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.

At the intersection of choice and friction

As retail consumers, let’s stop and think about the choices we had a decade or so ago.

With few exceptions, almost all products were purchased from a physical store during limited store hours. For the most part, we selected from what was in-stock; custom orders were generally time-consuming and expensive. If we wanted to shop for alternatives we had to get in our car, walk to another store in the mall or, if we lived in a small town, drive many miles to explore the competition. It was pretty much the same drill if we wanted to check prices. Product reviews came from neighbors and friends, if we were lucky, or from sales people, if we weren’t.

Until fairly recently, many of our shopping experiences were laden with friction, primarily driven by scarcity of choice. Sometimes we had decent alternatives. Many times we did not. Often we had to settle for good enough.

Today, if anything, we are overwhelmed by choices. At a macro-level, consumers are experiencing less and less friction all the time as selection expands, prices decline, access becomes easier and information is abundant. Technology is enabling retailers to root out the so-called pain points in the customer experience. Fierce competition is unlocking more and more value for consumers.

But for many retail brands, this can be quite problematic. Mediocrity in the customer experience is now laid bare. Uncompetitive pricing, stale merchandise, out-of-stocks, long call-center hold times and the like, have gone from mere customer annoyances to the reasons customers are bailing in droves to the competition.

It amazes me that so few retailers truly understand what drives customer loyalty and how they stack up against the evolving competition.

It stuns me that so many brands remain clueless about the sources of friction in the shopping experience, particularly among their most profitable customers.

Blather on all you want about omni-channel this and omni-channel that. But if you don’t really understand what’s going on for your customers at the intersection of choice and friction, chances are you’re wasting your time.

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?

Knowledge is not a differentiator

Knowledge isn’t automatically power either.

Today, all one needs is access to the internet to be able to “know” almost anything, practically instantaneously.

Many companies have all sorts of data, and whether they label it “Big” or not, it’s completely meaningless without useful action.

Many people are extremely well-educated, but they leave the world without having made a mark.

I know, as just one small example, that my holding on to a resentment is not only pointless–at least until Elon Musk invents a time machine–it also only serves to make me miserable. Do I act on that knowledge consistently? Hardly.

Knowledge is becoming closer to a commodity literally every single day. Chances are if you don’t know something it’s because you don’t want to–consciously or otherwise.

Companies confuse data with insight all the time.

Many non-profits are particularly good at exposing the world to a raft of research and “findings” apparently content that, once society is made aware of something, lasting change is just a simple step away.

Plenty of organizations, big and small, secular or otherwise, try to win on the notion that they know something others don’t and rest safely on the strength of their set of facts and convictions. Individuals are hardly immune from this way of thinking. I’m most certainly not. #self-righteous.

To what end?

Awareness is critical, but it only creates an opening.

Knowledge is important, but it’s just the start.

Acceptance of reality merely forms the foundation for progress.

He who dies with the most facts does not win.

The difference that matters–the shift–is revealed in our actions: the leap, the willingness to be vulnerable, the stepping down from the stands into the arena, the abandonment of creeds in favor of deeds.

The difference isn’t in the knowing, it’s in the doing.

Why we don’t know why

If you are anything like me, whether it’s in your personal or professional life, you have a list of goals you seek to achieve.

And if you are anything like me, you don’t always achieve them. Which begs the question: why?

Sometimes the answer is painfully obvious. Other times it takes more work. Yet, I am struck by how often, whether it’s my own stuff, interactions with friends and colleagues or issues my clients are struggling with, the answer is “I don’t know.”

Why are we losing share to the competition? I don’t know.

Why isn’t our social media strategy working? I don’t know.

Why am I working harder and harder and getting less accomplished? I don’t know.

Why does an innocuous statement by my partner, make me instantly defensive? I don’t know.

It seems to me there are a few reasons why we don’t why.

Sometimes, no matter how hard we dig, it’s simply unknowable. I’d put the “God” type questions in this bucket.

Sometimes, we haven’t dug deeply enough. If it’s important, if we make it a priority, more work–or perhaps a radically different approach–stands a pretty good chance of unlocking the root cause.

