Brand Marketing · Customer Growth Strategy · Luxury

Tiffany seeks to execute the ‘customer trapeze’

Last week the Wall St. Journal featured a story on Tiffany & Co’s “midlife crisis.” The piece highlighted the jewelry brand’s struggle to regain its “cool” and improve recently tepid sales and profits. A few days later they announced the hiring of a new CEO.

Yet Tiffany is hardly alone in dealing with what I have coined the “customer trapeze“, particularly as Millennials become an increasingly important demographic.

The customer trapeze is the idea of hoping to reach a new, highly desirable set of customers while letting go of those with less favorable characteristics. Most often we see it at play when brands face an aging customer base. Knowing full well that their customers will literally die off, companies will seek to update their image and strategy to seem more hip and trendy. This might include becoming more fashion forward, less expensive or attaching themselves to celebrities that appeal to different cohorts. The key to executing the trapeze move is to not let go of one group before being fully ready to take on the new one.

In Tiffany’s case, over the years they have introduced less expensive items and expanded their assortments in an attempt to widen their appeal. Most recently, they’ve taken on Lady Gaga and Elle Fanning as spokespeople and launched a new, more youthful ad campaign. They’ve even taken steps to lessen the predominance of their iconic blue in their brand imagery. The challenge, of course, is that many of these steps to attract new customers run the risk of alienating long-term, often highly valuable, ones.

Tiffany follows in the footsteps of many brands that see the demographic writing on the wall and take bold steps to attract new customers. Readers of a certain age may remember the “This Is Not Your Father’s Oldsmobile”campaign. This is a text book example of a brand that let go of one customer group before it could safely latch onto another one. The once legendary company went too far, too fast and, at the risk of pushing the trapeze analogy too far, suffered mightily from its aggressiveness and decision to work without a net.

There are many examples of brands essentially abandoning one customer group too quickly to chase a new, sexier one. Often this comes through an attempt to “trade up” the customer base by pushing more expensive and fashion forward products to attract more affluent consumers. The most recent disaster of this sort came under Ron Johnson’s failed reboot of JC Penney. While not (yet?) fatal, the company has been struggling to recover for over 4 years.

History reveals that very few established brands are able to successfully execute a dramatic re-configuration of their customer base–at least quickly. Once you get beyond Cadillac and IBM, the list grows short indeed. It’s not hard to understand why. The more a brand is known for one set of things, the harder it is to persuade consumers to believe something fundamentally new and different. To the extent a company starts to dramatically move away from what made it successful with its traditional segment in the hopes of cultivating a new group, it risks alienating its historical core. More often than not, the customers that are being de-emphasized are significant contributors to current cash flow. We saw this with JC Penney and I witnessed it first hand when we tried similar moves at Sears more than a decade ago.

With rare exception, brands simply cannot survive, much less thrive over the long-term without being really good at acquiring profitable new customers to replenish those that leave or naturally decrease their spending. But executing this transition is not so easy. Like any trapeze act, the customer trapeze is all about speed, coordination and timing. Let go at the wrong time, be it too late or too early, and the fall can be disastrous.

A version of this story recently appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.

Brand Marketing · Marketing · Me-tail · Personalization · Retail · Share of attention · We-tail

I am the captain now 

For a long time brands had the upper hand.

The purchase funnel was relatively straight-forward. Media channels were few and generally well controlled. The consumer’s access to product and pricing information was limited. Distribution channels were highly disciplined. Communication was largely one-way. Marketing plans were often drawn up just once year and any changes required substantial lead times. Mass marketing ruled the day.

Today? Well not so much.

The shift of power away from brands to consumers has been swift and profound. The advent of search unleashed a tsunami of information access that tipped the balance of power irretrievably. The rise of social networks allowed for tribes to connect more easily to share ideas, reviews and instantly understand that people like us do stuff like this. The rapid adoption of smart devices has meant that most consumers now have access to just about anything they want, anytime, anywhere, anyway. We no longer go online, we live online.

Yet still some brands remain seemingly unconscious and horribly stuck.

They continue peddling average products for average people, when no customer wants to be average. With nothing new and interesting to say, they simply shout it louder and more often. Many retail brands continue to rely on one-size-fits-all strategies when those programs rarely get noticed, must less drive any profitable business. In today’s attention economy these efforts remain merely a dim signal amidst the noise.

The power shift away from the brand to the individual consumer and the power of the tribe is upon us. Retail has a new immediacy. Retail is now much more ME-tail and WE-tail than some holistic top down strategy cooked up in a conference room. Don’t kid yourself–you’ve never been less in control than right this very minute. And that’s not changing.

The individual is the captain. The collective “we” increasingly rules the roost. And unlike in Captain Phillips, no one is coming to save us. We can only accept this reality, let go of the past and work with a new set of rules and tools.

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Being Remarkable · Brand Marketing · Customer experience · Digital · Share of attention

The new retail ecosystem: NRF edition 

For quite some time, we’ve thought about stores, catalogs and the internet as distinct shopping entities. Today the blended channel is the only channel.

