Fetzer's Footwear: Fed Up

Today, I am meeting Lauren Fetzer, CEO of Fetzer's Footwear, for a picnic at Bacteria Bay, located on the west side of Madrona Island.

Bacteria Bay is named after a mysterious illness befell the early settlers of Madrona Island, causing them to scratch uncontrollably and, in many cases, to run into the bay in a desperate attempt to alleviate their misery.

Kevin: "What are you listening to?"

Lauren: "But It's Alright by Huey Lewis, now that's a classic."

Kevin: "Alright."

Lauren: "You work with a lot of companies, don't you?"

Kevin: "True."

Lauren: "So let me ask you a question. Do the Executives at other companies always do what the CEO tells them to do?"

Kevin: "That's a loaded question. I think most Executives execute the spirit of what the CEO asks them to do."

Lauren: "I want for my team to execute exactly what I ask them to do."

Kevin: "Sort of like the robotics in your distribution center, right?"

Lauren: "In some ways. They're really loyal ... lifeless, but loyal. These folks, I'm asking them to be strategic, and they just keep focusing on tactics and in-fighting. Is it like that at other places?"

Kevin: "Why would you expect Bart Cox to be strategic when you blitz him with a weekly verbal assault because the Alderwood store fails to deliver positive comps?"

Lauren: "It's his job to get that store to perform."

Kevin: "So do you want him to focus on the tactics associated with getting one store to perform, or do you want for him to focus on a five year strategic plan?"

Lauren: "Both, that's the life of the multi-tasker."

Kevin: "But he gets fired if he doesn't get Alderwood to perform this year, right?"

Lauren: "Possibly."

Kevin: "Then that's what he's going to focus on."

Lauren: "And Penny keeps focusing on campaigns. I want to know what our marketing strategy is going to be to compete with Zappos in 2015."

Kevin: "Everybody keeps asking her how the campaigns are working, what would you like for her to do?"

Lauren: "I need a strategic plan from Penny, now. I'm fed up."

Kevin: "Fed up?"

Lauren: "Absolutely. I'm thinking of buying a business. I've been talking with the CEO of Buckley Boots. He's got a five million dollar business that can't get to breakeven, but he's got a social component to his business that is second to none, and he even sends catalogs to his loyal customers. I'm thinking we can fold his business into our business, and then leverage his expertise to develop a marketing plan that takes us to 2015 and beyond. What do you think?"

Kevin: "That's one way to get the job done."

Lauren: "Sure is. Would you be willing to evaluate their customer file so that I can understand the five year potential of their business?"

Kevin: "Absolutely! That's what I do best."

Lauren: "Good! I'll send the data tomorrow, have your review completed by next week."

Kevin: "Alright."

Fetzer's Footwear: You Can't Share That!

Once again, I enter Lauren Fetzer's office, as we prepare for her weekly Executive meeting.

Kevin: "What are you listening to?"

Lauren Fetzer (CEO): "'I Got A Man' by Positive K. It doesn't get much better than that, does it? Memories of college.

Kevin: "Alright".

Lauren Fetzer: "Here's what we're dealing with today. Penny Parker has her own Twitter account, and I pretty much let her run with it, I mean, what damage can a Twitter account do with 37,000 followers, of which only 27 really pay attention to anything that Penny says? Well, the rest of my team seems to think that Penny is a few french fries short of a happy meal, they hate what she tells her followers."

Kevin: "Didn't you hire me to help you provide a data-driven roadmap to 2015?"

Lauren Fetzer: "Yup, and we get there by resolving small issues that folks perceive to be big problems. Even Patton had to figure out where latrines should be stationed."

Kevin: "Alright".

We enter the Executive boardroom.

Lauren Fetzer: "Ok team, let's get down to business. Penny, how was business yesterday?"

Penny Parker (VP Marketing): "The website was 8% behind last year, our suite of mobile apps were 200% over plan, so in total, the direct channel was 5% ahead of last year. Retail comps were +4%, with Downtown Seattle leading the way at +11% and Alderwood bringing up the rear at -9%"

Bart Cox (VP Stores): "That's the best Alderwood has done in two months, folks. And Penny, while we're at it, why exactly did you tell everybody on Twitter that Alderwood is running double-digit negative comps. That's proprietary information, you can't share that!"

Ashley Zimmerman (VP Merchandise): "Yeah, and last week you told your followers that our Fall assortment delivery is delayed by a week due to problems at the Port of Tacoma. That's proprietary information, you can't share that!"

Connie Simpson (VP Finance): "Yeah, and what was up with your comment about us taking a bath on Streamline Yukon Hiker gross margins? That's proprietary information, you can't share that!"

Bill Bledsoe (VP Logistics): "Yeah, and you told your followers that you were giving a full refund to @butterbean411 because his shipment took nine days to be delivered. Now everybody who has a late shipment will want a refund, you can't share that!"

Penny Parker: "Kevin, help me out here. You analyze our comp customer segment. Those customer spent $82 last year, year-to-date, what are they spending this year, year-to-date?"

Kevin: "Your comp customer segment is spending $91 this year, year-to-date".

Penny Parker: "Customers are spending more this year than last year, hmmmmmm. Kevin, help me out here. What is the conversion rate for our average customer, and what is the conversion rate for customers who we know have a Twitter account?"

Kevin: "Your conversion rate last week was 8.2%, the conversion rate last week for customers with a Twitter account was 18.4%."

Penny Parker: "Where's the damage to the business, folks?"

Bart Cox: "Those are psuedo-metrics. Comp customer spend might have been $93 this year, year-to-date, had you not been out there blathering about company secrets."

Connie Simpson: "And you can't compare conversion rates between those two audiences, because the Twitter audience self-selects itself --- those are already our better customers. And why is it acceptable to share the fact we're taking a bloodbath on the Streamline Yukon Hiker? That gives our competition an advantage?"

Penny Parker: "What advantage? They browse our website every day, they knew the item was $129 and then was marked down to $99 and was marked down again to $79. Are you telling me that our competition is so stupid that they can't figure out that a 39% price reduction isn't damaging to the gross margin of that item?"

Bart Cox: "Maybe."

Ashley Zimmerman: "You just can't announce that we're having problems with product delivery. Aren't we supposed to be a multi-channel brand? We should do all things across all channels at the same time. We'll tell customers via e-mail and the website and stores on August 15 that the fall assortment is ready. The customer doesn't have to know that we were supposed to have the fall assortment ready on August 8."

Penny Parker: "Remember last February, I told our audience how awesome the spring assortment was, I featured key items in e-mail before they were available, we advertised key items online weeks before they were available. When the assortment was available, we had website comps of +80% for three consecutive days. Nobody complained about that."

Ashley Zimmerman: "Those comps happened because customers loved my merchandise."

Penny Parker: "Those comps happened because I told my customers that they had to love your merchandise."

Ashley Zimmerman: "Those aren't your customers, Penny. Without merchandise, you don't have anything to market."

Penny Parker: "And without my marketing efforts, how would anybody ever know you were even selling merchandise?"

Bill Bledsoe: "Don't we have guidelines for what employees can share with the public?"