Sometimes, if we’re brutally honest with ourselves, we don’t want to know the answer. We’re afraid of being confronted with the harsh reality of our situation. We fear being seen for who we really are or having to acknowledge that we aren’t a victim. Accepting accountability and seeing that the only road is difficult and scary is often to great a burden to bear, much less wake up to and own.

Of course it’s pretty easy to go through life blissfully ignorant, to avoid an honest look in the mirror.

Until it isn’t.

Confusing necessary with sufficient

We’re told we have to embrace all things omni-channel, yet Macy’s and Nordstrom, two of the acknowledged leaders in this arena, have yet to move the dial much on market share and profitability.

We’re told we have to digitally enable most dimensions of our business, yet Sears, which has been a pioneer in many aspects of e-commerce and digital innovation for more than a decade, looks to be in the midst of the world’s slowest liquidation sale.

The excellent and provocative work by L2 on companies “digital IQ” frequently ranks brands on the top end of the scale that are laggards on many key performance metrics.

Some will tell you that this proves that embracing a digital first strategy is over-rated or that investing heavily in omni-channel is a mistake.  They are mostly wrong.

The error comes in confusing necessary with sufficient.

There are few brands, especially in retail, that can ignore an aggressive move into frictionless commerce. The customer experience must become more unified.

More and more, mass marketing strategies are dying and it’s becoming extraordinarily difficult to break through the clutter. Letting go of one-size-fits-all strategies in favor of creating more personalized programs is becoming increasingly important.

And we can’t keep interrupting customers with largely irrelevant messages at the wrong time and out of context. Deeper customer insight, coupled with an understanding that smartphones and tablets allow the customer to be untethered and addressable at the moment of need, puts a premium on marketing that is localized.

We are entering an era where a high level of competence in the above three principles is necessary just to stay in the game, to be even marginally relevant, to have a crack at the customer’s consideration.

You can be leading edge on all of these dimensions and it’s still not enough.

What we offer the customer needs to be amplified–that is, it must be truly unique, intensely relevant and remarkable in the purest sense of the word. This is where Sears falls incredibly short and where Macy’s struggles to break out from the sea of sameness that characterizes much of the department store world.

Unfortunately too many companies vaguely embrace all things digital and start gulping down the omni-channel Kool-Aid while ignoring this last critical piece.

At the end of the day, if the dust ever settles, they’ll have spent a ton of time and money on merely keeping pace and not enough on the things that ultimately matter.

PurpleCow

Pretending it’s new

When some leaders wake up to reality, when they slowly start to notice that things are in fact meaningfully different from how they were before, we often witness a self-absorbed, I’ve just found Jesus and I need to tell you all about it, kind of thing take over.

“Consumers who shop multiple channels are more valuable than single channel customers” they breathlessly announce at conferences.

“Stop thinking about e-commerce as a channel” becomes the title of a newly released white-paper.

“We need to differentiate ourselves on experience” the CEO implores a group of assembled executives.

Suddenly everything is about “seamless”and “omni-channel” and “the single view of the customer.”  Their sentences start to include a disquieting use of “integration”, “customer-centric” and “relevance.” Investor presentations and annual reports turn into games of buzz-word bingo.

I hate to drag you out of your pink cloud, but just because you took a long time to notice, doesn’t mean it’s a recent phenomenon. Responding energetically to a totally foreseeable crisis does not make you a great leader.

Pretending it’s new may prop up our ego or cast ourselves in a better light. Better late than never, huh?

Pretending it’s new may buy ourselves some time with a less than savvy Board. What they don’t know can’t hurt them, right?

Much of what passes for insight today has in fact been known for years if only we had taken the time to become aware, confront its import and accept the implications. It’s not new and we shouldn’t pretend it is. Of course, neither is this.

Now obviously we can’t go back and fix all the should of’s and could have’s.

But we can ask ourselves what of potential importance might we be missing right now?

We can go into understanding what our fear causes us to avoid.

We can accept that often our pretending creates the illusion of keeping us safe.