For quite some time, we’ve run our retail businesses as a loose affiliation of vertical departments and systems. Today we see that brands are horizontal and that silos belong on farms.

For quite some time, we’ve talked about customers “going online.” Today, most customers practically live online and there is a “nowness” to marketing that we’ve never experienced.

For quite some time, we’ve said that product is everything. Today, product is clearly important, but experience has a way of making product secondary.

For quite some time, the front door of our store was literal and faced the street or the interior corridor of the mall. Today–increasingly–it is often virtual. And dynamic. And you’re probably holding it in your hand right now.

For quite some time, we started to believe that physical stores were dying and that most categories would be revolutionized by “online only” brands. Well, physical retail IS becoming different, but it’s not going away. And–plot twist–pure play retail is on its death bed.

For quite some time, we’ve evaluated store closings on the straightforward four-wall profit contribution and costs of exiting a lease. Today, a physical location is merely one manifestation of a brand, serving to fulfill a digital intent while also serving as a gateway to e-commerce–a relationship portal of sorts.

For quite some time, marketing was mostly one-size-fits-all. Today, as the world grows ever noisier, it’s harder to detect the signal amidst the clutter, the cacophony and the downright boring. The burden has shifted to becoming more relevant, more personalized, more remarkable.

At NRF, we’re already hearing some speakers make some or all of these points as if they are revelations, when they are merely after the fact observations and, more likely than not, strong evidence of a lead from behind strategy.

The new retail ecosystem has been coming into shape for more than a decade. The most salient and actionable points have been obvious for years. That is, if one were really paying attention and truly committed to a plan of action.

As much as I might hope that the really juicy and useful stuff were shared at a conference in a room filled with the competition, alas, my experience tells me otherwise.

 

 

 

 

 

Being Remarkable · Brand Marketing

Confusing the offering with the story

We’re typically pretty good at laying out the features and benefits; at explaining all the reasons why our product offering is superior to the competition’s and why it makes perfect sense that you should choose us.

Unfortunately when the consumer is overwhelmed by choice, when it’s hard to get them to even notice us–much less take the time to do the rationale calculation we are depending on–and when all too often price can be the default tie-breaker, all that focus on defining and hyping our offering may not benefit us very much at all.

If you think Apple wins because of its superiority in a head to head features comparison, think again.

If you believe folks pay a huge premium for a Louis Vuitton handbag because of the demonstrably superior raw materials, fabrication and stitching, I’d beg to differ.

The idea that the $250 cream or scent being hawked at the cosmetics counters at your favorite fancy department store “works” meaningfully better than what’s readily available at your local drug store is pure folly.

Unless it’s all about price, people buy the story before they buy the product. We get in trouble when we don’t understand the differences and the priority.

Being Remarkable · Brand Marketing · Branding · Customer Growth Strategy · Frictionless commerce

The road to your brand

When the customers you wish to acquire and grow think about your brand is there a closeness and connection that instantly arises, or do they see it as far off with the road to relevance marred by potholes and other sources of friction?

Are they moving closer or drifting farther away? Do you even know?

In an attempt to draw distant consumers closer we are often tempted to create an express lane paved with discounts and other give-aways. While this serves the purpose of shortening their journey (and goosing our top-line) this frequently proves to be uneconomic and unsustainable.

As we craft a more compelling customer growth strategy a few things are worth pondering, I think.

How far is the distance to our brand?

Are there customers that are simply too far away and should be ignored?

For each of the segments we desire to grow, what does the road to our brand look like?

What can we do to smooth the journey?

Once they arrive, what can we do to make them feel especially welcome?

And what can we do that is so remarkable that they will want to invite their friends?

Being Remarkable · Brand Marketing · Growth

A place to buy things

What do your customers really think of you?

Do they have a compelling story to tell about your brand? Have they had experiences that deeply resonate with them? Do they proactively advocate on your behalf? Can they easily justify the premium they choose to pay? Would they give you another chance if you screwed up?

Or, when it comes down to it, in their minds and hearts, you’re merely a place to buy things?

And when there’s a slightly better price–or a marginally more convenient option–they jump at the opportunity, without a trace of regret.

Amplify · Being Remarkable · Brand Marketing · Customer Experiece · Frictionless commerce

The antidote to a tsunami of stuff

We live in a world of expanding choice. A world where–if we are fortunate enough to have the money–almost anything can be purchased from almost anywhere in the world almost anytime we want. With the smart phone as a growing (and often omnipresent) access point, the web provides the portal to nearly infinite information and virtually unlimited products and services.

At one level this is a consumer bonanza. Limited data can now rarely be seen as a barrier to purchase. Prices are down, selection is up. A click replaces waiting until the store opens. Products come to us, rather than us going to them. Consumers are empowered in ways never thought imaginable.

Yet, more and more, we are faced with a tsunami of stuff. A bewildering array of seemingly undifferentiated products. Look-alike websites and marketing schemes. In-boxes chock-a-block with one-size-fits-all promotions. Spam, spam, spam, spam.

This growing mass of information and options–often combined with unrelenting interruption marketing–can be overwhelming. When the distracted consumer is the norm and it becomes increasingly harder to separate the signal from the noise, more is often less.

