Maybe it’s a fact

“If you have the same problem for a long time, maybe it’s not a problem.  Maybe it’s a fact.”

-Yitzhak Rabin

“Facts are simple and facts are straight
Facts are lazy and facts are late
Facts all come with points of view
Facts don’t do what I want them to”

- Talking Heads, “Cross-eyed and Painless”

I’d wager that the vast majority of business failures are rooted in a profound denial of reality.  The demise or persistent flailing of Borders, Blockbuster, Sears–and many other current or future residents of the retail graveyard–stems largely from a lack of awareness and acceptance of the unassailable facts of shifting consumer behavior.

It’s far too easy to dismiss an industry upstart or new technology as a fad or hype, until it’s too late.  It’s common to worry more about protecting your turf rather than embracing a product or service for yourself that you fear “cannabilizes” your core.

Of course this is commonplace in interpersonal relations and communications as well.  I know I can be quick to defend my behavior when I know deep down I’m the one who made the mistake, I’m the one who needs to change.

The next time someone challenges your business or your point of view, maybe your first reaction shouldn’t be to dismiss or defend.

Facts may not do what you want them to.  But that doesn’t make them untrue.  Ignore them at your own peril.

 

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.

The showroom of death

Maybe you have noticed that e-commerce has been growing far faster than brick and mortar retail. That’s been true for years and it’s not changing any time soon.

Maybe you have noticed the explosion in comparison shopping sites that allow customers to easily search for the merchant with the best price. The number and quality of these sites will continue to grow, with powerful mobile applications right around the corner.

Maybe you have noticed that as more retailers cut back on sales associates–or fail to train them so that they become merely order takers, baggers or direction providers–the “value proposition” of actually buying something in a physical store becomes less and less attractive.

So I have to ask you, is your store a relevant, differentiated and remarkable experience for your target customer?  Or is it slowly, but inexorably, becoming a showroom; a place for the customer to see, touch and feel your product, but less and less a place to actually buy stuff.

The economics of leasing a store, fixturing it, filling it with inventory and staffing it are untenable if an increasing percentage of your customers are only there for research and will ultimately buy elsewhere because the experience or price is better.

Blockbuster and Borders may well be on the way to insolvency because they botched this transition. Best Buy is doing far better, but faces significant risks of their physical stores becoming more and more a showroom every day. And this is just the “B’s.”

Becoming a showroom is death.

Do you know what percent of your traffic uses your physical stores mostly for research purposes, only to buy elsewhere?  I bet it’s higher than you think.

 

 

 

Taking Pitches

In baseball we often see a batter “take a pitch.”  In other words, before the ball is thrown the batter decides he’s not going to swing regardless of how good the pitch is.  Sometimes this is a tactic to tire his competition–the pitcher–out.  Sometimes it’s an attempt to draw a walk because that’s the best the batter can hope for under the circumstances.  Sometimes it’s a strategy to wait things out, figuring a better opportunity will present itself later.

Lots of businesses take pitches.

When Sears allows discounters and category killers to erode their core customer base and chip away at their dominant market share, they are taking pitches.

When Blockbuster fails to mount a compelling response to NetFlix and Redbox, they are taking pitches.

When Neiman Marcus, Saks and Nordstrom allow flash-sales sites like Gilt and RueLaLa to build brands with significant market value, they are taking pitches.

When dozens of companies deny the future of social networking and location-based marketing, they are taking pitches.

Of course there are times when it makes sense to wait things out–to study and analyze before placing a big bet.    Customer-centric companies know who their most important customers and prospects are, and when the metrics on those customers deteriorate, they dig in to understand the drivers and take action.

You don’t always need to swing for the fences, but it’s hard to win without a few hits.

Wrong Turn at Lung Fish: Critical Decisions in Strategic Evolution

Twenty years ago the brilliant Chicago-based Steppenwolf Theater Company debuted Garry Marshall and Lowell Ganz’ play Wrong Turn at Lung Fish.  This farcical piece is an inquiry into the often harmful peculiarities of human behavior.  In a pivotal scene, one of the characters wonders whether mankind may have made a profound wrong turn along the Darwinian path of evolution.  The “wrong turn at lungfish” sets humanity on a path of despair, and ultimately begs the question whether our fate is inevitable, or could pain be averted with different decisions at critical junctures?

With the benefit of hindsight, it would appear that many businesses have made profoundly wrong turns in the evolution of their business models.  Sears failing to enter (or acquire into) the big box home improvement category.  Blockbuster neglecting to launch a serious alternative to RedBox and NetFlixCircuit City’s decision to exit appliances and abandon its high service sales model.   Any number of smaller retail formats laid to waste in Walmart’s wake.

