Customer Insight · Marketing · Personalization

Compelling, creepy, annoying or just bad? Retail’s personalization opportunity

It’s hard to believe it’s been over 20 years since Martha Rodgers and Don Peppers’ seminal book The One to One FutureAt the time, Dr. Rodgers and Mr. Peppers (not to be confused with Mr. Rodgers and Dr. Pepper!) offered up the radical notion that mass, one-size-fits-all marketing would begin yielding to a brave new one-to-one world. Followed just three years later by Seth Godin’s classic Permission Marketing the more intrepid among us started to make “treat different customers differently” our mantra and advocate for a shift to more targeted and personalized campaigns. Alas, we were a bit ahead of our time.

Despite years of missteps and hype, some two decades later the business case for greater marketing and experiential personalization remains strong. Fortunately, lower cost data storage and more effective technology solutions, along with general advances in know-how and the ability to reach customers through digital channels, now make it possible for most retail brands to realistically differentiate themselves on the basis of deep customer insight, data science and advanced targeting strategies. From where I sit, it won’t be long before advanced personalization skills become table-stakes in the battle for customer share of attention. To remain relevant — to become the signal amidst all the noise — retail marketers will have to get good at one-to-one marketing and in delivering more personalized experiences both in the store and on the web.

Yet, despite the strong business case, advancing capabilities and many years of experimenting, personalization’s potential remains largely untapped. For every success story, it seems as if there are dozens of weak efforts or outright debacles. In fact, a recent study by Accenture estimates that personalization failures cost US firms $756 billion and a total of $2.5 trillion globally. While I have a hard time getting my head around the accuracy and magnitude of those numbers, there is no question poor data management and far from stellar personalization can chase away business as well as leave a lot of money on the table.

As we start to understand how to both avoid problems and seize on opportunities, I find it’s worth asking a few basic questions.

Is it compelling?

The essence of good personalization is two-fold: is it relevant and is it remarkable? Delivering intensely relevant one-to-one (or mass customized) experiences is predicated on deep customer insight and the ability to target the right interaction (or offer) to the right customer at–or as close as possible–to the right moment. Retailers that are getting it right use data science to ascertain customer needs and wants and to better predict the next most effective marketing action. Stitch Fix is a great example of a company that has built predictive analytics and targeted marketing into the fabric (heh, heh) of their enterprise. The other key element is “remarkability.” Even if an offer is relevant, simply serving up the same old tired promotional tricks is unlikely to get a good response and help enhance the brand’s image. According to the Accenture study, 44% of all customers feel that brands fail to deliver relevant personalized experiences. Plenty of untapped opportunities here.

Is it creepy?

In my experience, the vast majority of customers have no idea how easy it is for marketers to purchase potentially useful pieces of data to better inform their targeted marketing strategies. Moreover, many customers fail to grasp how their lack of attention to privacy settings on places like Facebook allows marketers to glean all sorts of insights from the data breadcrumbs left behind by our traffic, likes and so on. Advances in statistical techniques and artificial intelligence allow for powerful inferences to be made by analyzing behaviors, transactions and demographic information. Walking the thin line between delivering surprisingly useful recommendations and something that smacks of Big Brother –or that raises unnecessary privacy concerns–is challenging. In the bloodthirsty quest for incremental revenue, it is all too easy for undisciplined marketers to step over the line. Resist the temptation. Strong brands are based on trust. Tread lightly.

Is it annoying?

I’ve met few marketers that believe less is more. For most, more is more, often to the point of going well beyond diminishing returns. Since email (and certain other digital messages) are often quite cheap at the margin, retail marketers often take the bludgeon approach to their campaign messaging. They dial up frequency until we yell “Uncle.” They chase us all over the internet with retargeting ads. They offer us products we just bought (oh yeah, sure I often buy a second dishwasher or espresso machine the week after I bought my last one). The holiday shopping season is a particularly bad time of the year where frequency goes to 11 and many promotional strategies look like they were created by Jackson Pollock. Just because you can, doesn’t mean you should.

Is it just bad?

In 2011 I started pointing out when bad personalization happens to good people and it’s become a bit of a hobby for me (apparently I have that kind of time). A certain airline (I won’t tell you which one, but their initials are “AA”) regularly sent my teenage daughters offers “specially selected” for them which included deals for mortgage financing. We were nicely generous with their allowances, but not enough for any real estate speculation. Neiman Marcus (where I once, ironically, oversaw our customer insight and personalization efforts) often encouraged me to redeem my InCircle Rewards points. Which would be great if I actually had any. Citibank still pitches me a credit card I already have, while AT&T, um, well where to start?

