The drip method of irrelevance

At first, the shift is almost imperceptible.

With quarterly earnings expectations to hit, we tell ourselves we can easily save a few bucks by automating some of our customer service functions. Or perhaps it’s through simplifying our organizational structure or eliminating “non-essential” positions. Better yet, let’s close some “unproductive” stores.

And obviously technology enables us to take away a bit of decision-making from the front-line staff. After all, human beings are notoriously misled by their own intuition. And whoever got fired for praying to the God of Efficiency?

And running all those different marketing campaigns adds a lot of complexity. It would be much easier to boil things down to just the major stuff that we know moves the dial.

And our product line is just too diverse. Sure it’s interesting to have something fresh and innovative, but doesn’t that just increase the risk of slowing down inventory turnover and increasing markdowns? Safe is smart right?

Of course, over time, the top-line stops growing and the only way we know how to drive profits is through cost-cutting.

Over time, we’re proud of our low average talk times, yet customers can’t speak to a human being and our Net Promoter Scores continue their inexorable decline.

Over time, our one-size-fits-all marketing is, at best, indistinguishable from the competition and, at worst, a dim signal amidst all the noise.

Over time, the sad reality is that all we sell is average products for average people and there’s no reason to pick us over the guy with the lowest price.

Sears, RadioShack and a host of others that are on a long inevitable march to the retail graveyard didn’t get trumped by a disruptive competitor that emerged out of nowhere. An oppressive government didn’t regulate them out of business. They weren’t crippled by a series of specious lawsuits or hobbled by natural disasters.

Usually the brands that become irrelevant have made hundreds of seemingly small decisions, over many years, that prioritized the short-term ahead of the long-term, the numbers instead of the customer, mass rather than personal, safe not remarkable.

And once they are gone, once their fate is sealed and their previously storied histories are part of the record, we’ll look back and realize it happened gradually, then suddenly.

All about that base?

When politicians start a campaign one of the first questions they ask is how they can appeal to the base. Mainstream candidates lock into the usual suspects for rally turnout and fund-raising. The reformers struggle for voter attention and ways to tap into the key PAC’s and the Koch’s and Soros’ of the world.

Traditional brand marketers usually start here as well. We focus on more and better ways of activating existing consumers where the investment to acquire them is sunk and where we already know that they like us and buy often. It seems like a perfectly logical place to concentrate our efforts.

Except where those cohorts are aging out of maintaining their spending. Think Sears.

Except where their needs have shifted and we are no longer their brand or store of choice. Think Barnes & Noble.

Except where a new disruptive model has come along and is doing things we can’t while gobbling up our core customers’ share of wallet. Think Warby Parker and LensCrafters.

Except where we are not replenishing defectors or downward migrators with enough new profitable customers. Think JC Penney.

Good customer analysis always starts with the base. Better customer analysis is focused on a deep understanding of the leverage and limitations inherent in our core segments and yields the insight required to know where to go next and how urgent and powerful any shifts need to be.

It’s all about that base, until it isn’t.

 

 

The problem with saying “no”

During the past 25 years Sears had at least three opportunities to transform itself by entering the home improvement warehouse business (I worked on two of them). This was probably the only way Sears was going to ultimately survive and unlock the value of its franchise Kenmore and Craftsman brands. Each time the answer was “no.”

When I headed up strategy at the Neiman Marcus Group (2004-08), we evaluated building a leadership position in omni-channel by consolidating our disparate inventory systems, we recommended moving from a channel centric marketing organization to a customer and brand focused one, we proposed aggressively expanding our off-price format and, having understood the share lost to competitors like Nordstrom, we analyzed improvements to our merchandising and service models to become a bit more accessible. Ultimately we said “no” to moving ahead on all of these. Years later, these strategies were ultimately resurrected. But the opportunity to establish and extend a leadership position may have been lost.

Obviously there are plenty of times when either the smart or moral thing to do is to say ‘no.” Obviously it’s easy to look back and say “I told you so.”

Yet systemically, most organizations are set up to reward the status quo (often cost containment and driving incremental improvement) and punish the well intended experiment. So it’s easy to say “yes” to the historically tried and true and “no” to just about everything else.

