You know what’s hard?

Customers say they want a more seamless experience across all channels and touch-points. “Sure” you say, “but it’s very expensive and complicated to implement that level of integration.”

Silo-ed data, systems, organizations and metrics are keeping your brand from being more customer-centric and relevant. “I know” is your response, “but greater centralization would be very jarring to our culture.”

In an increasingly noisy world, mass marketing and one-size-fits-all approaches fail to gain share of attention, becoming less effective by the day. You respond, “you’re right, but treating different customers differently is difficult to scale.”

Relentless price promotions and layering of discounts and reward points deteriorate profit margins, teach customers to only buy on sale and accelerate an inevitable race to the bottom. Your defense is to say “well that’s what moves the top line” and to point out how hard it is to justify full price.

In the inevitable battle between denial, defending the status quo and rationalization vs. acceptance, leaping and innovation, we tend to choose the former. And our fate is sealed.

Many of the things we avoid as too risky are, in fact, often just the opposite. The risk is in the failure to change, in the lack of passion to become intensely relevant, in being stuck in “me too” instead of choosing to become remarkably different.

What’s hard is to move where the customer is headed after the competition has already established a beach head.

What’s hard is to break through the clutter with undifferentiated products and tired messaging.

What’s hard is to acquire, grow and retain the right customers with average products for average people.

What’s hard is to catch up when you’ve fallen behind.

Mass or built for me?

All about price, or all about unique value?

Average or remarkable?

My guess is that every brand that’s gone through the work of closing stores, firing people and liquidating inventory might have a different view of what’s hard.

Not quite my tempo

Every individual has a pace at which they prefer to work. Of course it can vary given the circumstances. We can pick up the tempo in a crisis, or slow down when faced with uncertainty. But there is a rhythm that feels most natural to us and, often, folks that consistently work faster or slower than we do can frustrate us.

Organizations are similar. Some are constantly on the balls of their feet, poised for action, working briskly through issues, taking risks, experimenting. When a new opportunity arises, they are ready to pounce. They’re passionate–and in a hurry–to be part of the next big thing.

Others are at the other end of the spectrum. They sit back and observe. They are cautious, timid even, moving deliberately to scope the situation out. They’re more afraid to make a mistake than to fall behind. They constantly need to be pushed into making any meaningful change.

There are problems with going too fast, just as there can be issues with going too slow. This clip from Whiplash brilliantly illustrates that one challenge is knowing and accepting your tempo.

In case you haven’t notice, the pace of innovation is accelerating. Customer expectations are being transformed, seemingly overnight. Whole industries are being disrupted like never before.

Which is why it’s a good time for a tempo check.

And when in doubt, it’s probably better to rush, than drag.

Overplaying our hand

We’re told to hyper-focus on our core customers. After all, doesn’t most of our profit come from a small group of loyalists and “heavy-users”?

We’re admonished to double-down on our highest ROI marketing strategies. Surely if a moderate amount of email or direct mail or re-targeting is working, more must be even better, right?

And exhortations to find our strengths, exploit our core competencies and “stick to our knitting” are central to many best sellers and legendary Harvard Business Review articles

Lather, rinse and repeat.

And this all makes a lot of sense. Until it doesn’t.

The past few years have brought us dozens, if not hundreds, of brands that have gone away–think Blockbuster, Borders and, very shortly, Radio Shack–largely through adhering to these notions.  Still others sit on the brink of irrelevance–I’m looking at you Sears and Blackberry–because they pushed a singular way of thinking well past its expiration date and, sadly, the point of no return.

Even far stronger and far better managed brands fall into the trap of overplaying their hands. Neiman Marcus (my former employer)–along with many other luxury brands–have had to re-work their strategies because they became overly reliant on a narrow set of highly profitable customers and failed to acquire and retain other important and emerging cohorts.

It’s all too easy to become distracted by peripheral issues or to stray into areas where we have few useful capabilities. We always must be mindful of where the customer gives us–or where we can readily earn–permission to go.

But in a world that is changing ever faster, and where new competitors can often launch highly disruptive business models in short order, what got us to where we are isn’t likely to get us to where we need to be.



