Blaming the hole

None of the top 10 retail profit leaders in 1970 remain on the list today, and only half are still around at all.

Leading brands like Best Buy and Barnes & Noble, that just a few years ago were building stores as fast as good sites could be found, are dramatically shrinking their store base and scrambling to re-imagine the customer experience.

Smart phones and tablets, that barely existed 5 years ago, are putting unprecedented power in the hands of consumers and blurring the lines between the physical and digital worlds.

More and more people are finding that what worked for them in the past isn’t getting the job done today. Sometimes painfully so.

That feeling of being a round peg in a square hole isn’t going away. Call it the “New Normal” or whatever you want, but it’s here to stay.

You can scream that this isn’t fair, or you can accept that there is no such thing as fairness. There is simply reality.

You can hang on to the illusion that you can control the way the universe unfolds, or you can get to work on the things that matter than you can actually affect.

You can stop blaming the hole.

Holes are going to change in size and number and complexity. New holes will emerge all the time. And probably at a faster rate than ever imagined.

But let’s be clear. If you find yourself being a round peg in a square hole, it’s the peg that’s the problem.

 

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.

Massively easy. Precisely wrong.

Most of the year turn on the TV, open your Inbox, wade through the Sunday paper and just about all you see are advertisements filled with store-wide sales and category-wide coupons and double points this and double points that.

During this Holiday season it’s even worse. More advertising. Promotions layered on top of promotions. Door busters. Early opening specials. And on and on.

It’s the retail industry’s equivalent of carpet bombing.

Why focus on best fit consumer segments? Why worry about reinforcing–or at least not denigrating–your brand positioning? Why fret about profitability? Let God–or the Finance department–sort it out after the fact.

The typical defense of this approach is that it works.

Really? Show me the data.

If your definition of “works” is market share, rather than building progressively deeper relationships with valuable customers, I will grant you that. If it’s about revenue, instead of profitability, okay you win.

But the real reason is that it is easy.

Developing actionable customer segmentation methods, building a permission asset, testing your way into progressively deeper personalization and increasingly differentiated and relevant value propositions takes time, involves risk and requires a financial investment.

Relying on mass, undifferentiated marketing is taking the easy way out. And for many, it will be the shortest way out of relevance and, ultimately, out of business.

Black Friday, Cyber Monday and the din of irrelevant analysis

During the past week–unless you were blissfully disconnected from all sources of media–you were likely inundated with news articles, tweets, posts and endless TV stories about Americans as weapons of massive consumption.

Reporters and pundits alike pontificated about the significance of earlier and earlier store openings, the relentless quest for the best “door busters”, the incredible growth of on-line shopping and the startling (to some at least) emergence of mobile apps.

Casting aside the glaring irony that after spending a few hours (allegedly) being grateful for all that we have, we quickly pivot and decide that, after further review, we don’t have nearly enough, much of what the media shares about the significance of our shopping habits during the past week is highly misleading.

Consider a few facts. First, historically there has been poor correlation between retailers’ performance during the Thanksgiving weekend and their overall performance for the quarter. In fact, there is growing evidence that there is an inverse correlation. Second, for most brands, Black Friday and Cyber Monday represent a small percentage of total sales for the holidays. Third, with Thanksgiving coming early this year, holiday sales are going to be more back-loaded than usual. Fourth, as more brands launch promotions prior to Black Friday, consumers spread their sales over more days, making any single event less important. Fifth, sales aren’t profits. Giving product away, and driving an abnormal amount of business to one or two days, wreaks havoc on profitability.

For those of you who breathlessly conclude that a given retailer “won” because of big increases on a given day or that Cyber Monday was a huge success because of a double-digit sales gain please realize the jury is still out.

A quick anecdote: when I was at Neiman Marcus we kept sweetening the deal on our thrice yearly InCircle Rewards promotion. Every time we added a new element our comp stores sales went up nicely, and it appeared that the incremental cost of the promotion was more than covered by the extra gross margin dollars we gained during the multi-day event.

Then a member of my analytics team wondered if anyone had looked at the possibility that as we made the deal better and better perhaps we were driving sales that would have occurred anyway (at a higher margin) into those sales days. Great question. So we did the analysis.

Lo and behold a comparative analysis that included a week before and after the event showed clearly that there was no appreciable increase in total sales. There was a change however. Our profits got worse.

The lesson is clear and compelling. Concluding that a sales event was a success without a more complete picture of how consumer behavior was changed over a longer period of time AND without including a profitability analysis is irrelevant.

I can hope that the media will pull back on disseminating useless information or that they will at least provide more helpful context. Not very likely, I know.

But there is one thing I can do. I can pay less attention.

And so can you.

 

 

 

 

 

 

 

Learning to harmonize

Let’s face it, nobody’s likely to be happy to hear you join Mumford & Sons on stage–or Crosby, Stills & Nash if you are old like me–to belt out a few tunes together. But that’s just some incredibly unlikely scenario.

What’s much more real is the need to harmonize in your business.

Your brick and mortar presence, e-commerce business, mobile offering, call center, marketing, and all other branded consumer touch-points, don’t need to be identical, but they need to be harmonious.