As our customers’ world grows ever noisier our reflexive response is often to dial things up to 11. Resist that urge.

The new battle ground is for share of attention. And we earn and command attention not through shouting louder than everyone else, throwing more at the wall to see what sticks or defaulting to using price as the only arrow in our quiver.

The antidote to a tsunami of stuff is to know more about our customers than the competition and to turn that insight into intensely relevant products and experiences.

The antidote to a tsunami of stuff is to eschew mass marketing techniques and to move aggressively toward more personalization and customization.

The antidote to a tsunami of stuff is to embrace editing and curation as a fundamental competency.

The antidote to a tsunami of stuff is to ruthlessly root out the friction in our customer experience and to distort those things we wish to amplify to the truly remarkable.

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HT to Barry Schwartz and his TED talk on the The Paradox of Choice  

Brand Marketing · Loyalty Marketing

Overestimating loyalty

Let’s get a few things straight. Just because someone is a member of your loyalty program doesn’t make them loyal. Just because a customer takes advantage of loyalty program discounts or redeems reward points doesn’t mean they are loyal either. Just because your brand is a consumer’s preferred choice is not a reliable indicator of their loyalty. And owning a large share of wallet, or garnering high rates of customer satisfaction, does not guarantee loyalty either.

By now, hopefully we understand that loyalty goes beyond behavior. Loyalty is an emotion. Loyalty is what allows a brand to command a price premium in the face of similar competition. Loyalty is why we stay when an organization has the inevitable screw up. Loyal customers aren’t always looking around for a better option or shifting their spending to a competitor when they dangle a sexy offer. Loyal customers trust us. Loyal customers drive our profitability. Loyal customers amplify our story.

When I was at Neiman Marcus, analysts–and the private equity investors that eventually bought us–were very impressed that we generated over half our revenues from our InCircle Rewards loyalty program. Alas that statistic was largely meaningless. Many of those customers were far from loyal, as subsequent events proved out. Sears (another of my former employers) makes a big deal about having some 80% of its sales come from their Shop Your Way program. If you think most (or many) of them have even a modicum of loyalty to Sears, I’m afraid you are very wrong.

One of the key things to understand about truly loyal customers is that they perceive switching costs to be high. In the good old days–i.e. before the internet–switching costs were often high due to scarcity of choice, access, information and risk amelioration. Today, with a nearly infinite assortment of products and services available online, 24/7 shopping, a multitude of user review sites and liberal return polices, perceived switching costs, in many cases, have plummeted.

The rise of digitally driven business models is fraying traditional bonds. The potential for new concepts to dramatically lower the cost-to-serve customers (think Uber or Netflix) and these brands’ willingness to spend freely–and often uneconomically–to acquire new customers (think every venture-funded dotcom business) is shifting the balance of power between industry incumbents and the upstarts that seek to peel away their loyal base. The potential to deliver a radically re-designed shopping experience can fundamentally redefine the basis for customer relationships.

This means the loyalty we take for granted can often be eroded very quickly. And overestimating loyalty is now not only common, it is increasingly dangerous.

We overestimate loyalty when we confuse behavior with emotion.

We overestimate loyalty when we don’t understand switching costs.

We overestimate loyalty when we can’t see how an outsider can attack our vulnerabilities and eliminate friction in our shopping experience.

There are plenty of examples of brands that had a large and seemingly loyal following that evaporated virtually overnight (I’m looking at you Blackberry and Blockbuster).

Label customers as “loyal” with considerable care. Understand the roots of their loyalty deeply. Dissect your vulnerabilities objectively and relentlessly.

Most importantly, work hard to eliminate the friction from your customers’ experience. If you don’t, be sure someone else will.

And overestimate loyalty at great peril.

HT to Nicole for helping advance my thinking on this topic

Brand Marketing · Customer Growth Strategy · Customer Insight · Loyalty Marketing · Marketing

Dating the wrong customers 

In most industries, the smart marketer wants to cultivate long-term, enduring relationships with her customers. For most of us, the end-game, best case scenario is to create customers for life–or for at least a very long time.

Imagine if, however, in our personal lives, we had a strong desire to get married, but we only went out with people who made it clear that they had no interest in a long-term relationship.

Imagine if the person we were romantically captivated by insisted that we bribe them each time just to go grab coffee, see a movie or have dinner with us.

Imagine if their decision to go on a date with us any given Saturday night was determined by how well our offer stacked up against the competing bribes they were getting from other suitors.

Now faced with this intensely competitive and highly promotional dating market you might determine that you should go on a lot more dates to increase the odds of finding just the right guy or gal. Or you could choose to make your bribes larger. Or you could decide that, in addition to your bribes increasing, you’d add some perks or value-added features to make your dating game more unique and competitive.

By now, hopefully it’s pretty obvious that the best answer is not to endlessly spin to win the hearts of a person who fundamentally does not meet our needs, nor is there any gain in fighting a battle we can never win.

So why is it so hard to see that, all too often, we are dating the wrong customers?