Oh, they’re not a competitor

Shortly after I became the head of strategy and multi-channel marketing at The Neiman Marcus Group I was asked to lead a strategic planning session for our senior executives. One of the exercises I suggested was a deep dive on our opportunities and vulnerabilities against each of our key competitors. As I reviewed my overall plan one of the top leaders responded, “I like the overall approach, but you need to take Nordstrom off your list. They’re not a competitor.”

Having come to Neiman’s after 12 years at Sears–which I affectionately call my journey from the outhouse to the penthouse–I will admit that my experience in the nuances of the luxury industry was pretty lacking at that point. I certainly understood that a substantial percentage of our customers were fabulously wealthy and preferred brands that you simply could not get at Nordstrom. But I had already learned that many of our shoppers were much less affluent and that we sold quite a few brands that overlapped. Nevertheless, being the new guy–and not especially confident in my hypotheses–I acquiesced. We didn’t talk about Nordstrom.

About a year later my team initiated an in-depth analysis of customer spending and activity trends. Ultimately what we found was pretty disturbing. While our very top spending group was growing in sales and margin rate, customers that represented about 2/3 of our sales had weakening stats.

As it turned out, virtually all our sales growth during the preceding 5 years was driven by raising our average unit prices and the growth of our e-commerce business. After much hemming and hawing about the value (and cost) of doing consumer research, we finally got approval to do a series of studies to understand the underlying drivers of these outcomes. We learned a lot, most of which Neiman’s failed to act upon until the financial crisis hit. But the overwhelming conclusion was that when we lost customers (or a portion of a customer’s spending) the majority of that leakage was to Nordstrom.


The point of this story is not to point out the limitations of the Neiman’s culture at that time, nor the power of my intuition. The fact is you don’t have to do much digging to find similar examples of mis-reading the consumer and failing to respond adequately playing out, over and over again, in any and all parts of industry.

Sometimes competition is rather direct even when there is a major value proposition innovation. Flash-sale sites clearly competed for a certain segment of the fashion business. Digital books and music obviously challenged the underlying business models of Borders and Blockbuster.

Sometimes competition might be less direct and its game-changing impact may be harder to glean at first. I’m not sure what the brand management teams at Folger’s and Maxwell House were thinking during the initial growth of Starbucks, but it’s now clear that there was a dramatic consumer preference shift that those brands failed to address–and a huge value creation opportunity that they didn’t participate in.

Even harder to see is when consumers have a more macro-substitution effect. For example, with some consumer segments, we’ve seen a broad and long-term trend to greater interest in personal experiences. This shift has, in many cases, supplanted spending on certain physical goods.

As in most elements of good strategy development the keys are pretty simple:

  • Clearly articulate a data-supported and trackable customer segmentation scheme
  • Stay current on the wants, needs and long-term value of each of those segments
  • Monitor direct competitors and emerging competitors for EACH segment
  • Model impact scenarios for nascent opportunities and threats
  • Develop potential responses and testing plans under each of those scenarios
  • When the time is right test those responses
  • Assume the time is right much earlier than seems comfortable
  • Be prepared to compete with yourself.

And one more thing. If someone tells you “Oh, they’re not a competitor” you might not want to take their word on it.

In God we trust, all others must bring data.


But first you have to believe

I’m all for market studies. And consumer research. And fact-based analysis. I’ve rarely met a 2 x 2 matrix I didn’t like.

I’m all for laying out reasonable hypotheses and putting together a sound testing plan. If I’m honest, I’m pretty solidly in the  “in God we trust, all others must bring data” camp.

But for me there’s no getting around this pesky little slice of reality. More times than not, the truly innovative, the remarkable, the profoundly game-changing, emerges not from an abundance of analysis and left-brain thinking, but from an intuitive commitment to a bold new idea.

More than a decade ago the folks at Nordstrom didn’t have an iron-clad, ROI supported business case when they made the big leap into investing behind channel integration. They believed that putting the customer at the center of what you do is ultimately going to work out.

Steve Jobs eschewed logic and conventional wisdom to pursue Apple’s strategy of “insanely great” products. He believed that leading with design and focusing on ease of use creates breakthrough innovation and customer utility.

Just about every successful entrepreneur adopts a strong and abiding belief in her product or service in the face of facts and history that suggest that, at best, they are wasting their time and money and, at worst, they are simply nuts.

