July 22, 2014

What Has Changed Since "Hillstrom's Database Marketing"?

We're going to take a few days, and talk about how times have changed, through the eyes of books and booklets.

This book was first, folks (click here). It took about six months to write the thing. Don Libey graciously published the book.

The book was essentially a retrospective of the work I'd done in my last year at Lands' End, and covered a ton of the work I'd done at Eddie Bauer. To promote the book, I started a blog, a place where I'd write on a daily basis. In March of 2006, the first post was published. I was thrilled, months later, when a post would go viral and I'd see ten or fifteen visitors an hour. Today, between blog visitors, blog subscribers, and Twitter followers, we're north of 10,000 folks a month. So let this be a lesson to the kids ... if you do something every single day for eight or more years, you might attract an audience.

What changed since publishing the book? Big Data.

I can still remember a person, back in 2011, publishing a link to the book on Twitter and copying me on the tweet ... "how does it feel to work in an industry that died and was replaced with something more interesting?" Good question!

I use many of the techniques in the book today, when working on projects for private equity folks. Many of the concepts in the "Buddies" series in the book are applied to private equity projects. And the Gliebers Dresses series wouldn't have happened had the response to the Buddies pet store section of the book not been so positive.

But by and large, the concepts in the book are not congruent with the popular style of digital analytics leveraged by modern analysts. The book helps one see how a business might evolve and change over time. What changed is that, across the board, modern measurement is about understanding a point in time instead of changes over time.

If you do the kind of work I do, you are blessed to do work that is not commoditized. To my knowledge, few (if any) vendors have elected to put the methodologies outlined in this book into their software applications. That's been a good thing!

July 21, 2014

Forrester Research Annual Report

If you're going to read retail annual reports, then you should read research brand annual reports as well. Click here to take a peek at the Forrester Research 2013 Annual Report (or click here).

A few tidbits for you.
  • Client retention dropped from 80% in 2011 to 77% in 2012 to 73% in 2013. 
  • Net income is at a five year low.
  • Cash is at a five year low.
  • It costs Forrester $39 to produce $100 of services.
  • It costs Forrester $36 to sell and market products and services. Is your ad-to-sales ratio 36%? It's really tough to generate profit at a 36% ad-to-sales ratio.
  • Pre-tax profit dropped from 13% in 2011 to 11% in 2012 to 6.7% in 2013.
  • Growth is coming from consulting services - not from the traditional research they sell to clients.
  • If you look at the salary information for top employees, you'll quickly see that these folks are not compensated at rates you might think they should be compensated at. Few are earning bonuses, which tells you that Forrester is not achieving internal financial projections.
  • Social tactics are considered "brand building". Contrast that with what the experts tell you about social tactics.
  • Client erosion is blamed on sales force issues.
News got worse in the first quarter of 2014. 
  • Revenue was flat.
  • Expenses were up.
  • No profit at all ... in fact, they posted a small loss.
  • 1% of employees were "terminated" as part of a reorganization. 
  • The company lost money on consulting, one of the few growth areas in 2013/2014. 
  • Client retention is down again, continuing what may now extend to a four year trend. 
  • Selling and marketing increased to 40.9% of net sales.
Forrester's stock price is a shade under $40 ... it was a shade under $40 in early 2011. In other words, the stock price hasn't fundamentally changed in three years (up and down and up again), a timeframe during which the S&P 500 gained 50% in value.

You have to feel really bad for the analysts at Forrester. Really bad. Can you imagine the pressure those poor folks are under, pressure to generate revenue? 

It's hard for me to go to a meeting or to spend ninety seconds on Twitter without somebody quoting a Forrester Research fact that if you're not mobile, you're dead - that you have to adapt your business model now (#mobilemindshift ... click here to see).

But Forrester is also struggling mightily to adapt and change - the mobile mindshift is not paying dividends for Forrester, at least in the past five years - in fact, the multi-year results are dreadful. They are in the same boat many of us are in. In fact, their position is arguably worse - they're competing against free resources (me), you're just competing against Amazon. 

Forrester financials do not look good. Keep that in mind the next time you read a particularly powerful tidbit from Forrester Research - consider the motivation behind the tidbit, and the need to "sell" ideas. It's got to be tough to be Forrester Research, or any research brand.

July 20, 2014

Elevating Bread And Butter

Have you had a chance to watch this video (click here)?

What does bread and butter have to do with your business? EVERYTHING!!