Penny Parker: "Of course we do. But what I am doing is different. I'm not tweeting about how great my Crab Benedict was at the Rocky Shore Cafe this morning. And I'm not tweeting that we made $1.7 million of pre-tax profit last quarter. I'm tweeting the Fetzer's Footwear lifestyle. I am giving our customer an insider's view of our company, helping our customer feel a bit closer to us. I don't sell shoes on the same web page that I sell Ad Words on like Target does. I sell Fetzer's Footwear, good, bad, or indifferent. Customers don't trust tweets that are like '... another great meeting, we have the best employees'. Customers follow us because we sell a realistic life experience congruent with their life experience. Heck, we have 37,000 followers on Twitter, Nordstrom only has 31,000 followers, and they sell, what, a billion dollars of shoes each year or more? Come on, something is working here."

Connie Simpson: "Is it working? What is the ROI of your Twitter antics? Why don't you prove to us that you drove a million in sales last quarter because of your comments? Heck, we have a morning dashboard that proves that Bart Cox is failing in his efforts to revive Alderbrook, he gets nailed for that every morning. Who holds you accountable for your comments? Show me the ROI of your Twitter activities."

Bill Bledsoe: "That's a good point, Connie. I get hammered each time our call center and distribution center expenses exceed 10% of sales ... it's a simple, easy-to-understand metric. Kevin, what is the simple, easy-to-understand metric that proves that Social Media is paying the freight?"

Ashley Zimmerman: "That IS a good point, Connie. My merchandise sales are tallied at a divisional level. If a division is failing, I know it first thing every morning. Lauren, you look at me and you ask why sandals were down 4% vs. last year, and I have to explain myself. We are all held to certain levels of accountability. So yes, Kevin, what is the metric that proves that Penny is contributing to the bottom line?"

Kevin: "Don't let anybody tell you that there is a metric that proves that Penny is contributing to the bottom line via Social Media. Social Media is, by definition, not measurable. Oh sure, you can measure followers or click-through rates or coupon redemptions, that's all measurable. Say a customer purchased via a coupon from Twitter. How do you prove that the customer wouldn't have ordered anyway? The majority of Social Media metrics are faux metrics, providing the illusion of accountability. The metrics are not of the family of metrics that the rest of you are measured by, and that's just a reality of life, sorry to say."

Bart Cox: "Then Penny should stop tweeting company secrets, because we can't prove that her comments generate ROI."

Penny Parker: "No, I should tweet more, because my tweets may be responsible for a two or three percent increase in sales."

Lauren Fetzer: "Ok, I've listened to enough of this garbage. Bill, did I ever ask you to prove to me that warehouse robotics would generate a positive return on investment? You know you can't prove that our customer retention rates are better because of robotics. And yet, you lobbied for them and I gave you a ton of capital to get that done, right? How much capital does it cost Penny to tweet her comments to our customers? And Connie, you wanted a new ERP system installed last year. Did I ever once ask you to prove how much more customers would spend because we linked our Human Resources system to our Finance systems? Do you honestly believe that because HR can talk digitally to Finance that a customer in Spokane says 'oh goodness, that's neat, I'll buy an extra pair of shoes because of their neat back-end systems integration process'? Bart, you ordered 275 mannequins last week, did I ask you to prove to me that the ROI on the mannequins would offset the cost? Did you ever think that Penny might view your purchase as being stupid, that your purchase won't possibly sell another pair of shoes? And Ashley, come on girlfriend. If you think our customers cannot live without your merchandise, go work for somebody else, and we'll be able to prove your value in comparison to the merchant we hire to replace you."

Ashley Zimmerman: "Why are you siding with Penny?"

Lauren Fetzer: "I'm not siding with any employee, I am siding with the customer. I always take the side of the customer. If we have 37,000 customers who are riveted with what Penny has to say, she must be doing something right, and I'm willing to take a leap of faith that her low-cost method for engaging with customers is a risk worth taking. Most of you weren't here in 1995 when I told a store-based brand that we had to move online. Bart, you remember those days. You used to mock me, you'd ask if I sold 9 or 10 pair of shoes a day, then you'd laugh and walk down the hall and tell me to enjoy 'fun time'. Now the website is four times as big as our stores are, and you don't mock me anymore, do you? We can all see the future. The future clearly isn't about our website. The future is some fusion of social, mobile, our website, and our stores. And we can't predict what that will look like, can we? So we have no choice but to let Penny experiment. We're not going to legislate her comments by committee. If I think she is out of line, I'll whop her upside the head and get her in line. Otherwise, give Penny room to innovate. We just wasted a perfectly good hour of time, and we are no closer to having a plan for what our business will look like in 2015, are we? Go get bus, go invent the future. This meeting is adjourned."

Ashley Zimmerman (to Connie Simpson): "I think Lauren got up on the wrong side of the bed this morning. Take her out to drop off some crab pots and calm her down!"

Fetzer's Footwear: Knockoff

Today, I am joining Lauren Fetzer, CEO of Fetzer's Footwear, at her Executive Team meeting. As always, I enter Lauren's office, where she is listening to her iPod Touch.

Kevin: "What are you listening to?"

Lauren Fetzer: "The Boy Is Mine ... it was that Brandy / Monica song from the late 1990s, don't ask. I got this song from Napster back in 2000. You might say I stole the song, lawyers would certainly feel that way. And that's our topic at our Executive meeting today."

Kevin: "Illegal file sharing?"

Lauren Fetzer: "Close. How do you deal with competitors that knock off your product."

Kevin: "Alright."

We walk into the Boardroom.

Lauren Fetzer: "Ok Penny, what did sales look like yesterday?"

Penny Parker (VP Marketing): "E-Commerce was up 3% vs. plan and up 4% vs. last year. The website was down 11%, mobile apps continue their meteoric growth. Retail comps were +5%, led by Redmond at +16. Alderwood trailed the field, at -14%."

Lauren Fetzer: "Bart, what in the name of S.S. Kresge is going on with Alderwood?"

Bart Cox (VP Stores): "Why don't you ask Penny what is going on with the website?"

Penny Parker: "We already know the answer to that one, crankasaurus, the mobile app is cannibalizing the living daylights out of the website. You know that nobody is cannibalizing the living daylights out of Alderwood."

Bart Cox: "So how, Penny, are you going to drive increased website sales? And Lauren, why don't you ride Penny like you ride the Alderwood store? And when are we going to renovate Alderwood? That store hasn't been renovated since 1998? Maybe the reason that store performs so bad is that it looks like it is preparing for Y2K."

Lauren Fetzer: "Ok Bart, you made your point."

Connie Simpson (VP Finance): "Bart, you already know that Alderwood isn't on the renovation schedule until 2012."

Bart Cox: "By then, the store will have lost 25% market share. Smart. Retail is like a zit to you folks, e-commerce is all that matters around here."

Ashley Zimmerman (VP Merchandising): "No, merchandise is what matters around here, we all know that. Here's the problem of the day. Did you see that Zappos is selling the Hi-Tec Women's V-Lite Altitude Ultra? One-hundred and twenty-four bucks. And Fred Meyer has a knockoff of that item, a store brand selling for $49.99. We invented that shoe last year, remember? It is our Womens Q-Max Mountain Climber, and we sell it for $199. It's the same shoe. We have a fully gusseted leather tongue, moisture wicking textile lining, rustproof hardware, ours is 16oz, I mean, it's a complete knock-off by Hi-Tec, and I heard that Zappos is selling a ton of the things.

Connie Simpson: "What happened to sales of our Q-Max Mountain Climber since Zappos began to sell the Hi-Tec knockoff?"

Ashley Zimmerman: "Sales are down 39% to last year."

Bart Cox: "Lauren, what are you going to do about the sales decreases in the Q-Max line of shoes?"

Bill Bledsoe (VP Logistics): "We probably need to price match here, right? Maybe we can make up margin dollars by selling more."

