Deadly Sins of Retail Innovation - ADMA · !"#$%&'()$*++,) )-) Seven Deadly Sins of Retail...

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Deadly Sins of Retail Innovation (and how to avoid them)

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Seven Deadly Sins of Retail Innovation (and how to avoid them)Innovation in North American digital retail is explosive. If you read any of the trade rags, listen to analysts, or chat with consultants, it seems to be an un-yielding tide of new concepts to try, new solutions to pilot, or new vendors to assess. Keeping up with innovation has had retailers investing phenomenal amounts of time on “what’s next”. Their gaze has been fixed at the horizon since the launch of digital in the 90s, but that has also created some challenges. As they continue to build their house of innovation, cracks have appeared in the foundation.

I use the term “foundation” very intentionally, as much of the newer technology and innovation is predicated on having the strong foundations to support them. The symptoms of this are a diverse collection of KPIs; Lifetime Value, Average order Value, Retail Brand Engagement, Share of Wallet/Share of Mind. These are the bedrock of what it means to build successful retail practice but, as we see with some of the top retail brands, if you are so focused on the horizon, it’s hard to see where you are stepping today.

The 7 Deadly Sins of Retail Innovation represents work that is having to be done today, across many top tier retail brands, in order to support their innovation needs tomorrow. For many these cracks in the foundation are large enough that it has impacted their ability to embrace the new opportunities that we all read about. Many of these foundational elements don’t get press, that aren’t talked about, because for many US retailers this is viewed as a “fixing” issue that should have been addressed along the way. The irony is – addressing these 7 Deady Sins actually results in substantial increases in revenue, far beyond the promise of what lays on the horizon...




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Deadly Sin 1. Silos vs. ExperiencesIssue: In US retail, most brands treated the digital channel as “the digital channel”. Website customers were treated as just that. This view influenced the culture within the retail organization, resulting in marketing programs being channel specific, treating “web” shoppers as though they are somehow different than the rest of the customer base, and creating a compromized “retail brand experience” as shoppers engage across multiple channels, be it digital and/or in-store.

Cost/Opportunity: The cost of this is only beginning to be realized. Recent first party research with several top brands has shown that marketing to customers who are known to be engaged across multiple sales channels, in ways that support their preferred shopping methodology, can impact LTV by as much as 30%.

Solution: It’s called an “enterprise data model” or, if you would choose to go old school, the fabled “360 degree view of the customer”. This data model creates an “org chart” style view of the customer, allowing a depiction of their value, their shopping pattern, the influence of marketing, and their engagement to be expressed through every sales channel up through the brand. This model has been embraced by some of the largest brands in retail as the core of their data driven marketing efforts.

E N T E R P R I S E L E V E L

Website

B R A N D L E V E L O T H E R B R A N D S

Using an enterprise data model

view of the customer, a retailer was able to identify over

5,000

unique shoppers who engaged with a product on-line who, within 20

days, purchased that product in-store. (Yes, this creates

a marketable persona).

Mobile App In-Store

Desktop Site

Mobile Site

IOS

Droid

#345 #076

#126 #014




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Deadly Sin 2. Acquiring clicks vs. customersIssue: The birth of digital marketing resulted in our focus on a myriad of new metrics and KPIs. We began focusing on view-through, click through, and yes – even conversion. In our roles, we began getting incented on “transactions”, but with little regard for the QUALITY of the click or the transaction being driven. Being blunt – we stopped focusing on acquiring customers who would have sustained value for our retail brand.

Cost: First party research across multiple US apparel and lifestyle brands has shown that LTV numbers are on the decline. The number of “one and done” customers have surged, especially during holiday/seasonal purchases (typically viewed as times when new customer acquisition should be at it’s peak).

Solutions: There are several, from basic to advanced:

1) Better Nurture of New “At Risk” Shoppers/Customer – Know your marketing sources that drove the visit or first product purchase. If it came from a source where loyalty would be “questionable” – put the shopper into a nurture program.

2) Better Ad Targeting – When you have an enterprise data model, you have the opportunity to build “stratactical audiences” to use as “look-a-likes” for your display/social marketing efforts.

This means that not only can you identify the shoppers who are engaged with specific product lines, but refine that audience to be those who have made multiple purchases in the line or have purchased beyond that line.

