Retail, in the eyes of the everyday customer

I realize this is an incredibly rough patch for retailers and apologize, in advance, for sounding too critical. I need to remind myself that it’s easy to find faults.  Had I been a retailer I too would be crying myself to sleep.  But, I’m not a retailer.

Why is this such a bad stretch? We all realize consumer spending is at an all time low but is this really why your sales are down 60%? You’ve always prided yourself on being a niche retailer so why are you looking at consumer confidence index these days?

See I believe this correction was needed.  Too many retailers simply carry products manufactured by other people, who in turn, simply produce those goods in third world countries.  Any retailer in this category should be happy to have survived this long.  According to Porter you should have gone extinct a long time ago.

Not everyone is hemorrhaging though, and we have success stories along the entire retail continuum.  Companies like J. Crew and Vermont Teddy Bear Company.

Retailers should model after Google.  The job of a retailer is to filter millions of prospective products and create a neat list of 50-100 for their customer-base.  Like Google, they need to police bad products and remove them from the results mix.  Like Google, they need to hone listening skills and know customers better than they know themselves.

Customers leave a ton of data but to capture real insight one needs to look beyond sales data, understanding why prospective shoppers walked into to your store, looked at products but ultimately decided to not buy is just as important.

If you don’t have a deep data warehouse and sophisticated mining tool then simply pick up the phone and talk to customers.  If you don’t have customers’ telephone numbers invite your husbands/wives/girlfriends/boyfriends and ask them what they think about the ‘cool’ stuff you carry.  If your typical customer persona visits the store and then leaves without a purchase chase them down and ask what they were looking for, ask what they thought about your store and products.  Now I am not suggesting you to do these things literally, you know your product and customer better than I could ever.  Take this information and convert it into something that would work on your customer.

This is an incredibly good time to acquire customers who are frustrated by the retailers they currently do business with.

The world is slowly slipping into the hands of Super Crunchers.

As every interaction starts getting recorded it will only improve the super cruncher’s ability to mine data and identify powerful causal relationships.  One company offering super crunching services to the eCommerce world is Proclivity.  Their Proclivity Mail platform allows marketers to individually market to customers based on purchasing likelihood, thus maximizing retailer margins.  Think of it this way: if their data mining algorithm identifies you as a motivated prospect with a high price premium tolerance for a specific item then instead of giving a 7% discount they’ll convert you with a 5% discount, thus leaving 2% more for the retailer.  Over thousands of transactions this quickly adds up.

Today Proclivity raised another $5.5 million which means their system will get even more bad-ass.

Led by the former head of BI and data mining at über etailer Bluefly Proclivity could grow to be a very scary company.

Learn more about their founder here.

I’ve just finished reading one of my favorite books this year.  It’s called Super Crunchers and I believe it has  some very valuable lessons for retailers.  The central theme is that through statistical tools like regression analysis it’s possible to test for the co-dependence of variables.  Finding these dependencies allows companies to exploit them.  Let me explain through my made-up example…

Borders (the book store) knows sending a mailer with a 60% discount lifts sales.  The discount variable is directly related to sales.  This is a no brainer and gives no strategic advantage to Borders as Barnes & Noble knows that too.  However, let’s assume Borders analyzes my transaction history and notices that every time I make a store visit and buy coffee odds of my purchasing a book increase 3x.  Now this is a solid marketing gold-mine.  Borders knows the average margin on each book I buy and can compare that to the cost of coffee.  They can now send me a coupon with 5 free coffees at their store.  Further, since they know what I get, mocha latte, they can specifically offer 5 mocha lattes in their promo.  I’m sure this will improve conversions.  Super Crunching gives Borders a tool to exploit my behavior and drive their bottom-line sales.

In the book, the author Ian Ayers cites numerous examples of Super Crunching.  He shows how Super Crunching accurately predicts good wine vintage, legal outcomes and even airline ticket prices.

Ian Ayers is a brilliant man and I also recommend you read his other book Why Not?

So whether you are a small etailer with no stores or one with 500 think of ways to deep dive your data and discover relationships you never knew, or expected, could ever exist.  Your customers will love your intuitive ability to predict their desires and they’ll reward you by opening their wallets.

Piano toilet paper

Andy Sernovitz is a passionate advocate for Word Of Mouth Marketing (WOM) and his book Word of Mouth Marketing: How Smart Companies Get People Talking is a must read for all niche ecommerce retailers.

So how does small retailer with a limited marketing budget ignite a following?

The first thing to seriously consider is the caliber of the product.  No amount of WOM helps an ill-conceived idea.  The second step is to concentrate on finding evangelists (an article about finding evangelists).

Alright, now that you’ve done the groundwork and identified a nice list of passionate customers you need to dream up creative ways of using them as brand propagators.  Here are two ideas:

Give away one item for free – Pecard prides itself on being an awesome leather horse saddle polish.  Mary, who lives in Ypsilanti, Michigan is an evangelist who orders on a regular basis.  The polish itself is inexpensive ($4) but matching shipping costs make it unattractive for the non-Mary’s of the world.  So, next time Mary orders I’d send her two free bottles accompanied with a hand-written note requesting she share the polish with a close friend.  Passionate horse lovers almost always know other passionate horse lovers.  If next month you find a mysterious new order from Ypsilanti, Michigan you’ll know your strategy worked.

Get evangelists to sign up as spokesmen – I love my dry-cleaners and if they made a local TV commercial I’d be more than happy to endorse them in front of a camera.  So if you sell great bonsais ask your evangelists if they’d mind being local references.  Those who want to participate could even provide their email addresses and give on-the-fence customers a good reason to buy.  If you think asking for email an address is a little too extreme just remember people do it all the time on message-boards.

Yoox.com has a useful little feature where when a customer lands on a product page (in my example handbags) if you don’t find what you were looking for you can click on “Email me when other items like these are available”.  When similar items get added to their site Yoox will send an email.

This is a nice way to get people to register:

A few months ago I bought a new hot-sauce and fell in love with it.  Now it’s time to restock but I have no clue where I purchased it.  The packaging makes no mention of the grocery store that housed it.  I could look online or search for the product on my next grocery trip but by not mentioning store name the grocery chain has taken me one degree away from ever buying this again.  A totally unnecessary risk.

A Photo:

Heavenly Chef hot sauce

If restaurants added a feedback feature on bills it would give valuable input on how people liked individual dishes.  As long as the feedback process was painless most patrons would participate and the information could be integrated to update the menu.  Avinash has shown how simple feedback gives valuable insight through 4Q, my idea merely extends the concept to an offline environment.

Concept Bill