Ashley Zimmerman: "That's a hard one. We'll sell 500 units at $199 and our cost of goods is $85, so we make $57,000 of gross margin. Say we lower the price to $119 and we sell 50% more units. That's only $25,500 of gross margin. Say we sell 100% more units, that's only $34,000 of gross margin. In fact, let me run the numbers here ... ... ... ... ... we'd have to sell 3.4 times as many shoes in order to break-even on the gross margin line. That won't happen."

Bill Bledsoe: "But you'd have more market share, and that counts for something, right?"

Ashley Zimmerman: "Sure, it counts for a reduction in profit of $23,000."

Bill Bledsoe: "Can't we sue them? I mean, we have a patent on the Q-Max line of Mountain Climbers, right?"

Ashley Zimmerman: "No, their shoe is just different enough to make it a unique line. It's a 16oz shoe, ours is 15oz. They have the exclusive Vibram hiking outsole, too."

Connie Simpson: "Penny, what is a viable marketing strategy here? I mean, how do we communicate to the customer that this shoe at $199 is fundamentally better than the shoe they can get at Zappos for $124?"

Penny Parker: "We can do an e-mail blast with a customer testimonial. Let's see ... we have an e-mail list of 100,000, and we'd get a 20% open rate, and 35% of those would click-through to the website, and 5% of those customers would buy the shoes, so that's ... what ... maybe 100,000 * 0.20 * 0.35 * 0.05 = 350 customers purchasing the shoes, so that's something."

Bart Cox: "Are you telling me that we have an e-mail list of 100,000 names and only 350 would buy something if we send an e-mail marketing message? 350? I thought e-mail marketing had the best ROI of any marketing channel? 350? I mean, why bother?"

Ashley Zimmerman: "350 units will translate to 250 units after accounting for returns, so we'll increase sales of the item by 50% over the 500 we'll sell without e-mail marketing support."

Bart Cox: "But that's a one-time fix. We send out something like 100 e-mail campaigns a year, so we have to advertise other products as well, right? So this e-mail campaign doesn't solve the core problem, here. The core problem is that Fred Meyer stores can sell a knockoff at $50 and Zappos can sell a knockoff from Hi-Tec at $124, and both win while we lose. So, what is our strategy? How do we deal with this?"

Connie Simpson: "Locally at least, we have a multi-channel advantage, don't we? I mean, nobody shops the Fred Meyer website, and Zappos doesn't have stores, so we should be well-positioned locally. Kevin, that should work to our advantage, right?"

Kevin: "On a local level, it could help you. All of your stores are here in the Pacific Northwest, so I can take a look at customers in Northwest Washington to see if they behave differently than in the rest of the country because of the Fetzer's Footwear multi-channel presence."

Penny Parker: "And Woodside Research said that by 2015 they expect multi-channel brands to see a 4% increase in market share over online brands".

Lauren Fetzer: "Ok, team, that's wonderful, but all you discussed were tactics and analytics. That makes it sound like you are busy or strategic, but not one person mentioned a solution to our problem, not one person even offered a suggestion. Allow me to restate the problem for you. What is our response when a big brand offers a knockoff item at only 25% of the cost? What is our response when an online brand offers a branded knockoff item at 37% off? Be honest, team. What is the reason that you would buy our item at $199 instead of buying the knockoff item for $125 at Zappos? It can't be customer service, because Zappos will get it to you tomorrow while we'll take 5 days to deliver it to the customer, and we'll charge the customer $5 to ship it to her. It can't be quality, because the customer realizes that for a 37% price decrease she'll accept lower quality. And we can't price-match big brands because that will just drive us out of business. So, again, I ask all of you, what is the reason that a customer would buy our shoe for $199 over the same shoe for $125 at Zappos or $50 at Fred Meyer?"

Bill Bledsoe: "We can't ever win that battle, can we?"

Lauren Fetzer: "I guess we can't. Oh well, let's just shut down operations today and go out of business. I'm sure Nordstrom is hiring in their shoe department, so we'll all enjoy selling the Hi-Tec Women's V-Lite Altitude at $125 a pop, earning a 7% commission on every single unit we sell. Sounds good to me."

Connie Simpson: "Can't we talk up our history? I mean, Zappos is a decade old business."

Lauren Fetzer: "Customers don't care about history. If they did, we'd all be shopping in Montgomery Wards stores, and the downtown corridor of any mid-sized city would have a vibrant collection of Gimbels department stores. No, we need to offer the customer a compelling reason to shop us over our competition. What is the compelling reason for a customer to shop us and not shop the competition? I need a compelling marketing answer to this question. I need a merchandising answer to this question. I need a logistics answer to this question. I need a store answer to this question. And I need the financials to work to our advantage. I don't need one-off e-mail campaigns, I don't need product development cycles that are too long to please the modern customer, I don't need it to take 5 days to deliver a pair of shoes to a customer, I don't need multi-channel bricks 'n clicks marketing theory that only benefits consultants and bankers, no offense Kevin, and I don't need to keep seeing the Alderwood store pulling -14% comps. I'm paying all of you $200,000 a year plus a 60% bonus to provide real solutions. So let's get to work on providing real solutions."

Fetzer's Footwear: Dependence Day

It is July 4 on Madrona Island, so it is time for the big Coho Bay Independence Day Parade. This year, 67 local merchants, politicians, and non-profit groups are scheduled to parade through the three-block downtown corridor. The Fetzer Footwear float is #1 in the pecking order, so the picture illustrates the view that Lauren and I have as we lead the parade. Not surprisingly, Lauren is wearing a beanie cap on this 57 degree morning, but does not have her iPod Touch with her today. Lauren is munching on a hot dog she purchased at a stand hosted by the Lion's Club ($4), stationed at Madrona Bank (a bank that did not receive TARP money).

We begin the 1mph drive through the three-block business district in Coho Bay.

Lauren: "Can you believe the crowd? This might be the biggest turnout we've had in the fifteen years I've been doing this."

Kevin: "I'm freezing. Does it ever get warm here?"

Lauren: "July 5 is the unofficial start of summer here on Madrona Island. June is often called 'Juneuary' because the temperatures are in the low 60s and there is plenty of drizzle to go around. We'll be in the 70s and sunny in just a few days. Now be honest, would you prefer that it be 98 degrees with a dew point in the mid 70s, like it is in Philadelphia today, or would you prefer this?"

(Lauren adjusts her driving gloves, gloves she's wearing because it is cold out, not because she is having trouble driving the giant hiking boot that is the Fetzer's Footwear entry in the parade).

Lauren: "Here, take a handful of Tootsie Rolls and toss them to the kids. Make sure you don't throw them at the dogs, dogs can die if they eat chocolate."

Kevin: "Alright."

(I toss a handful of Tootsie Rolls at a throng of enthusiastic children. Many of the Tootsie Rolls bounce off of the skulls of the children, prompting disapproving looks on the faces of the adults lining the business district here in Coho Bay).

Kevin: "Why exactly are you paying me to ride a float in the Coho Bay July 4 Parade?"

Lauren: "What do you think the ROI is of paying $150 to have this float in the Independence Day Parade, Kevin?"

Kevin: "Probably zero."

Lauren: "That's right. I doubt that a customer in Charlotte cares that we are in this parade. This community depends upon us, Kevin. We spend $150 to be in the parade, five dozen other organizations pay $150 to be in the parade, and all of a sudden you reach critical mass. Now the parade is big enough to draw a big crowd. The crowd is big enough that you can't be a resident of Coho Bay and miss the parade, it's what everybody will talk about. These people could spend this cold morning at home watching a hot dog eating contest on ESPN, or they could be out here being part of their own community."