The first rule of personalization club is to not ask a customer to provide information that you already have (unless it’s to verify identity). The second rule is to demonstrate that you know the customer and understand their relationship with your brand. Any offer that belies that is likely to make a brand look dumb. The third rule is to show the customer that you value them: value their time, their spending, their loyalty, the exchange of information they may have provided you. Don’t waste a customer’s time by misusing their data, failing to protect their privacy, trying to sell them stuff they already own and not making a real effort to treat different customers differently. Don’t mistake simple or cheap for useful or effective.

Personalization is not easy. But the revolution sweeping retail demands that brands get more relevant, more differentiated and more remarkable. And fast. For many, delivering more personalized experiences and marketing may be the difference between success and being roadkill in the age of Amazon and digital disruption.

The changes that many brands need to make are not insignificant. They typically require new technology, new people, new processes, new metrics, material incremental investment and a willingness to aggressively experiment. But to paraphrase Eric Shinseki, “If you don’t like change, you’re going to like irrelevance even less.”

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  For information on keynote speaking and workshops please go here.

Being Remarkable · Customer Insight · Reinventing Retail

Discount Nation, Promiscuous Shoppers And The Sucker Price

Early in 2011, I first wrote about what I called “Discount Nation.” Having worked at Sears earlier in my career I was quite familiar with highly promotional retail. But what I was noticing was the ever growing intensity of discounting. Among traditional retailers the degree and frequency of deals was escalating. More brands were layering on loyalty programs or additional percents-off if you used their private label credit card. Free shipping was virtually ubiquitous during the 2010 holiday season. Newer business models, like the growing flash-sales segment, were trumpeting 40-60% off as the core element of their value proposition.

Since then it’s only gotten worse. The fastest growing segments of physical retail are off-price and dollar stores. Free shipping of online orders, once reserved for special promotional periods and often limited to higher order values, is fast becoming a basic consumer expectation. Minimum order sizes are falling and free returns & exchanges are becoming increasingly common. Rich discounts to incentivize trial now range from the sublime to the ridiculous (I’m looking at you Blue Apron). At any given time, it seems like virtually everything is on sale.

It’s easy to credit the transparency of the internet, cite the rise of digitally-native disruptive business models or simply blame the Amazon Effect for the erosion of any semblance of price integrity. And to be sure these are all contributors. But the reality is that it’s been a decades long process of retailers turning most of us into promiscuous shoppers. Regular price did not become the “sucker price” just in the last few years.

Some of this was inevitable; yet much is self-inflicted. Retailers could have chosen to focus on deep customer insight to deliver more relevant personalization. They could have invested in product innovation. They could have seen their physical stores as assets to leverage in creating a more harmonious and remarkable customer experience, rather than as liabilities to cost reduce and shutter.

We know that the relentless downward pressure on pricing only squeezes margins for all but the most cost efficient. As a result, many retailers find themselves standing at a precipice. The rather rosy forecasts for holiday spending are small comfort as it is clear that profits are another matter entirely and the harsh reality is that the future will not be evenly distributed. Living in Discount Nation may be great for consumers but it is disastrous for all too many retail brands that have failed to reinvent themselves and will be lucky to limp their way into 2018.

While it is too late for some, many brands still have a choice: engage in a discounting fueled race to the bottom or seek to do what is unique, intensely customer relevant and truly remarkable, where price is not the determining factor in the customer’s decision.

As they saying goes, choose wisely. And remember to hurry.

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

For information on speaking gigs please go here.

Agility · Customer Insight · Digital · e-commerce · Innovation · Store closings

Retail’s next punch in the face

Five years ago I wrote a post entitled: “The next punch in the face”, which you can read here.  I began by quoting noted retail legend Mike Tyson who allegedly said “everybody has a plan until they get punched in the face.” My point, more or less, was that in the world we live in, we’re going to get punched. Sometimes we’ll see it coming, sometimes we won’t. But we must be prepared and we must get our organizations to be more agile.

A few years later, after a successful trip to the Metaphor Store, I decided I needed a less violent but still powerful message to underscore how innovation and transformation were rippling through the industry, sometimes casting brands against the rocks like boats in the tempest.

