Working out in public

For many of us, particularly when we first get started, the idea of letting others see us struggle through a physical exercise program fills us with dread.

We might be self-conscious about the way we look or embarrassed by what we think is a paltry rep count. Perhaps we feel a bit ashamed as we compare ourselves to those who fly by us on the running trail or log countless minutes at a furious pace on the elliptical machine nearby.

When it comes to a personal fitness plan it’s a choice whether to start one at all and it’s a choice where and how we work out.

Alas in business neither of those are good choices any more.

It used to be your that marketing plans could be studied and honed before the big reveal of a new campaign. But opportunities to do that now are few and far between.

It used to be to that new ideas could be test marketed in carefully controlled environments that allowed for precise measurement and rigorous forecasting. But good luck making that your predominant mode of bringing new products to market today.

It used to be that a brand got to decide how fast information about their new product or service got disseminated to the world. Today that notion seems increasingly ridiculous.

The new reality is that, more and more, you have no choice but to work out many of your strategies and tactics in public before you feel totally ready. You have to be set up to test and learn, to rapidly evolve your plans and to dynamically respond to whatever the market throws at you.

And you have to accept that from time to time you may look foolish. You have to risk that your competitor is better at some things than you are and that the market might notice.

But just like your own personal fitness program some things are true. If you don’t start and persevere through the initial, most challenging phases you will never achieve a high level of performance.

And reps do matter.

Merge ahead

More and more, your web presence is the front-door to your brand, not just a sales channel.

More and more, mobile, and all things digital, blur the lines between e-commerce and brick-and-mortar.

More and more, your channel-centric thinking–and organization, metrics, incentives and budgeting–are becoming barriers to meeting the customer where she is.

More and more, your mission, if you choose to accept it, is embrace the world of channel hop and focus on delivering a frictionless customer experience.

Merge ahead.

Or risk being side-swiped.

 

 

Less bad, not yet good

Unless you are the #1 choice for your core customers, with staggeringly strong loyalty & advocacy ratings and nary a competitive threat on the horizon, you’re probably working to close performance gaps between you and the market leaders.

But here’s a potentially big problem. There’s a pretty good chance you are working to become less bad. But don’t confuse that with actually being good.

I worked at one major retailer where we analyzed a mountain of consumer research, identified key drivers of market performance and rated ourselves against our “best in class” competitors. On a scale of 1 – 10–across key purchase dimensions–we had lots of “5′s” and “6′s” whereas the market leaders had primarily “8′s” and “9′s.”

At a meeting of our top executives our recently anointed leader breathlessly announced, with considerable fanfare, that we would drive all our efforts (all of them!) to close the gaps versus our targeted competition. He was confident that with the right focus and intense commitment we could quickly improve our scores to “7′s” across the board.

In other words, we would still suck. Just not quite as much as before.

Inspiring.

He didn’t last long.

In my experience, way too much time, energy and money is spent in search of mediocrity.

And even on the rare occasions that a company is successful in closing the identified gaps, by the time implementation occurs, consumer expectations and/or competitive performance has shifted. The cycle begins anew. And you’re still #2. Or #3. Or worse.

Compelling, customer-centric growth strategies aren’t about shoring up your weaknesses. They are about being remarkably relevant and differentiated on the key dimensions of current and future customer loyalty and advocacy.

If you have major gaps to address, clearly you have to pass through the chasm of mediocrity to get closer to the other side.

But don’t kid yourself that you don’t have more work to do. Ultimately a “less bad” strategy is never a good idea.

Built for me (Part 2): Treat different customers differently

In my last post, I suggested that the most powerful brands elicit the feeling from their core customers that the business was designed around their unique needs and wants. That is was built for them.

This idea is a core tenet of strategic business model design. But it extends to tactical execution as well.

I’m hardly the first person to espouse the “treat different customers differently” mantra, but embracing it is essential to putting “built for me” into practice day in and day out.

Built for me can extend to how you deliver your customer experience. One size fits all approaches rarely yield superior customer service marks. When you don’t pay attention to–and act upon–my unique preferences, I’m less and less likely to return.

Know me, show me you know me and show me you value me.

Built for me should be a driving force behind just about any brands marketing strategy. More and more, mass promotion fails to move the dial or gives the illusion of prosperity when all you are doing is chasing sales with no potential to be profitable–or chasing customers with no potential for loyalty.

Leverage analytics and insight to deliver a progressively more personalized set of messages, offers and experiences.

There is no question that pursuing a built for me strategy introduces cost and complexity. But more and often than not, failure to embrace this path eventually leads to middling performance and consumers who are more than happy to take their business elsewhere.

 

Who cares?

Before you sit down to work on that business plan or send that tweet or gird yourself for the big sales pitch, maybe it’s worth spending a bit more time focused on one question: “who cares?”