On the other side–with clients and in organizations where I’ve been a leader–a lack of belief that getting closer to the customer is generally a good idea or that it’s okay to fail has resulted in an unwillingness to invest in innovation. Any meaningful action was predicated on a tight business case and, when that was lacking, it was easier to do nothing than to take a chance. All these brands are now struggling to catch up.

Obviously commitment to a belief is not, in and of itself, sufficient. Execution always matters. And there are certainly plenty of strongly held beliefs that are wildly misguided or morally reprehensible.

Yet, when I embrace the notion that just about every great idea starts with a belief not a compelling set of facts–or that often some people see things way before my logical brain can-the field of possibilities expands.

And I believe that sounds like a pretty good thing.



The discount ring

I’m amazed that Wall Street analysts are “surprised” that as hot brands get bigger (think Michael Kors, kate spade), their level of discounting increases. Apparently they were all sleeping during their first year economics course when supply and demand was covered.







Whether it’s Walmart or Chanel, at the center of any brand’s customer bullseye will be customers who don’t need a discount (or any extra incentive) to buy. This is what I referred to in my recent obsessive core post. As we move out in the rings, away from the center, we encounter customer segments that are less and less intrinsically loyal and thus more in need of extra incentives to buy.

Since Walmart’s value proposition is largely about price–whereas Chanel’s rests on a high percentage of full-price selling–the composition and dynamics of these various customer segment rings will obviously be quite different. But the fact remains that as a brand grows by casting a wider net for customers it will, at some point, develop a discount ring.

As the name implies, customers in the discount ring don’t buy unless they get a deal. In fact, most brands will have multiple discount rings. There will be a ring that needs only minor or modest incentives to pull the trigger. Others only come off the sidelines when prices hit a much deeper level of markdown (or some other incentive).

Unless we are examining a brand that has decided strategically to shun price discounting completely–or assessing certain companies early in their life-cycle–the existence (and relative growth) of a discount ring should surprise no decent analyst.

The real question for anyone trying to understand the validity of a brand’s long-term customer growth strategy is whether the company has a firm grasp of the dynamics within each of these rings and is intelligently balancing the portfolio of these different customer segments.

Coach is a brand that in recent years lost its grip on its customer portfolio and pushed too far on the discount ring. They have paid a steep price and are now trying to rebalance.

In Michael Kors’ case, there are only so many customers willing to pay at or close to full-price for their core offering. Sustaining growth means appealing to more customers. And that means they will need to become more reliant on more price sensitive customers.

Ultimately the point at which the discount ring becomes meaningful is mostly a matter of brand maturity and math. If you get shocked by that it just means you’re not paying attention.

The starting point–the pivotal matter of strategy and intelligent customer development–is to build a level of deep insight about each relevant customer segment. Then we must become intentional about how each plays into the brand’s long-term growth. Having a discount ring emerge is not automatically a matter of good or bad. How it plays out over time is a strategic choice.

Choose wisely.

Might happen, will happen, has happened

In a classic Rowan Atkinson and Richard Curtis routine, Rowan asks “what is the secret to great comedy?” But before Richard can offer his reply, Rowan interrupts. “Timing” he blurts out.

Timing is, of course, essential to great strategy as well. Commit too early, and we risk over-investing or distracting ourselves from something more urgent and important. Commit too late, and we might miss a new opportunity entirely or end up falling woefully behind.

Understanding when to act at all, much less knowing when to act decisively, has everything to do with developing keen awareness of relevant factors and acceptance of their implications. Here is where most get it wrong.

Because most brands fail to invest sufficiently in developing actionable market and consumer insight, their ability to discern between “might happen”, “will happen” and “has happened” is woefully lacking.

Because most organizations do not have sufficient commitment to experimentation, they aren’t ready to act boldly when “might happen” becomes “will happen”.

Because most companies spend more time defending the status quo rather than embracing the future, they are often stuck in the past and miss “has happened” entirely.

Many important dynamics have–or are about to–change your customers and your business. Whether you realize it or not, is one thing.

And whether you are prepared to act on that realization is ultimately the difference between winning and wondering what the heck just happened?