Loyal Customers On Sale

Two things caught my eye over the past few weeks. First, a NYT article  reported that some high-end retailers are resorting to ”secret sales,  whispered discounts and discreet price negotiations between a customer and a sales person in the aisle of the store,  in order to convert browsers into buyers.  The reporter went on to suggest that this very personalized recession-driven pricing strategy is democratizing the time-worn tradition of offering a  Private Sale to a store”s best customers.   Most of the invitations to these private sales come in the form of targeted emails to a store’s best customers. Neiman Marcus,  for example, regularly invites “special” customers  to an, online only,  ”Midday Dash” where they can get discounts of  up to 50%  on luxury items.

The second item was a comment by Greg Furman, founder and chairman of The Luxury Council, who said that  it wasn’t long ago that  many  luxury brands saw the internet as only a mass marketing vehicle but now, for many luxury retailers, more and more of the action on the internet is highly targeted.   An example given was the segmented e-mail messages Bloomingdales sends  to  its online shoppers  with offers like,  “Today only! Take $500 off your regular-priced online purchase of $1,500 or more in Mens.”

What struck me was  all the  retailers mentioned were using price as a primary promotional tactic and they were targeting their best customers,  the same customers who had been willing to pay a little more based on their perception of better product quality, more attentive service or  simply shopping convenience. During a recession, especially one as deep as the one we are in,  consumers  reevaluate all their discretionary spending. What’s the message being sent by these retailers ? All other things being equal … quality, service, convenience … we can now offer you the same merchandise for 30, 40, even 50% less than you paid twelve months ago. But once the economy improves, we expect you to go right back to paying a premium for shopping with us. My guess is that  for many of these customers the message is clear. For smart buyers, a price discount trumps all other considerations.  For luxury retailers, that is a pretty scary thought.

Mixing Media

I love books and book stores. My favorite airport stop is the book store. I have actually missed flights while I pondered  which books to buy. I also read the newspaper every morning and, creature of habit,  still get the New York Times delivered to my home.

Dave, my friend and former business partner,  is like minded,  although he’s never admitted to missing a flight over a book and he switched to the Boston Globe many years ago. Several weeks ago Dave surprised me. He confessed he had  gone Kindle. It wasn’t a proactive decision, Kindle was a gift, but now he is hooked and, like many early adopters, effusive in his praise for this new technological marvel.

That’s how I got interested in Kindle. Not interested enough to buy one yet,  but the electronic reader is now on my radar screen. And that’s why a recent Ad Age story, “Showtime Taps Amazon’s Kindle for Advertising” caught my eye.

Starting in June Showtime is offering Kindle users a free download of the pilot script for it’s new series, “Nurse Jackie”, featuring Emmy award winner (Carmela Soprano) Edie Falco. The offer is being promoted with banner ads on Amazon and on the Kindle storefront. The script comes with cover art,  show scheduling information, and a call to action to go to Sho.com to watch the pilot episode. The strategy according to Jon Haber, US Director of OMD’s Ignition Factory,  is to “use the client’s content as advertising”. From a marketing perspective,  I think this is pretty clever. From a consumer perspective,  I think it is one more example of the blurring of the lines between entertainment, editorial content, and advertising.

You may remember from previous posts that the White’s are masters of the universe when it comes to channel surfing, pre-recording favorite shows, and generally avoiding TV advertising at all costs. Around the dinner table, we recently discussed how advertising  has  also started to infiltrate the books we read, that discussion prompted by my decision to purchase a $54 bottle of Don Julio anejo,  the favorite drink of Dirk Pitt,  Clive Cussler’s  sophisticated adventurer and bon vivant.

Now that we have Kindle with direct internet access it’s not too far fetched to expect that the subliminal advertising included in our electronic reading will also  include links to websites where we can buy immediately.  It’s the next generation of the product placement strategy we now see all the time in  movies and on TV.  For some reason  this new technology-driven  strategy that mixes media seems more insidious.  Maybe because it’s an attempt to catch us when we are most vulnerable,  living vicariously through the adventures of a fictional character like Dirk Pitt.  I’m an admitted  Dirk Pitt fan but I’m not sure I can afford the quail pate and the ostrich tartare to go with my Don Julio anejo, chilled, served straight up with salt and a slice of lime.

