The drip method of irrelevance

At first, the shift is almost imperceptible.

With quarterly earnings expectations to hit, we tell ourselves we can easily save a few bucks by automating some of our customer service functions. Or perhaps it’s through simplifying our organizational structure or eliminating “non-essential” positions. Better yet, let’s close some “unproductive” stores.

And obviously technology enables us to take away a bit of decision-making from the front-line staff. After all, human beings are notoriously misled by their own intuition. And whoever got fired for praying to the God of Efficiency?

And running all those different marketing campaigns adds a lot of complexity. It would be much easier to boil things down to just the major stuff that we know moves the dial.

And our product line is just too diverse. Sure it’s interesting to have something fresh and innovative, but doesn’t that just increase the risk of slowing down inventory turnover and increasing markdowns? Safe is smart right?

Of course, over time, the top-line stops growing and the only way we know how to drive profits is through cost-cutting.

Over time, we’re proud of our low average talk times, yet customers can’t speak to a human being and our Net Promoter Scores continue their inexorable decline.

Over time, our one-size-fits-all marketing is, at best, indistinguishable from the competition and, at worst, a dim signal amidst all the noise.

Over time, the sad reality is that all we sell is average products for average people and there’s no reason to pick us over the guy with the lowest price.

Sears, RadioShack and a host of others that are on a long inevitable march to the retail graveyard didn’t get trumped by a disruptive competitor that emerged out of nowhere. An oppressive government didn’t regulate them out of business. They weren’t crippled by a series of specious lawsuits or hobbled by natural disasters.

Usually the brands that become irrelevant have made hundreds of seemingly small decisions, over many years, that prioritized the short-term ahead of the long-term, the numbers instead of the customer, mass rather than personal, safe not remarkable.

And once they are gone, once their fate is sealed and their previously storied histories are part of the record, we’ll look back and realize it happened gradually, then suddenly.

But did it get the right laugh?

During the recent Saturday Night Live 40th anniversary special, Mike Myers made fun of founder and producer Lorne Michael’s legendary pickiness by evoking his best Dr. Evil inspired impression and saying  “well, it got a laugh, but did it get the right laugh?”

Of course, it’s easy to challenge–or simply ignore–those who lapse into overly theoretical frameworks (guilty) or who can be relentlessly particular about how something should play out (guilty again).

Then again, it’s also to see marketers who obsess about the size of their database, how many folks their emails touch or the sheer number of impressions from a TV ad, when it’s not reach they really want but engagement and impact.

Then again, social media is filled with people who frantically collect friends and followers–and blindly follow-back themselves–when it’s often merely a meaningless quest to grow a number totally devoid of true connection.

Then again, organizations hold on to mass market strategies, throwing money and time at bad prospects, promiscuous shoppers and demonstrably unprofitable relationships, when a more focused strategy that treats different customers differently is what makes far more sense.

Perhaps asking ourselves whether we’re getting the right laugh isn’t such a silly question.

All about that base?

When politicians start a campaign one of the first questions they ask is how they can appeal to the base. Mainstream candidates lock into the usual suspects for rally turnout and fund-raising. The reformers struggle for voter attention and ways to tap into the key PAC’s and the Koch’s and Soros’ of the world.

Traditional brand marketers usually start here as well. We focus on more and better ways of activating existing consumers where the investment to acquire them is sunk and where we already know that they like us and buy often. It seems like a perfectly logical place to concentrate our efforts.

Except where those cohorts are aging out of maintaining their spending. Think Sears.

Except where their needs have shifted and we are no longer their brand or store of choice. Think Barnes & Noble.

Except where a new disruptive model has come along and is doing things we can’t while gobbling up our core customers’ share of wallet. Think Warby Parker and LensCrafters.

Except where we are not replenishing defectors or downward migrators with enough new profitable customers. Think JC Penney.

Good customer analysis always starts with the base. Better customer analysis is focused on a deep understanding of the leverage and limitations inherent in our core segments and yields the insight required to know where to go next and how urgent and powerful any shifts need to be.

It’s all about that base, until it isn’t.

 

 

Digital first retail

Many traditional retailers are already living in a “digital first” world. If your brand isn’t quite there yet, it’s likely only a matter of time–a short time.

Digital first means that even if the customer ultimately buys in a brick & mortar location, their journey starts online.

Digital first means that the primary way prospective customers learn about your brand is through your website, social media or online peer-to-peer reviews.

Digital first means whether the customer comes to your store for a particular transaction or not is determined by how well your online or mobile presence meets their needs in a highly relevant and compelling way.

Digital first means that holding on to the customer relationships that matter is largely determined by how well your digital tools eliminate customer experience friction and are rooted in a treat different customers differently philosophy.

