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It's 2010. Do You Know Where Your E-Commerce Strategy Is? 7 Signs You Need to Find It.

Happy New Year, a few weeks in.  Despite one of the most challenging years for retail in recent memory, those of us in e-commerce had, by most reports a positive 2009.   Cash strapped consumers turned to our channel for research, relevance and convenience like never before, using new devices and tools to access our brands. Most of the colleagues I speak to are teetering on that pivot point between energized and exhausted. 

Even if (or perhaps especially if) your 2009 was successful, chances are your business has changed, and the role of e-commerce in your organization has changed.  When you were in the heat of the moment reacting to the recession, the sand was shifting beneath your feet.  You were doing what needed to be done, hardly coming up for air.  Now that it's January and you can actually take a breath, you're probably finding that some of the reactionary activity of last year has become commonplace, and it 's probably time to hit "refresh" on your strategic plan (oh, and if you never HAD  a strategic plan to begin with, chances are you need one now more than ever). 

If you find your e-commerce business facing two or more of the following, it's time for a strategy check in:

1) Your competitive landscape has shifted. The recession has brought exciting innovations to e-commerce (see social and mobile points below), but it's also brought the demise and consolidation of many retailers. Some that were big (think Amazon) have gotten even bigger and expanded into new categories. Do you have an updated, clear picture of  what you're up against, where you stand and who you're trying to beat?

2) You reduced the size of your team.  A lot of pruning took place in 2009, through attrition and layoffs.  Many times, the team gets smaller but the amount of work stays the same (or even grows).  If you haven't re-examined priorities, roles and processes in light of your new resource structure, chances are you're not operating as efficiently as you could be.

3) You delayed or initiated a site redesign or re-platforming effort (or think you need to).  With demands on e-commerce sites increasing at a rapid rate, record numbers of retailers are looking to upgrade or replace their site experience and infrastructure.  As a result, the e-commerce platform landscape is more crowded, confusing and complex than ever before.  Do you have a solid understanding of what you need to innovate at the pace your company and customer expect?  Have you re-calibrated what your site experience needs to deliver to more savvy, discriminating consumer?

4) The multi-channel initiatives in your company are increasing in number and importance.  If 2009 found you shifting gears to drive in-store sales in addition to online transactions, it's time to re-evaluate and clearly re-state the purpose of the online channel in your organization.  Is it about driving direct sales? Building integrated experiences across channels? Somewhere in between?  Does everyone know and agree to the success measures for the e-commerce?

5) Mobile is moving from R&D to bread and butter.  If you launched a mobile commerce site, app, or mobile marketing initiative in 2009, it's probably time to determine mobile's strategic role in your business and how you'll fund and resource this exciting new digital touch point.  Likewise, if your company yet to make a mobile move, it's time to plan when that needs to happen and what that should look like (hint: sooner would be good).

6) Social marketing and social commerce are moving to the center of the marketing plate.  Ok, you've experimented and hopefully had enough success to say this is no longer a novelty.  The conversation with your customer is only going to continue to ramp up from here. Do you have the resources to listen, converse, measure and maximize the power of the dialogue?

7) You're going (or thinking about going) global.  With U.S. e-commerce maturing, many reatilers are looking for growth in new places and finding that it really is a whole new world out there, with plenty of challenges.  Do you have a roadmap (when, how)  for entering new markets or better serving those that you cover?

Chances are your e-commerce business has become more sophisticated and complicated than it used to be.  That's to be expected given what it needs to deliver. 

Creating (or updating) a strategic plan for the online channel doesn't have to be (and really shouldn't be) a monumental effort.  After all, you have REAL work  to do, and things in e-commerce change rapidly.   But, taking some dedicated time to get everyone informed and on the same page on what's important in the new reality, where your resources will go, and how you'll measure success will allow you to execute better, have more focus, and, yes, react more nimbly to new challenges (even recessions) when they occur.

The Mom & Pop Store: A Book Review, a Personal Perspective, and 5 Lessons for E-Commerce

I'm just back from a 2 week vacation where finally, for the first time in nearly a year, I had time to read books.  While I promised myself ahead of time that those books would not be related to e-commerce or retail, one of them was, and I am thankful that I allowed myself to break the "no working on vacation" rule.

Robert Spector's book " The Mom & Pop Store: How the Unsung Heroes of the American Economy Are Surviving and Thriving"  is well worth reading by anyone in e-commerce, retail, marketing or customer care.   While the book centers on the challenges and triumphs of small local brick and mortar businesses, there are lessons to be gleaned for anyone who interacts with customers in any channel (especially e-commerce, where personal  connections with customers are unfortunately rare).