Kevin: "Even if it is 57 degrees with a wind chill in the low 40s in early July."

Lauren: "That's exactly why you are out here. You'll be able to tell the story of how you needed to buy a hot chocolate from the Booster Club. And not surprisingly, the Booster Club benefits as well."

Kevin: "So everybody is dependent upon each other in a way, right?"

Lauren: "Exactly. Everybody played a role in making this parade a success. Did you see entry #27 ... that guy is riding a unicycle while carrying an America flag ... that's it ... but he paid his $150 and he's participating. Now let me ask you a question, Kevin, how do you separate out his impact in making this parade a success from the impact our float is having, and how do you separate out the impact of the Booster Club selling hot chocolate and the Lion's Club selling hot dogs for $4?"

Kevin: "You couldn't. They all contribute to the success in an undefined but dependent manner."

Lauren: "This is where you fail, Kevin. You always want to parse our business into tidy little components. You want to demonstrate that the Tacoma Mall store drives 3,000 visitors to the website, you want to prove that search drives customers to a landing page the yields a 9% conversion rate."

Kevin: "I don't think I'm the only person who wants to do that. My entire industry works hard to allocate success to the marketing components that created success."

Lauren: "Will you please wave at the folks, Kevin? And smile, too."

Kevin (waving): "Alright."

Lauren: "But how do you truly know which marketing component created the success? You've done this work with my business, you'll tell us that 32% of an order came from paid search, 22% from affiliate marketing, 8% from our blog, 12% from our Facebook presence, 9% from YouTube, 4% from having a regional store presence, and 23% was organic in nature. Well guess what? We hired a consultant before you, and gave her the same task. She told us that 23% of an order came from paid search, 9% from affiliate marketing, 13% from our blog, 17% from our Facebook presence, 10% from YouTube, 0% from having a regional store presence, and 28% was organic in nature. Who is right, Kevin, you, or the consultant we fired three months ago?"

Kevin: "Well, obviously, there is a level of confidence associated with each number, each number could vary by a certain percentage. It's possible we both are right."

Lauren: "Exactly. And if both of you are right, and your numbers differ that much, then why bother going through the exercise? I mean, honestly, your paid search budget will vary dramatically if you trust your number over her number. Pay attention to your vendor partners, Kevin. The really good ones willingly acknowledge that the percentages vary, and that there isn't a right or wrong answer."

Kevin: "Must be fun to be a person in the marketing department who reports to you, huh?"

Lauren: "Why, because I challenge assumptions? I mean, honestly, the numbers are garbage, Kevin. It's fool's gold. Here's what you do. You have a marketing budget, and you trust your marketing staff to spend it in the most efficient way possible. Their job is to deliver a 15% ad-to-sales ratio. They can spend the money anyway they see fit, they can experiment, they can try new things. But at the end of the year, the ad-to-sales ratio had better be 15%, or their budget will be cut."

Kevin: "A lot of folks would say that you have dramatically oversimplified a process that is inherently complex, a process that requires complex mathematical algorithms."

Lauren: "Look at this parade, Kevin. This isn't Independence Day, this is 'Dependence Day'. Every person in the community, the businesses, the hot chocolate, the police who make sure this goes off without a hitch, the street cleaner who scoops up the Tootsie Rolls that you errantly tossed at innocent children, they all depend upon each other. This event only works if everybody plays a role. Who would ever go through the process of allocating credit to each person, then prioritize next year's parade based on who contributed the most credit to making this a success?"

Kevin: "So you're saying that all marketing activities ultimately depend on each other in some way. Does that mean that you have to execute all marketing activities, do you have to be multichannel as the pundits would say?"

Lauren: "Heck no! That guy on the unicycle probably won't be here next year. That doesn't mean that the parade will be a failure next year, somebody will enter and will juggle bowling pins with mini-flags on them and that will capture the fancy of the crowd. Every channel and every marketing activity has a season, if you will. Seasons change. I'm looking for my marketing team to adapt and change, while keeping the ad-to-sales ratio under 15%. As long as it is under 15%, they can spend more. When they go over 15%, I throw the hammer down on them. And I know your next question. Yes, I trust that my marketing folks are actively measuring the ROI of everything they do. This isn't like they are throwing darts and making guesses, Kevin."

Kevin: "And yet, people love tradition. They come to this parade because they know that the Fetzer's Footwear boot float will lead the pack through the business district."

Lauren: "People are odd, Kevin. They say they like tradition. But go watch the video of this parade from 1992 on YouTube. You had the baggy pants bunch dancing to MC Hammer songs, they aren't here today and nobody misses them. You had an entry from the local organic farmers who were upset with President Bush for saying he hated broccoli. Heck, there were a bunch of kids out there walking around with pumpkins on their heads, they literally carved out pumpkins and wore them during the parade, they called themselves the 'Pumpkinheads'. Who knows what that was about? And they haven't been seen since ... imagine if they did that today and it got on Facebook and they couldn't get a job because they were the 'Pumpkinheads'? Anyway, I digress. All I can say is that all of that stuff is gone. What people care about, Kevin, is that the 4th of July parade still happens every year."

Kevin: "So in the case of Fetzer's Footwear, nobody cares about the marketing tactics you use. All people care about is that you have quality, stylish merchandise at a fair price. Your merchandise is like the parade. The styles you offer and the marketing you use to offer the merchandise to the customer, all of that can change."

Lauren: "Exactly, you get it! Now get off the float, it is time for us to talk with the press."

Kevin: "The press? What press?"

Lauren: "The Madrona Monitor, it's been the voice of the islands for more than eighty years."

Kevin: "I thought people were odd, that they didn't care about tradition?"

Fetzer's Footwear: A Mobile Moment

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?"

Kevin: "Alright".

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?"

Kevin: "Correct."

Lauren Fetzer: "And your data suggests that total sales, when you add e-commerce to app sales, are essentially flat, correct?"

Kevin: "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."

Kevin: "Alright".

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."

Fetzer's Footwear: Competition

Today, I am meeting Lauren Fetzer, the CEO of Fetzer's Footwear, to put crab pots in the ocean. The Dungeness Crab that are just off the coast of Madrona Island in Northwest Washington are among the most delicious you'll ever find.

I walk up to Ms. Fetzer, who is listening to tunes on her iPod Touch.

Kevin: "What are you listening to?"

Lauren: "Said I Loved You, But I Lied by Michael Bolton. Don't ask about my opinion of men."

Kevin: "Alright".

Lauren: "Hop in the boat, we're dropping off crab pots this morning."

Kevin: "It's 10:00am, you're not at work."

Lauren: "I work fifteen hours a day, seven days a week. If I want to drop a few crab pots in the ocean at 10:00am, I'll do it. And my employees can do it, too. They aren't slaves. You have to have a life. This isn't that Human Resources pap about work/life balance where you get to have three weeks of paid time off in exchange for forty-nine weeks of servitude. You can go do something at 10:00 in the morning."

Lauren fires up the boat, and we're on our way, patrolling the northern coast of Madrona Island, dropping crab pots in the ocean.

Lauren: "How do you compete with Zappos?"

Kevin: "Why do you ask?"

Lauren: "Our Executive team grapples with this issue every day. Zappos has a better selection of branded shoes than we do. They deliver shoes faster than we do. They use their scale to generate four cents of profit on every dollar, whereas our scale prevents us from leveraging that business model. So, ultimately, we can't compete with them, they've already won."

