August 13, 2014

Feedback Loops

You cannot observe a feedback loop when measuring conversion rates.

We continue to hear how foot traffic is down in retail stores.



Here's the challenge, folks. Something changed in the 2010 - 2011 timeframe. Industry experts might posit that the Great Recession "changed everything". I don't subscribe to that theory.

If you worked in retail from 2000 - 2009, you know that retailers did not have direct response smarts. Nope. Well, I take that back. If you were a J. Crew and you possessed strong catalog marketing skills and possessed a direct marketing infrastructure, you had smarts. Everybody else? Not so much.

In the 2010 - 2011 timeframe, that flipped. Retailers, through a decade of trial and error, "figured it out". They learned how to sell online.

When retailers figured out how to sell online, things changed.

What changed?

Well, a subset of customers didn't have to get in a car, drive to a store, and conduct research. That was over. The website became a priority. And with every other business just a click away, a subset of the customers changed behavior. Not all customers. Not a majority of customers. Just enough customers to reduce in-store foot traffic.

Do you see how this feedback loop formed?
  1. Retailers were told they had to be "multi-channel" to be successful.
  2. Retailers built credible e-commerce sites.
  3. Some customers chose to use the sites and not visit stores.
  4. Store traffic dropped, and sales stalled.
  5. Retailers are now being told they fix this problem by being "omnichannel" - by being even more digital - a solution that might just reinforce the very feedback loop that created the problem in the first place.
You can't see this feedback loop forming when you're measuring conversion - or when you are performing "attribution" work. All you see is a bunch of digital channels that result in a purchase, so your worldview is that you have to "do everything", because that's what conversion data tells you.

You will miss the feedback loop by looking at retail comps and online conversion rates.

And as a result, you miss out on what just might be destroying your business, while at the same time your measurement techniques tell you that you are successful.

Hmmmm. 

P.S.: Give this a read, if you want to see what feedback loops can do (click here).