Of course we don’t have to look very hard to come up with brands that have been struggling for many, many years (Sears, JC Penney, Radio Shack) or have completely imploded (Borders, Blockbuster, etc.). All of these said “no’ to any number of potentially game-changing strategies along the way. Care to hazard a guess at how many long-term Board Members of these perennial laggards and outright losers got pushed out for saying grace over a series of crippling “no’s”? How many CEO’s had their compensation whacked for never missing an opportunity to miss an opportunity?

In a world where change is coming at us faster and faster, we need to be challenged just as much on what we are saying ‘no” to as we are on what gets a “yes.”

And If you think there is always time to fix the wrong “no” decision, you might want to think again.

Omni-channel: Myths, distortions and, yeah, that’s just silly

Let me be clear: I’m pretty into all things omni-channel. Get me started talking about creating a single view of the customer, silo-busting, frictionless commerce, creating a seamless experience, etc. you might want to order a pizza. We could be here for a while.

I was named the VP of Multi-channel Integration at Sears way back in 1999. I led multi-channel initiatives and enterprise customer analytics at the Neiman Marcus Group from 2004-2008. I’ve written dozens of related posts and given numerous speeches on the topic during the last few years. I’m a believer.

Yet much of what passes as inspired strategy on the part of brands extolling their new-found “omni-ness” is, well, let’s just say it ranges between being disingenuous and outright foolhardy. And then there are the legions of analysts, pundits, consultants and software providers peddling a guaranteed path to customer-centricity nirvana. Much is hype. Some is just plain dumb. Here’s an attempt to move toward more “truthiness.”

  1. You don’t really mean “omni.” “Omni-channel” means “all” or “every” and typically refers to both channels for communications and for transactions. Do you really intend to sell on cruise ships? In airports? How about door-to-door sales? Are you going to do infomercials? I didn’t think so. What you really mean is expanding your marketing and sales channels to those essential for the acquisition, growth and retention of key consumer segments–and being really good at doing it. A rush to invest in omni-channel without an actionable segmentation–and without understanding which levers are really the most important to hone in on–is a license to lose money and waste precious time.
  2. Omni-channel customers are not your best customers. Chances are it’s the other way around. And causality matters. A lot. The customers that already trust your brand are often the early adopters of new media and new places to buy. There is a dangerous false narrative that suggests that simply by becoming omni-channel a world of new sales will open to you. As Kevin Hillstrom has pointed out, many companies that have gone omni-channel have failed to improve their business. This is usually because the brand’s core is weak and merely adding more places to research and buy does not fix the underlying issues (see Sears). The best multi-channel strategies are rooted in a deep understanding of current customer behavior–and prioritize opportunities to stem defection, address new customer acquisition barriers and build add-on sales. A sensible growth strategy has clear building blocks, not a mad rush into e-commerce or rolling-out the next bright and shiny mobile or social media application.
  3. You say you want a revolution. Yet, organizational and data silos abound. Yet, analysis of most promotions still have a single channel focus. Yet, much of your marketing remains mass, rather than personalized. The underlying move to omni-channel is about customer-centricity. As long as you hold on to traditional metrics, silo-ed organizational structures and rely on fragmented data and batch, blast and hope marketing programs, not much is really changing.
  4. Confusing necessary with sufficient. To be sure, more and more customers are becoming cross-channel shoppers and, particularly with the rapid growth of mobile devices, the distinction between e-commerce and physical retail is blurring. Certain “omni” capabilities like order online, pick up in the store are becoming base expectations. It’s hard to imagine that many retailers will survive, much less thrive, without robust integration capabilities and compelling web and mobile offerings. But far too many brands think that by adding these newish features they are doing enough. They’re not. Many of these capabilities are becoming table-stakes. In other cases, they are expensive and complicated “nice to have’s.” What you need to do to keep pace is not the same as what you need to do to become differentiated and remarkable. Confuse this at your own peril.
  5. New hybrid-models are genius. The press is eating up Warby Parker’s, Bonobos and many other e-tailers move into physical locations and raving about their productivity numbers. First, this isn’t new (see Williams-Sonoma). Second, the move into actual stores had to happen. Over 3 year ago I was sitting with the CEO of one of these companies and asked him when they would think about opening stores. He answered: “we will never have physical stores.” Now he’s on CNBC singing their praises. Did I have the gift of prophecy? Of course not; the move was totally foreseeable given the known economics and limitations of pure-play e-commerce. Lastly, what would be remarkable about these hybrid-models’ sale productivity in their initial forays into the physical realm is if they did NOT do huge numbers. Bear in mind, they have opened stores in trade areas where they already have a density of customers and are in very small locations. Comparing their initial results to more mature specialty stores is silly. Comparing them to say, the top 2 or 3 bays of Neiman Marcus’ beauty counters in the Beverly Hills, Bal Harbour and Michigan Avenue stores is more apt (hint: it would be well over $3,000/sf). I am a repeat customer of the two brands I mentioned and believe they have bright futures. But let’s be careful of false positives. There is much more of this story to play out.