Kevin: "You sound defeated."

Lauren: "Quite honestly, it is the opposite. I think your job as a leader is to acknowledge what the competition does well, and then ask yourself if you can compete with the competition. If you can't compete with them, then you work around your competition instead of blowing straight through them. You probably watched 'Enemy of the State', where the Gene Hackman character talks about the advantages of being small. He talks about not challenging a large competitor at what they do best, you harass the large competitor by doing what you do best when you are small."

Kevin: "You have proprietary product, right?"

Lauren: "And that is a starting point. Our proprietary products sell 45% better than our branded products sell. You can't buy our proprietary products on the Zappos website. This is the problem with branded product. Eventually, somebody aggregates enough branded product that they become the resource, and when they are the resource, customers gravitate toward it, and customers talk about it. That's a swirl that Fetzer's Footwear cannot compete with. So why would I ever want to compete with that? We will carefully analyze what is selling in the branded world, and then create products that our customers have to have."

Kevin: "What about your stores?"

Lauren: "Well, we're experiencing the demise of the Mom and Pop store, aren't we? Again, how does the Mom and Pop store fight with the aggregation of branded product? It can't. So the only way we can survive is by having some branded product to complement our proprietary product. And then, the secret is to tell a story about our proprietary product that is so compelling, so unique, so persuasive that customers have no choice but to share our story for us."

Kevin: "That sounds risky."

Lauren: "Well that's life, Kevin. Should I go the conservative route and just let the business bleed a slow and painful death? Because that's what will happen if you compete with the monsters. If you were a department store, you'd never try to compete with Macy's or Penney, that's a recipe for disaster. You have to do something different, right?"

Kevin: "Seems like it."

Lauren: "So when you look ahead, and you put a five year plan out there, your marketing team and your merchandising team must have a compelling story to tell, one that causes the customer to be willing to purchase merchandise at a healthy gross margin. Apple has a story to tell, well, actually, their customers tell the story for Apple. Zappos technically lets customers tell the Zappos story, with employees facilitating the discussion. Amazon doesn't have a story, they have scale and price and availability. Best Buy doesn't have a story, they have scale and price and availability. Starbucks doesn't have a story, they have scale and price and availability."

Kevin: "How do you tell the story?"

Lauren: "I like the way Crutchfield tells a story. Their people appear to be more knowledgeable than anybody else, to me that's their story."

Kevin: "So you can do that via Social Media?"

Lauren: "Oh please. What a waste. Be honest, Kevin, do you want to be friends with that goofy Burger King clown figure from the TV commercials? Do you want to be friends on Facebook with that goon? Nobody, I repeat nobody, wants to be friends with a brand. You provide great customer service via Social Media, and then other people in Social Media talk about you. That's how you do it, Kevin, you don't create a bunch of campaigns to grow friend counts. Social Media is fool's gold as promoted by Social Media experts. You don't sell stuff by 'joining the conversation'."

Kevin: "So how do you sell stuff via Social Media?"

Lauren: "You don't. You just have to be excellent, and you have to tell a compelling story, one that people want to share via Social Media. I think you do that, you compete, by having your merchandising team craft the story. Your merchandising team must truly believe in the product, and must be absolutely compelled to share their passion with everybody on the planet. When you do that, and you do it well, and your marketing team is 100% behind the merchandising team, that's when you have success. Over the next five years, that's where we will find our way to growth. We have to have a vision for telling a merchandising story, and we have to have unique product at a healthy gross margin coupled with great customer service. That's the only way we are going to compete with Zappos online and with folks like Nordstrom in stores. You can't compete on price and assortment."

Kevin: "Ok."

Lauren: "You do this with your consulting. You don't consult on optimizing conversion rates, or in the catalog world, you don't figure out how to create a better co-op. You tell a unique story and you offer products that aren't available anywhere else and you let other people spread your story."

Kevin: "Gotcha."

Lauren: "Now let's go pick up yesterday's crab pots and have some lunch!"

Fetzer's Footwear: The HiPPO

Today, Lauren Fetzer, CEO of Fetzer's Footwear, has invited me to join her in a meeting with her Executive Team. The team is going over plans for 2011. Lauren is in her office, listening to her iPod Touch.

Kevin: "What are you listening to?"

Lauren: "Always The Last To Know by Del Amitri. The lyrics aren't what matters, I just like listening to this before Executive meetings because so often something comes up, and I'm the last to know."

Kevin: "Alright."

Lauren: "Let's go."

We enter the conference room.

Lauren: "Ok folks, let's get going. Penny, what did sales look like yesterday?"

Penny Parker (VP, Marketing): "The website was up 17% yesterday vs. last year, traffic was up 22%, conversion rates were down significantly, continuing a theme we've seen for a long time now. Retail comps were up 5%, led by Downtown Seattle at +22%. Alderwood was -2.8%"

Bart Cox (VP, Stores): "Don't ask, Lauren."

Bill Bledsoe (VP, Logistics): "Something doesn't make sense, folks. We've worked so hard to improve the website experience for our customers. We've implemented a myriad of improvements. Yet, no matter what we do, conversion rates don't improve. Well, they seem to improve for a while, then they just fall back to our baseline."

Ashley Zimmerman (VP, Merchandising): "What's on the docket to improve conversion rates in 2011?"

Connie Simpson (VP, Finance): "And given the potential sales we could generate if we improve conversion rates, it makes perfect sense to spend money to improve conversion rates, so I'm not here to get in your way."

Penny Parker: "Let's pull up a spreadsheet (Penny clicks on her laptop keyboard, a file opens and is displayed on a large plasma monitor). In 2011, we are planning to do a series of website improvements, based on testing we've done during the past year. You can clearly see the laundry list of improvements on the monitor. We have at least two dozen e-mail campaigns that will support our improvements and drive traffic to the website. We strongly believe, based on our tests, that we need to focus more on the product on the home page, and utilize less lifestyle imagery. The tests show we can improve conversion rates by 8.43% if we do this on an ongoing basis."

Ashley Zimmerman: "We've gone over this over and over and over again. We need to communicate the lifestyle aspect of our brand, or we don't have a brand, we're just Zappos without the social media tie-in."

Penny Parker: "And our testing shows that presenting the lifestyle aspects of our brand is counter-productive to driving sales and profit. We have the data to prove it."

Bill Bledsoe: "Are the result statistically significant?"

Penny Parker: "Absolutely. Our tests showed that there is only a 2 in 100 chance that the results are wrong."

Bill Bledsoe: "Wow, that's amazing. How often in business can you count on something ninety-eight times out of a hundred?"

Penny Parker: "I agree! That's why we need to stay the course. We need to focus on what has always worked. I think we just need to make our campaigns work harder. Everybody needs to step up to the plate and be accountable for delivering results."

Ashley Zimmerman: "That works to a point. If you follow that strategy to the extreme, we'd still be selling Colorado boots from the 1980s. At some point, you have to take risks."

Penny Parker: "My team measures risk. We test products against each other, we test creative treatments, we test home page offers, we test it all. When we follow the outcome of our test, we succeed."

Connie Simpson: "So why is it that we do all of this testing and optimization and analysis and nothing ever gets better, Penny? What was our annual retention rate last year, 55%? It's been 55% for a decade. You keep improving everything, and the needle doesn't move a bit."

Penny Parker: "I disagree. Had we not tested and optimized, maybe our retention rate would be 47%?"

Connie Simpson: "If you go back to 1999, how many online marketing campaigns were we executing each year?"

