September 12, 2016

Football and Nordstrom

Last weekend was the start of the National Football League season.

Think about what this machine does to generate revenue.
  1. You can attend a game, though that's hard to do as many teams sell-out prior to the beginning of the season ... so you'll pay 2x or 3x or 4x face value for a ticket through the secondary market. But if you attend, you tailgate before the game, creating a sense of unity and common purpose among the fans who attend (and you'll pay for parking - you don't pay for parking at Macy's very often, do you?).
  2. You can watch your favorite team for free on television, as long as you live in the market of that team. If not, fork over hundreds of dollars for NFL Sunday Ticket.
  3. Have money? You can bet on your team or any other team.
  4. Don't have money? You can play in a Fantasy Football League, drafting your own team and competing for a title. Now you have a vested interest in watching the games, because the outcome of the games determines how your fantasy team performs. #engagement
  5. ESPN and Fox and countless online outlets breathlessly cover the sport, holding your attention ... at no cost. #engagement
In other words, there's a whole ecosystem that surrounds the slate of games each week. Most of it is free, designed to keep you interested digitally. Diehard fans pay money ... the best fans pay a lot of money ... and the wealthy fans pay through the nose for their fifty yard line in-stadium experience and club seats and prime rib at halftime.

I know, I know. You work at Macy's. Or for a catalog brand with one store. You're going to tell me that there's no way that the NFL experience translates to retail. I got a lot of emails yesterday, and a lot of tweets over the past month telling me that I'm wrong.

I am going to tell you that you are wrong.

Now, I haven't worked at Nordstrom in a long time. But let me tell you a story of when I did work there. Every July, we held our "Anniversary Sale". This wasn't your typical sale (20% off, shop now) that most retailers exploit for 43 out of 52 weeks a year, thereby fully diluting the impact of each individual sale. Not even close. This was the first introduction of the Fall Merchandise Assortment. Here's how the event worked (I haven't worked at Nordstrom in years, so the event is likely different today).
  • New Fall Merchandise Was Offered at Around 20% Off For 17 Days.
  • Then Fall Merchandise Went Back To Full Price, Through The Rest Of The Fall.
That strategy, alone, was enough to cause utter madness. I had to work in a store the first day of the sale. Nuts, folks, nuts.

But here's the part of the strategy that worked against every #bestpractice in the industry.

The Nordstrom family authored rules that my team researched on their behalf. If a customer spent $750 in the past twelve months, the customer was eligible for special benefits.
  1. The customer, through contact with a store employee, could visit the store one week prior to the start of the sale.
  2. The customer could see the Fall Merchandise Assortment before anybody else - the store employee walked the customer "backstage", if you will, and gave the customer a private showing of the new merchandise assortment.
  3. The customer could pick-and-choose the items s/he wanted.
  4. The customer could not take the items out of the store, however. The items were "held" for the customer.
  5. On the first day of the sale, the customer walked into the store, met with his/her personal shopper (I.e. store employee), paid for the merchandise, and then waited while his/her merchandise was brought out. The customer paid for the merchandise, and felt special waltzing out of the store while the rest of the customers battled for the assortment on the sales floor.
  6. The store employee, as always, earned 7% of the sale (does that happen at Gap?)
  7. Oh, did I mention? The customer could invite a friend who did not achieve the $750 level to attend as well, and the friend could purchase as well. #customeracquisition
You might think, "who would be crazy enough to pre-order the merchandise and then wait for a week and then have to go back into the store a week later?"

Who would be crazy enough to do that?

The Very Best Customers That Nordstrom Earned Via Years Of Outstanding Customer Service, that's who.

My team tested the impact of this strategy ... customers who were enrolled into this program, on an equal recency/frequency/monetary basis ... spent 20% more than other equal customers.

20% more!!!!!!

Did I mention that sales from mid-July through early-August were equal to Christmas sales levels?

When is the last time you got customers to spend 20% more without investing marketing dollars or discounts or promotions (remember, the sale was going to happen no matter what)?

What would you do to generate a 20% sales gain among your best customers between Black Friday and Christmas? You'd pretty much have to beg the customer to buy something, right?

And yet, Nordstrom was pulling this off from mid-July to early-August.

My team sent letters to customers in April/May, telling the customer that the customer was within $x of meeting the $750 level to be included in the Anniversary Sale program. Those letters increased sales as well, pushing customers over the $750 level while generating sales in April/May.

The start of the NFL season is not fundamentally different than the start of the Fall Merchandise Assortment, offered via the Anniversary Sale at Nordstrom. There is an event off in the distance, customers can prepare for this event ahead of time, customers can take the events in for free, and best customers are essentially getting "Club Seat" treatment.

Yes, retail can emulate the sports experience.

But there needs to be a compelling event that is rare, one that offers something the customer wants, one that generates emotional benefits that encourage the customer to spend more prior to and during the event.

You can't replicate this experience by offering 20% off plus free shipping 43 of 52 weeks a year.

You have to have a series of events.

You have to work hard to create a sense of importance in these events.

You have to create an ecosystem that promotes the events ... this is more than paying a social media influencer $2,000 to say something nice. Think about Apple fanboys, for instance, because that's a good example.

And then you have to offer something so stunning that the customer has no choice but to participate.

I know, I know, this is hard work, and you are employed by Staples and there is nothing thrilling about selling inkjet paper. You have a different set of problems. You are being disrupted by e-commerce, and your industry leaders are telling you to turn your stores into distribution centers. You are being #disrupted.

But for everybody else, for those who do not sell commodity items that can easily be purchased at Amazon, you can create 4-5 events a year that are unique and interesting ... and then create a series of benefits that cause customers to spend money during the year so that the customer can participate in the benefits. This isn't gamification, it's common sense.

You just have to find a way to be creative - you have to understand what motivates your customer - and then you have to leverage your in-store experience in a manner comparable to a sports team.

Who within your company has the creativity to lead this process? That's a tough question to answer. And if you cannot answer the question, maybe that's what is holding your company back.