Drawing from his own personal experience working in his family's "Mom & Pop" meat business, Spector explores the history and perspectives of dozens of small merchants from grocers to jewelers to booksellers to restaurateurs.  They range from century old legacy family businesses to 1st generation entrepreneurial ventures.

These business owners are passionate, innovative, resilient, service oriented and deeply involved in their communities.  No strangers to change, many of them are operating successful e-commerce stores in addition to their core brick and mortar businesses.

This book resonated for a personal reason.  While I was away, I periodically checked the news.  The headlines of the recession continued.  Last week's big news was the unemployment rate, now topping 10%.  The last time that happened was in the early 1980's, which coincided with my graduation from college.  Broke and discouraged by the lack of "real" jobs for new college graduates, I took a part time retail job in what could easily be described as a "Mom & Pop" store.  Without expecting to, I became a merchant. I checked in the new merchandise.  I decorated the store windows.  I helped customers (many I knew by name) and rang up sales.  And most surprisingly, despite the low wage, sore feet and weekend hours, I loved it.  That "Mom & Pop" experience was the foundation of my retail (and later e-commerce) career, and it taught me life long lessons about customers, communities and the importance of humility, whether you're selling in a store or selling online.

As I read Robert Spector's book, I realized how much these successful Mom & Pop stores have in common with one another, and how much the e-commerce community can learn from the guiding principles of successful Mom & Pops.  Here are my 5 favorites:

1) The store is uniquely yours:  I've written in the past about the importance of a compelling and unique value proposition.  Mom & Pops continually face stiff competition from national big box stores and e-commerce giants that under cut them on price and over do them on selection.  The smart Mom & Pops have done their homework and found their niche; the thing that they can offer that no one else can.  Read the story of a small urban grocer who had the nerve to get rid of Coke and Pepsi in order to carry an exhaustive selection of old fashioned bottled soda pops.  He's no longer slugging it out on price with big grocery chains, he's the long-tail merchant of soda pop and his customers love it.   Read about a tiny ice cream shop in Philly that still sells ice cream from a 5 generations old family recipe that defies the science of frozen desserts and keeps customers coming back for more.  And read about the small hardware store in Washington, D.C.  that's just blocks away from a Home Depot and takes care of customers with a well edited assortment and over the top service.   Whether it's a unique product, a unique experience or a level of service that can't be matched, these retailers (like good e-commerce merchants) have something special that is theirs alone.

2) It's personal: E-commerce sites take pride in offering algorithmically driven personalized product recommendations. Great, but is there a human touch to the site, to the service?  Read about the jeweler who visits a long time customer in the hospital.  Her terminal illness has caused her fingers to swell, so he gently cuts the ring off of her finger and has it re-sized so that she can wear it during her final days.  Read about the florist who reaches out to customers who have lost a loved one with a bouquet and a hand written note after the funeral and visitations are over.  On a brighter note, I recall buying swimwear from Landsend.com last year and receiving a friendly phone call the day after the package arrived to see if I needed to exchange a size.  Sure, e-commerce thrives on automation, but a true human touch at the right time is something your customers won't forget.

3) It's the community, stupid:  In the world of e-commerce, social networking and community are things we treat as somewhat novel and new.  Ask any successful Mom & Pop store and they'll tell you that the community is the essential foundation of their business and always has been.  Your reputation is all you've got.  Of course people talk about you.   When people shop, they connect with others, keep on top of community news and gossip and exchange information about who's got great products, who's having a sale, who sold them lousy meat last week.  Mom & Pops donate to local causes, sponsor Little League teams, hang banners out to congratulate high school graduates, take up collections for a local business or family in need.  They do it not as a means of promotion, but as a way of life.  They know that the community will be what pulls them through their own tough times.  Read Spector's example of a florist who lost everything in a fire and was back in business within 6 hours, thanks to the outpouring of support from the community (including supplies and resources from competing florists!).  Read the example of the grocery owner who was shot in a robbery.  The people of the community, including other local businesses, took up collections for the injured man and helped the family get back on their feet.

4) Invent, then re-invent. Staying in business is about change.  Read about the ethnic grocer who introduces new items as the neighborhood shifts from European immigrants to Hispanic immigrants.  Read about a long standing neighborhood bakery that now focuses on weekend business and smaller cakes and bread loaves for smaller families.  Read about an upscale London butcher  who now carries premium quality seasonal game since his neighborhood has become increasingly affluent.  Your audience might change, their needs and tastes might change, but you can still be meaningful.  You have to be.