Penny Parker: "Maybe a dozen, a monthly e-mail campaign at most."

Connie Simpson: "And today, how many online marketing campaigns are we executing on an annual basis?"

Penny Parker: "Oh, heavens, thousands, maybe tens of thousands, coupled with hundreds of thousands in search."

Connie Simpson: "And yet, our annual retention rate is the same as it was ten years ago. So what is the point of all of these campaigns? Do any of them generate incremental sales, or is all of the work done by your team just cannibalizing work done by other members of your team?"

Bill Bledsoe: "This is a multi-channel world, Connie. Multi-channel customers are the best customers. We have to be in all of these channels, or we lose market share among the most valuable customers."

Ashley Zimmerman: "I need the creative flexibility to run the products I want to run, and I need the creative flexibility to present the products the way I want to present them. I'm not going to have some marketing bean counter telling me what I should or should not do. Do I tell the marketing bean counter how to execute a test, do I dictate the control size, do I force the marketer to use a certain type of statistical test, do I judge the analytics wizard based on one-tail or two-tail tests? Certainly not! They are the experts, they get to do what they do best. I, too, should be able to do what I do best. I am the expert when it comes to presenting products."

Connie Simpson: "And yet, Penny's data suggest that you are not the expert, her data suggests that your customer has preferences that you can follow in order to improve business."

Ashley Zimmerman: "Connie, do I tell you how to invest money? You lost $200,000 last month by hedging against the Euro, what does that have to do with selling shoes? Maybe we should have Penny run optimization tests against your hedging strategies. And Bill, do we honestly think that your delivery tracking system is working best? Maybe we should have Penny measure how many days it actually takes to get a product to a customer, and then optimize against UPS or USPS or FedEx. How does that sound? I mean, seriously, everybody loves measurement and optimization until you are the person being measured and optimized. Then it isn't so much fun. Lauren, I need the creativity to do what I think is best."

Penny Parker: "And Lauren, I think it is sub-optimal to present merchandise the way Ashley wants to present merchandise, I think it is hurting our business."

Bill Bledsoe: "Kevin, you are sitting there smiling, why?"

Kevin: "Lauren, what do you think we should do?"

Lauren Fetzer: "I think we need to give Ashley the room to do her job as she sees fit, and when she fails, she's fired. Penny is free to measure Ashley's techniques, but by the same token, Penny is accountable for her own campaigns, and as best I can tell, her campaigns aren't working, because our annual retention rate isn't moving. So in time, Penny and Ashley will succeed, or they will fail."

Bart Cox: "That's how we do things in retail. We don't need to be hit over the head with a bunch of complex metrics. Either things work, and you keep your job, or they don't work, and you're fired."

Kevin: "That's why I was smiling. Lauren is playing the role of ..."

Penny Parker: "The HiPPO. She always plays the role of the HiPPO."

Kevin: "Yes, and that role, despite being despised in the social media and analytics world, is needed for dispute resolution."

Bart Cox: "We don't have disputes in retail. We do what I say we should do. My team marches in formation to my commands."

Penny Parker: "But that's a problem with this company. We're not a data-driven company. We have the metrics to prove points, and then Lauren's opinion trumps others."

Ashley Zimmerman: "We need to be a merchant-driven company, Penny. Without merchandise, we are out of business. Without marketing, we aren't profitable."

Lauren Fetzer: "We'll, we've beaten this horse long enough, it is time to move on to something productive."

Penny Parker (whispering to Kevin): "HiPPO".

Fetzer's Footwear: You Have To Want It

Today, I am meeting Lauren Fetzer, CEO of Fetzer's Footwear, at Eagle Heights, a barren prairie on the southern end of Madrona Island. As usual, Ms. Fetzer is listening to her iPod Touch.

Kevin: "What are you listening to?"

Lauren: "Walking on Broken Glass by the Eurythmics" That's how I feel when I'm dealing with my creative team, you have to tread lightly with them."

Kevin: "Why are we meeting here?"

Lauren: "Look around, there aren't any trees here. There were trees at one time, but they were harvested a hundred years ago. Now, they have a hard time getting started again. In November and December, the windstorms down here are brutal. So the landscape changed, it evolved."

Kevin: "What would it take for a tree to grow here again?"

Lauren: "Well, it would have to really want it."

Kevin: "What does that mean?"

Lauren: "A friend of mine has a saying. She says 'you have to want it' when it comes to success. I couldn't agree more with any other statement than that one. The tree would have everything working against it. The soil is sandy now, so if it did grow to a reasonable height, the winds in November and December would uproot it. The tree has to want it!"

Kevin: "It wouldn't be a best practice to start growing here, would it?"

Lauren: "Absolutely not. But if the tree made it, and the odds are against the tree, it would pave the way for a forest. Nobody would ever recommend that the tree take root here, would they? No, the experts would find the perfect environment, they would take soil samples and they would measure everything so that they could find the best place to plant the tree."

Kevin: "And they would be successful, wouldn't they?"

Lauren: "Define success? The tree would grow, but it would be one of, what, a million trees? Is that success? Who wants to be part of a forest?"

Kevin: "What does this have to do with Fetzer's Footwear?"

Lauren: "Have you ever taken part in strategic planning, Kevin? I assume you have."

Kevin: "Sure."

Lauren: "Strategic planning is not a spreadsheet exercise, Kevin."

Kevin: "Meaning what?"

Lauren: "Penny Parker, you've met her, she is our VP of Marketing, she has all of these fancy spreadsheets and metrics. Her life is a series of campaigns. She'll line up two hundred different campaigns for next year. She'll figure out how to optimize every single campaign, to squeeze an additional eight percent out of every single campaign. Then she sits back with this big smile. She adds up eight percent on top of eight percent on top of eight percent and thinks she has the answer. All we have to do to grow the business is be perfect across two hundred consecutive campaigns, and if we're perfect across each and every one of two hundred campaigns, our business will grow by something like thirteen percent. She has the metrics to prove it, she opens up this big spreadsheet and puts it up on a plasma monitor and everybody gazes as all of the metrics, and she is manipulating one cell and twelve other cells all improve. Wow. She's really optimizing the business, isn't she?'

Kevin: "Why the attitude?

Lauren: "Well, for one thing, her strategies never work. Who can be perfect two hundred times out of two hundred? If you do your best, you might improve the performance of one hundred and fifteen campaigns, and you'll inadvertently fail eighty-five times."

Kevin: "That's still improvement, right?"

Lauren: "It's fools gold. Her answer is to simply execute more campaigns, if you have more campaigns, you'll have more sales, and if you have more sales, your business will grow. Paid Search, Email Marketing, Affiliate Marketing, Organic Search, Print Ads, Banner Ads, Re-Targeting, Radio. Now we have thousands of campaigns, and our marketing team and analytics team believe they can optimize each and every one of thousands of campaigns, squeezing an additional four percent and six percent out of each one. It's funny, Kevin, nobody in marketing ever says that they expect campaigns to perform less well. Every single metric in every single spreadsheet points north, showing improvement. Fools gold."

Kevin: "Maybe you hate metrics and spreadsheets? There's lots of people who feel that if you test and optimize your business will experience unfettered growth. They are frustrated by people like you."

Lauren: "We had this consultant in a few weeks ago, maybe you know him, his name is Chip Cayman. He had this document that said if we grew to a hundred stores, our sales would essentially quadruple, his spreadsheets showed that multichannel customers are worth nine times as much as single channel customers, he showed how the website would benefit from a national store presence. Nice presentation, classic stock photos that he paid $6 each to obtain, great math, an opportunity to rack-up ten or twenty million dollars of debt that a spreadsheet suggests will be paid off with profits from the stores in ten years."