Digital first means that the way your customers activate their passion for your company and become true brand ambassadors is primarily by sharing their remarkable experiences via their smartphones, tablets and other digital devices.

Digital first retail profoundly changes the way we engage customers, the way we deploy technology and the way we re-envision the physical store experience. It causes us to break down our silo-ed thinking and organizations to put the customer at the center of everything we do.

It’s not easy.

It’s not inexpensive.

It’s not without risk.

But frankly we have no other choice but to embrace it and get on with it.

And I’d hurry if I were you.

The right customers, a remarkable experience and a story that must be told

We can make things complicated. I can make things complicated.

And there’s no shortage of frameworks and methodologies you can power through in search of the perfectly crafted strategy and the well-honed marketing plan.

There are the 4 P’s (or is it 5?) and the 7 S’s. There are the classic constructs put forth by Porter and Christensen and the like, not to mention whatever newest bestseller helps you find your strength, lean in or whatever.

There are the people who will tell you it’s all about the product (spoiler alert: they’re wrong).

There are the people who will tell you it’s all about value (sorry, too vague).

There are the people who say it’s all about price (well, that depends. So partial credit for them).

If you are in a business category that is more or less a commodity, where the lowest price defines who gets the sale, then three things are true: you are engaged in a race to the bottom, you had better be sure you can meet or beat whatever price point is likely to clear the market and you must become the low-cost provider. Otherwise, you’re toast. If not today, then soon.

For everyone else–and that’s most of us–there are plenty of things that are table-stakes. Don’t deliver on them and you aren’t in the game.

But the three things that ultimately matter are these:

  • Cultivate the right customers. Customer selection and focus is essential. If you’re complaining that too many of your customers only buy with deep discounts, guess what? That’s your dragon to slay. If your customer base is mis-aligned with your value proposition and how you can make money, it’s time for a shift. If you’re not sure, get to work to understand the needs, desires and lifetime value of each segment. And it’s okay to fire the wrong customers.
  • It’s the experience, stupid. Product is important. It’s not everything. There is a reason that some people pay $1 for a bottle of water and others pay $4 for essentially the same stuff. There is a reason that people stand in line at the Apple store for the newest phone when they can get the same phone more quickly and (some times) more cheaply elsewhere. People pay vast premiums and/or select one competitor over the other for virtually identical stuff all the time. And it’s the total experience that matters. In today’s world of endless choices and relentless downward pressure on prices, it’s up to you to find your secret sauce or purple cow. Otherwise you might be seeing your pink slip.
  • A story that must be told. It’s always been a good idea to encourage word-of-mouth. In the connection economy it’s a must. The art of storytelling must be woven into your DNA and that starts with remembering that people engage with emotion more than reason and that in order to be remarked upon you must be remarkable. Stories that connect emotionally and personally, that demand to be shared, are what matter more and more

Here’s a brand that puts it all together in a funny, on brand (albeit not totally SFW) marketing piece.

The problem with saying “no”

During the past 25 years Sears had at least three opportunities to transform itself by entering the home improvement warehouse business (I worked on two of them). This was probably the only way Sears was going to ultimately survive and unlock the value of its franchise Kenmore and Craftsman brands. Each time the answer was “no.”

When I headed up strategy at the Neiman Marcus Group (2004-08), we evaluated building a leadership position in omni-channel by consolidating our disparate inventory systems, we recommended moving from a channel centric marketing organization to a customer and brand focused one, we proposed aggressively expanding our off-price format and, having understood the share lost to competitors like Nordstrom, we analyzed improvements to our merchandising and service models to become a bit more accessible. Ultimately we said “no” to moving ahead on all of these. Years later, these strategies were ultimately resurrected. But the opportunity to establish and extend a leadership position may have been lost.

Obviously there are plenty of times when either the smart or moral thing to do is to say ‘no.” Obviously it’s easy to look back and say “I told you so.”

Yet systemically, most organizations are set up to reward the status quo (often cost containment and driving incremental improvement) and punish the well intended experiment. So it’s easy to say “yes” to the historically tried and true and “no” to just about everything else.

Of course we don’t have to look very hard to come up with brands that have been struggling for many, many years (Sears, JC Penney, Radio Shack) or have completely imploded (Borders, Blockbuster, etc.). All of these said “no’ to any number of potentially game-changing strategies along the way. Care to hazard a guess at how many long-term Board Members of these perennial laggards and outright losers got pushed out for saying grace over a series of crippling “no’s”? How many CEO’s had their compensation whacked for never missing an opportunity to miss an opportunity?

In a world where change is coming at us faster and faster, we need to be challenged just as much on what we are saying ‘no” to as we are on what gets a “yes.”