5) Overcome adversity. Big adversity: Not every business survives recessions, fires, floods, death and destruction, but those that do teach us valuable lessons.  Read the chapter about Hurricane Katrina and the passionate bookstore owner who managed to get the store re-opened within 6 weeks after the disaster (it took Barnes & Noble 6 months to re-open).  Read about the beloved New Jersey deli that burned to the ground, only to re-open 9 months later to lines of customers wrapped around the block.  Many of the businesses in this book have been around for nearly a century and have endured much more than the e-commerce industry's "bubble" or the current recession.  They've taken the long view and weathered the inevitable hard times with dignity and perseverance.

Of course, I highly recommend reading "The Mom & Pop Store" in a beach chair with the sun on your back and a drink in your hand.  If that's not in the cards, I still recommend that you read it.  Every e-commerce leader has an inner-merchant, and this book should help you get in touch with yours.

For the record, the rest of the books I read on vacation don't have anything to do with e-commerce or retail.  Unless of course you have a lot of nasty office politics to deal with, in which case I recommend Roderick Graham's "The Life of Mary: Queen of Scots: An Accidental Tragedy".  Nothing quite like imprisonment, poisonings and be-headings to help you keep things in perspective.

Webinar Replay - More for Manufacturers. What is the Meaning of Your E-commerce Life?

If you missed last week's webinar with Elastic Path, From Manufacturer to Retailer: Expanding Your Brand Through E-commerce, you can view a recording of the webinar here

You can also check out my guest blog post on getelastic.com highlighting a portion of the webinar: Getting Your Product Content Ready for the Consumer

Still hungry?

A critical decision manufacturers face when establishing their e-commerce presence is "What is the meaning of life?", or more practically, "What is our site's role in e-commerce?"  The obvious answers of "we want to sell more product" and "we want to build our brand" immediately surface, but the subtleties of how you choose to do that can be much more interesting and complex.

While manufacturer websites are cited as one of the first places shoppers go to get product information (source: Forrester Research), these sites, while growing, aren't getting a lion's share of the online sales. See the below chart from e-Marketer:

It may be that the commerce capabilities on these sites are limited. It may be that consumers simply want to research on manufacturer sites, then go to the retailer (bricks or online) to buy.

Whatever the case, manufacturers can win by determining where they can add value to the shopping experience and how they can best facilitate the transaction, even if it's on a retail partner's site instead of their own.

Here are a few note able examples from the webinar showing distinct approaches to handling the transaction:

First, online powerhouse Nike.  Great site, well executed shopping process with extensive imagery and product information.  This is all about Nike capturing the transaction and customer relationship themselves, and they do it well. Note that access to retail partners is hardly noticeable at the bottom of the page and the store locator is utilitarian at best, no indication of whether or not those stores even carry the product I'm looking at.

 

Contrast the approach above with Patagonia, who offers a choice of seamless options to purchase, either on their own site, or at a retail partner.  They let me know that the item I'm looking at is available from a variety of partners, and take me right to the appropriate product page, with identical product descriptions to assure me that I am indeed getting the item I want.

Callaway Golf offers a good shopping and transactive experience, but then passes the order to a nearby retail partner for fulfillment  - a nice way of servicing the customer and adding value for retail partners: 

 

Samsung does the ultimate in combining great decision tools for both product selection and retail selection.  The shopping tool helps me choose the dimensions, price and specifications of my TV. Then, I can see what retailers have the item in stock and even do a price comparison.

 

Whether it's one of the above or somewhere in between, the options for taking or transferring the transaction should be  carefully considered, factoring in:

• Your brand's pervasiveness online and offline - how easy is it for customers to buy your product somewhere else?

• The size/scale and capabilities of your retail partners

• Your relationship with your retail partners

• Your own capacity/infrastructure for handling fulfillment, service and direct customer relationships

• Your brand and business objectives: is it about building a direct customer relationship? Or helping your retail partners sell more of your product? Or both?

Above all, think creatively: where can you add unique value in the customers research and purchase process? And, where can you bring value to your retail partners?

10 Reasons Why Some Manufacturers Still Ponder Selling Online

Earlier this month, I read a blog post from E-consultancy titled "Why Not Selling Online Can Damage Your Brand".   The piece covers many of the key reasons why e-commerce has become a must have for brands, and why not selling online can be more than a missed opportunity; it can actually damage the brand. 

