I hope you will check out my new column for Colloquy, the leading source of publications, education and research for the loyalty industry. I am proud to serve as their luxury industry contributing editor.
For a long, long time, scarcity propped up and protected a lot of brands.
Scarcity of information. If I wanted to learn about your product or service I had to go to your store, meet with your salesperson or see what a neighbor or friend had to say. Other sources simply didn’t exist or required an unreasonable amount of time and effort on my part.
Scarcity of trust agents. If I needed objective data on product performance, customer service or whether your price was fair, there was Consumer Reports–which came out in print monthly–and not a whole lot more.
Scarcity of access. With consumer brands, the product was either carried in a store near me or it wasn’t. When it came to retail options, there was either a store convenient to me or not. And one could only buy things during “regular business hours.” Mail order catalogs mitigated some of this, but were never large factors in most categories.
Scarcity of competition for attention. Marketing messages were delivered mostly through a fairly limited set of broadcast media, print and direct marketing channels. And the brand got to control the composition, breadth and frequency of communication. The signal to noise ratio was favorable.
Scarcity of substitutes. Launching and growing a new product typically meant investing in large marketing budgets along with huge cash commitments to inventory and to build out physical locations. Few competitors could afford to play this game.
And so on.
Today, the sources for product and pricing information are nearly endless.
Today, hundreds, if not thousands, of digital sites provide virtually real-time data on brand performance and the best pricing.
Today, e-commerce has enabled an explosion of choice and, often, the ability to access products around the world, 24/7. Products and services that can be delivered digitally have made physical access and store hours completely irrelevant.
Today, there is an overwhelming amount of competition for our time and attention. Share of attention is becoming the scarce commodity.
Today, many brands can be launched with minimal investment in marketing and/or physical capital, which has led to many flavors and varieties of alternative choices for consumers to choose from.
As scarcity has ebbed, the vulnerabilities of many brands have been exposed. And for some it has already ended badly.
When the scarcity that protected your brand goes away, you can no longer get away with selling average products for average people.
The only sensible choice is to build something truly relevant and remarkable.
I’d hurry if I were you.
We dodge in and out of traffic, roll through stops signs and pass aggressively on the right, all just to arrive at our destination a few seconds earlier.
We reflexively respond to a text, even while driving, despite the obvious dangers and the virtual certainty that the message is neither urgent nor important.
We sit in lines for days to be among the first to get a new iPhone.
We pack our schedules with mind-numbing activity, only to move from one meeting or event to the next, in a Tasmanian Devil like frenzy.
We eat most of our meals as if we were in some sort of qualifying heat.
We’re quick to interrupt.
And even faster to judge.
Just what exactly does all this rushing about and false urgency get any of us? An ego boost? A rush of adrenaline to make us feel more alive? A sense of importance?
There are, of course, plenty of good reasons to hurry.
There are urgent and sometimes desperate situations which demand our attention right now. There are meaningful problems we all can help solve.
It may be as simple as calling that friend who needs to hear a compassionate voice.
It may be embracing forgiveness, rather than living in resentment and condemnation.
It may be tutoring an under-privileged child who needs help reading.
Perhaps it’s donating money to provide a safe place for victims of domestic violence to escape from their abuser.
The list of good and valuable reasons to hurry goes on and on.
And it doesn’t include cutting people off (literally and figuratively) or compulsively rushing to purchase some new gadget in the vain hope that it will truly make us happy.
But perhaps I’m too quick to judge?
During my undergraduate days I remember watching one of my professors work through a mathematical proof on our lecture hall’s chalkboard. This particular proof involved quite a few steps. At one point, as he scribbled the formulas and described his process, several of us noticed that he had made a mistake, thereby rendering it logically impossible to derive the correct result of his efforts.
As he neared the hoped for outcome, the professor paused, apparently realizing that he had somehow gone astray. He looked back at his earlier work. And then back again at where he had left himself. The seconds creeped by as we all waited and wondered how he was going to own up to and undue his error. After a few more awkward moments he finally exclaimed: “and then a miracle happened.” And then, without further explanation, he skipped the last steps and wrote the desired final answer on the board.
Over the years, I’ve noticed twisted versions of this scenario play out in many forms, in ways big and small.
The company that says they are committed to growth and innovation, yet has no real process or meaningful budget to support this goal.
The friend who constantly laments their life situation, yet keeps doing the same thing over and over again, expecting a different outcome.
The sales forecast that’s based on faith, not science.
The talking head who meets resistance to his ideas and simply repeats himself, just more loudly.
The marketer who promotes average products for average people–and promulgates tired one-size-fits-all approaches–and waits for remarkable results.
The political leaders who think we can bomb people into loving and respecting us.
All of them have made fundamental mistakes along the way. All of them can’t own up to and address their errors. If they are honest, all of them are counting on a miracle.
Sure, there is a chance that lottery ticket will pay off. Maybe, just maybe, repeating the same unsuccessful tactics will finally yield a breakthrough. And perhaps there IS a divine force who–after they’ve picked the winner of this week’s SEC showdown and chosen among the Shias and the Sunnis–will turn His/Her/Its attention to whatever it is you are working on and fundamentally alter your course.
Errant steps, periodic lapses in logic, flat-out mistakes and the occasional embarrassing failure are all normal parts of the human experience. And there’s no good reason to fight our humanity. But there are lots of reasons to examine our beliefs and challenge our default tendencies. There are plenty of reasons to get rigorously honest with ourselves.
From time to time, in some way shape or form, consciously or unconsciously, we are all hoping for a miracle to happen. There is nothing fundamentally wrong with hope.
