September 04, 2013

#Omnichannel vs. Algorithms

Yup - fall is just around the corner.

As the Northern Hemisphere tilts away from the Sun, temperatures cool, bringing about a season of change. Think about what you do for recreation in Fall, how does it compare with what you do for recreation in Spring? It's different, isn't it?

In other words, the simple tilting of the axis causes us to enjoy different activities, to behave differently, even though everything else is constant. We behave opposite of an omnichannel framework (where everything would be the same, regardless of season).

In the omnichannel world, everything is the same. The customer does everything, all year, every day. We have to emulate the exact same experience across all devices and channels. Right?

In the real world, channels are exploding, but the opposite is happening - customers are rapidly sprinting to their preferred niche.

Don't believe me? Take a look at the merchandise that sells via email marketing. Lower price points, free shipping, or lower price points plus free shipping. The channel is fundamentally different than the rest of the business, thanks to 15 years of incessant promotions designed to stimulate response. The customers who buy because of email marketing (buying is different than being on a list) are fundamentally different than everybody else.

If you have retail stores, look at your top 500 best selling items in stores vs. online. Sure, there are similarities. But there are major differences - at least in the data I get to see there are major differences.

If mobile is responsible for more than 5% of annual sales, then compare the top 500 best selling mobile items ... they're different than the top 500 best selling e-commerce items. Some are the same, some are fundamentally difference ... suited for a tiny screen away from home.

So customers are running off into their own, personalized niches, even within your business. Just go analyze merchandise performance, and see this for yourself.

Omnichannel experts demand that we patch things back together - creating integrated campaigns that all reflect the brand the same way - same merchandise - same promotions - same same same same same.

And the data suggests otherwise - niche niche niche niche niche.

Algorithms are only going to exacerbate this issue.

Don't believe me?

Perform a search on Google on your computer - then perform a search on Google on a different computer.  Or visit a news site - and look at the ads that you get - compare them to the ads that your spouse receives. Or visit Amazon on two different computers, they've been mixin' in up for close to a decade - doing the opposite of Omnichannel.

This level of difference ... called "targeting" by some, called "relevancy" by others, called "personalization" by another camp, is coming to every website, to all email programs (of smaller companies - big companies have been tailoring merchandise in email campaigns for 15 years), and especially to mobile. Sure, we've been told about this for decades, but it's unavoidable. And via machine learning / neural networks, we're not going to understand "why" an algorithm is doing what it is doing ... the neural network will self-learn, faster than we can understand what is happening - freaking folks out!

In other words, you'll merchandise your home page and landing pages dynamically (big companies already do this and have done this for a long time), you'll merchandise your email campaigns dynamically, and you'll merchandise your content marketing strategy dynamically. This strategy will appeal to different customer segments. This strategy will further push customers into personalized niches.

Niches are not congruent with omnichannel strategy. Niches are the opposite of omnichannel strategy.

We already see the result of niche activities in catalog marketing. Catalogers, using algorithms from the co-ops, have dramatically accelerated the age of their audience to 55+ rural customers, completely separating catalog brands from mainstream customer behavior. This is what algorithms do to omnichannel businesses - algorithms accelerate niche behavior.

Algorithms accelerate niche behavior.

Omnichannel eviscerates niche behavior.

Algorithms hate equality - algorithms demand efficiency. Omnichannel is all about equality - same merchandise and pricing and promotions and look and feel in all channels.

In the next few years, there will be a battle - the battle between controlling the experience for the masses vs. using algorithms to tailor the experience for the niches.

I'm betting that the latter strategy wins. It's more efficient, and therefore, more profitable.

What do you think?