Do me a favor. Go take a walk through your merchandising department, and identify the one person who possesses this level of passion. Once identified, give that person an opportunity to represent your brand.

Think carefully how the message in the video, about bread and butter for crying out loud, compares with the message you see below.



July 17, 2014

Maybe The Best Article I've Read In 2014

Click here to read this article about restaurants and mobile. Seriously. Do it now.

Use the comments section to describe how you'd fix this challenge.

Think carefully how this change in behavior impacts your business.

July 16, 2014

Creative

In an omnichannel world, you are supposed to align all channels with beautiful creative, impressive campaigns, and robust technology. You're supposed to tear down all silos (though the vendors who tell you to do this still seem to have siloed sales teams, don't they), and you're supposed to provide a 360 degree view of your business to the customer.

Few, if anybody, talks about merchandise and creative.

Your creative presentation says a lot about your business. If you were a 27 year old looking for a wig, and you end up on the Paula Young website, you're more than likely to be presented with a creative style that is fundamentally different than what is appreciated by your generation ... and for good reason.

Conversely, younger brands break all rules for home page real estate in an effort to sell to their customer.

Go overlay some demographic data on top of your website - then measure conversion rates by creative presentation and age cohort. Modern omnichannel agendas frequently fail to quantify the influence of creative demographics on selling stuff.





July 15, 2014

Pay Attention To Birchbox

Click here, retail fans.

Look past the glitz of artificial intelligence and machine learning, which simply means that "they're going to recommend product that a customer should purchase, just like retailers have been doing for hundreds of years", and think about the experience they're trying to create.

Compare the experience being created at Birchbox to, say, this:



Again, go past the obvious data-driven, omnichannel message, and think carefully about the experience.

Compare and contrast the new approach to retail to the approaches being vacated due to financial challenges.



July 14, 2014

But How Do I Create Demand?

Assuming you are the only person on the planet who watches live television and pays attention to commercials, you know all about prescription drug ads. They go a little something like this:

Woman: "Like you, I live an active lifestyle".

We see images of this woman as she participates in a bike race, dances at a wedding, and scoots to a meeting she is hosting as Vice President at a major corporation.

Woman: "But when I started experiencing calf cramps on a regular basis, I became concerned."

We see an image of the woman, sitting on a bench in a park, holding her calf, experiencing excruciating pain, while another professional woman runs by the bench, unaffected by calf cramps.

Woman: "That's when my Doctor told me about Zimbamby. After taking just three doses of Zimbamby, my symptoms went away."

We see images of the woman, in her post-Zimbamby glee, climbing Mt. Hood with her husband and a sherpa. She looks at the retreat of a glacier at 8,400 feet, lamenting the damage being done to the planet by climate change, pointing out to her husband and the sherpa where the glacier used to be just 100 years ago. A narrator voices over the images.

Narrator: "Consult your physician about Zimbamby. Side effects may include nose bleeds, sudden drooling, toe cramps, eyebrow twitches, ear ringing, meningitis, gingivitis, leg hair loss, rapid arm hair growth, nausea, insatiable appetite, acne, possible ligament and/or tendon damage, sneezing, rapid chewing, rotator cuff damage, growth of additional vertebrae, and vertigo. Know the risks, understand the benefits."

After the woman summits Mt. Hood, we see her walking down the mountain, taking business calls on her mobile phone. Her husband and the sherpa are a good quarter mile behind her, and look winded. The woman stops in front of the camera.

Woman: "I couldn't have reached the summit without Zimbamby. Neither can you!"

The sun sets behind Mt. Hood. The woman, her husband, and the sherpa stop to take in all of the beauty of Northern Oregon.

That, ladies and gentlemen, is how you create demand. An industry that is federally mandated to tell the customer how the customer might suffer after using a drug is able to somehow increases sales and profit, is somehow able to introduce new products that you never knew you needed.

If the pharmaceutical industry can create demand while telling you how you might suffer from the product they are selling you, don't you think that you, selling simple widgets, can create demand?

July 13, 2014

Creating vs. Capturing Demand

I wanted a healthy portion of breaded lake perch, something you're not going to find in the Pacific Northwest.

One simple search "breaded lake perch" took me to Walleye Direct (who knew), where, you can get all the breaded lake perch you could ever want.

This is called "capturing demand". Walleye Direct did not create this order. Rather, they used marketing smarts to steer me to them, once I decided I wanted to buy lake perch.