3) Better “lifecycle marketing” strategy – If the click is the start of the relationship, managing the shopper relationship that follows is where the relationship is monetized. From working the consideration set towards the first purchase, recognizing lateral product opportunities based on that purchase (these aren’t always “complimenting products”), identifying volatility in a shopper’s purchase pattern of consumable product lines, to knowing when and how to ask the rock star customer for a referral. It all starts with the quality of the acquisition and having a plan for that shopper – no matter who they become.

First time purchasers who come through

comparison shopping are

75% less likely to conduct a secondary

purchase with your brand than those acquired through other channels (and some of those

numbers are scary too).

L.O.V.E.

Listen. Observe. Validate. Engage.



Forrester recently reported

that a typical retailer would generate

16% in incremental revenue

within the first 3 years of deploying conversation marketing at scale.

(That’s 46 million over 3 years for a $100 million US retailer).


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Deadly Sin 3. Batch and Blast Marketing vs. “Conversation Marketing”Issue: US retail fell into the trap of “email is cheap so I’m going to send a lot of it”. US retailers are sending different offers, different products, flooding into the shopper’s inbox at an average of 3 emails per week (during holidays the average was 8 emails per week). These emails more often than not failed to account for historic purchase activity, seasonal browse activity, known product propensity, or the shoppers active engagement with other offers/marketing messages.

Cost: Aside from the obvious subscriber fatigue and diminished value of your retail brand, there are substantial opportunity costs in not ”listening and acknowledging what your customer has told you through their actions.”

Solution: Move to a “conversation marketing” strategy. The concept is simple. If your shopper has initiated a conversation with you through their behavior, then acknowledge that instead of sending the next batch and blast email. This gets us into simple triggered email (browse abandon, purchase abandon, on-site ad interaction) but can extend to some advanced programs (seasonal shoppers, continuity/replenishment, purchase nurture).




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Deadly Sin 4. Digital Measurement vs. Retail MetricsIssue: As you scale the ranks of a retailer’s organization, everyone uses different measures to judge the success of their responsibilities. As senior level executives are running the company based on metrics that speak to the health of the company, their subordinates are often times looking at metrics that fail to align to those same goals, but rather are role/practice focused.

Cost: A friend of mine, Jim Novo, Principal at The Drilling Down Project, often refers to a “common measuring stick”. There should be cohesion in measuring of business critical KPIs that serves as the goals for the entire organization. If those metrics don’t exist, then maybe we need to create them (hint: see the last Deadly Sin).

Solution: Become data driven. It starts with finding a good pub and scheduling an offsite for leadership and key contributors. You discuss 2 sets of metrics; strategic metrics (those that are irrefutable and enduring drivers of business growth) and tactical metrics (that address current opportunities or challenges, yet still align to strategic goals). Every key contributor is charged with reporting on existing metrics (stratactical tactical), and developing a path of measurement of new metrics. This exercise provides transparency and alignment to business drivers, creates transparency and accountability, allows the team to applaud success and address/focus on short comings. This extends from EVP/C level execs through managers.

RecordSet: A US retailer extended Loyalty Program award notification into their website, letting shoppers know they have a $10 certificate to use.

Results: Peaked at a 10x conversion increase before settling at a 7x. That said, the goal was bolstering LTV – which early results are indicating a 38% increase in spend for the 12 months post the transaction.




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Deadly Sin 5. The discount brand (or… my retail brand is only known for discounts)Issue: US retailers are using discounts as the crutch to support their lack of brand development and commitment to the shopper. There. I said it. I know it’s harsh, but it’s true. This is one of the top challenges facing almost every retailer that I work with (especially general merchandisers).

Cost: Billions. Discounting as a differentiator not only erodes margin but marginalizes your brand paving the way for attrition. I could throw some stats your way, but instead I will offer one word – Amazon.

Solution: For many of my US Retailers, they are beginning the painful path of moving away from discount strategies. For some that has meant redefining their retail brand value/differentiation. For others, it has meant refining their loyalty program strategies, adding more value that isn’t simply based on discounting.

What nearly all of my retailers have agreed on is “conversation marketing”. I.E. Listening and responding to not just what your customers are telling you – but who they are... see Sin 6 following.

Life-Cycle Marketing

Attract Interest Capture Leads Nurture Prospects Convert Sales Deliver & Satisfy Upsell Cusomers Get Referrals




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Sin 6. Relevance without Context (or... dumb triggered communication)Issue: A growing issue for US retailers is the realization that they don’t know who we are talking to. Simplest example? Abandoned shopping cart emails. Are they relevant – sure. That said... context is more than understanding “what” – it’s “who” where that transitions triggered communication from tactical to strategic.

