January 29, 2015

Final Post On Hippomans: Using Omnichannel To Improve The Future

Ok, we've spent a month diagnosing the problem at Hippoman's. Fun times, no doubt about it.

Now it's time to fix Hippoman's. Nobody hires a doctor to diagnose the problem. We go to the doctor, asking the doctor to fix what ails us.

There are plenty of omnichannel ideas that you'd love to implement, to fix a business like Hippoman's.


Let's start with merchandise. There aren't enough new items, and the trend in new item development is starving the customer file. This, more than anything, needs to be changed. I'd set goals for both the merchandising and marketing teams.
  • 40% of Annual Bonus.
  • 100% Payout = > 700 New Items and > 40 Winners.
  • 50% Payout = > 600 New Items and > 30 Winners.
  • 0% Payout = Failure to achieve either 600 new items and/or 30 winning new items.
Why put this on the marketing department? Simple. If marketing shares this objective, then marketing must help the merchandising team promote new items. This forces the marketing team to put promising new items in email campaigns, key landing pages, and the home page. If both departments are not given the same incentive, then the incentive is not going to be met. And if the merchandising team ignores the objective, then there will be a department of marketers who are white-hot angry, putting pressure on merchants unwilling to change.

Second, I'd focus on new customers. Again, both merchandising and marketing have the same objective.
  • 40% of Annual Bonus.
  • 100% Payout = > 450,000 New + Reactivated Customers.
  • 50% Payout = 350,000 to 449,999 New + Reactivated Customers.
  • 0% Payout = 0 to 349,999 New + Reactivated Customers.
Why have the merchandising team be accountable for new + reactivated customers? Simple. If the merchandising team does a great job of finding new items and carrying over winning items, then more customers will purchase. And since Hippoman's is highly dependent upon new + reactivated customers, then any merchandising gains will clearly manifest in new + reactivated customers. This is the metric everybody needs to focus on. The marketing team is going to have to provide full transparency, so that the merchandising team knows that marketing is doing a good job. Better yet, marketing and merchandising get to learn about each other. In the merchandising objective, the marketing team is going to have to comb over a lot of merchandising reporting, in order to do a better job. Finally, if marketing ignores the objective, then there will be a department of merchants who are white-hot angry, putting pressure on marketers unwilling to change.

I'd also create an objective that pleases the omnichannel community. My objective would look like this:
  • 20% of Annual Bonus.
  • 100% Payout = At Least 20 Items That Generate > $50,000 on Tablets + Phones.
  • 50% Payout = Between 14 Items and 19 Items That Generate > $50,000 on Tablets + Phones.
  • 0% Payout = 0 to 13 Items That Generate > $50,000 on Tablets + Phones.
Notice how this objective is written. It is written in a way that encourages the merchandising team to take an active interest in finding the merchandise assortment (likely to be different than the core merchandising assortment) that works best on mobile devices (very important for future success). The objective forces the marketing team to acquire new customers on mobile devices, and as a consequence, teaches the marketing team the merchandise that works best on those devices. The objective helps both merchants and marketers begin to move to the future. Best of all, the marketing team is going to have to fully explore modern marketing (omnichannel) techniques, if the marketing team wants to achieve the objective.

I would make sure that reporting is published, weekly, to the entire company, on the progress of the marketing/merchandising team on the three objectives above. And when marketing and merchandising succeed, I would pay big, big bonuses to all employees ... all employees. Everybody should share in the success.

I would make sure that every employee, yes, EVERY employee is bonus eligible. Every employee must have an incentive to perform well, and must be compensated nicely if they perform well. I recommend the following bonus incentive strategy.

  • Hourly Employees = 5% of Annual Salary depends upon meeting bonus criteria.
  • Analysts = 10% of Annual Salary depends upon meeting bonus criteria.
  • Managers = 20% of Annual Salary depends upon meeting bonus criteria.
  • Directors = 40% of Annual Salary depends upon meeting bonus criteria.
  • Vice Presidents = 80% of Annual Salary depends upon meeting bonus criteria.
  • C-Level Executives = 120% of Annual Salary depends upon meeting bonus criteria.
This form of "variable pay" appropriately rewards all employees - all employees share in the success of the company. All employees, of course, are then required to pay attention to each objective. There is no reason why a Distribution Center Manager cannot ask why the merchandising team isn't developing enough new items ... no reason whatsoever. There is no reason why a Finance Director cannot ask why the marketing team isn't acquiring enough new customers ... and if marketing is not acquiring enough new customers, there's nothing wrong with marketing demanding more $$$ from finance to get the job done. The objectives force all employees to focus on the stuff that matters, and jointly holds employees accountable for success.

I know, you're going to say, "But Kevin, we can't do that, that's too expensive." Fine. Then don't do it. Keep all the money for yourself. And then don't complain to me when business performance continues to suffer. I'd rather pay my employees to fix my business than pay a vendor for an omnichannel solution that won't move the needle one bit.

That's where I'd start.

How would you create incentives, to make sure that employees do the right thing for the business? Discuss.