Kevin: "So what is the problem?"

Lauren: "He didn't want it."

Kevin: "He didn't?"

Lauren: "Not even close. He wanted somebody to love his spreadsheet, his math. He didn't give a rat's behind about the relationship between a customer and an employee ... it is a humbling experience to serve a customer who wants to buy shoes in a store. No spreadsheet solves for a human being wanting to help another human being."

Kevin: "Why are you telling me this?"

Lauren: "Tell me I am right."

Kevin: "So what if you are right? You are the CEO, it doesn't matter."

Lauren: "It means everything. Penny hates it when I ride her on this topic, she calls me a 'HiPPO'"

Kevin: "A hippo?"

Lauren: "Highest Paid Person's Opinion. She has all of this science, and she believes that if I just listened to her science, everything would be fine. Then I tell her that she 'has to want it'. I tell her to have a passion for our business, not a passion for spreadsheets and optimization. And she just stares at me, she says the spreadsheet tells the whole story. But listen to me, Kevin. She's been optimizing year after year after year, and somehow, our annual retention rate, the percentage of customers who bought last year and will buy again this year, that never budges, it always stays the same. Well don't you think that if she was right, if we listened to her and her glorious metrics, that the annual retention rate would improve? See, that's the problem. If all of that math and optimization were right, business would improve. It doesn't improve. She doesn't want it, she wants science."

Kevin: "So what does wanting it look like?"

Lauren: "Wanting it means being willing to take a risk. There are no risks in spreadsheets, only numbers. Wanting it means innovating. Wanting it means moving beyond campaigns. Campaigns are nothing more than glorified begging, you are trying to manipulate the customer into buying something."

Kevin: "Isn't that what a marketer does? Don't marketers manage campaigns?"

Lauren: "Marketers tell stories. See, that's what matters. A marketer that doesn't try to tell a story is a marketer that doesn't want it. Here's the neat thing. If you tell a story, and if you are consistent with that story, and then the sales naturally follow."

Kevin: "Or they don't."

Lauren: "And if they don't follow, it is self-evident that the story didn't resonate with the customer. Then you try another story. The marketer must have an instinct for getting from Point A to Point B. Look, we're all getting killed by Zappos. They tell a story. Their story is flimsy, of course, but it is a story. They ship you product fast, they have every sku imaginable, they have perceived free shipping, and their employees will chat with you via social media. That's a story. There's no optimization and spreadsheet manipulation and campaign management there, heck, where was the best practice for that business model before they invented it? Coming up with that story, a marketing story supported by merchandise, that's hard work, Kevin, it isn't easy. That's what I call 'wanting it'. We have to want to beat Zappos so bad that we come up with a better story. When people don't have a better story, they revert to campaigns and optimization and spreadsheet manipulation."

Kevin: "So the tree trying to grow on this prairie needs a different story?"

Lauren: "Exactly!"

Kevin: "Seems like it would be easier to simply transplant this tree in the forest on the other side of the island."

Lauren: "Yes, it's easier to manage by spreadsheets and metrics and campaigns and optimization. That's not what I am looking for. We need to break through, we need to tell a story that is more compelling than the story that Zappos tells. We need to want it more than them."

Kevin: "Yup, you're just another dumb HiPPO."

Fetzer's Footwear: The Executive Team

I enter Lauren Fetzer's office. As always, she's listening to her iPod Touch.

Kevin: "What are you listening to?"

Lauren: "Bonnie Raitt: 'I Can't Make You Love Me', it reminds me of things that happened in college."

Kevin: "I'm sorry."

Lauren: "Moving right along, today you're going to get to meet with my Executive team. We'll have you sit in on some of our meetings. Feel free to offer your opinions, I won't censor them. And don't let anything Bart Cox says offend you. Every good Executive team should have one crusty individual with a contrarian point of view. All viewpoints are welcome at Fetzer's Footwear. Let's go."

We enter the Executive Boardroom.

Lauren Fetzer: "Good morning everybody. I want to introduce Kevin Hillstrom to you. Kevin will join us from time to time to review our current strategies, analytics, and help us achieve our goal to craft a vision for the future"

Bart Cox (VP, Stores): "Who is this guy, again, no offense?"

Lauren Fetzer: "Kevin is a direct marketing industry analyst, and Bart, Kevin previously worked at Eddie Bauer and Nordstrom, so he does know something about stores."

Bart Cox: "Sure he does."

Lauren Fetzer: "Let's start our meeting. Penny, please share business results from yesterday."

Penny Parker (VP, Marketing): "Comp store sales were up 2.8% yesterday, led by Bellevue with a +8.3%. Alderwood was at -6.5%. The website was up 14.5% from last year, and was up 9.5% vs. budget. The Mountain-ariffic e-mail blast was responsible for the entire increase yesterday, that was an outstanding campaign."

Lauren Fetzer: "Bart, what happened at Alderwood yesterday? That's three consecutive weeks of negatives at Alderwood?"

Bart Cox: "We've talked about this for two consecutive weeks, the mannequins are too athletic, and as a result, we're not drawing customers into the store."

Ashley Zimmerman (VP, Merchandising): "Bart, we have the same mannequins in Bellevue and Bellevue is running positive comps."

Bart Cox: "The Bellevue customer is different, she is more likely to hike in the Cascades. The Alderwood customer is functional, she's going to wear her shoes to Red Lobster. You already know this, just look at the taper reports that show what sells by store, the best selling styles are totally different."

Bill Bledsoe (VP, Logistics): "Penny, do you see these customer differences online? In other words, do you have online taper reports that show what sells by geography?"

Penny Parker: "Now that's a great idea, we'll go back and take a look at that!"

Connie Simpson (VP, Finance): "Year-to-date, retail is trending at +3.3%, online is +11.4% to last year at +6.8% to budget. I'd say that we're having a very nice year. Your teams deserve kudos for their hard work."

Lauren Fetzer: "Let's talk a bit about our vision. Penny, what did you learn about where the experts think online retailing is headed?"

Penny Parker: "I purchased a Woodside Research report that predicts 88% of businesses will generate up to 22% of their revenue in 2015 from a combination of mobile and social."

Bart Cox: "You know, folks have been saying all of this virtual stuff will wipe out retail for at least fifteen years now. And it never does. Retail keeps plugging along. Last time I checked, retail comprised 90% of all purchases, just like it did fifteen years ago. So, yes, keep thinking visionary thoughts, folks, but remember that from a net sales standpoint, almost nothing has changed in the past fifteen years. Back then it was telemarketing and direct mail, then it was the internet, now it is mobile and social."

Ashley Zimmerman: "That doesn't change the fact that we have to change with the times, Bart. You probably didn't envision a customer walking into your Downtown Seattle store with a Fetzer's Footwear iPhone app back in 1995, did you? Today she walks into the store, and if the item she saw online isn't available in the store, she punches up her app and gets the item shipped to her home. So you have to adapt and change."

Bart Cox: "And I want credit for that sale, too, because I generated that sale. Bill, when are we going to make the reporting changes necessary to show that I drove that sale?"

Bill Bledsoe: "Who cares who drove the sale, just be thankful that somebody bought something! In that case, the website, the store, and the app all contributed to the sale. That's the future. Trying to parse out that combination and assign weights to each channel is nothing short of fool's gold."

