Living la vida local

Until the end of the 19th century virtually all retail was local.

There was no such thing as a chain store or a catalog merchant. Most raw materials were locally or regionally sourced. The local shopkeeper predominated.

For centuries, the typical merchant specialized in a particular area of expertise–butcher, baker, cobbler and so on. He knew most customers by name and understood what they liked. With the ability to get instant feedback on his offering he could readily curate his offering to local tastes. He didn’t have to learn 1-to-1 marketing. It was his lifeblood.

In the 1880′s, Richard Sears and Aaron Montgomery Ward launched their catalog businesses, and in the decades that followed, consumers began to have greatly expanded choices. As the 20th century unfolded, the transportation infra-structure improved dramatically, creating greater opportunities for sourcing product from around the globe. Multi-unit retailers proliferated and eventually the bulk of retail shifted to regional malls, mass discount stores and dozens of national “big box” retailers and specialty chains.

In the last 15 years, the advent of e-commerce, along with incredibly efficient direct to consumer supply chains, have made it possible for the individual consumer to have virtually infinite choices available to them. The local shopkeeper model has become largely extinct.

Now it’s come full circle. Retail, like politics, has always been local. The winners have always been those that bring the most remarkable and relevant solutions to individual consumers. But over time what was possible shifted. Those that failed to keep pace lost out.

Today the retail world is becoming increasingly bifurcated. A few players are winning by riding the long tail and by offering low prices and efficient shopping. For everyone else, the world is a lot more complicated. Right now the challenge is to differentiate your brand in a sea of sameness. Right now the goal is to curate your offering–or make it incredibly easy for the customer to do it for herself–to a specific set of consumer needs and wants. Right now your mission is to know your customer better than the competition and to leverage that insight to craft more unique and personalized solutions.

Sounds familiar right?

Advances in technology make it possible for your brand to provide value in much the way the shopkeepers of yesterday did. To know me, to understand my individual preferences and to use that information to tailor your offering to my specific requirements is the formula for winning.

You can keep chasing price and remain wed to mass approaches to marketing, customer service and operations. And you can hope to beat Amazon and Walmart at their own game. Let me know how that works out. Or…

Or you can commit to treating different customers differently and invest in a strategy steeped in localization and personalization.

The choices are increasingly clear. The commitment to one path or the other is becoming more urgent. You need to choose.

Ultimately it’s death in the middle.

 

 

 

 

Easy or good?

It’s far easier to run your business with a paint-by-numbers operating model.  Why risk the vagaries of human interaction?

It’s far easier to craft a one-size fits all marketing plan. Why invest in complicated customer analytics and the complexities of managing vast numbers of different campaigns?

It’s far easier to focus on efficiency rather than effectiveness. Doesn’t Wall Street reward brands that run a tight ship?

It’s far easier to remain product or channel focused. Organizing your business around customers–and the realities of the omni-channel blur–means blowing up many existing processes, metrics, incentives systems and management structures.

It’s far easier to focus on the certain short-term fix, rather than commit to a long-term program of testing and learning and building foundational capabilities. After all, how can we be sure we will ultimately generate sufficient ROI?

The problem is that easy is not the same as good.

And good enough is rarely good enough anymore.

Remarkable. Relevant. And built for me, rather than built for everyone, is what it will take for just about any business that cannot win by price alone.

And like it or not, easy is not going to cut it.

 

Built for me (Part 3): The promiscuous shopper

You may know the old joke that ends: “We have established what you are, madam. We are now merely haggling over the price.” Now apply that in the retail context.

I introduced the notion of the promiscuous shopper nearly 3 years ago. This special, but hardly rare, breed of consumer is always on the hunt for the best deal and completely devoid of any potential to be loyal.

When you choose to anchor your marketing strategy on relentless un-targeted promotions, and then layer on extra coupons and rewards points, it’s the promiscuous shopper who is the first to bite, and who then spikes as a percentage of your business.

To be fair, most businesses need some of these consumers from time to time. There is clearance product to be sold and any sensible marketing and merchandising strategy will reflect a natural demand curve.

An unusually high level of discounting may also be necessary to drive initial trial, so long as you are confident that repeat business has the potential to be loyal and profitable.

And certainly promiscuous shoppers are not always immediately apparent. Time and solid analysis are needed to separate them out and start to chase them away.

But always bear this in mind: when the promiscuous shopper feels that your business is built for them, it’s the first sign of trouble. Big trouble.

Built for me (Part 2): Treat different customers differently

In my last post, I suggested that the most powerful brands elicit the feeling from their core customers that the business was designed around their unique needs and wants. That is was built for them.

This idea is a core tenet of strategic business model design. But it extends to tactical execution as well.

I’m hardly the first person to espouse the “treat different customers differently” mantra, but embracing it is essential to putting “built for me” into practice day in and day out.

Built for me can extend to how you deliver your customer experience. One size fits all approaches rarely yield superior customer service marks. When you don’t pay attention to–and act upon–my unique preferences, I’m less and less likely to return.

Know me, show me you know me and show me you value me.

