do You Change Old School Thinking?” I had three unsubscribes that day – and they were all CEOs. I didn’t name any names in that posting; I didn’t even have any of these three people in mind when I wrote it. But, evidently, they saw me criticizing the way they run their businesses, and their lack of change and decided to take action. They unsubscribed! Good for them. But, I would much rather have had them send me an email or call me and say “Bill, you are wrong, wrong, wrong and here’s why…”.  I answer all emails, and if I feel you have proven me wrong, which does happen, I will gladly publish a mea culpa. This blog is not intended to make Datamann or Bill LaPierre look like we have all the answers. It is meant to further a discussion on the things that matter in this industry.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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Are They Really a Web Buyer?

When catalogs first accepted orders over the web, catalogers were mystified as to who these buyers were. I remember going to a conference where the owners of the Music Stand catalog said that whenever they mailed their catalog, web orders increased. People in the audience were literally shaking their heads in disbelief at this revelation.

This was followed by tests by catalogs putting their URL on the front cover, vs. not. Catalogers were afraid that if they encouraged people to order online, it would hurt response. Why? They rationalized that a good catalog shopper would pick up the phone and call in their order right now, but if you encouraged them to order on the web, they would wait until the next time they were sitting at their desk – probably at work – to place their order. This opportunity for procrastination would simply result in too many lost sales, or worse, the customer might have the audacity to search on someone else’s website for the same product.

Of course times have changed.

But there is one stronghold in “old school thinking” to which many of you are holding on to – classifying all buyers that order over the web as being a “web buyer”, and treating them all the same.

Many mailers – and this includes many Datamann clients – segment their database by customers who have mailed or phoned in their order (catalog buyers) from those that have used the internet (web buyers).

But I’ll use myself as an example of a catalog consumer.  I never use my smartphone to shop or browse the internet. I often go to Amazon and eBay when I think of something I want to buy. But even when I’m on my laptop, I rarely “browse” any catalog websites.  I still need a catalog to prompt my attention as a consumer. But, with the exception of the Edward R. Hamilton book catalog, I have not called in or mailed in an order in at least 10 years. I place all my orders with catalog companies online. I still see myself as a classic catalog shopper. But according to most mailers, I’m a web buyer.

Why does this make a difference?

If you are segmenting your file by catalog and web buyers as described above, you have probably found that on a segment by segment, or even name by name basis, the web buyers do not perform as well when mailed a catalog as a similar catalog segment.

But, your matchback – and let’s assume you are doing your matchback fairly and accurately – shows that 70% of your “web buyers” were mailed a catalog within the past 30 days of their online order. Let’s further assume that none of these customers came to your website via PPC, SEO or an affiliate. They simply received your catalog and ordered online.

To me, that makes them a catalog shopper. And if you isolate those names, you will see that they compare very closely in performance when mailed a catalog to the “catalog” names in equal segments.

What should you do?

Let’s not get into a giant discussion of matchback funnels and allocations. Let’s just assume that your matchback process is fair and accurate, and that it is not overstating or understating the impact of the catalog. Therefore, any web buyer that matches a mail file in the matchback process according to your matchback business rules, and clearly has no other online activity associated to it (such as retargeting), should be considered a catalog buyer.

At this point, you can reclassify your database by moving these web buyers into the catalog buyers channel. This will strengthen your circulation planning by combining all of the like performing catalog names together, regardless of which channel their last order occurred. It also isolates the remaining “pure” web buyers – those buyers that found you without aid of a catalog – allowing you to segment and mail them differently in the future.

However, we recommend “flagging” these catalog buyers (or even putting them in their own “channel” on your database) that have previously purchased on the web as their performance, for most mailers, will differ from those that have purely ordered via mail/phone.   You may be able to mail these customers a smaller page catalog, or even flyers in the future, that generate the same profit as mailing them a full size catalog. This becomes part of your catalog circulation testing.

Further, you will probably find that the remaining “pure web buyers” don’t respond to a catalog at all.

The point is that you should segment your customers based on their source (catalog mailing, PPC, SEO), not on the channel in which they order.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

 

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How Do You Change Old School Thinking?

In 1935, when Harry Truman (33rd President of the US) was first elected to the US Senate, he felt very out of place. His only prior public office had been as a county judge in Missouri. But Senator Hamilton Lewis from Illinois soon relieved him of any feeling of inferiority. “Mr. Truman,” he advised the freshman senator, “don’t start out with an inferiority complex. For the first six months you’ll wonder how you got here. After that, you’ll wonder how the rest of us got here.”

