Being Remarkable · Innovation

I fought the math and the math won

Emotion often trumps logic.

We buy the story before we buy the product.

How our experience with a brand makes us feel can overcome the simple calculus of pro’s and con’s.

Because of this, I advise start-up entrepreneurs and deeply experienced corporate types alike to start with the story, to envision the full experience we want to deliver, to design for how we intend the customer to feel and how we hope they will amplify our message to their tribes.

But then comes the math.

And, alas, there is no escaping a few basic equations.

You can’t escape the fact that customers can’t buy your product or service if they aren’t aware of it. In an increasingly noisy world, where the toll-takers who often control getting your brand in front of the right customers keep raising their prices, you had better crunch these numbers.

If you are in any kind of retail, you can’t escape the math that your sales are a function of the amount of traffic you drive to your store or website, your conversion rate, the average unit retail of the items sold and the # of items purchased. Failing to understand these dynamics–and the throughput at each stage–is often where things start to fall apart.

In any business, if the lifetime value of the customer is less than the cost of acquisition and ongoing costs to serve, your numbers will never add up.

If it’s costing you more and more to acquire new customers, while you are experiencing high-rates of churn among existing, lower cost to acquire customers, the wall is fast approaching.

If you are adding a lot of cost to become omni-channel while merely spreading existing sales over a now higher cost base, you don’t have to be Descartes to know that’s not a long-term winning formula.

There are two ways we fight math. The first is to ignore it in the first place. The second is to stick our head in the sand when it starts to become more and more obvious that our numbers don’t add up.

Math–like feelings, ironically–doesn’t go away because we ignore it. Math doesn’t care that we are all about brand building. Math doesn’t have an opinion on how disruptive our start-up is. Math couldn’t care less that we hope to get acquired and cash out before we have to demonstrate profitability. Math is immutable and dispassionate. Math is a stubborn you-know-what.

Fight the industry incumbents all day long. Fight The Man, the power, the haters and the status quo as much of you want. Math doesn’t care.

But at some point, your numbers will have to add up and multiply through. And you’re going to want math on your side.

Being Remarkable · Brand Marketing · Branding · Customer Insight · Innovation · Leadership · Retail

Dead brand walking

The business graveyard is filled with brands that have gone from the lofty heights of recognition, stature and profitability to flagging relevance and, ultimately, complete extinction. For every long-standing, legacy brand that continues to thrive (think Kraft or Coca-Cola) there is a former high flier that is now gone (think Borders or Oldsmobile).

Sometimes companies are hit by a largely unexpected exogenous force that sends them reeling. More often than not, the company’s ultimate demise surprises no one.

For some of us–investors or potential employees, for example–the key is to separate out the walking dead from the exciting turnaround story or the metaphorical Phoenix.

For business leaders, the obvious implication is to become aware of the early warning signs of decreasing brand relevance, accept the need to change and take the requisite actions. The obvious question, of course, is why are there so very many strategy meltdowns?

In my experience, brands go from healthy to critical in one or more of three ways.

First, you can’t fix a problem you aren’t aware you have. Many dead or dying brands lacked a fundamental level of customer insight. So not only did they not appreciate their vulnerability early enough, they didn’t focus on the important things quickly enough.

Second, just because you know something, doesn’t mean you accept it as the new reality. When I was a senior executive at Sears–the poster child for dead brands walking–we had tons of evidence that clearly showed our weakening relevance and declining profitability in our core home improvement and appliance businesses. Did those that could have changed Sears’ destiny truly accept that without aggressively attacking these issues it would eventually be game over? Sadly, then, as it is now, the answer is “no.”

More recently, when I ran strategy and multi-channel marketing at Neiman Marcus, we had plenty of customer research and analytics that our strategy of narrowing our assortments and pushing prices ever higher was losing us valuable customers to Nordstrom (among others). Did we accept that it constrained our growth and made us increasingly vulnerable in an economic downturn? Fortunately the harsh lesson of the recent recession–and a new CEO–“forced” Neiman’s to address these problems before they became crippling.

Lastly, even with keen awareness and complete acceptance of new realities, we regularly fail to take the (often radical) action needed. This is mostly about fear. Fear of being wrong. Fear of looking stupid. Fear of getting fired. Fear of risking one’s legacy or resume value.

In fact, history teaches us that it’s far more common to see executives holding on to a mediocre status quo rather than risk competing with one’s self or making a big bet on that new technology or innovative business model that is ultimately used against them by an upstart competitor.

Frankly, if your inability or unwillingness to act on saving your brand is rooted in fear, don’t hire McKinsey or Bain (or me for that matter) to help you with your strategy. My advice would be to get yourself a new management team and/or go see a therapist. It’s far cheaper and more likely to work. And do this before your Board figures it out.

Dead brands almost never die by accident. They die by leaders failing to see the signs of terminal illness while there’s still time to save them. And they die by management teams’ inability or unwillingness to take the necessary and decisive action before it’s too late.

Hopefully dead brands walking can be a lesson to us all.