An example? Sure. Every retailer I work with has cart abandonment programs running... many with a discount as a 2nd or 3rd drip in the program. I start the conversation out the same way.

Would you change your abandon cart email message and offer if you knew I was:1) Potentially a higher value new to file customer?2) Someone you have paid (SEM/Display) to come to your website?3) A win-back customer/or am currently in attrition risk?4) A loyal in-store customer making my first purchase through the

website/mobile site/app? 5) Active in your loyalty program?

Believe it or not, I have yet to sit across from a retailer who says “Nope – I would give them all the exact same message and treat them identically.”

Cost: As mentioned before, blind discounting only hurts your bottom line. Without knowing who our customers are (and letting that influence our marketing strategy) we are wasting millions in discounts unnecessarily. When we discount, we fail to do so strategically – meaning that hit to margin isn’t an investment.

Solution: Remember that Enterprise Data Model we talked about all the way back at Sin 1? Yeah, it’s value is back again. The ability to mobilize these critical audience insights means (simply) smarter marketing.

360˚ Customer

View




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Sin 7. We ignored the Science (data science, that is)Issue: Data Science as a practice has been readily available for the last 15 years in turn key technology – but we ignored it. Now, everyone is in hot pursuit of the latest “predictive model”, but most retailers are poorly positioned to take advantage. Our data is still siloed, it’s dirty, and while we want the value of the data science – we aren’t in a position to spend the money for the specialists required to build accurate and compelling insights.

Cost: Simply put, if you compete on data science you win. Retail brands will live (and many will die) based on their readiness for this next “evolutionary step”. This is the path to customer centric retail and being able to rapidly respond to changes in our markets, merchandising mix, and sales channel adoption. Data science depends on a clean data set, actionable customer depictions, and an understanding that the science doesn’t end at an audience or segment, but influences the message, the merchandising and the campaign. Without these, your models simply aren’t effective. With it, your models (and revenue) soar.

Opportunity: It starts with the appetite. Knowing, right now that this is a top priority. Then you need an enterprise data model... something that allows your data to readily participate in machine learning/data science. You need to avoid common pitfalls like designing your models to only create audiences without the corresponding creative support. And you need a partner, one that understands what it means to manage the lifeblood of your retail efforts – from shoppers to product.

Multiple retailers in the US are realizing substantial

DECREASES INPROMOTIONAL COSTS

using DaysToNextPurchase models to optimize offer strategy,

eliminating offers for those shoppers with high

likelihood to transact.




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About the authorAngel Morales, author of this piece, has built his career in that gap between inspiration and the transaction – data driven marketing. While he has been called an Entrepenuer/Intrapenuer, a more accurate description is a “frustrated practitioner” with some hard earned SaaS/PaaS/DaaS business accumen. While trying to solve the problem of a unified, relevant, cost-optimized marketing ecosystem (for everyone) he has had the opportunity to launch his own companies, work with amazing partners, and is endlessly proud of the value delivered to over 200 retail brands.

Angel has always loved retail (insert heart-eyed smiley face emoji here). There is something basic and wonderful about it. It’s an exchange of “value” for dollars. This is as true when considering “who” to shop as well as the actual products purchased. If only everything leading up to that moment was as simple.

The collaborations he has led have seen the power of unifying email, display ad, on-site messaging and mobile marketing together. He has done so while still honoring the shopper with incredibly relevant messaging that creates consistency across our marketing channels. He’s led retail marketers to have gotten far more strategic with their spend; having optimizing offer, message and channels – to engage more shoppers and acquire customers more cost effectively than ever before.



www.alterian.com

Alterian is a leading provider of cross-channel campaign and RTIM management software, which is used by agencies and marketing services providers to deliver compelling and personalized customer experiences in multi-channel, multi-country scenarios for many of the world’s leading brands and corporations. Learn more at www.alterian.com and follow us on Twitter @alteriandigital and LinkedIn www.linkedin.com/company/alterian

Copyright © 2016 Alterian. All Rights Reserved. All company product or service names referenced herein are properties of their respective owners.


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Deadly Sins of Retail Innovation - ADMA · !"#$%&'()$*++,) )-) Seven Deadly Sins of Retail...

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