Optimizing to extinction

There’s a growing narrative that suggests that as e-commerce grows the obvious answer for most retailers is fewer and smaller stores.

It’s nearly taken for granted that if a brand struggles with sales then it’s time to take a whack to expenses.

And, most often, it seems as if investors value a story of efficiency rather than one of effectiveness.

It doesn’t take much creativity or inspired leadership to lay people off, close stores, prune inventory, defer capital expenditures and the like. Sadly, though not too surprisingly, it’s rare to find a company that actually becomes more customer relevant by following this path.

In fact you don’t have to look very long or hard to find scores that have tried cost-cutting their way to prosperity only to end up in the retail graveyard. You might even be able to come up with a few that are in the midst of this downward spiral.

It’s typically pretty easy to rally behind optimizing the cost side of the ledger. It’s far harder to get the revenue side right–to go from average to remarkable, me-too to intensely relevant.

All I know is if you set out to optimize something you might want to be sure you picked the right thing.

If you build it, they might yawn

Through my various roles I’m exposed to a lot of new ideas and business concepts. Some come from clients looking to grow, others from entrepreneurs hoping to create the next big thing and still others, somewhat randomly, from connections within my network or who find me via my writing and speaking.

Regardless of how our worlds collide, I generally find that most proponents have a decent sense of the customers they intend to serve and almost everyone can clearly articulate the features and benefits of their idea. It’s all good, but it’s rarely enough.

While technology has advanced to the point where many ideas–including your competitors’–can be developed and scaled rapidly and inexpensively, saying you’re a “lean startup” doesn’t automatically convey any advantage. And in a world where customers are overwhelmed by information and choice, your marginally better mousetrap isn’t likely to get easily noticed, much less considered.

The real battle today, the one you need to win, is for attention and trust.

It’s helpful to have a demonstrably better product or service, but to standout out among all the noise, your signal needs to be amplified. And that happens by being intensely relevant and truly remarkable–not merely incrementally better–and by delivering a story that demands to be told, again and again.

Building trust takes time. But if you are serious about building a brand it’s completely about creating an expectation of excellence and emotional power over time. And average or slightly better no longer works.

The reason so many new products and brands struggle is they are merely slightly different rifts on the same old features and benefits. Nice, but hardly remarkable.

The reason so many solid innovations struggle as well as that they fail to connect at an emotional level. Remember, people buy the story before they buy the product.

Just because it’s easy to build the product, don’t be seduced. Just because the internet allows for seemingly easy and cheap customer access, don’t under-estimate the challenge of breaking through the noise.

It’s never been easier to be innovative. It’s also never been easier to be boring.

The easy prey

In most endeavors it’s a good idea to start with the easiest sale. Get the quick win. Gain some traction. Build a base. Rinse and repeat.

Organizations with any chance of staying around all have easy prey. The easy prey need the least convincing. The easy prey likes just about everything we do. They buy more often and more broadly. They’re typically the least price sensitive and provide the strongest word of mouth.

The tendency in established organizations is to rely on the easy prey too much, to go back to the well too many times. When I was at Neiman Marcus, our easy prey were the super wealthy who were intensely interested in the latest fashion. We raised our prices 8-10% per year and they kept buying. They loved the ridiculously expensive and exotic redemption opportunities in our InCircle Rewards program. We offered ever more exclusive merchandise and events and they cried “more, more, more!”

Unfortunately, the majority of our profits came from folks that weren’t in this elite segment, and our over-reliance on the best of the best started to chase them away (you’re welcome Nordstrom). When the recession came we were hit unnecessarily and devastatingly hard by the lack of balance in our customer portfolio.

For newer, rapidly growing brands, the typical mistake is to optimistically project that early success will readily scale. Many hot e-commerce brands are classic examples. These start-ups hyper-focus on a particular demographic and product-niche and use the advantages of the internet to quickly and cost effectively acquire an initial batch of customers. The metrics for the easy prey are impressive and venture capital dollars follow. Alas, the dynamics that worked so well for the easy prey become quite different (and challenging) as the business scales.

The next tranche of customers don’t get the value proposition as readily as the easy prey. They are harder to convert, requiring more expensive marketing and more costly incentives. Some may like the offering in concept, but want to see, touch and try on the product to be certain they wish to buy it. Acquisition costs go up and physical retail stores are often needed to scale the business to the next level. This isn’t necessarily a bad thing, but it is a big change and fundamentally alters the nature of how the business operates and makes money.

All brands of any size are composed of multiple customer segments, each with somewhat different needs, values, emotions and behaviors. Some are easier to acquire, grow and retain than others. Some aren’t worth the effort. A well crafted growth strategy is rooted in a solid understanding of each segment and employs a targeted and balanced portfolio approach to maximizing customer value. It necessarily involves moving beyond the easy sale and moving outside of our comfort zone.

I suppose it’s human nature to choose the path of least resistance. Ironically, it’s when we get stuck in what is easy that suddenly things get very, very hard.

You’re going to like irrelevance even less

As a senior retail executive and consultant I’ve worked on more strategic growth and innovation projects than I can possibly enumerate.