So it seemed easy to borrow from Jack Kornfield, one of my favorite spirituality teachers. My updated message, dripping with stolen metaphor, was to point out that once we wade into the ocean, waves are inevitable and that to cope with that reality we are all going to have to learn to surf.

So what does any of this have to do with thriving in today’s environment? Well, if one looks at what’s happening to retail today that is highly disruptive, much of it may feel like a punch when it fully hits. The waves may seem unending and often violent. But here’s where the metaphors lose power and relevance.

We SHOULD have seen it coming. At least, most of it. Instead what we have is more slow motion car crash than retail apocalypse–despite what the pundits say.

A brand that’s been in business over 100 years suddenly has 20% or more of its total store base it needs to close immediately? That didn’t happen overnight.

A retailer that has tons of customer data and dozens, if not hundreds, of marketers wakes up one morning and discovers they are not ready for Millennials?

A retailer with masses of merchants, sophisticated planning software, consultants galore, misses sales and margin plans quarter after quarter? I guess they suddenly got a whole bunch of new customers they didn’t notice and know nothing about?

A CEO goes to a conference (or on CNBC) and “enlightens” the audience about how most in-store purchases are driven by digital and how a consumer that shops in multiple channels is most profitable and shopping needs to be seamless and blah, blah, blah. Sir, anyone who’s been paying attention at all has known this for years (too bad I didn’t save my presentation to the Neiman Marcus Board from 2007 to show you),

Most of the troubles afflicting major retailers, wholesale brands and the commercial real estate market have been obvious for years and their impact highly predictable. You can go look it up. I’ll wait.

If we were paying attention, if we were doing the hard, necessary work, if we were innovating, rather than just talking about innovation, if we accepted the inevitable realities of the marketplace, how could we not have acted?

Awareness.

Acceptance.

Action.

Accountability.

Rinse and Repeat.

The only real surprise is how some of these leaders still have their jobs given what lousy surfers they’ve turned out to be or how awful they were at seeing the punch coming.

Maybe they over-looked the really hard part of surfing?

Or maybe they just don’t know how to take a punch?

Either way, the next time someone says “wow, nobody saw this coming” chances are they were looking the wrong way all along or too busy riding the brake when they need to step on the gas.

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CRM · Customer Growth Strategy · Customer Insight · Personalization · Share of attention · Uncategorized

This time it’s personal

A book that I read more than 20 years ago fundamentally changed my perspective on business overall and marketing in particular.

Peppers and Rodgers “The One to One Future” embedded in my psyche the notion that knowing more about your customer than your competition was a critical component of competitive advantage. And before long “treat different customers differently” became my mantra.

As brilliant as Don and Martha’s book is, it was, for the most part, way ahead of its time. To be sure, many brands and marketers benefitted from its wisdom. But overall, few brands saw personalization as a burning platform and many of the espoused concepts simply could not be operationalized in any practical and cost effective way.

For most, a strategy of uniquely identifying customers, differentiating them by their needs and value, interacting with them to understand their desires and then customizing the experience in a relevant and remarkable way, lingered somewhere between a dream and a nice-to-do.

Yet today personalization is not only increasingly possible at scale, it is rapidly and inexorably becoming a business imperative.

It’s an imperative not because it’s cool or sexy or sounds good at a conference.

It’s an imperative because the battle has shifted from market share to share of attention–and it’s increasingly difficult to be the signal amidst all the noise.

It’s an imperative because one size fits all marketing strategies are well past the point of diminishing returns.

It’s an imperative because we are drowning in a sea of sameness and delivering average products for average people gets you average results, if you are lucky, and gets you fired, if you aren’t.

It’s an imperative because the power has shifted irretrievably to the consumer and the only way to stand a fighting chance is to compete on deep customer insight, intense relevance, remarkability and trust.

That means small is the new big and intimate is the new interesting. And that, at last, the one to one future is here.

 

I will be moderating two very different expert panels on personalization during the next month. Stop by and say “hello” if you can.

On April 20th I’ll be with the Dallas-Fort Worth Retail Executives Association. Pre-register here: http://bit.ly/1Moj5ag  

Then it’s ShopTalk in Las Vegas on May 17th. More information is available at http://bit.ly/1qYKvul  Readers of this blog can use my promo code “sageb250” to save $250 on their conference registration.