These are retail examples, but virtually every industry has multiple stories of brands that were on top, but that failed to evolve to the changing customer and competitive environment.  Before long they found themselves dropping from leadership positions to also-rans or, in some cases, filing for bankruptcy and possibly disappearing altogether.  And indeed for some their fates may have been inevitable.

Yet, in the Sears, Blockbuster and Circuit City examples, it’s clear that those companies had the opportunity to know-and the resources to act–to change their course.  Through a lack of customer insight, faulty economic analysis and a fundamental misperception of risk, they somehow failed to see what was obvious to many others.

For these brands the worst case scenario has come true, or the day of reckoning is drawing ‘nigh.  Their fates are sealed.

Chances are, however, that you still have time to act, to develop deep customer insight, to understand your vulnerabilities to competitive innovation, to realize that you should be the one to cannibalize your cash cow.   It is easy?  No.  Is it more than a little scary sometimes?  Of course.

But I always think about the guy on the way to the bankruptcy hearing and what they wish they had done differently when they had the chance.  I bet what they are about to go through seems a lot harder and a lot scarier than what they could have gone through.   Don’t be that guy.

Blockbuster: In Search of Customer-Centricity

By most accounts Blockbuster will soon seek bankruptcy as a last ditch effort to address its mountain of debt and incredibly shrinking business model. While Blockbuster’s immediate term issues are capital structure related, the Blockbuster story is one of a company that has neglected to embrace even the basic tenets of customer-centricity for more than a decade.

Yet again, we have a once dominant category leader who has failed miserably to respond to shifting customer needs and preferences, despite possessing a brand that is virtually synonymous with on demand home entertainment and its ownership of a vast retail network. Most incredibly to me, however, is how Blockbuster–under various regimes–has neglected to utilize what should be their primary asset: a rich customer database and the ability to leverage it to deliver relevant, personalized products and services.

Think about it. Blockbuster’s business model lends itself beautifully to the foundational elements of a customer-centric growth strategy.

Deep Customer Insight. Yup, since it’s a membership driven model they have a pretty good idea of who’s buying what, how often, etc.
Actionable Segmentation. Check. Tracking current value is easy and customers’ needs can be reasonably inferred from the frequency and history of the genres of movies that they rent and buy.
Segment Specific Differentiated Experiences.  Pretty easy too, since they can readily treat different customers differently and have the ability to deliver in store, through direct mail, via email or on the web.

My personal experience demonstrates Blockbuster’s missed opportunities.

Nearly six years ago, when I moved from Chicago to Dallas I had to get a new Blockbuster membership card because I was told membership and customer data was location specific. Never a good idea to have to restart the relationship when you already have my data.

About two years ago, my spending at Blockbuster plummeted when I joined NetFlix. Presumably any kind of rudimentary data analytics would reveal this disturbing trend to the CRM department (if in fact Blockbuster had one) and trigger some sort of marketing campaign to try to win me back. No dice. And while this is my own sample of one experience, I’m pretty sure this has been going on for lots of customers as NetFlix and RedBox’s businesses have been on fire.

During the last few months I’ve been back into Blockbuster several times to rent movies (apparently I have a high tolerance for pain). Did I receive any kind of messages that they were happy to see me back? No, but I did notice each time that the space they had devoted to a snack bar was devoid of customers (“honey, let’s drive past these seven other places that surround Blockbuster because I hear Blockbuster’s Diet Coke is really good”). Did I receive any kind of personalized point of sale offers, or perhaps a request for my email so they could communicate with me in the way I’d like to be communicated with? No, but each time I did get pitched soft drinks, candy and popcorn. Gee, if I didn’t know any better I would think your management were trying to turn Blockbuster into 7-11.

It seems to me that what the Blockbuster brand needs to stand for is home entertainment on my terms, anytime, anywhere. And given the vast amount of product choices out there and that my habits are reasonably predictable, you should be able to curate the options for me and make it easy for me to do business with you. And that all requires great customer data, personalized marketing and business models that are relevant and differentiated. It doesn’t have a lot to do with magazines, candy and soda at the cash wrap.

Unfortunately Blockbuster wasn’t paying attention to these things years ago when they had far more degrees of freedom to act and hadn’t lost many of their valuable customers to the competition.

Blockbuster’s history may have been written. Hopefully you can still write your company’s. If you truly embrace customer-centric thinking it doesn’t have to be an obituary.