Bart Cox: "Or a lack of analytical imagination."

Lauren Fetzer: "So the future involves more channels and more analytical complexity. That's what we need to focus on. Kevin, where do you see the customer in five years?"

Kevin: "I think she'll have moved away from static websites. I believe that the traditional e-commerce website is already a 'dead man walking' if you will. So much of what a customer does today has nothing to do with the traditional e-commerce website. She's on Facebook, Twitter, Foresquare. He's on a mobile app that basically shifts eyeballs away from a traditional website. All of the things we deal with in e-commerce, our entire knowledge base, is dying. We need to learn to be really good at being there for our customer. When she needs us, we're there. When she doesn't need us, we quietly disappear. We cannot assume that she will visit us like we are some sort of destination that she desperately needs."

Bart Cox: "That's just hokey theory."

Ashley Zimmerman: "Sure it is, but we need to think about it, because you can see it happening already. We worked so hard to get user generated comments on our website, only to realize that we get a hundred comments on Facebook and Twitter for every user generated comment on our own website. User generated content on a website is so 2008. My customers love my product, and they talk about it all of the time in their social circles, they don't come back to our site to chat with us, we have to go out there to chat with them."

Bill Bledsoe: "I don't want brands following me out into my 'solar system', if you will, to chat with me, that's just plain creepy."

Connie Simpson: "So that speaks to our future, doesn't it? How do we follow the customer out into the 'cloud' without announcing that we are right there next to her, screaming at her every five minutes to buy something?"

Bill Bledsoe: "That's why I like our our series of apps for all mobile devices. We're essentially following the customer in an invisible manner. When she needs us, she just punches us up!"

Penny Parker: "That's where my job becomes challenging. Somehow, I have to encourage the customer to carry our apps with her without sounding like a snake oil salesman."

Lauren Fetzer: "Good discussion, folks. I want for us to honor our meeting requirements. We have ten minutes left before this meeting ends, and as you all know, we end all meetings at five minutes to the top of the hour so that nobody is late for the next meeting. Thanks to Kevin for being here, he's going to join us a lot in the future as we flesh out where we think we want to take Fetzer's Footwear."

Bart Cox: "I think we want to open a bunch of stores!"

Fetzer's Footwear: Vision

Lauen Fetzer awaits me at the bottom of Mt. Youngstown. Today, we are going to hike up the mountain, this is the view that awaits us at the top of the 1,100 foot mountain ---->

As usual, Ms. Fetzer is listening to her iPod Touch via earbuds.

Kevin: "What are you listening to?"

Lauren: "Will Smith, 'Getting Jiggy With It'. You want the proper motivation to climb a mountain, don't you?"

Kevin: "Alright."

Lauren: "Let's go, dude."

Kevin: "What are we talking about today, Lauren?"

Lauren: "Have you ever tried to get a team to work together?"

Kevin: "Absolutely."

Lauren: "It's not an easy thing to do. I find that I spend close to sixty percent of my time trying to get people to work together in an effective manner. And the ratio doesn't ever change. I was awful at managing people a decade ago, so I spent a ton of time putting out fires. Five years ago, I spent a ton of time trying to develop people, to get them to achieve their potential. Today, I spend a ton of time trying to get people to climb on board and follow my vision. No matter the agenda, I spend sixty percent of my time motivating or challenging or encouraging people. I keep repeating the same messages over and over and over again, and it seems like nobody is ever listening to me."

Kevin: "I don't think that is uncommon."

Lauren: "The big problem now is getting people to follow my vision."

Kevin: "What is your vision?"

Lauren: "I think e-commerce is moving 'into the cloud'. In other words, the future of e-commerce has nothing to do with websites and shopping carts and landing pages and all of that pap. The future of e-commerce happens off of the website. It happens on your mobile device. It happens on whatever replaces Facebook. It happens where the customer wants it to happen, in other words, the customer doesn't go to a destination website, but instead, Fetzer's Footwear finds the customer. And quite honestly, Fetzer's Footwear in 2017 looks a lot more like CNN than like Zappos. Every company will be a media company."

Kevin: "How do you articulate that vision to your employees?"

Lauren: "My Executive Team hates it when I talk about this, they say I am being way too theoretical. They want for me to break my vision down into distinct projects that they can work on. I don't think it works that way."

Kevin: "Why not?"

Lauren: "The minute you break a vision down into projects, you lose the momentum of the vision. If I tell my employees to create apps for Facebook, they will inevitably lead us down the Facebook campaign rat hole. They understand campaigns, campaigns tie the past to the present. I don't want a campaign, a campaign does nothing for me. I want one of our customers to think Fetzer's Footwear when she has a need, and if she's spending the majority of her time on Facebook, then our business should be available for her when she needs us."

Kevin: "How do your programmers act upon this vision? They need detailed specs in order to be able to write code that meets your needs, right?"

Lauren: "Certainly. They get really angry with me when I 'get visionary' on them."

Kevin: "People can't possibly read you mind, you know that, right?"

Lauren: "I don't expect them to read my mind. I expect them to build a roadmap to the future."

Kevin: "What if their vision of the future is different than your vision of the future?"

Lauren: "My vision of the future is the one that matters, right?"

Kevin: "To an extent. Every employee will combine your vision with her vision, and that can create brilliance, and that can create chaos."

Lauren: "Exactly! So how do I stop the chaos?"

Kevin: "I don't think you get to stop the chaos. If you stop the chaos, you limit brilliance."

Lauren: "Would you be willing to spend some time with our Executive team? Would you be willing to sit in on upcoming Executive team meetings, and assess how we work together, assess how we push ourselves to the future, assess how we get ourselves stuck in the past?"

Kevin: "Certainly."

Lauren: "Good. We'll have you start meeting with us next Wednesday."

Kevin: "Who will I be meeting with?"

Lauren: "We have five members of our Executive team. Penny Parker is our VP of Marketing. I think she's a problem. She breaks everything down to a campaign. She wants to know what the objectives of a campaign are, then she wants to buy media, then she wants to measure how effective the campaign was. It's this cycle that causes her to completely lack vision. I'm tired of this 'conceive - execute - measure - conceive - execute - measure' cycle."

Kevin: "Ok."

Lauren: "Bill Bledsoe is our VP of Logistics. He is responsible for IT, for moving product between stores and the website and our suppliers. He's like the arteries and veins of our company. Without Bill, we're sunk."

Kevin: "How about merchandising?"

Lauren: "Ashley Zimmerman. Pure genius. She is our product, she is Fetzer's Footwear."

Kevin: "Stores?"

Lauren: "Bart Cox. Couldn't care less about e-commerce. He finds e-commerce and social media in particular to be completely phony. Everytime Ashley talks about creating lasting relationships on Facebook, he talks about lasting relationships with real customers in-person in stores. He's the person who holds our e-commerce efforts back, and that's probably a good thing, because his view of in-person relationships cause us to think long and hard about what the future of e-commerce looks like."

Kevin: "Who else?"

Lauren: "Connie Simpson. She runs Finance. She's a wet blanket. She views the world like a series of mutual funds. She doesn't like to invest in anything new and risky, and I'm here to tell you that I cannot achieve a vision of the future when somebody won't invest in anything new and risky. That being said, we need Connie, we need somebody with her discipline."

Kevin: "So I'll attend your Executive meeting next Wednesday, assuming that the authorities are able to retrieve my exhausted body from the top of this mountain?"

Lauren: "I have med-flight insurance, we'll be able to get a helicopter up here to bring you down."