Being Remarkable · Customer Insight · Share of attention

You picked a really bad time to be stupid

Last year I wrote a post entitled You picked a really bad time to be boring, the fundamental premise of which was that in a slow growth, highly competitive, ever noisier world, for our marketing to get noticed–much less acted upon–we had better go beyond average. We need to be truly remarkable.

Now I will admit remarkable is easier said than done. But can’t we agree that there is no reason to be stupid, ignorant, unaware or down right lazy with our marketing? Simply no excuse anymore for one-size-fits-all?

The fact is when a brand treats customers as part of an undifferentiated mass, they quickly lose interest. When we fail to demonstrate basic relevance we have little or no chance to command what is increasingly marketing’s limiting factor: customer attention.

Last week I got a voicemail from a sales person at a local car dealership. His pitch went like this: “Hi this is Dave from (car brand I have no interest in) in (town some 30 miles from me) and I was going through the White Pages (huh?) and came across your name and I thought you might be interested in the great deals we have this weekend on (names type of vehicle I also have no interest in). So give me a call when you get a chance.”

It would, of course, be easy to dismiss this as the misguided tactic of some mom & pop, largely clueless business owner who has found some poor sap to work on commission in the hopes of a hit or two. But this form of batch, blast and hope marketing remains common among many larger, more “sophisticated” brands.

As an example, I recently got an email from a luxury retailer that I may or may not have worked for in the past. The hook was this: “As one of our best customers, save an extra xx%…” Really? I have bought absolutely nothing from you in over 5 years and I’m one of your best customers? This brand–which is the same one that has sent me emails encouraging me to redeem my non-existent rewards points–possesses the data to know what my shopping behavior is and therefore could take a totally different, and presumably more effective, targeting strategy.

When brands make little or no effort to know us, show us they know us and show us they value us, our interest wanes. And it’s rarely long before a brand’s share of our attention starts to drop. In my experience, attention, once lost, is very hard to win back.

 

 

CRM · Customer Growth Strategy · Customer Insight

What’s the frequency Kenneth?

Every retailer can tell you about same-store sales. Most can readily quote their online conversion rates. Some can even dissect the composition of physical store visits (conversion rate, average transaction value, # of items per transaction and so forth). And, more and more, we’re hearing about metrics such as the growing percentage of digital engagement done on a mobile device. Much of this can be pretty useful.

Yet, we don’t hear much about frequency. When we do, it’s rarely broken down by key customer segments. That’s a mistake. And, all too often, a big one.

In my experience, one of the earliest signs of trouble is a decline in frequency–both in terms of shopping behavior and willingness to recommend. Low frequency, even when it’s comparatively stable, can be a sign of trouble as well. Conversely, growing frequency among core customer cohorts suggests strong forward momentum.

One of the reasons I knew the flash-sales category would hit the wall was the preponderance of low-frequency customers across the customer base of several well-known (and, as it turns out, ridiculously over-funded) brands. This fact, combined with declining frequency among the highest spending segments, spelled impending doom.

Similarly, it was increasingly obvious that a certain luxury department store was headed for trouble when frequency across all but one of the core customer segments we tracked was ebbing. Moreover, the remaining (and most profitable) segment’s revenue was only positive because of significant increases in average unit selling price, not through adding more customers or greater shopping frequency.

Understanding frequency is hardly the be-all and end-all of customer analysis. Yet you don’t have to be a Ph.D in statistics to dissect the data, nor do you need to be some sort of analytics savant to draw the requisite conclusions. You merely need to be willing to ask the question and dig deep into the root causes.

Oh, and it’s important that you be willing to act on the implications.

Being Remarkable · Customer Growth Strategy · Customer Insight · Loyalty Marketing

The wrong side of scarcity

The formula for success in retail–in being intensely relevant and remarkable for customers and investors alike–is ultimately rooted in scarcity.

Scarcity for a highly desired good or service amplifies demand and enables a brand to command a premium price. Conversely, abundance undermines those abilities.

So, let’s be honest, in your market sector are any of these things truly scarce?

  • Frequent % off promotional events
  • TV ads that focus on the above
  • A cash back rewards programs
  • Free shipping offers
  • Ability for consumers to gather product and price information
  • A selection of major national brands
  • Sunday newspaper circulars
  • A professional looking website
  • Convenient locations
  • Friendly sales associates.

How about these?

