Ecommerce Consulting.com | Experts in Online Retail

Five Recession Lessons from an E-commerce Old-Timer

Regular readers of this column have probably noticed that my posts of late have been absent of any news or discussion about the current economic climate.  Don't worry, I'm not in denial.  No question it's difficult out there. E-commerce, while still growing has slowed significantly and probably will continue to do so.  The news every day cites retail sales plummeting and consumer confidence doing the same. 

As I have thought about what, if anything to say about the current state, I've been drawn back into my own history of prior downturns and burst bubbles.  While the seriousness of this downturn will likely surpass the others, I suspect that some of the things I learned along the way still apply.

I confess that some of this learning has come from making my own fair share of mistakes when trying to deal with cut budgets, nervous e-commerce teams, demanding consumers and even more demanding executives and shareholders.  That said, I recall some great work and groundbreaking best practices coming from e-commerce teams in their darkest days. The key is focus and prioritization - and being sure that you keep the right people around.

1) Take advantage of the fact that momentum is no longer driving your business:  For those of us in e-commerce, let's face it.   No matter how hard you've worked or how great your site is,  a healthy portion of the good business you've experienced over the last few years has been from the pure momentum of the industry.   With that no longer a factor,  you have an opportunity to think about the things you will need to do to strategically drive growth vs. draft off of the wind at your back.  Those are two different ways of working that need to be treated as such.  And, no, just adding another free shipping promotion is not a strategic solution.   When this recession/downturn/whatever is over, your business will be in a different place than it was before the downturn.  Your customers will have adopted new behaviors and will see the world differently.  Try to give yourself the time for strategic thought - you are going to need it.  Get an outsider's point of view or someone to help you think through the important issues.  Strategy may have been a luxury before, but it's essential now.

2) If you have to cut, be decisive about it:  No one likes to cut initiatives or people, but the biggest mistake is cutting "across the board" without a real strategy.   Too often, every department or functional area is asked to sacrifice one person, but the workload remains the same, causing burnout and lousy execution.  It probably makes more sense to eliminate specific work and then reorganize based on the new work vs. trying to all of the same work with less people.  It's harder and takes more strategic thought to do it this way, but you'll have more focus and better execution.  In fact, you may be able to eliminate organizational "layers" and fast track on innovation.

3) Cut idea generators vs. executors:  This one is tough, and probably controversial, but  I have never worked in or for an e-commerce organization that has been lacking for ideas.  Typically what's lacking is a sense of priority on those ideas and enough skilled e-commerce designers, copywriters and engineers to execute on the ideas.  Yet, I find it interesting that in downturns, the people really making the website hum can be the ones to go, while the idea generators often stay behind, frustrated that they can't get things done.  Be careful to stay balanced across the idea thru execution chain.  And don't worry, the ideas won't dry up:  the executors usually have a bunch of good ideas too, no surprise.

4) Prioritization is more important than ever: If you are being asked to operate with less money and less people, that means that unless you had a bunch of unproductive people or marketing programs (not likely) that you are not going to be able to get as much done.  In an older post, I referenced a favorite Meg Whitman quote of mine about strategy being about what you're NOT going to do.  Take it to heart and be decisive.  It will help focus the team and you'll execute better.

5) Whatever you do, don't give up a good web analyst:  In the data rich environment of e-commerce, an analytics specialist is the window to your customer's mind.  They can unlock the hidden opportunities and zero in on your site's trouble spots.   They can help you see where customers are screaming for more or voting "no".  In a previous post, I told the story about how a slashed marketing budget forced site usability analysis to the forefront and saved the day  by getting more customers to convert on less site traffic.  Bottom line - you can't live without  a good analyst when times are tough.  With prioritization more important that ever (see point #4 above), your analyst is the key to doing it intelligently.

From the Author's Mouth (well, actually, from his computer): An Interview With Martin Lindstrom

If you haven't had the chance to read Martin Lindstrom's book Buyology yet, trust me when I tell you that when you read it, you'll have plenty of questions. I did. Fortunately for me (and you) Martin generously agreed to answer a few of my questions in an email interview.  Our virtual discussion is below.  My review of the book is not quite as interesting, but if you'd like to read it, you can find the post here.

SM: The neuromarketing research used in Buyology is obviously very complex and expensive.  How quickly do you see these techniques becoming more widely available?

ML: I am pretty convinced that it is only a matter of years before many if not most of the Fortune 1000 brands in one way or another will begin adapting components from the neuromarketing communities in order to strengthen their research.   Recently I founded Buyology, Inc. , a New York based company specializing in analyzing brands based on the findings from the Buyology study.  My idea was to make this type of insight accessible for everyone, not just for the big boys, and thus ensure that we'll see a combination of qualitative, quantitative, and neuromarketing based research.  It makes sense, as we today know for sure that existing research techniques simply aren't able to understand and analyze our subconscious mind.  Neuromarketing studies can today be conducted at price tags as low as $40K.  As the techniques become more advanced and the technologies and software more sophisticated, we'll see a further price drop, and most likely offerings which even the smallest companies would be able to afford.

SM: You cite the humbling statistic that 80% of new product launches fail within the first 3 months.  For companies that can't yet afford or access neuromarketing research, what sorts of things can they be doing to improve on the failure rate?