Are we crossing the line by mixing media?

Used Car Chic

An article in the NY Times this weekend asks the question, “Can American drivers live without that new-car smell?” The answer seems to be “yes they can” as new car sales  have plummeted to below 10 million, a 46% drop from their peak a few years ago. Most industry observers are forecasting continued lower sales through 2010 and maybe even longer. The question being asked is, “What’s the new normal?” Are we  going to be content owning fewer cars and driving our  cars longer? Considering how many new car sales were financed by home equity loans … buy a new car now and get a tax deduction…or cheap short term leases,  it’s easy to understand why consumers are learning to love their old cars more.  The easy money days are gone.

In my last post I talked about the need for reinvention. I’m think it is unlikely that consumer spending will rebound to prior levels. This recession has frightened  many people to their core. The long held belief that things will always get better,  I’ll get that guaranteed raise or a big bonus, has been shattered. With nearly 6 million Americans out of work, many people are downsizing, doing without, focusing on value, and actually trying to save money. From a marketer’s perspective, it looks to be a permanent change in consumer behavior.

With change, comes opportunity. Recent spots by Auto Zone target the “do it yourselfer” with the message that Auto Zone  provides the quality parts and expert advice to help you get it right the first time.  And , not unexpectedly, Auto Zone recently reported better than forecasted quarterly results with sales up 9.3% and net income up 9.5%. In an article in Ad Age, ” Marketers Fear Frugality May Just Be Here to Stay”, P&G Chairman A G Lefley, commenting on declining department store sales says, “”My belief is some of that (department store sales) is gone forever. And it’s gone forever because [the consumer] has changed her pattern of shopping. She’ll still go to get advice and counsel, maybe even see new products and new brands at department or specialty stores. But she’s replenishing online and she’s quite comfortable using our [less expensive] Olay lines. I mean, let’s face it, those Olay products test as well or better.” That’s a pretty glum outlook for premium brands sold through department stores but it also speaks to a big opportunity for value brands sold through lower cost online channels.

Maybe we should all  stop looking back and instead focus on the many opportunities that come with change. It would certainly speed the recovery. Do you know what your customers need? Do you know what they want? Time for reinvention!

A Time for Reinvention

I was reading some of the online news  this morning and I came across  a recent article on Forbes.com titled ” To Reinvent Your Company, Reinvent Yourself “  .  The authors, Scott Anthony and Michael Putz, write that companies are beginning to recognize that to survive  turbulent times like we’re experiencing now requires a “process of continual reinvention”. They describe the challenge of building a  “dual core culture” that excels at creating new growth businesses while still maximizing the potential of your existing business. The process calls to mind the words of F Scott Fitzgerald, “The test of a first rate intelligence is the ability to hold two opposed ideas in the same mind at the same time and still retain the ability to function”.

As I prepare for the departure of David Melnick, co-founder of March Second, and my friend and colleague for many years, I too am thinking about surviving turbulent times and the continual process of reinvention that is required to be a successful entrepreneur.  When I take inventory of what we have accomplished   for our clients , it is clear that we have been most valued in the role of strategic advisors who have helped companies assess  their marketing technology infrastructure and have provided unbiased advice on required  investments and process improvements. It is also clear that the rapid growth of social  media and  and the need  for accurate measurment and timely analysis have made decisions about technology even more important. 

Many CMO’s I have spoken with recently tell me they are beleaguered and living lives of “quiet desperation” in an attempt to evaluate and optimize their marketing mix. Too much data, too many conflicting reports, and too little time is the common complaint. Sounds like there’s a need and it’s time for some entrepreneurial reinvention. 

What’s your opinion?