As a long time veteran and advocate of e-commerce, I agree with all of the points in the article.  Yet, having worked with some notable manufacturer brands who have yet to take the plunge into online selling, I can offer that for many of these companies, the decision to sell online is not the "no brainer" that it might appear.

Manufacturers who sell online don't just need to become web merchants, they need to become retailers, and that presents some interesting and often sticky strategic issues.

1. Lack of in-house retail or e-commerce talent.  This means that manufacturers may not know what questions to ask or understand the complexity of what they are getting into.  It also means that there may not be a logical choice for a leader of the strategy, planning and execution of an e-commerce initiative.
2. Concern about disruption to retail relationships.  This typically tops the list of issues, as manufacturers attempt to walk the delicate line between building their brand through direct to consumer sales and cannibalizing their retail partners.  Every manufacturer selling online has faced it, and there are many flavors of potential answers to striking the balance.
3. Product offering and pricing decisions can be mired with complexity.  Manufacturers' product lines many not be "retail ready", meaning they have been assorted for the retail buyer, not the consumer.  Thus, there are key decisions to be made around the online offer. The whole assortment? An edited version? Exclusive products? Clearance items? New test products?   And then there's pricing.  There's a need to offer the consumer a competitive value,  yet the need to be sensitive to retail partner margins and not undercut.
4. Product information and assets are not e-commerce ready. Manufacturers have a unique opportunity to showcase their products online, and consumers will likely have an expectation that the best and most extensive product information will come from the manufacturer's website.  Yet, many manufacturers find that their product images and copy are geared towards product spec manuals for retail buyers vs. online shoppers.  Re-purposing and enhancing product assets for the web can be a significant undertaking.
5. Fulfillment is not set up for single piece consumer orders.  Separate processes and systems may need to be set up to effectively manage consumer shipments and returns. Ditto for new packaging. Outsourcing many need to be investigated and considered.  Similarly, managing inventory for e-commerce can be complex if the manufacturer's systems are not set up to buy and reserve inventory for the online store, or allow for easy access to overstocks.
6. Customer service takes on a whole new role.  As with fulfillment, discreet processes, systems and people will be needed for e-commerce. Whether or not to turn service over to an outsource partner can be a critical strategic decision.  Build the team and infrastructure and reap the benefits of direct communication with your customers? Or hire experts with the people and systems in place to get you up and running quickly?
7. Marketing activities have been focused on B2B relationships and broad consumer branding.  Digital direct response marketing may not be part of the company's DNA, so understanding search marketing, email, affiliate relationships, retail promotions, social media and the whole balance between traffic and conversion becomes a new skill set need.
8. E-commerce ecosystem components need attention.  While the search for an e-commerce platform will likely be part of the manufacturer's path to online selling, equally important is the suite of supporting systems (many of them possibly in "legacy" condition) that will need upgrading or readying for integration. Order management, CRM, warehouse systems, the list goes on.
9. Resources, Resources, Resources (People, Money, Time).  All of the above is a lot of work, and everyone has day jobs.  Not to mention, this sounds like it could be a significant investment.  Maybe we're just too slammed to deal with this now?
10. Lack of a deliberate process to work through #s 1-9.   It's easy to get confused and overwhelmed by the decisions and intimidated by the potential costs, especially when you're busy running your core business.   A host of manufacturers have made the transition to direct online selling successfully and profitably.  If you have not yet taken the plunge, it's probably high time that you start the investigation process to wrestle these issues to the ground.  None of them are insurmountable, but they do require some disciplined thought and decision making.  Get some help from a knowledgeable, experienced expert to help you identify the issues and opportunties, and engage in a process to work through the answers.  Your brand deserves it, and your prospective consumer customers are asking for it.

Keeping up with Your Customers: 5 Fundamentals for Tackling the Multi-Channel Monster

This morning, two very good articles about multi-channel retailing popped up from Twitterers that I follow.  With way too much to read already, I hesitated to click but I am glad that I did.  This is a topic I have long been passionate about; and with the changing dynamics of customer behavior in a recession and mobile moving like a high speed train, more and more retailers are becoming equally passionate about aligning channels and devices to capture demand.  First, a bit about the two articles and then my take.

Both articles are well worth reading.

The first, in How to Fit Into Your Customers' Multi-Channel Lives, Peter Merholz of HBR does a great job of setting the historical stage for multi-channel services.  Long before e-commerce or the Internet, Kodak helped customers and built loyal relationships by breaking up the process of taking pictures an developing film, letting each step be managed by the people and places best suited to the task.  Apple followed suit with the iPod decades later by separating the music purchase and management from listening.  Good multi-channel food for thought for any  retailer or service provider.