Customer Growth Strategy · Innovation · Leadership

Wired to say “yes”

When it comes to making innovation stick, my experience is that there are two types of people: those who are wired to say “yes” to new ideas and those that are wired to say “no.”

Multiple times during my career I have been responsible for the growth agenda for a major company.  That typically included helping the CEO and senior team figure out how to accelerate growth in the existing lines of  business, as well as exploring ways to grow in new areas, be that through creating new concepts or acquisitions.    It’s pretty hard to be successful in this sort of role if you aren’t wired to say “yes.”

Ironically, I did not start out in business that way, but that’s another story and you can read about it here:

Among those that are wired to say “no” you have folks so consumed by fear that they will never take a chance and therefore, sadly, will never create anything new.  But there is power in the “no” sometimes.  The Doubting Thomas and the Devil’s Advocate often make ideas stronger through their skepticism.

But ultimately if a company is serious about generating meaningful sources of profitable new growth it must fundamentally be looking for reasons to say “yes” to a new idea, rather than lining up all the potential “no’s.”

I once worked for a CEO who said he wanted growth, but when it came down to it, every time a new idea was presented he found myriad reasons to shoot it down or tread water.   It took me a while–too long in fact–to realize he was wired to say “no.”   He wasn’t going to change, and neither was I.  It was time to move on.

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Being Remarkable · Customer Growth Strategy · Customer Insight

Defying the Sea of Sameness

Any business school course on strategy will devote significant time to the importance of competitive differentiation.  We attend marketing conferences where speakers pontificate on the need to have a unique value proposition.  Excellent books like Seth Godin’s Purple Cow preach the benefits of being remarkable to separate yourself from the herd.

Yet any visit to the mall or surfing of the internet quickly reveals an often numbing “sea of sameness.”

This has long been true for many retailers.  But I believe the recession has made it worse.  As retailers have slashed inventory, desperate to demonstrate inventory productivity progress to investors, merchandise assortments have become less interesting, less differentiated, decidedly less remarkable.

By now it should be apparent that a full recovery is going to be slow in coming.  That means revenue growth must come primarily from stealing market share.

Now is the time to go on the offensive.  Now is the time to commit to deeply understanding your target customers’ needs, compromises and preferences and to find ways to innovate, to be truly remarkable.

For some companies, this means embracing the trusted agent role, going out into the market and curating a unique offering for a discerning clientele.  This is what the best specialty boutiques do.

For others, it means finding more exclusive products in the market, leveraging existing vendor relationships to construct a unique offering and/or developing their own compelling private brands.  This is happening across the price spectrum.  Kohl’s recently reported that 47% of revenues now come from exclusive products.  Saks Fifth Avenue is aggressively working to significantly increase its percentage of private label and national brand exclusives to differentiate itself in a challenging luxury market.

I think two basic principles are at work here.  First, a willingness to move away from a product-centric, gross margin rate maximization mind-set to embrace customer-centricity and all that entails.  Second, an acceptance that it is actually more risky to play it safe and swim in the sea of sameness.

Someone in your industry will decide to break away from the herd and gobble up share while the competition is on their heels.  What’s your choice?
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Customer Growth Strategy · Customer Insight · Customer-centric

The Office of the Customer

A remarkable growth strategy for your brand or business should be, at its core,  a customer-centric growth strategy.  Contrast this with most companies’ strategies which are strongly product-centric or channel-centric.

To be truly customer-centric, your organization needs to start with a single, cohesive understanding of the value, needs and wants of your most important customers and prospects. And then you need to consistently turn this insight into action to drive meaningful results.

So how are you doing?

Have you integrated all your relevant customer data into an enterprise data warehouse?  Is all your “voice of the customer” information–from formal research studies to satisfaction surveys to customer complaints accessible and its implications understood by key decision-makers? Do you have people, and I mean specific individuals, responsible and accountable for understanding your most important customer segments, monitoring critical metrics and for coming up with new and improved ways to engage, grow and retain them?

I can hear the objections already. We don’t have enough data!  Our systems aren’t good enough!  We can’t afford to get good customer research and create sophisticated segmentations!   We can’t add headcount in this economic environment!

Sure, it would be better to assemble a new department with lofty goals and a big budget to take on all these noble activities.   But here’s the choice you can make.  You can sit around and hope for money to be freed up or for your CEO to suddenly get that old time customer religion.  Or you can make something happen.  Today.   You can become a linchpin in taking that first step in the journey towards true customer-centricity.

If no one else is doing anything that’s making a difference, create the “The Office of the Customer.” Invite people to become part of your tribe.  Vest yourself and those who join in your movement with the responsibility to pull the critical customer information together.    Work collectively to glean the insights, design the better solutions and relentlessly advocate for putting the customer first.    Help your management see what can be done with a purpose and a passion.

If no joins in, or perhaps worse, your boss tells you to stop wasting time on these fanciful notions, you’ve learned something valuable.  It’s probably time to find a job at a company that gets it.
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