Appliance, Tools and More

Without much fanfare Sears launched a networking hub called MySears at the end of March and quickly registerd about 200,000 users. This past week it launched a similar site called MyKmart. A company spokesperson said that the chain’s goal is to “glean new insights from customers and give the brand more of a human face.”  Sears said they have already used information gleaned from the site to restock items and to help improve the shopping experience.

I was curious about what Sears customers have in common and what they want to talk about so I visited the site this morning. I found lots of reviews, good and bad, and discussions on topics ranging from “Kenmore Dryer Timer Not Working”   to “Complaint About Poor Automotive Service. There’s a product focused blog where I’m guessing  most of the contributors are employed by Sears. What is interesting is that Sears has linked MySears to other social networking sites like Facebook, Twitter and Linked-In. If your goal is to build a community it’s smart to leverage communities that already exist rather than trying to create new ones from scratch.

It’s hard to say how successful Sears will be but I was impressed by their first efforts. Some industry analysts have  doubts about their long-term success. Josh Bernoff, svp-idea development at Forrester Research, has said that he believes Sears will have a tough time with MySears. “It’s pretty hard to start a community in the context of a retail site unless your customers have a lot in common,” he said. “If you look at Sears, a Craftsman tool community would probably work out better than a Sears community. Do we really want to get together and talk about vacuums?”  

 I didn’t see any vaccuum related comments but one that did catch my eye from “concernedconsumer” reported that her oven refused to turn off. Maybe she got so over heated trying to connect with a live person at Sears customer service she desperately logged into to MySears to register her complaint.

My fifteen minutes of MySears research did leave me with one lingering question. Who are the 200,000 people who have  the time to do this?

Fast Forward Blues

After a few evenings watching TV with my older kids I’m convinced the 30 second spot is one of  least effective ways to invest marketing dollars. I’m sure many of you are not surprised. Nielsen media research may not say that but what are they measuring? If it is share and rating points for American Idol, the statistics must be very misleading. At 8pm last night my daughter switched to American Idol on Fox and immediately hit record. “I thought you said you wanted to watch Idol tonight”, I ask as she flicks back and forth between the Yankees Redsox game and the NHL playoffs. “I am Dad. Just have to wait 15 minutes so we can fast forward through all the commercials.”  Knowing how much advertisers are paying for 30 second spots on Idol, I couldn’t help wondering how often this scene is repeated in millions of  households across America. Honestly, does anyone watch TV commercials anymore?

 Social media is still in it’s infancy and many companies are trying to figure out where it fits, or if it fits, in their marketing mix.  If the White household is typical, and I expect it is,  developing a social media strategy has to be a very high priority. Common sense would say it’s better to try to connect with consumers in media where they actively participate  than in media where they work hard to avoid you.

There must be a lot of folks that agree. Our survey on the use of social media got an overwhelming response. You can still participate and receive a copy of the report by clicking here.

Oprahsized

A week ago Twitter, the microblogging service,  received a big boost from Oprah Winfrey when she signed up and tapped out her first message during her afternoon talk show. Soon after, Megan Calhoun, founder of Twitter Moms, declared that “Twitter has officially hit the mainstream”.  Like Facebook, Twitter is quickly attracting millions of users,  growing from 8 million users in February to over 14 million in March. With Oprah on board,  the San Francisco start-up is expected to quickly attract millions of additional new users from her legion of loyal fans.

I have to confess I think this is all pretty cool. I actually joined Twitter before Oprah gave the thumbs up to baby boomers. I also have a page on Facebook, periodically check in on Classmates and have become obsessive about growing my Linked-In network. I’ve signed up to get  a few RSS feeds from blogs I like and I’m  not shy about posting a comment or opinion. I also use blogs in the courses I teach to facilitate class participation and I’ve created a networking group for my graduating seniors on Linked-In.