Of course, one way to think about it is whether it’s the least bit important or relevant at all.  The world will probably be fine not seeing one more Facebook post along the lines of “so excited just got the cutest ballet flats ever!”  And frankly nobody really needs to see that Instagram of what you had for dinner.

More substantively, however, is taking the time to really zoom in on each word in the question.

First, getting real clarity on the “who.” Are you crystal clear on the customer(s) or audience(s) for your product or service?  Not just in some pithy, simplistic, high-level demographic view, but in a way that meaningfully differentiates the customer types whose attention you wish to command and whose specific wants or needs you intend to address in a compelling and unique manner.

Then it’s all about “cares.”

If you aren’t resolving a compromise I know I have–or addressing a want to need that I can connect with in powerful way–I’m not likely to listen in the first place.

But even if you get my attention for a moment, I won’t stay engaged if you I’m not inclined to care in the first place.

Squirrel!

This might take a while

Certainly the world is moving at an increasingly faster pace.

Clearly we have seen transformative new business models seemingly come out of nowhere to supplant industry incumbents.

Without a doubt, traditional sources of customer loyalty are being challenged in a rapid onslaught of ever-expanding options and innovative marketing techniques.

Yet, for many brands, it is still very much the case that relationships and trust matter.  And those precious assets are rarely earned quickly.

Despite the publication of Permission Marketing well over a decade ago, too many brands fail to follow the basics of Seth’s admonitions.

Too many brands want to get married on the first date.  Too many brands fail to take the time to treat different customers differently.

Too many brands think quantity trumps relevance (I’m looking at you Groupon).  Too many brands think they can shift their customer base quickly (I’m looking at you JC Penney).

As the pace of change accelerates, you may be tempted to do everything faster. But if you have a business model that is anchored in trust, rooted in deep relationships and in building a growing permission-based asset, the right answer may well be to go more slowly and deliberately.

Yes, it might take a while. But it’s likely to be worth it.

 

 

Math is hard…for JC Penney

JC Penney’s CEO Ron Johnson has recently been making the rounds with various media outlets proclaiming that Penney’s will return to growth this year. They had better.

There is an old adage in retail that the best way to run a same-store sales increase THIS year is to have run a decrease LAST year.  While we are a couple of weeks away from learning the specifics of how Penney’s fared in their first year of radical transformation, it’s likely that they will be down 25% or so.

This means they will have to run a 33% same-store sales increase just to get back to where they started two years earlier.  Given that new shops are rolling out in the Spring (Joe Fresh in March, Martha Stewart and a new home concept in May) it’s difficult to imagine a major turnaround in sales growth until later in the year. Good luck getting back to even.

Another math problem is their new “semi-promotional” strategy.  While Penney’s sorely needed to re-introduce more aggressive promotions to restore traffic growth, the pricing strategy rolled out last year relied on having prices that were competitive day in and day out.  For this strategy to develop better gross margins, they would have to sell the vast majority of product at the new regular price.  Now, by layering on additional discounts, they will either run lower gross margins or need to take their regular prices up to end up in a sustainable place.  The problem with the latter approach is it means they will be uncompetitive when not on sale.  My guess is gross margin will continue to disappoint until they can fine tune this approach.

The last math problem is their recent institution of “Elsewhere Prices.”  The notion of giving consumers a comparison price is a good one.  But the fine print is the issue.  According to Penney’s most recent circular “the ‘Elsewhere’ price reflects a comparison to the price of that or a comparable item found on-line or in-store for national specialty stores during the last 90 days.”  In other words, not their most direct competitors prices. Not necessarily a price that more than a handful of consumers might actually have paid.

To be fair, lots of other retailers engage in such shenanigans. The off-price and factory outlet stores play this game all the time.  A charitable person might say that such comparisons represent a desire to be helpful for consumers.  A cynic might say that it’s closer to a con.  You can decide for yourself.

To claim truly meaningful progress in the transformation it’s not going to be enough to simply see sales growth.  To have any chance of justifying the massive investments being made, the new JCP must begin to consistently deliver out-sized same-store sales growth and evidence of progress on gross margin rates.

The math for improvement is not that hard. The math for success is pretty daunting.

The multi-channel customer is your best customer. Duh.

This is the 3rd straight year that I’ve attended a National Retail Federation “Big Show” session and a senior retail executive takes the stage and proclaims that the multichannel–or “omni-channel” if you want to be trendy–customer spends more than a single channel customer.

In fact, they say–pausing to create a little extra anticipation as they prepare to bestow another morsel of massive insight–the more channels she shops in, the more she spends.

I then scan the crowd and notice dozens, maybe hundreds, of my fellow attendees furiously taking notes. I check the Twitter feed and there is a sudden burst of activity as these pearls of wisdom. Must. Be. Shared.

From where I sit, if you care about such things and this is actually news to you, it only proves on thing. You haven’t been paying attention. At all. Let’s hope the boss doesn’t find out.