Regardless of the size, industry sector or maturity stage of the company, every effort has had a common denominator: risk. And every one has had a common enemy too: fear–or, more specifically, fear of change. Fear of change is always the bogeyman to be conquered, the dragon that must be slain.

To be sure, some of my employers or clients have been better at managing change than others. Yet the fear of change is always there, sometimes lurking like a ravenous lion ready to pounce, other times it is right up in our faces, obvious for all to see. Unless conquered, progress simply doesn’t happen, innovation is stalled.

Years ago, despite what was espoused, most of these efforts were really seen as optional–as “nice to do’s.” Of course, we’d like to grow faster. Obviously we want to be seen as innovative. Naturally, more or different might be better. Yet as a practical matter, unless the initiative operated well within our comfort zone, the chances we’d actually take the plunge we’re rather small indeed.

Yet what’s different now–what matters more and more–is that change can rarely be viewed as optional. Increasingly, the status quo is a prescription for disaster. Legacy brands are being challenged by disruptive technology. Once stable customer loyalty bonds are fraying. What worked splendidly before is now merely a dim signal amidst the noise. The tried and true is anything but.

It’s becoming hard to ascribe a value or judgment to change. It is neither good, nor bad, neither easy, nor hard. It just is.

And, as a wise person once said “if you don’t like change, you’re going to like irrelevance even less.”

seth

In search of amplification

When you live in a cacophonous world, if you want to be something other than a dim signal amidst the noise, you need amplification.

When consumers are inundated by a tsunami of marketing messages, much of which are virtually identical, you need amplification.

When your default strategy is to lower your price, and you find yourself in a losing race to the bottom, you need amplification.

When you find yourself regressing toward the mean in almost everything you do, because it seems safer, you need amplification.

The battle for share of attention isn’t won by merely shouting louder, beating the consumer into submission or constantly bribing customers to buy from you.

It’s won by being intensely relevant and remarkable. It’s won by taking one or more aspects of what’s commonly done and distorting it to new heights. It’s won by cultivating an obsessive core of customers. It’s won by creating a story that begs to be told, again and again.

If your business plan doesn’t contain clear points of meaningful value amplification, it’s time for a re-think.

If your best customers aren’t willing to amplify your message to your most valuable prospects, something is amiss.

Creating and leveraging points of amplification isn’t easy. But being irrelevant is a whole lot tougher.

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Dating the wrong customers 

In most industries, the smart marketer wants to cultivate long-term, enduring relationships with her customers. For most of us, the end-game, best case scenario is to create customers for life–or for at least a very long time.

Imagine if, however, in our personal lives, we had a strong desire to get married, but we only went out with people who made it clear that they had no interest in a long-term relationship.

Imagine if the person we were romantically captivated by insisted that we bribe them each time just to go grab coffee, see a movie or have dinner with us.

Imagine if their decision to go on a date with us any given Saturday night was determined by how well our offer stacked up against the competing bribes they were getting from other suitors.

Now faced with this intensely competitive and highly promotional dating market you might determine that you should go on a lot more dates to increase the odds of finding just the right guy or gal. Or you could choose to make your bribes larger. Or you could decide that, in addition to your bribes increasing, you’d add some perks or value-added features to make your dating game more unique and competitive.

By now, hopefully it’s pretty obvious that the best answer is not to endlessly spin to win the hearts of a person who fundamentally does not meet our needs, nor is there any gain in fighting a battle we can never win.

So why is it so hard to see that, all too often, we are dating the wrong customers?

Send in the clones

How’s this for an idea?

Let’s sell products that are pretty much identical to everything else that’s already out there in the market.

And then let’s employ advertising that is virtually indistinguishable from our competition.

Every week we’ll have big sales–and if you’re really crafty, you can use our coupons to save even more!

Sign-up to be on our email list and we’ll give you 10% off your next purchase. And then, just about every day, we’ll send you an email highlighting some of our me-too products while also reminding you how much you can save.

Be a good customer and we’ll throw in free shipping. Oh, you hardly ever buy from us? No worries, you get free shipping too!

We’re all omni-channel and what not, so of course we’ll have e-commerce. And our site will look like every other site. We want you to feel comfortable.

Oh, you didn’t buy just now when you were on our website? That’s cool, we’ll just keep serving up ads on Facebook and everywhere else you go on the internet. Hope you don’t mind the little interruption.

And, after we do all this and we don’t get the sales we want, we’ll just launch a “loyalty” program that–wait for it–rewards you with gift cards so you save even more!

As silly as this sounds, it’s the play book for many retailers. They continue to swim in a sea of sameness. Most often, their default mode is to compete on price because, faced with a paucity of actual difference, it’s the only thing that seems to drive sales.

Unfortunately, the fact is most categories aren’t growing faster than the rate of inflation. The fact is most consumers have more choices than they can possibly sort through and make sense of. The fact is share of attention is the new battleground. The fact is almost all price wars end badly. The fact is any real growth needs to come from stealing share.

Imitation may be the sincerest form of flattery. And it may seem safe.

Yet the fact is it is just the opposite.

seth