February 27, 2008

Secret Sauce

Eighteen months ago, I was invited to a breakfast session on customer behavior, hosted by a large management consulting organization.

I think there were maybe seven of us who bothered to attend, four of us from Nordstrom. The session hosts waited and waited for more folks to show up. We got off to a late start.

About thirty minutes into a Powerpoint presentation typical of a breakfast session hosted by management consultants, an attendee sitting next to me raised his hand.

Attendee: "Ok, what's the secret sauce?"

Speaker: "Excuse me?"

Attendee: "Just tell me what the secret sauce is. What should I do?"

Speaker: "You should segment your customers, and market to them as unique segments".

Attendee: "Thank you".

The attendee picked up his briefcase, pushed his chair back, stood up, and walked out of the room. For the next thirty minutes, the six of us who remained progressed through another dozen Powerpoint slides.

Secret sauce.

We seemingly want to know what we can add to our existing products/services to make them great. We want this information for free. We want this information now. We want the secret sauce to work across all industries. And when somebody tells us that the secret sauce is ketchup, we're offended. Surely the secret sauce can't be ketchup, any rube can use ketchup!

Maybe this person felt that ninety minutes of his time was a fair trade for free muffins and profound enlightenment at no cost to his organization.

In the past two decades, I've rarely seen an instance where something more exotic than ketchup solved problems in a dramatic way. The biggest problem I had to fix was at Nordstrom in 2001, having to do my part to turn a $30,000,000 loss into profit in short-order.

The secret sauce?
  • Have the circulation team decide who receives a clearance catalog, not the clearance merchandise manager.
  • Hire experienced people to solve a problem now.
  • Hire inexperienced people, and train them to solve tomorrow's problems.
  • Implement a hotline program to mail catalogs to customers immediately after a first purchase.
  • Replace RFM selection techniques with statistical models.
  • Eliminate remail catalogs, replacing them with new creative that was more productive.
  • Circulate customer acquisition catalogs below breakeven, paying back within 0-24 months.
  • Evaluate housefile circulation based on incremental profit, after factoring in cannibalization.
  • Mail internet customers differently than catalog customers.
  • Use matchback analytics to understand how catalogs drive business to the website and to stores.
  • Use test/control groups to measure incremental volume, offsetting the overstated results of matchback analytics.
  • Build a routine to send multiple targeted versions of an e-mail campaign to different segments of customers.
Nothing in that list represents "secret sauce". It's ketchup and sugar and spices all blended together.

If you do all of those things well, and all of your executive counterparts do comparable things in their field of expertise, you suddenly have something that appears to be a "secret sauce" to outsiders.

3 comments:

  1. It is a little frustrating when company leaders expect simple answers to complex problems.

    When working in general advertising agencies, I would present testing strategies in an effort to distill solutions to increase profits from existing budgets. Inevitably, the agencies leaders who had no DM experience would ask me, "What is your BIG IDEA"?

    My answer, "There is no BIG IDEA. Only small ideas expertly executed."

    This was not the answer they were looking for. They wanted a single solution to a multifaceted problem.

    Does this represent the same issue you are bringing up in your blog? Maybe not. But it sure sounds comparable.

    ReplyDelete
  2. Yup, that's the issue.

    Now honestly, there are big ideas. And each big idea has a probability of success associated with it. The probability of success is low ... really, really low. So low that you don't keep your job if it fails, or you become Seth Godin if it succeeds.

    ReplyDelete
  3. The number of big idiots often outweighs the number of big ideas.

    ReplyDelete