An entire generation of marketers have been trained to capture demand. E-commerce continues to grow because the first generation of online marketers have more than a decade of experience capturing demand. 

Think about it. Gap runs a commercial last year (click here) ... that commercial doesn't capture demand, rather, it creates demand (creating demand requires a whole different set of skills, by the way). 

Gap spent the money to create demand. Hundreds of companies compete to capture the demand created by Gap. Some companies are far better at capturing demand than others, leaving Gap at risk.

We can all attest that retail (in-store purchases) is stuck in the mud. This is the logical outcome of the creating/capturing demand issue. Retail is unable to capture demand effectively - why drive 20 miles to Macy's when you can sit at home and buy from Macy's ... or why drive to a Gap store when you can buy from Macy's online (or Gap online)?

Retail has to change. Retail is terrible at capturing demand - meanwhile, retail "brands" are great at creating demand. And yes, I get it, retail still comprises more than 85% of purchases ... but we're not complaining about retail comprising the majority of purchases, we're complaining about the fact that retail (in-store purchases) is not growing.

I think retail will become more entertainment-centric, it will have to, in order to better capture demand. This, not omnichannel, is the focus of the next half-decade.

July 10, 2014

Retail

Read this, my friends (click here).

I could be 100% wrong, folks, but I believe we are killing retail by digitizing it.

Retail, the largest component of the much demonized "offline" world that software wishes to eat, must be experienced. Retail must be fun!

When I moved to the Seattle area, I would visit a Barnes & Noble store in University Village. This store had a fantastic math/science/marketing area. Stuff you couldn't find anywhere. It was a thrill to go in the store, spending an hour thumbing through these books. Then I'd purchase a book or two (often unrelated), or a magazine. Or not.

The internet changed the experience.

I could find anything I wanted online, at any time of the day. Discovery and thrill happened online. Barnes & Noble responded - they got rid of all the obscure books that I loved looking through, maybe because they weren't selling - obscure stuff could now be found online. Instead, they carried popular math and marketing books. Instead of 1 copy of 100 unique books, you'd find 100 copies of Seth Godin books, stuff that would sell in volume. Eventually, I stopped visiting the Barnes & Noble at University Village. No discovery, no thrill. I didn't need to go to a Barnes & Noble store to see a veritable plethora of books from a small number of pundits, or a wide selection of "Books for Dummies".

The popular line of thought is that the internet killed retail. This might be true. But, to me, our response to the internet killed retail more than anything that the internet did to retail.

First, we were told we had to be "multi-channel" - we had to have an online store to complement our retail store. This accelerates the demise of retail - we move discovery from the retail store to the website, decreasing in-store traffic. Why would we want less traffic in a store? When have you ever seen Apple encourage less traffic in an Apple store?

With less traffic in a store, fixed costs catch the eye of the CFO. Fixed costs are battled on two fronts. First, you cut expenses. That sure can't make the retail experience more fun. Second, you use marketing to drive traffic back into the store. And you've got problems when you ask marketers to drive traffic into the store. Why? Marketers love discounts and promotions. Discounts and promotions are taxes placed upon brands for being unremarkable. Eventually, most stores offered 10% or 20% or 30% or 40% off, often. When everybody executes promotional tactics, you end up with the same level of traffic averaged across the same number of businesses ... with the end result meaning that every retailer makes less money off of each transaction. This catches the eye of the CFO, who demands more expense cuts.

You end up with a self-serve store with few employees, no music, no smells, nothing visually enticing. 

You end up with a modern day mall.

And everything is sterile. It has to be sterile, because we're taught that the experience must be identical across channels - you cannot take a risk and capitalize on the strength of online at the expense of retail, or have a great in-store experience that is different from online. You must be generic, unified, integrated. You become boring, as boring as the solutions thrust upon retailers by the vendor community. You become the technology that wires the brand together. You lose your identity as a brand.

I always wonder why we bought into this line of thinking? H&M sold billions in the US in stores, with no e-commerce, at a time when the experts told everybody they had to integrate e-commerce with stores to be successful.

So now we are boring, sterile, integrated, and we're failing. Be honest - when is the last time you walked into your local Gap store and left feeling like you had the greatest experience of all time? And I'm not trying to pick on Gap, at all, it's just that you know who Gap is and you can relate to their in-store experience, which is every bit as "good" as the experience offered by their competitive set.

What is the response to the malaise we're in?