Perhaps you’ve experienced a musical performance where someone hits a discordant note. It’s obvious and not very pleasing. If it persists you’re not likely to want to hear more and you’re not likely to want to come back.

Chances are there are quite a few discordant notes in your marketing and your customer experience.

Maybe it’s time to hold a choir practice?

Pick a lane

Funny how often it seems like keeping your options open seems like the least risky strategy.

The job seeker crafts an “I can do anything” resume designed to make her appealing to the widest range of potential employers.

A brand launches a low price guarantee, while still claiming to embrace a strategy focused on service and differentiation.

A retail CEO attempting a bold turn-around talks about making his brand more distinctive and relevant while also striving to become “everybody’s favorite store.”

Sometime you can have your cake and eat it too. Spiritually, the middle way can be the path to enlightenment. Black and white thinking can often get you into trouble.

But in a world of overwhelming data, endless choices and a sea of sameness, you had better choose. And choose wisely.

It’s far more risky to engage in the race to the bottom if you aren’t committed to being THE low-cost provider.

It’s far more risky to try to be a little of everything to everybody than something powerfully compelling and remarkably relevant to a tightly defined set of consumers.

We are all familiar with the driver who straddles the line, failing to commit to a lane.

But that’s just annoying.

For businesses, it’s death in the middle.

Pick a lane.

And then step on the gas.

 

 

 

In gut we trust

A couple of weeks ago I had the opportunity to hear Ron Johnson–JC Penney’s new CEO–present an outline of his transformational strategy. Short version: take a heaping tablespoon of Apple, add a dash of Target, fire the deadwood, stir, and then… a miracle happens.

To be fair, there were plenty of bold, inspiring new ideas presented–and I absolutely agree that Penney’s needs much more than a modest upgrade.

But the scariest thing was Johnson’s insistence that it was sensible to do zero consumer research and eschew any real customer analysis (in fact, one of the first things he did when he took the helm was to blow up both the strategy and the customer relationship management groups). He glibly mentioned the collective experience of his new hires and said that was sufficient to decide on the new strategy.

While reporting dismal quarterly results yesterday, Johnson and team said they were surprised how hard it has been for their new strategies to take hold and by the degree of the corresponding sales decline. Really? They were only surprised because they failed to do the analysis before they boldly swung for the fences.

Consumer research and robust customer data analytics are not the be all, end all.  As the name of this blog suggests: customer-centricity is both an art and a science.

Of course, history shows us that consumers are often not very helpful in reacting to innovative new products or programs. But history also shows us that some of the most successful brands have embraced deep customer insight and competing on analytics not only as a foundational element of their strategy, but as a major source of competitive advantage.

You may be able to thrive on gut feel when you have a superior product line, little direct competition and a simple operating model. But in most businesses, customer-centricity means developing deep customer insight, robust analytic capabilities, actionable segmentation schemes and a commitment to treat different customers differently.

For Penney’s leadership it’s time to get humble, admit you have a problem and take the steps to get back on track.

 

Now you’re just someone that I used to know

Most senior executives will readily agree that it is expensive and difficult to acquire new customers.

Most will agree that it takes considerable time and investment to build deep insight, create trust and engender loyalty with a customer.

And most will agree that customer value is generally pretty well correlated with duration as a customer.

Most will therefore conceptually agree that retention of valuable customers should be a strategic priority.

So….?

So how come you can’t show me a report that details the % of sales and profits represented by customers that defected during the last 12 months?

So how come you don’t have any analysis of the drivers of defection, highlighting the addressable factors along with action plans to mitigate?

So how come your performance reviews and bonus plans don’t have any retention goals?

How is it that you can spend the shareholders’ money to create awareness, generate trial, promote repeat and progressively build a deeper, more personalized relationship and then just let them become someone you used to know?

Well?

Where everybody knows your name. The “new shopkeepers.”

More and more the retail world is bifurcating.

At one end of the spectrum, you have the high-efficiency players. Great prices, endless assortments, super convenience, built for speed. Amazon, Walmart, iTunes, Home Depot. You get the picture.

While each go about it slightly differently, their world is mostly a mass market one. Customer segmentation means little. For all intents and purposes, you shop there anonymously.

At the other end of the spectrum are what I like to call the “new shopkeepers.” In the (good?) old days retail was characterized by owner-run, single location, small specialty shops. The butcher, the baker, the candle-stick maker. No CRM system was needed because the shopkeeper knew you, knew what you liked and she tailored her assortment and experience to you and her other like-minded customers.

We know that very few of these old-timey shopkeepers are around any more. But the new shopkeepers embrace the fundamental principles of old. Deep customer insight. Remarkable experiences. Relationships, not transactions. They treat different customers differently. They know your name.

Your mission–if you choose to accept it–is to pick a lane. Too many retailers straddle the line, trying to be something for everyone and ultimately being totally unremarkable and eventually irrelevant.

If you can’t out-Amazon Amazon–I’m looking at you Best Buy!–you had better move strongly to the other end of the continuum. You had better embrace all things customer-centric.

I’d get started if I were you. You have a lot of names to learn.