Retail, in the eyes of the everyday customer

Viral Loop is a new book by Adam L. Penenberg.  I’ve not read it yet but did go through the author’s guest post on TechCrunch.com (article link).  The Hotmail story is relevant to BetterRetail.  A summary:

Hotmail initially raised money through the VC firm Draper Fisher Jurvetson.  While considering advertising Hotmail founder suggested billboards.  Draper (founder of Draper Fisher Jurvetson) suggested putting PS: I love you. Get your free e-mail at Hotmail at the bottom of every email.  The Hotmail team did not like this approach and didn’t include it in launch.  Hotmail.com launched Independence Day 1996 and was adding couple of hundred users a day.  Draper still insisted on adding PS: I love you. Get your free e-mail at Hotmail.  Finally, the Hotmail team agreed; though they dropped the PS: I love you bit.

The impact was almost instantaneous.  Within hours Hotmail’s growth took on the shape of a classic hockey stick curve.  They started averaging 3,000 users a day, compounded daily.  By Labor Day they registered 750,000 users and within six months they were up to 1 million.  Five weeks after that they hit the 2 million user mark, adding more than 20,000 signups a day.

The rest is history.

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.

OfficeMax discovered that by keeping too many products in their store they started losing margins because associates were spending inordinate amounts of time helping customer find products. More choice was causing lower satisfaction levels (an idea eloquently described in ‘The Paradox of Choice’). Does this apply online too?