In a slow growth, ever noisier, consumer-in-charge world, it’s hard to see how doubling down on the already abundant is likely to get any brand very far. Yet that is where most our focus, energy and resources seem to be pointed.

Unfortunately what passes for strategy at a lot of companies is the notion of being better at being common. Good luck with that.

Customer Growth Strategy · Customer Insight

The easy prey

In most endeavors it’s a good idea to start with the easiest sale. Get the quick win. Gain some traction. Build a base. Rinse and repeat.

Organizations with any chance of staying around all have easy prey. The easy prey need the least convincing. The easy prey likes just about everything we do. They buy more often and more broadly. They’re typically the least price sensitive and provide the strongest word of mouth.

The tendency in established organizations is to rely on the easy prey too much, to go back to the well too many times. When I was at Neiman Marcus, our easy prey were the super wealthy who were intensely interested in the latest fashion. We raised our prices 8-10% per year and they kept buying. They loved the ridiculously expensive and exotic redemption opportunities in our InCircle Rewards program. We offered ever more exclusive merchandise and events and they cried “more, more, more!”

Unfortunately, the majority of our profits came from folks that weren’t in this elite segment, and our over-reliance on the best of the best started to chase them away (you’re welcome Nordstrom). When the recession came we were hit unnecessarily and devastatingly hard by the lack of balance in our customer portfolio.

For newer, rapidly growing brands, the typical mistake is to optimistically project that early success will readily scale. Many hot e-commerce brands are classic examples. These start-ups hyper-focus on a particular demographic and product-niche and use the advantages of the internet to quickly and cost effectively acquire an initial batch of customers. The metrics for the easy prey are impressive and venture capital dollars follow. Alas, the dynamics that worked so well for the easy prey become quite different (and challenging) as the business scales.

The next tranche of customers don’t get the value proposition as readily as the easy prey. They are harder to convert, requiring more expensive marketing and more costly incentives. Some may like the offering in concept, but want to see, touch and try on the product to be certain they wish to buy it. Acquisition costs go up and physical retail stores are often needed to scale the business to the next level. This isn’t necessarily a bad thing, but it is a big change and fundamentally alters the nature of how the business operates and makes money.

All brands of any size are composed of multiple customer segments, each with somewhat different needs, values, emotions and behaviors. Some are easier to acquire, grow and retain than others. Some aren’t worth the effort. A well crafted growth strategy is rooted in a solid understanding of each segment and employs a targeted and balanced portfolio approach to maximizing customer value. It necessarily involves moving beyond the easy sale and moving outside of our comfort zone.

I suppose it’s human nature to choose the path of least resistance. Ironically, it’s when we get stuck in what is easy that suddenly things get very, very hard.

Customer Insight · Frictionless commerce · Omni-channel

At the intersection of choice and friction

As retail consumers, let’s stop and think about the choices we had a decade or so ago.

With few exceptions, almost all products were purchased from a physical store during limited store hours. For the most part, we selected from what was in-stock; custom orders were generally time-consuming and expensive. If we wanted to shop for alternatives we had to get in our car, walk to another store in the mall or, if we lived in a small town, drive many miles to explore the competition. It was pretty much the same drill if we wanted to check prices. Product reviews came from neighbors and friends, if we were lucky, or from sales people, if we weren’t.

Until fairly recently, many of our shopping experiences were laden with friction, primarily driven by scarcity of choice. Sometimes we had decent alternatives. Many times we did not. Often we had to settle for good enough.

Today, if anything, we are overwhelmed by choices. At a macro-level, consumers are experiencing less and less friction all the time as selection expands, prices decline, access becomes easier and information is abundant. Technology is enabling retailers to root out the so-called pain points in the customer experience. Fierce competition is unlocking more and more value for consumers.

But for many retail brands, this can be quite problematic. Mediocrity in the customer experience is now laid bare. Uncompetitive pricing, stale merchandise, out-of-stocks, long call-center hold times and the like, have gone from mere customer annoyances to the reasons customers are bailing in droves to the competition.

It amazes me that so few retailers truly understand what drives customer loyalty and how they stack up against the evolving competition.

It stuns me that so many brands remain clueless about the sources of friction in the shopping experience, particularly among their most profitable customers.

Blather on all you want about omni-channel this and omni-channel that. But if you don’t really understand what’s going on for your customers at the intersection of choice and friction, chances are you’re wasting your time.

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?