What is unusual, or maybe not, is I’m old, at least demographically speaking.  So now I’m wondering,  “Am I an early adopter among boomers or was social media  already going main stream well before Twitter was Oprasized?”  I think Oprah may actually be a laggard. So many of my friends are on Facebook that it can get a little overwhelming. I don’t want to play 25 things! I don’t really want to keep track of everyone’s birthday!  I’ve also learned that social media requires a new form of etiquette. For example, posting on someone’s Wall is not like sending an email. That’s a lesson I learned when I posted an empathetic message on the Wall of a friend of my daughter’s who was having relationship troubles not knowing it would be visible to her entire network. Embarrassing, not to mention the flaming email I got from my daughter.

One other indicator that social networking is fast becoming main stream is the list of companies and brands that are now using some form of social media to create awareness, connect with customers, and drive incremental sales. It all seems fairly chaotic right now but all the evidence, including my personal experience, suggests that social networking is not a passing fad. We expect it will continue to evolve as new segments join and build communities and eventually it will find an equilibrium point between true social networking and marketing-driven promotions and information sharing.

We’re very interested in hearing about your experiences and opinions. You can post them here or you can go to  http://www.surveygizmo.com/s/129581/social-media-survey-from-march-second  and complete a short survey we are conducting. Or you can do both. If you complete the survey and provide your email address, we’ll send you the tabulated results.  But please don’t write on my Wall. It would be so uncool.

Pricing Temptations

When demand drops, price discounting becomes very tempting. It’s not surprising. It’s easier to drop prices than it is to change perceptions on product quality and value.  Add a large dose of economic uncertainty,  and prices will inevitably come tumbling down. Ideally, discounting should be a tactic of last resort for luxury, high perceived value brands. But this year fear seems to have driven everyone to put out the “On Sale” signs as fast as possible. How much discounting is really necessary is hard to predict but one thing is certain…once you head down the discount road,  it is very hard to turn back.

As a marketer I’m always interested in observing how companies deal with adversity and capitalize on opportunities. The travel and hospitality industry is particularly fascinating. By now no one believes there is one price for an airline ticket or a hotel room. Consumers have been trained to play the booking travel game and minimize their cost while revenue managers at airlines and hotels are playing their side and attempting to maximize yield. It’s hard to tell who wins in this game  but it certainly hasn’t improved the quality of our travel experience.  If it wasn’t for business travelers, especially short-notice business travelers, nobody would be making any money.

The Cruise industry is the exception. There is no business traveler to save the day and help prop up yields. A recent CNBC Special Report put the spotlight on the unique challenges of this growing industry. On the positive side, cruising is the fastest growing segment of the travel industry,  largely due to the  success cruise companies have had in attracting new segments, particularly younger families.  At the same time, the capital investment requirements are enormous.. it costs over $1B to build a new ship…and the break-even per cruise is a mind boggling 104% on average. All the profit comes from on board sales. It’s no wonder then that discounting is the tactic of choice to fill the ships and, in this economic environment, there are lots of deals for consumers.

As ticket prices come down, there will be  even more pressure to increase the average reveue per passenger in order to achieve profitability targets.   I don’t expect that will  do much to enhance the cruising experience.  It would be smarter to better manage the ticket price – value equation.  That  would require the ability  to precisely target potential passengers, tailor communications throughout their pre and post booking lifecycles, and deliver differentiated content, offers and pricing. Interestingly the technology is available, in fact we offer it, but it’s not widely in use because,  unlike hotels and airlines, cruise lines are still very dependent  on travel agents for the majority of their bookings. As a result,  they have limited information and control over offers and pricing.  The strategic options…promote booking direct or convince travel agencies to share consumer data…are either risky or culturally challenging. It’s a situation that begs for a solution that would enable cruise lines and their travel agency partners to share information and to be able to “make the right offer at the right time” .

It will be interesting to see if the economy is the catalyst that will  drive true innovation.

Survival Tips for Small Businesses

In listening to President Obama’s tutorial masquerading as a press conference last night I was struck by his ability to stay on message. Be patient, stay positive, things are getting better.  A lot has been written about the power of positive thinking, some of it psycho babble and some of it pretty insightful. As a small businessman I do think that one of the best ways to  recession proof your business is to stay positive. While it’s true that consumers and businesses are being more cautious about what they purchase, good products and good service will always be in demand. If you can find ways to serve your customers better than your competitors, you will be smiling while they are singing the recession blues. Here are six things small businesses can do to keep  customers close and  sales soaring during these difficult economic times.