I’ll explain in a minute how this quote from Senator Lewis reminded me of an issue that came up at the Datamann seminar in March when one of the attendees asked “how do I change the old school thinking of catalog marketing in my company?”

Old school thinking was defined as upper management that did not see or understand that the dynamics of cataloging were changing, mainly because customer behavior was changing.

Who are the “old school people” in upper management? Most of them climbed their way up the catalog career ladder starting back in the 1980s and 1990s. They were the managers that constantly walked out to the call center (when it was still housed in headquarters) and looked at a chalk board that showed the number of mail orders received that morning, and the number of phone orders received each hour so far that day. They fretted when the orders for the 1 PM to 2 PM time slot only came in at 215 instead of the planned 250. They checked the catalog delivery reports, questioning if there was something happening with catalog delivery in Idaho that was impacting phone orders.

They wanted you to quiz your list broker about what was the best mail date for the Holiday 3 remail. They kept pestering the merchant, reminding her that it had been 2 years since she had introduced a new product that generated more than $1 million in sales. They repeated to anyone that would listen that “web-only” products do not work, ignoring the fact that the web-only items that were on your website were overstocks and dogs, neither of which you supported with any additional online promotion. They were proud of the fact that in their career, they had never been late to the printer with the final film/print files, but never seemed too concerned that your new web platform was three months behind its scheduled start date. Finally, they knew that customers “retained” your catalog for months at a time, based on the fact that each week, of the tens of thousands of orders you received, six were from catalog eight years or older, which was proof positive that customers loved and kept their catalogs.

Some of these people accepted that the catalog environment was changing, and made changes. Some did not.

LL Bean is not a Datamann client, but I look at them as an example of 100+ year old catalog company that has evolved to keep up with changing times. In my opinion, one of the seminal moments in the history of cataloging occurred in 2011 when LL Bean decided to offer free shipping on all orders, all the time. I’m sure they did not want to go down that road, but they did. They changed their business model without fundamentally changing their product – which is after all what customers are buying. I’m not going to list all the changes that I’ve seen them make, but they have been considerable. I’m sure things are not perfect at LL Bean, but on the surface, they seem to be adapting as best as can be expected for a company with such a long tradition of relying on a printed catalog.

Companies that are unwilling to change their “old school thinking” tend to have management that is very defensive, and risk adverse. Some of that upper management may not have grown up in cataloging over the past 25 years as described above, but they can be just as obstinate in their actions towards running the catalog. They immediately dismiss new ideas as not being appropriate for the company.  I have clients tell me all the time how frustrated they get when their suggestions for basic changes to the way things are done or which merchandise is sold – all of which they can quantify as being positive for the company – are ignored by upper management.

Just as with the advice to Harry Truman, after a while you start to wonder how these people got here.

I get equally frustrated with these mailers.  I have come to realize that no matter what you tell them, no matter what you demonstrate to them – they simply hear what they want to hear. They remind me of my grandfather’s search for a doctor. My grandfather lived to be 86. In his mid-70s, he developed diabetes, and kept searching for doctor that would tell him he could still eat whatever he wanted. He finally found a doctor who said something along the lines of “well, I suppose if you eat at the same time every day, that might help you.” My grandfather latched on to this like it was a line from the Old Testament, and told everyone that his doctor told him as long as he ate dinner every night at 5 PM (why did it always have to be 5PM?), he could eat whatever he wanted.

Old-School-thinking

Going back to the question first posed back in March on how do you change old school thinking, you know all of the human frailties that stand in your way. You already know that in some cases, you simply can’t get people to change. Some marriages can’t be saved because one or both spouses don’t want to change. Some companies can’t be saved because management – and staff – don’t want to change.  What stinks is when you are working somewhere and despite your best efforts, you can’t move the rock by yourself.

The best you can do is compellingly and convincingly show people results and conclusions based on their own decisions. You show them the way of their actions. This will be one of the focuses of the 2017 Datamann seminar, which we will again host for the VT/NH Marketing Group next March. How do you lead people to see that their daily decisions about where to invest time and resources will have the most impact?  More to follow.

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by Bill LaPierre

VP – Business Intelligence and Analytics

Datamann – 800-451-4263 x235

blapierre@datamann.com

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