The reality is that Sears and JC Penney were reporting that their multi-channel customers outspent single channel customer by 3 or 4X nearly a decade ago.

At Neiman Marcus we reported the same phenomenon in public statements in 2006 and 2007.  Lots of other brands have said essentially the same thing over the last several years. Look it up. I’ll wait.

So now that we know to be skeptical about how NRF selects its speakers–and you’re aware that you need to up your market research game–so what?

First of all, it might be better to state things this way: your best customer is a multi-channel customer. The distinction being that if someone is already a good customer they are more likely to start engaging with you in other forms (web, mobile, social, etc.). Understanding cause and effect, and segmenting your customers by pathway to profitability, is well worth the effort.

Second, stating facts about customer behavior isn’t a strategy. You aren’t going to win in an increasingly omni-channel (see how trendy I am!) world unless you fully embrace customer-centricity, are committed to treating different customers differently AND you have a clear idea of how each channel or touch-point delivers a remarkable customer experience.

So if you are just learning to appreciate the multi-channel customer and are thinking about an omni-channel initiative, I’d get started.

And I’d hurry. It’s later than you think.

 

My Top Ten Blog Posts of 2012

Happy New Year.

And now, as has become my custom, here are my top ten posts of the past year. Enjoy. Comment. Debate. Share.

1.   The world’s best loyalty program.

2.  The end of e-commerce.

3.  JCPenney’s Road to Recovery (Part 2): The intervention.

4.  JCPenney swings for the fences (Part 1).

5.  JCPenney’s Road to Recovery (Part 1): The reality distortion field.

6.  JCPenney’s Road to Recovery (Part 3): The 10 point action plan.

7.  In gut we trust.

8.  Now you’re just somebody that I used to know.

9.  Honey, I shrunk the store.

10. 8 things that are wrong with your omni-channel strategy.

And one of my personal favorites that, in my humble opinion, was mostly overlooked: Knowing what ‘yes’ looks like.

But it did get excerpted in Seth Godin’s new book The Icarus Deception.  So I got that going for me. Which is nice.

JCPenney’s road to recovery (Part 1): The reality distortion field

Last week the JC Penney story went from bad to sad.

The bad part is well-known by now: financial results dramatically below expectations, thousands of JCP employees laid off, a precipitous drop in the stock price and a debt downgrade amidst mounting liquidity concerns.

The truly sad part, however, is the apparent lack of acceptance of reality being demonstrated by senior management.

Two decades ago Steve Jobs became famously known for what fellow Apple executive Bud Tribble coined the “reality distortion field (‘RDF’).  As Wikipedia puts it: The RDF was Jobs’ “ability to convince himself and others to believe almost anything with a mix of charm, charisma, bravado, hyperbole, marketing appeasement and persistence. RDF was said to distort an audience’s sense of proportion and scales of difficulties and made them believe that the task at hand was possible.”

During his first year as Penney’s CEO (or as he might put it CEO of JC Penney and CEO of JCP), Ron Johnson has frequently alluded to his experience at Apple as being the inspiration for his transformation strategy. While the relevance of those analogies to JCP’s situation seems pretty tenuous (more on this in my next post), it’s beginning to look like the legacy of the RDF is being carried on.

Though it may not seem like it at times, I get no personal pleasure in doing the “I told you so” victory dance or taking pot shots at seemingly easy targets or sitting in snarky judgment. Nobody wants to be that guy.

So to be fair, the Penney’s team HAS taken on an incredibly daunting challenge. They have rightly said that the company needs a transformation, not an evolution. They have begun to put in place a number of exciting and promising initiatives. And as they remind us, this is a multi-year journey and it’s still early.

But the reality is that things are MUCH worse than they thought and most of what they sold the analyst community earlier this year-and in subsequent earnings calls–is simply not proving out.

In some 12 Step recovery programs they talk about a model of change. The first phase is Awareness. Followed by Acceptance and then, ultimately: Action.

I’m not suggesting that Penney’s leadership team is a bunch of addicts (though one analyst recently opined that she thought they were addicted to BS).

Yes, some elements of Penney’s new strategy clearly need time to prove themselves out. But a lot of change remains necessary on key strategic elements to stem the hemorrhaging and get the transformation back on track.

But no major behavioral change is possible unless there is a rejection of denial and a rigorous commitment to reality.

My future posts will detail specific strategy and tactical changes that I believe Penney’s needs to begin making right now. But unless management acknowledges their mistakes and ceases the obfuscation and misdirection, I’m skeptical they will be able to clearly see what they need to do and embrace the requisite urgency.

Moreover, without a big “mea culpa” and a lot more straight talk, they risk losing the trust of vendors and investors.

If that happens, it’s game over.

 

Up next: JCPenney’s road to recovery (Part 2): The intervention