But hope isn’t a strategy. And expecting a miracle to happen doesn’t really count as one either.
Many famous and influential artists toiled in obscurity for the majority of their lives. In fact, some only found celebrity and critical acclaim posthumously.
There are plenty of examples of great spiritual leaders–Siddhartha Gautama and Muhammad come to mind–whose messages were largely ignored early on. It took many years for them to develop anything that could remotely be described as a following.
Most great entrepreneurial ideas are hatched in privacy–or among a very small tribe of like-minded folks.
You’ve never heard of the band you’ll be obsessing over in a few years time.
The next great writer probably hasn’t even written her first book.
And guess what? That blog you’ve been thinking about starting all these months. No one is going to read your first post. Or your second. Or your third.
Much of the time we’re afraid to bring our ideas, our art, our passion to the world because we fear others judgment or ridicule. Somehow, we tell ourselves–despite never having practiced–were supposed to be good right out of the gate. So often our ego protection tells us to not even start.
But most of the time, in the beginning, nobody is paying attention. And if we believe this and embrace it it’s actually very good news.
Because nobody pays attention at first, we get to try things out, experiment, be vulnerable, push boundaries, fail better.
Because nobody pays attention at first, we can create largely free of critics and trolls.
Because nobody pays attention at first, we get to practice, for real, not just in our heads.
If we fight through the resistance, if we begin to develop a following, there will be plenty of time for second guessing and reaction to how the world meets our work.
But right now, enjoy the anonymity while you can. And get started.
In physics, an object’s escape velocity is the speed needed to break free of a planet or moon’s gravity and leave it without the need for further propulsion.
In business, understanding escape velocity is critical as well. There is a point when a brand’s positioning starts to gel, when enough of the early mistakes are in the past and when the underlying economics become clear. There is that critical moment when the obsessive core starts to coalesce and remarkability begins to work powerfully in a brand’s favor. Formerly insurmountable challenges start to fade. Customers (and capital) become abundant.
While randomness and serendipity pervade virtually all situations, it’s not terribly difficult to glean what has to be true for any brand to achieve escape velocity. Still many companies fail to do it.
For some, they are too busy putting out the daily fires to take the time to think it through. For others, perhaps there’s a subconscious fear that the analysis will reveal the futility of their current efforts.
Yet finding the time and the courage are crucial. The gravitational forces of the marketplace are powerful. And only the competition wins when a brand crashes back down to earth.
The shift in retail to a more omni-channel world is dramatic and profound. And since the term “omni-channel” gets thrown around a lot–often vaguely or carelessly–let me be clear about what I mean: more and more customers are becoming engaged in utilizing multiple channels–stores, mobile, online, social networks and the like–to explore, research and transact.
One important implication of this phenomenon is that many consumers are becoming what I call “blended channel” customers; sometimes choosing to transact in physical stores, sometimes buying online. And they commonly use multiple sources to aid in the decision journey, regardless of where their ultimate transaction may be recorded.
Their loyalty is to the brand, not a channel.The pressure, therefore, is on retailers to become more channel-agnostic, break down their operational silos and create a frictionless experience across channels if they hope to win over this growing cohort.
So, at one level, it’s easy to understand the retail industry’s frantic quest for so-called omni-channel excellence. But the success from omni-channel will not be evenly distributed–and for reasons that go beyond a given company’s willingness to invest or their capability to execute well.
What many leaders and analysts fail to appreciate is that as customers migrate even a small portion of their purchasing from physical stores to digital channels, a number of important dynamics come into play, and a huge dilemma may emerge.
It’s important to understand that the transaction economics of physical stores and direct-to-consumer (D2C) are quite different. Brick and mortar is mostly a fixed cost business characterized by lots of capital tied up in real estate and the supply chain, married with some relatively high costs just to stay open and staff the store during typical open hours. By contrast, above a basic scale, D2C is highly variable. In most cases, it costs more or less the same to take an order, process it, pick it out of central inventory, pack it up and ship it, regardless of whether the item is priced at $15 or $150. Generally speaking, the higher the average order size, the greater the profitability. If you sell cheap stuff on-line–particularly if you can’t recover your shipping costs from the consumer–good luck making any money.
So if the variable economics of the digital channel are superior to brick and mortar–everything else being equal–the more customers become omni-channel in their behavior, the better a brand’s economics become. This is one of the reasons you’ve seen brands with higher average order sizes (e.g. Nordstrom, Neiman Marcus) investing aggressively in building out their e-commerce capabilities for over a decade.
If the marginal economics of the digital channel are worse than bricks & mortar AND the brand is growing slowly or not all, a real dilemma emerges. On the one hand, changing consumer preferences essentially demand investments in omni-channel capabilities. And this is no cheap date. Yet as customers migrate from stores to online, the overall economics deteriorate in the aggregate. Worse still, a dramatic shift away from physical stores to e-commerce will make many stores questionable economic propositions. Yet, closing those stores may cause the loss of some or all of a blended channel customer’s business. It’s easy to see this as the start of a downward spiral (I’m looking at you RadioShack).
From a consumer’s point of view, the deployment and improvement of omni-channel capabilities is a bonanza. From a retailer’s point of view, the rush to all things omni-channel–without a clear understanding of the underlying economics, the different behaviors by different customer segments and how physical channels interact with digital channels to deliver a remarkable total customer experience –can lead to some very serious mistakes.
Note: For an insightful and data rich discussion of many of these issues, I wholeheartedly recommend Kevin Hillstrom’s blog: http://blog.minethatdata.com/