ML: The premise of my book is to dare; dare to be different, to go to the edge - in short, to stand out.  A wise man once said " If you're standing in front of a monster and need to beat it, turn its strength into its weakness."  The strength of Fortune 1000 brands is that they have the capital to build brands.  Their weakness is that they're inflexible, afraid of offending anyone, and petrified of standing out.  As a small business this is your opportunity.  Some of the most successful brand releases I've seen build exactly on this; they provoke, stand out, go to the edge.  In short, they leverage the fact that they dare in contrast to the multi billion dollar brands.   In fact, when advising those Fortune 1000 brands I often ask them to imagine cutting their marketing budgets in half, helping them to recover their entrepreneurial spirit, simply for the reason that they struggle to regain that spirit which once helped them to become what they are today.

SM: It was clear from the research that a sensory approach to branding; one that incorporates sound, touch and smell in addition to visual elements is very important.  This obviously gives brick and mortar stores an advantage over e-commerce sites, at least for now.  Do you see the e-commerce experience becoming more sensory, and if so, how?

ML: I'm still surprised about why sound hasn't found a natural role on the internet. We all have speakers, and we all have ears - yet how come less than 1% of the top 1000 websites contain branded sounds, i.e. sound which reflects the signature of the brand?  And how come navigation sound hasn't hit the net yet? I mean, you use your cell phone and it replies by playing navigational sounds when you dial, switch it on/off, have a low battery, you name it.  The same is the case with computer games, your TV, even your alarm clock.  Yet still when you visit Amazon, eBay or any other shopping site, there's just dead-on silence.  No confirmation sound when I've clicked "accept credit card", no sound confirming when I've placed stuff in my basket, no error sound if I've filled things out wrong.  How come? I think that would be a good first step to pursue before anything else.

SM: I was fascinated by the chapter on mimicking behavior; how seeing others do something makes us want to do it too.  Will the explosion of user generated content and social tools work to a marketer's advantage to propel this behavior?

ML:  Most definitely, and it is already happening.  It is not coincidence that YouTube and other video sharing networks have turned out to become as popular as they are.  We love to observe, imitate, and repeat other people's behavior.  I still recall when I was a kid watching Michael Jackson moon walking.  Suddenly the whole world was imitating him, then we were wearing a white glove.  Those trends or fads are likely to be started by brands in the future, and because of the internet they're likely to spread substantially quicker and more efficiently.  From a practical point of view this means that brands will begin to consider how their new soda has to be consumed, or how their new candy is to be eaten.  In short, they'll no longer just develop the product, but consider the entire experience package and spread this using social media.

SM: For me, the greatest irony in the book was the success the cigarette makers are having with subliminal marketing.  The law says they can't advertise traditionally, yet that doesn't seem to be a detriment to their success.  This obviously raises some ethical issues and some interesting debate about government involvement in these sorts of situations....thoughts?

ML:  I was honestly shocked when we discovered the true power health warnings have on smokers - encouraging them to smoke even more.  It's scary, and so is the fact that we indeed smoke more, not less at a global scale.  How come?  Because the tobacco companies were banned from advertising and thus had to find alternative avenues.  This was indeed the best thing which ever could have happened to them.  Why?  Because it forced them to think about new techniques.  As everyone else was resting on the good old techniques, tobacco companies suddenly went ten years ahead of time, bypassing the problem the rest of the brand world today faces: that consumers are bombarded with information and thus the impact is somewhat diminishing.

So, what have we learned?  I think government needs to play on equal terms with the tobacco industry.  When I released Buyology we were, to my knowledge, the first in the world using fMRI to understand the true power of tobacco advertising.  Considering the impact the tobacco industry has on the world and our health, not to forget the cost of the health bill, anti-smoking communities should have access to substantially more sophisticated research techniques and thus gain the latest insight about the true effect of anti-smoking campaigns.  This should be the starting point, and a lot of resources should be put aside to further understand the true influence of tobacco related messages.  Once we've discovered the truth (or as close as we can possibly come to the truth) new regulations should be established, yet regulations which can be adjusted as time goes by and new research results emerge.  It will always be the dog chasing its tail.  My hope is with studies like the Buyology project we'll continue keeping an eye on players and beat them at their own game.

SM: As I read the book, I noticed a lot of parallels with another recent marketing book, "Buying In" by Rob Walker.  You cite many of the same brands (Hello Kitty, Livestrong, American Apparel, Apple, etc.) Have you read the book? If so, do you feel that your findings are complimentary?

ML: There are indeed parallels, and I'm glad this is the case.  It would be kind of scary if everything I wrote about in Buyology would be totally opposite of everyone else.   It is easy to identify  the successful brand players in the world; the numbers and the buzz tell it all.  This where I'm in clear agreement with people like Rob Walker.  Buyology however represents one difference which Rob's and I'd say just about every other book or study out there doesn't include: scientific evidence proving why the Hello Kitties of the world have succeeded.  The good news here is that some of the theories we've been working on for fifty years or more have finally been confirmed.  The bad news is that many of the theories now finally can be confirmed to be an utter waste of money.  So you could say where Rob and other's books are version 1.0, Buyology is version 2.0; where science offers us an insight and a dimension never put on the classic brand heroes of today's world.

SM: What stores do you do go to for your favorite dopamine hit?

ML:  It's funny you're asking about that, because I often joke around with this exact term when my girlfriend and I are shopping, teasing her by saying "let's go in and get a dopamine boost."  I love brands which are not yet discovered.  I love art, creative stuff that doesn't have labels on, but which tells a story that is unique and special.  I love products which have a special story.  I love stuff you can't buy everywhere, but only in small stores; somewhere in Japan, Columbia or Saudi Arabia.  Things which no one has and few care about.  That gives me the rush.  And yes I am, by the way, affected by brands, however I guess I'm one of the harder individuals to persuade (for some strange reason) ;-D