Built for me should be a driving force behind just about any brands marketing strategy. More and more, mass promotion fails to move the dial or gives the illusion of prosperity when all you are doing is chasing sales with no potential to be profitable–or chasing customers with no potential for loyalty.

Leverage analytics and insight to deliver a progressively more personalized set of messages, offers and experiences.

There is no question that pursuing a built for me strategy introduces cost and complexity. But more and often than not, failure to embrace this path eventually leads to middling performance and consumers who are more than happy to take their business elsewhere.

 

Built for me

We’ve all been there.

We walk into a new store, check out a just opened restaurant, surf a recently discovered website or perhaps slip into the front seat of that new model car and instantly it hits us: whoever designed this must have had me in mind.

The overall feel, the tiniest details, the careful editing, all seem built around our particular wants and needs. We can’t wait to come back and there is a pretty good chance we’re eager to tell all our friends about our new-found love.

Contrast that experience with the brands we engage with infrequently, or try once, never to return. In many cases–as a point in strategy–that’s not only fine, it’s desirable. It’s not supposed to be for us. Walmart is not trying to get the Saks customer. And vice versa.

But if you aren’t winning with the consumer segments your brand is supposed to be for, than clearly you’ve got work to do.

More and more, building deep engagement, loyalty and “remarkability” in a world of constant connection, ever-expanding choices and a blitzkrieg of marketing communications, demands that you become the signal amidst the noise.

Increasingly retail is shifting toward  “Me-tail.”

If your core customer segments don’t resonate with a “built for me” notion,  you need to get at the root cause. And you need to get busy.

 

 

Retail’s fifth “P”

For years, marketers have been told that their marketing plans must address the “4 P’s”: product, price, promotion and place.

Over time, various gurus have come along suggesting that other P’s are essential components of any marketing strategy. So now we have people, physical evidence and process thrown into the mix. Others have moved away from the letter P entirely, giving us a couple of variations of the “4 C’s” as well as the “7 S’s.” Fair enough.

But in a world where options are exploding, channels are blurring and consumers are easily overwhelmed, the new “P” that really matters is “Personalization.”

Sure, there are segments that are all about price, where the customer is willing to do the heavy lifting to get the best deal. But if aren’t Costco, Amazon or a handful of other retailers, you can’t win just on price and dominant assortment. You HAVE to treat different customers differently. You have to embrace personalization.

It is said that “retail is detail.”

Now retail must become “me-tail.”

 

Right globally, wrong locally

When I walked into my local Starbucks yesterday afternoon it was 104 degrees out (nothing like a balmy September day in Dallas!). So you can imagine my delight in being greeted with the promotional signs proclaiming that “Pumpkin Spice Lattes Are Back!” Naturally I bought a Venti one, headed home to put on my sweater and curl up in front of a warm fire with a good book.

In recent weeks I’ve gotten various promotional emails encouraging me to redeem loyalty points I don’t have, as well as numerous e-mails marketing products or locations that aren’t remotely of interest to me. All of this despite these retailers having enough data about me to know better.

Or maybe you’ve had the experience of being prompted by your bank’s ATM screen to choose the language you wish to use (what the heck, after 20 years of choosing “English” maybe now is a good time to start practicing my high school Spanish!).

Sure it’s easy to take the one size fits all approach. I’m sure you have plenty of seemingly good reasons why even some basic customization is too complicated and/or expensive to execute.

And yes there are situations where you can get away with the mass approach. Just realize that what is right for you often doesn’t work for your customers. Sometimes it’s just annoying or amusing. But sometimes you are missing great opportunities or losing out to competition that truly gets and implements customer-centricity.

Like politics, all retail is local.

Treat different customers differently.

 

8 things that are wrong with your omni-channel strategy

Read anything about retail, attend a conference, get pitched by a consultant, evaluate a new software product, and chances are you hear “omni-channel” mentioned early and often.

So with geniuses like me throwing the term around ad nauseam, let’s get specific about what is probably wrong with your current strategy and what you need to do to go from meaningless words to remarkable action.