1.       Identify your most valuable customers and find ways to serve them better. A simple RFM analysis (recency, frequency, and monetary value) will help you identify your best customers and how much they contribute to overall sales. These are the customers you can’t afford to lose.

2.       Find ways to identify and satisfy unfulfilled needs. Some purchases can be deferred but others can’t. Looking at the purchase history of your frequent buyers will allow you to group them into segments and gain insights about what they are buying and what else they may need.

3.       Stay in touch and listen well. When it comes to customer loyalty, absence does not make the heart grow fonder.  Make it a practice to reach out and speak directly to customers often. Create opportunities through email marketing or online surveys to establish a dialog and to let your customers know you appreciate their business.

4.       Add value before you drop price. When times are tough consumers and businesses focus more on getting good value. And that doesn’t always mean getting the lowest price. Create innovative package and service options that will allow you to provide more value without discounting.

5.       Invest in people, process and technology. Yes, invest. A recession is often the best time to make your business stronger and more competitive. Hire and retain the best people. Streamline your operations. Leverage technology to improve the effectiveness and efficiency of your marketing programs.

6.       Don’t be afraid to ask for help. Getting expert advice or choosing to outsource functions that are not a core competency will save you money and time. It will also lower your fixed costs and provide more flexibility to adjust to shifting economic conditions.

 

Business cycles are a fact of life. Sometimes it’s the economy, sometimes it’s the regulatory environment, and sometimes it’s the emergence of a new competitor. I can’t promise that, if you follow the six steps outlined above, you will avoid the impact of this recession but I am confident you will be able to recover faster and will emerge as a stronger company.

Sports Marketing Redefined

Bank of America’s decision to back away from becoming the elite sponsor of the new Yankee Stadium will cost the team $10 million in annual revenue. It also is a harbinger of how the recession is impacting sports marketing marketing overall. Ken Lewis, Bank of America’s CEO, defended sports marketing deals saying, “I think they are worth the investment because they generate sales and profits”.  However, Lewis was quick to add that “he wasn’t one of those executives who just want to have access to sports teams and athletes”, seemingly putting that predeliction right up there with joining Eliot Spitzer for a visit to  the Mayflower Hotel. For Bank of America, I expect the decision was as much about not wanting to face the reaction from  politicians  and the media as it was about the actual investment. Who wants to face Barney Franks’ smug demeaner and listen to his sarcastic pronouncements, “Customers won’t do business with Bank of America because you sponsor the Yankees “, if you can avoid it.

Bank of America isn’t the only financial institution with second thoughts about sports sponsorships. Wells Fargo stepped in to save  floundering Wachovia and promptly stripped Wavchovia’s name from the Wachovia Championship PGA Tour event leaving the organizers scrambling for a new name. Absent a sponsor, it’s now called the Quail Hollow Championship. Catchy. Not much brand affinity with that name unless you’re the Quail Hollow Club.  But Barney will be happy. Bad publicity also scared Morgan Stanley into declaring that it would not entertain clients and executives at The Memorial Tournament, a  golf event the bank is sponsoring in Dublin,  Ohio. Now that makes sense. Sponsor the tournament but don’t leverage the event.

You can’t help but wonder whether all the political posturing in Washington is leading companies to make irrational decisions. Sports marketing is a big business because all the data suggests that sponsorships drive incremental sales. Have sponsorship fees gotten out of hand? Maybe. But that’s simply supply and demand. Citigroup isn’t willing to pay $400 million to the Mets for naming rights to Citi Field so Vikram Pandit can watch games from his luxury box. It’s business. I don’t know about you but I don’t think it’s progress when political pressure from Washington starts to dictate where or how companies invest in marketing or…how they pay their employees.