Easy to measure, not all that useful

For a long-time the retail industry has focused on same-store sales as the primary measure of a retailer’s success. This ignores the fact that a brand can drive a sales increase through excessive promotions and completely destroy profitability. It fails to recognize that we can teach consumers to become promiscuous shoppers and have them show up in droves during a given sales event while completely undermining true loyalty. It neglects the reality that total channel performance in a given trade area is a better metric because comp store sales don’t account for the role of a physical presence in creating a viable e-commerce model.

More recently, we’ve latched onto the growth of e-commerce as a key barometer for success, failing to acknowledge that virtually every pure-play brand has an unsustainable business model that is rapidly approaching its expiration date. We also seem to forget (or deny) that for most established omni-channel retailers the outsized increases are merely the result of existing customers shifting their sales away from a physical store to a channel with typically far worse economics (owing primarily to incredibly high fulfillment costs).

We work to optimize the ratio of digital ad spending to digital sales, even though we know that digital mostly drives physical channel volume. Worse yet, we make these sort of measures a part of an incentive scheme that reinforces the silo-ed behaviors that undermine customer-centricity.

We obsess over our e-commerce conversion rates even though they are highly imperfect measures of long-term consumer engagement and retention and we know that so much of our traffic is really part of the customer’s journey to a brick & mortar location anyway.

Attribution is messy. Economics is messy. Getting our organizations and constituencies to let go of metrics, processes and habits that are no longer relevant is messier still.

Yet just because we’ve always done it that way is a terrible reason to continue doing so.

Just because someone else expects us to do it doesn’t mean we have to.

Just because it’s easy to measure doesn’t make it useful.

And just because doing something is hard or imperfect doesn’t mean it isn’t worth trying.

 

h/t to Seth for inspiring this post.

Author: stevenpdennis

Steven Dennis is a trusted advisor and thought-leader on customer-centric strategic growth and innovation. As President of SageBerry Consulting, he applies his C-level executive experience to drive growth and marketing strategy for multi-channel retail, e-commerce and luxury industry clients. He shares his ideas and wisdom regularly in the press, as an industry speaker and through his popular blog "Zen and the Art & Science of Customer-Centricity"(https://stevenpdennis.wordpress.com/). Prior to founding SageBerry, Steven was Senior Vice President of Strategy, Business Development and Marketing for the Neiman Marcus Group. As a member of the Executive Committee he drove the company's major growth initiatives, multi-channel marketing programs and customer insight agenda. Before joining Neiman Marcus, Steven held leadership positions with Sears, including Acting Chief Strategy Officer, Lands' End acquisition integration team leader, Vice President-Multichannel Integration and General Manager-Commercial Sales. Earlier in his career he was with NutraSweet and the global management strategy consulting firm, Booz & Co. Steven received his MBA from the Harvard Business School and a BA from Tufts University. In addition to his consulting work, Steven is an executive-in-residence at the JC Penney Center for Retail Excellence at SMU’s Cox School of Business, President of the DFW Retail Executives Association and serves on the Advisory Boards of Invodo Inc. and Nectar Online Media. He is also active in the social innovation and education reform arena as a Partner and member of the Board of Directors of Dallas Social Venture Partners. He is currently co-leader of DSVP's investment and engagement with SMU's Center on Communities and Education "School Zone" initiative in West Dallas.

1 thought on “Easy to measure, not all that useful”

  1. Great post, Steve. Was pondering exactly this issue recently. And how the financial markets rewards money losing ecommerce operations for “potential” but penalize existing, profitable retailers based on store comps. Another kind of insanity.

    Like

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