Omni-channel is a nice catch phrase, and there can be no question that we are witnessing an incredible transformation in how consumers shop and how brands need to do business. The status quo is not an option, but neither is a blind rush into all things “omni.”

The future of omni-channel will not be evenly distributed. The path you choose is critical.

Some customers

One of the more amusing moments of my time at Sears was when our newish CEO insisted that we stop referring to our customers as “him” and instead say “her.” This was meant to underscore the need to reinvigorate our apparel business and identify women as the most frequent decision-makers for our softline categories.

While there was merit to this strategy–and Sears testosterone-driven, male dominated culture absolutely deserved a swift kick in the, uh, pants–it ignored the complexity of Sears myriad businesses and the attendant diverse consumer segments we needed to attract, grow and retain.

Of course, Sears wasn’t alone. It’s common for business leaders and analysts to make global pronouncements about what “she wants” or how “our customer” is responding. While these statements may have an air of profundity, they’re just glib soundbites.

Today there is no everyone. There is no monolithic him or her or them.

Today the idea of being a little bit of everything to everybody is irrelevant. The era of mass is giving way to the era of us.

Today one-size-fits all strategies are running out of gas. We must treat different customers differently.

Today it’s not about “the customer” or any notion of all customers.

It’s about some customers; the right customers, carefully selected, deeply understood and served in unique and remarkable ways.

Everywhere. And nowhere.

You’ve probably read the admonishments. You must be everywhere your customer is: online, bricks & mortar, mobile, Facebook, Twitter, Pinterest and on and on.

You’re told the future is now and that future is all about allowing the consumer to shop anytime, anywhere, anyway.

You’re urged to create a seamless experience across all channels and touch-points.

And much of this is valid. If you don’t meet your customer where she is (and is headed), you’re very likely to be yesterday’s news (RIP Radio Shack). More and more, the consumer IS everywhere and channel hop is becoming the norm.

But for those who think that all they need is a little omni-channel pixie dust and a side order of frictionless commerce, think again.

In the rush to embrace all things digital, integrated and omni-channel, far too many brands have lost sight of the need to be relevant and remarkable. Most of the capabilities that industry white papers wax eloquent about–and consultants relentlessly peddle–are merely the new table-stakes. And, quite frankly, your mileage will vary. Perhaps a lot.

Sears has made huge investments to create powerful digital and integrated commerce capabilities. In fact, they are regularly recognized for their leadership position in many aspects of what industry pundits describe as the holy grail of everywhere commerce. So how’s that working out? Oh yeah, they forgot to sell stuff people want in the way people want it. This is certain to end badly.

On the other hand, Amazon has managed to become a retail industry behemoth, crushing competitors in its wake and continuing to gobble up market share, all without physical stores and, in many cases, putting forth a pretty lackluster mobile and social presence. Their lack of “omni” doesn’t seem to be slowing them down too much.

As I’ve pointed out before, the future of omni-channel will not be even distributed. For those brands that rush eagerly into the “everywhere retail” world without a clear view of the customers they wish to serve and how they wish to serve them in a relevant and remarkable way, don’t be surprised when you don’t get the ROI you hoped for.

It’s quite possible to be everywhere and nowhere at the same time.

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.