  1. Focusing on semantics rather than strategy. I’m often asked what’s the difference between “multi-channel” and “omni-channel” and my answer is typically: “Not much and who cares.” The point is having a strategy that reflects how customers shop today. The point is designing a value proposition that fights and wins in an increasingly blurred channel world. The point is delivering a compelling customer experience day in and day out. Call it whatever the hell you want. It’s what you do that matters.
  2. An appalling lack of customer insight. If you are blessed with a killer offering and virtually no competition, go straight to #3. But if you don’t work at Apple or Google, chances are you need an actionable customer segmentation. Chances are you need far better insight around consumer behavior. Chances are you need to be able to differentiate your target customers by needs and value. If you don’t have the data to treat different customers differently, you are at a huge disadvantage.
  3. Your mileage may vary. On one side, you have pundits screaming that if you aren’t “omni-channel” today you will be out of business tomorrow. On the other side, there are those that find that sentiment preposterous; just look at Amazon, they don’t have retail stores and they are doing fine. The truth is that every brand’s situation is different. An omni-channel strategy as an abstract concept is useless. An omni-channel strategy that reflects the reality of YOUR consumers, YOUR competition and YOUR current and future capabilities is all that matters. You aren’t Amazon. You aren’t Nordstrom. You aren’t Macy’s. Take what you like from some of the leaders and leave the rest.
  4. Screwed up metrics. Ask a retailer about their  “same store sales” and “gross margin rates” and “sales per square foot” and the growth in their brick and mortar stores compared with e-commerce sales and you are inundated with data and commentary. Ask them about growth in key customer segments, segment profitability, traffic conversion or retention rates, cross-channel browsing behavior and the like, and you are probably met with silence or meaningless babble. What gets measured gets done. But if you are focused on the wrong data you are going to do the wrong things.
  5. A dumb organization structure with dopey incentives. Most of the time I was at Neiman Marcus our then CEO would get on analyst calls and talk about our “compelling multi-channel strategy.” We included similar words in our annual reports and investor presentations. In reality, we were organized by channel, had no meaningful truly customer-centric efforts and all the top executives had incentives to maximize their own fiefdoms. Silos belong on farms. If are serious about “omni-channel’ you need to set a structure that reflects customers first, and channels and/or products, second. You need to pay your people on those things that truly advance key customer segment growth, engagement, loyalty and advocacy over the long-term.
  6. Confusing the vehicle with the destination. Yes, the web can be a sales channel, but for most retailers it is mostly a tool. Having a social media or mobile strategy is critical, but only as a means to your customer growth strategy ends. If you don’t know where you are going, any road will get you there.
  7. Failure to ship. The era of months of intensive market planning, controlled testing and the big reveal are over. In case you haven’t noticed, things move a lot faster today, communication channels are increasingly blurred, and customer desires are far less predictable. Trial and error works far better than spectacular planning and flawless execution. Better to ship often and fix it in the mix.
  8. Neglecting relevance. Retailers are great at talking to themselves. And passing to where the receiver used to be. And wallowing in me-too-ism. And going big and easy, rather than small and challenging. Treat different customers differently. Make it relevant. Extra points for remarkable.

Honey, I shrunk the store

Until Amazon–and a handful of other pure-play concepts–emerged as power-house brands, a retail growth strategy largely consisted of two major components: build bigger stores and create a bigger retail footprint.

Whether you were Walmart, Office Depot, Coach or Lowe’s, your strategy was mostly about pushing the limits of market dominance: expanding your assortments to cover every related purchase occasion and expanding locations to cover every trade area perceived to be viable.

Then digital happened, and if a large part of your product offering could be delivered without the need of a physical location (think Best Buy, Blockbuster or Borders–and that’s just the “B’s”) this has proved to be a big problem indeed.

And show-rooming happened, and if you were in categories where the consumer likes the research service found in a brick and mortar location, but ultimately buys on price, you were losing a lot of business to direct-to-consumer players not burdened by your overhead structure.

Then there’s the emergence of omni-channel retailing, and if you aren’t making it frictionless for your customer to shop anytime, anywhere, anyway, you were losing share to those who have truly embraced customer-centric retailing.

Last, but not least, the recession happened, and many of the consumers you were counting on–you know, the ones that had become weapons of massive consumption fueled by easy credit–suddenly pulled back big time, and many of the locations you opened in the last five years or so are dead in the water.

So for most, it’s time to shrink.

Fewer, more productive stores. New, smaller formats that resonate more strongly with today’s blended channel realities and that can work in different kinds of trade areas.

But if you think getting smaller is just about physical space, think again.

When you think smaller, think more intimate. Become more personalized, more intensely relevant. Treat different customers differently.

In the future the customer shouldn’t walk away from interacting with your brand thinking that you have down-sized. They should feel that you know them, you get them and that your brand was built with them at the center of all that you do.

Where everybody knows your name. The “new shopkeepers.”

More and more the retail world is bifurcating.

At one end of the spectrum, you have the high-efficiency players. Great prices, endless assortments, super convenience, built for speed. Amazon, Walmart, iTunes, Home Depot. You get the picture.

While each go about it slightly differently, their world is mostly a mass market one. Customer segmentation means little. For all intents and purposes, you shop there anonymously.

At the other end of the spectrum are what I like to call the “new shopkeepers.” In the (good?) old days retail was characterized by owner-run, single location, small specialty shops. The butcher, the baker, the candle-stick maker. No CRM system was needed because the shopkeeper knew you, knew what you liked and she tailored her assortment and experience to you and her other like-minded customers.

We know that very few of these old-timey shopkeepers are around any more. But the new shopkeepers embrace the fundamental principles of old. Deep customer insight. Remarkable experiences. Relationships, not transactions. They treat different customers differently. They know your name.

Your mission–if you choose to accept it–is to pick a lane. Too many retailers straddle the line, trying to be something for everyone and ultimately being totally unremarkable and eventually irrelevant.

If you can’t out-Amazon Amazon–I’m looking at you Best Buy!–you had better move strongly to the other end of the continuum. You had better embrace all things customer-centric.

I’d get started if I were you. You have a lot of names to learn.