And If you think there is always time to fix the wrong “no” decision, you might want to think again.

Omni-channel: Myths, distortions and, yeah, that’s just silly

Let me be clear: I’m pretty into all things omni-channel. Get me started talking about creating a single view of the customer, silo-busting, frictionless commerce, creating a seamless experience, etc. you might want to order a pizza. We could be here for a while.

I was named the VP of Multi-channel Integration at Sears way back in 1999. I led multi-channel initiatives and enterprise customer analytics at the Neiman Marcus Group from 2004-2008. I’ve written dozens of related posts and given numerous speeches on the topic during the last few years. I’m a believer.

Yet much of what passes as inspired strategy on the part of brands extolling their new-found “omni-ness” is, well, let’s just say it ranges between being disingenuous and outright foolhardy. And then there are the legions of analysts, pundits, consultants and software providers peddling a guaranteed path to customer-centricity nirvana. Much is hype. Some is just plain dumb. Here’s an attempt to move toward more “truthiness.”

  1. You don’t really mean “omni.” “Omni-channel” means “all” or “every” and typically refers to both channels for communications and for transactions. Do you really intend to sell on cruise ships? In airports? How about door-to-door sales? Are you going to do infomercials? I didn’t think so. What you really mean is expanding your marketing and sales channels to those essential for the acquisition, growth and retention of key consumer segments–and being really good at doing it. A rush to invest in omni-channel without an actionable segmentation–and without understanding which levers are really the most important to hone in on–is a license to lose money and waste precious time.
  2. Omni-channel customers are not your best customers. Chances are it’s the other way around. And causality matters. A lot. The customers that already trust your brand are often the early adopters of new media and new places to buy. There is a dangerous false narrative that suggests that simply by becoming omni-channel a world of new sales will open to you. As Kevin Hillstrom has pointed out, many companies that have gone omni-channel have failed to improve their business. This is usually because the brand’s core is weak and merely adding more places to research and buy does not fix the underlying issues (see Sears). The best multi-channel strategies are rooted in a deep understanding of current customer behavior–and prioritize opportunities to stem defection, address new customer acquisition barriers and build add-on sales. A sensible growth strategy has clear building blocks, not a mad rush into e-commerce or rolling-out the next bright and shiny mobile or social media application.
  3. You say you want a revolution. Yet, organizational and data silos abound. Yet, analysis of most promotions still have a single channel focus. Yet, much of your marketing remains mass, rather than personalized. The underlying move to omni-channel is about customer-centricity. As long as you hold on to traditional metrics, silo-ed organizational structures and rely on fragmented data and batch, blast and hope marketing programs, not much is really changing.
  4. Confusing necessary with sufficient. To be sure, more and more customers are becoming cross-channel shoppers and, particularly with the rapid growth of mobile devices, the distinction between e-commerce and physical retail is blurring. Certain “omni” capabilities like order online, pick up in the store are becoming base expectations. It’s hard to imagine that many retailers will survive, much less thrive, without robust integration capabilities and compelling web and mobile offerings. But far too many brands think that by adding these newish features they are doing enough. They’re not. Many of these capabilities are becoming table-stakes. In other cases, they are expensive and complicated “nice to have’s.” What you need to do to keep pace is not the same as what you need to do to become differentiated and remarkable. Confuse this at your own peril.
  5. New hybrid-models are genius. The press is eating up Warby Parker’s, Bonobos and many other e-tailers move into physical locations and raving about their productivity numbers. First, this isn’t new (see Williams-Sonoma). Second, the move into actual stores had to happen. Over 3 year ago I was sitting with the CEO of one of these companies and asked him when they would think about opening stores. He answered: “we will never have physical stores.” Now he’s on CNBC singing their praises. Did I have the gift of prophecy? Of course not; the move was totally foreseeable given the known economics and limitations of pure-play e-commerce. Lastly, what would be remarkable about these hybrid-models’ sale productivity in their initial forays into the physical realm is if they did NOT do huge numbers. Bear in mind, they have opened stores in trade areas where they already have a density of customers and are in very small locations. Comparing their initial results to more mature specialty stores is silly. Comparing them to say, the top 2 or 3 bays of Neiman Marcus’ beauty counters in the Beverly Hills, Bal Harbour and Michigan Avenue stores is more apt (hint: it would be well over $3,000/sf). I am a repeat customer of the two brands I mentioned and believe they have bright futures. But let’s be careful of false positives. There is much more of this story to play out.

Omni-channel is a nice catch phrase, and there can be no question that we are witnessing an incredible transformation in how consumers shop and how brands need to do business. The status quo is not an option, but neither is a blind rush into all things “omni.”

The future of omni-channel will not be evenly distributed. The path you choose is critical.