Today, Lauren Fetzer, CEO of Fetzer's Footwear, asked me to attend her Executive Meeting to share stats on a mobile/iPad app hear team launched in May. As I approach her office, I notice that Lauren is listening to her iPod Touch.
Kevin: "What are you listening to?"
Lauren Fetzer: "I'm Not In Love, by Will to Power. A nicely updated version of the 10cc classic, don't you think?"
Lauren Fetzer: "So that you know, we're having a bit of a kerfuffle over our iPad/Mobile app. Your data suggests that existing online buyers are switching to the app, causing website visits to decrease and causing e-commerce sales to decline, correct?"
Lauren Fetzer: "And your data suggests that total sales, when you add e-commerce to app sales, are essentially flat, correct?"
Lauren Fetzer: "So Connie Simpson, our CFO, is going to wonder why we waste time on shiny new toys that do not deliver incremental revenue. Penny Parker, our marketing leader, will advocate pursuit of new marketing channels. Bart Cox, our Store Executive, will probably be highly disengaged."
Lauren Fetzer: "Let's go, then!"
We enter the Executive Meeting Room, where a lively discussion is taking place about why South African soccer/football fans are compelled to make noise with the vuvuzela.
Lauren Fetzer: "Good morning, everybody. I've asked Kevin to attend today and share his analysis of our iPad/Mobile app, but first, Penny, let's go over sales results from yesterday."
Penny Parker (VP, Marketing): "The website was down 6% to last year, our mobile app went bonkers again, so the online channel in total was up 8% to last year. Retail was +1% yesterday, led by our Redmond store at +11%. Alderwood brought up the rear, at -16% to last year."
Lauren Fetzer: "Bart, what the heck is going on at Alderwood, their results get worse every single day?"
Bart Cox (VP, Stores): "Don't ask, I've got it under control. And I could use some marketing help to drive traffic into the store."
Lauren Fetzer: "Kevin, can you explain what is happening between the website and the app?"
Kevin: "Sure, you've now had your iPad, Android and Blackberry apps active for a full month. During that time, apps are now up to eight percent of total online sales. What is interesting is the composition of customers who use the app. Buyers using the app are 88% existing buyers, in fact, they are among the best customers you have. In addition, overall customer retention rates have not changed in the past month, and purchases per buyer have not changed in the past month. Clearly, a portion of the file shifted their allegiance from the website to the app."
Bart Cox: "My store managers tell me that customers are using the apps to identify merchandise that does not appear in our stores, the customer is literally using the app to buy online product while standing in a store. Our store managers don't like that, because it takes a sale away from them."
Connie Simpson: "If our apps didn't increase total sales, then why are we even bothering with them? Lauren, you've always preached that we need to focus on merchandise, not on channels. Well, an app is just a micro-channel, and if it isn't adding incremental customers or isn't creating incremental sales, let's just prune the channel and save expense. We can't keep focusing efforts on all of these shiny online channels that seem to add complexity but never seem to add sales."
Penny Parker: "This isn't a channel issue, this is a customer service issue. If a customer wants to shop via a mobile app, let her shop that way, who are we to tell her how to shop?"
Ashley Zimmerman (VP, Merchandising): "But the app is a terrible shopping experience. You get this boring little screen with a handful of choices. I want the customer to see my full assortment when she visits the website, I don't want for her to be given micro-choices, her shopping experience should be like an all-you-can-eat buffet!"
Bill Bledsoe (VP, Logistics): "And this takes work, folks. My team has to divert resources to our apps, we're diverting resources away from the website. The website still drives more than 90% of our online sales, but we're spending 25% of our resources right now on our mobile apps ... we tweak them, we optimize them, we respond to customer preferences. It takes a lot of work, and we're not gaining incremental sales."
Bart Cox: "Store managers hate 'em ... they take sales away from the store. Maybe that's the problem at Alderwood, Lauren, the app is killing the store, huh?"
Lauren Fetzer: "So Connie, how would you advise us on making investments in new channels? I mean, if we follow your logic, we could conceivably never launch a new channel, just because the new channel would cannibalize sales from the existing channel, right?'
Connie Simpson: "I don't think it is that simple. Take paid search. We found that paid search cannibalized half of our organic search results. But we ran a profit and loss statement, and we learned that the paid search investment made up for itself in eight months, so on an annual basis, we were making money. That's a decision that makes fiscal sense. If our apps are simply cannibalizing existing sales and we're spending developer resources on something that isn't driving incremental sales, then I'm not confident we're making the right decision."
Penny Parker: "But Woodside Research says that by 2015 we'll see 42% of all online sales happening in the mobile channel. If we're not there, we're not learning."
Ashley Zimmerman: "Did Woodside Research predict the economic collapse? What do they know, they're always wrong, and we pay them. Geez."
Bart Cox: "Store managers hate apps."
Ashley Zimmerman: "I'm just saying that if apps takes away from the merchandising experience, then I'm not in favor of our apps. We need to present the entire merchandise assortment to the customer."
Penny Parker: "But what about the customers who don't care about the entire merchandise assortment, what about the customers who only care about the deal of the day? All they need is the app, the hop on at 11:00am and see the deal of the day and they buy that specific item. Those customers don't need a full website experience, do they? Doesn't anybody care about the customer experience?"
Lauren Fetzer: "Here's where I come out on this, folks. We've always been willing to cannibalize our own sales. We did it with paid search, which sounds crazy, right? I mean, we pay for sales that we could get for free, but we did the math, and the long-term math supported the investment. We did it with e-mail, right? We found that when we don't send e-mail campaigns, we still get 55% of the sales. But we did the math, and the math supported the investment. We even do it in retail, right Bart? We opened our Redmond store knowing full well that it would cannibalize Bellevue. So we're going to make an investment in Mobile, folks."
Ashley Zimmerman: "But the merchandise experience isn't great."
Lauren Fetzer: "Ashley, don't focus on what the experience is today, focus on what the experience should be, and then put pressure on Bill's team to make the experience be one that a merchant can be proud of."
Connie Simpson: "Do we care that app users aren't visiting the website? I mean, they're missing out on the entire brand experience, right?"
Lauren Fetzer: "I don't care. We need to learn how customers interact with this form of media, and then we need to adapt to it. Make something happen, folks. Go out there and invent the future, don't act out of fear."
Bill Bledsoe: "But my development team is being stretched thin. With 25% of the development team focusing on apps, the remaining folks are forced to deal with an ever-increasing number of website issues."
Lauren Fetzer: "We are not backing off of our pursuit to invent the future. It is obvious that our customers love the app, or our best customers wouldn't all be switching to our apps, right?"
Penny Parker: "Absolutely!"
Lauren Fetzer: "So we move forward, we learn, and we adapt."