Omnichannel!

The way out of this mess is to even further digitize the in-store experience. "Fix the supply chain and you've fixed the brand!" We're being sold a CRM-centric experience of personalized, relevant, engaging content, coupled with behind-the-scenes technology that makes inventory awareness easy across all channels. That's it. That's what saves retail. Engaging content and knowledge of the fact that the socks you want aren't available in your store but can be shipped in a day or two from the store in Bellevue. You're told that the "customer demands this". Really? The customer demands operational excellence from a retail brand? Like that has never been the case previously?

Operational excellence certainly helps, no doubt. But it helps the vendors that sell operational solutions a heck of a lot more than it helps the retailer. And vendors dominate trade journals, where you hear about omnichannel solutions.

Honestly answer a series of questions for me.

  1. When you have engaging content, how much do your sales increase? 200%? 20%? 2%? 0.2%?
  2. When you have relevant content, how much do your sales increase? 200%? 20%? 2% 0.2%?
  3. When you do a great job of personalizing content, how much do your sales increase? 200%? 20%? 2%? 0.2%?
  4. When you have campaigns that are the same across channels, how much do your sales increase? 200%? 20%? 2%? 0.2%?
  5. Over the past decade, when you've done a great job of aligning your channels and you've done a great job of providing a technology-based solution to align channels, how much did your sales increase?  200%? 20%? 2%? 0.2%?
  6. When you identify a great new series of products/merchandise, how much do sales increase?
  7. When is the last time you experienced joy, love, happiness, thrill, excitement, satisfaction, or any other positive emotion after entering a mall-based retail store? What store provided you with that experience?
In sports, there is intense competition from "the living room". You have 7.2 channel surround sound and a 65 inch screen and access to every game live and you have great food (nachos) that can be made at home for a fraction of the price. Why should the customer ever get in a car, drive forty-five minutes or three hours, fight traffic, pay $20 for parking (can you imagine paying $20 to park at Macy's), pay $45 for a ticket for each of four people (or pay $145 for a ticket on the secondary market), pay $9 for a beer and $6 for a hot dog and $3 for a program. Why would anybody do that? Why would a person spend hundreds of dollars when the entire experience is digitized, at home, for free?

The only way you'd pay all that money for a three hour experience is if the experience gave you emotional benefits that greatly exceeded the emotional benefits that you get by staying at home.

Every Milwaukee Brewer game is televised in Wisconsin. Every Seattle Mariner game is televised in the Pacific Northwest. And yet, people pay to attend. The Brewers have Sausage Races. The Mariners just had a "Bark in the Park" promotion ... bring your dog to the game and your dog gets to run the bases after the game. At a Red Sox game, you sing "Sweet Caroline" as a collective group of 33,000 fans (so good). You attend a Cubs game because the stadium is old and decrepit ... the stadium "has history, tradition". At a Seattle Seahawks game, the stadium is designed to amplify noise ... so fans scream for the sole purpose of making it loud, which then impacts the opposing team ... and the Seahawks have the tradition of raising the 12th Man flag ... they've created reasons for you to be at the game ... they've created a reason for somebody to get in a car and drive downtown and deal with horrific traffic and sit in the rain.

In sports, the trend isn't toward a seamless experience across channels ... not at all. The trend is toward a great experience. The in-game experience, in-person, must be great. There must be emotional benefits from being at the game that greatly outweigh the experience of sitting at home, enjoying the game for free.

One wonders if this is a trend that has meaning in retail?

Might it be that a seamless omnichannel experience provides incentive for the customer to never enter a retail store? Might a seamless omnichannel experience lead to boredom, a boredom that can ultimately be better fulfilled by Amazon?

Might it make more sense for the retail experience to be so spectacular, so entertaining, so delightful, that the customer wants to get into a car and drive 20 miles to a retail store?

I mean, honestly, when is the last time you felt a thrill run down your spine after shopping Staples, Coldwater Creek, Barnes & Noble, Orange Julius, Penney, Sears? Be honest!

Time for your thoughts. Leave a comment.

July 09, 2014

Name Just One Retailer Who ...

... initiated an omnichannel alignment strategy, attempting to integrate digital and offline into a wonderful blend of sales bliss ... and actually grew comp store sales by at least 10% in the first year after integrating digital and offline?

Use the comments section to list all of the retailers who accomplished this level of success.

Or Tweet all of the businesses you are aware of that accomplished this level of success.

Go.