The second, a new blog post at X-Channel Retail provides a good overview of recent multi-channel studies from Aberdeen and Retail Systems Research.  You'll find plenty of stats indicating that multi-channel initiatives are alive and well in most top-tier retail organizations, with improved visibility to inventory across channels and coordinated marketing efforts high on the priority list.

It's hard to argue that investing and executing well on a multi-channel strategy is a smart thing to do.  But achieving the elusive "seamless experience" is easier said than done.  With mobile adoption on a fast and furious pace, the need for retailers to orchestrate the research, shopping and buying experience not only across channels but devices (and devices within channels) means that execution will be more complex than ever.  While many retailers are doing it well, many are simply not prepared for the cultural, technical or organizational challenges that come with tackling the multi-channel monster.  Having spent a good portion of my career and consulting life in the multi-channel world, here are my top 5 fundamentals for taming the beast:

1.  Focus on the unique strengths and uses of each channel and device.  Multi-channel is about more than having the website available in your store or on a mobile phone.  It's about each channel bringing unique value to the customers' shopping and buying experience along the way. Think about the Sears curbside pickup program; customers receive a text message when their online purchase is ready for pickup at the store curb.  The cell phone didn't process the transaction, but made it a more convenient experience.

2. The decision to integrate across channels and devices must be deliberate.  Most retailers today are multi-channel in at least some sense.  Most have some level of channel synergy, but often that synergy has happened organically or accidentally.  Despite the clear customer demand for multi-channel convenience, many retailers organize and incent team members to behave like silo channel operators.  According to the Shop.org 2008 SORO Report, 85% of multi-channel retailers say that their website's highest priority is to drive online sales and profit.  If that's the case, multi-channel initiatives are unlikely to be at the top of the priority list, with online conversion drivers taking precedent.  If the decision is to integrate (and it should be), giving it the appropriate priority and resources will leapfrog internal silos and organizational boundaries.

3.  The technology essentials must be defined and planned.  Those in the know on multi-channel will tell you that transparency to inventory and pricing across channels, centralization of customer data and flexible access to product content are key. None of these are small things, so a clear road map will need to be created based on priorities and anticipated ROI.

4.  Multi-channel integration requires clear ownership and teamwork.  An executive mandate to integrate is critical, but so is "on the ground"  leadership.  Often, multi-channel initiatives lack a clear owner or a dedicated cross-functional team to focus on execution.  According to the SORO study, only 37% of companies surveyed reported having a cross-functional team to design and roll out cross-channel features.  Consistent accountability for multi-channel programs vs. treating them as "side projects" outside of normal business will go a long way.  You'll need a great knowledge source from each channel, someone from customer care, someone from IT and likely others, depending on the initiative.

5.  Objectives and incentives must be aligned around customer scenario success.  Teams tasked with multi-channel issues need to map the "end to end" customer experience, carefully planning how each channel or device will help the customer achieve their goals.  If performance metrics are focused on customer success, the right decisions will follow.  Chances are someone on your e-commerce team is skilled in scenario design: tap into them for multi-channel experience design.

Finally, pace yourself and don't expect overnight success.  Most multi-channel initiatives by their nature are hard to do well.  Be sure roll outs are carefully planned and tested before wide release, and have mechanisms in place to gather customer and employee feedback early.  You're going to have a long relationship with the multi-channel monster.

Why CRM Matters More Than Ever in Tough Economic Times

Everywhere I go, someone is trying to save me money.  The grocery store.  The department store. Restaurants. And of course e-commerce sites.  It's everywhere: coupons, signs screaming "sale", huge percentages off.  It's like every retailer in the world is dolling out virtual dollar bills.

No question, we're in a nasty economic situation and no question, it's taking more incentive than ever to get the register to ring.  As a retailer and as someone who has spent the better part of her life trying to crack the code on getting customers to buy, it pains me to no end to see these genuinely well-intentioned efforts by retailers executed in a way that is costly and ineffective in achieving the desired result.  Here's my latest example:

There's a spa/salon not far from my house.  It's fantastic and I've been going there for years.  Actually, as I've aged, I find that I go there more frequently as there's a lot more work that needs to be done.  Brows, nails, toes, hair, the occasional facial when the wrinkles get too hard to hide.  You get the point.

I am a regular, to say the least.  Every 3-4 weeks for haircuts and brow waxing.  Typically every 4-6 weeks for pedicures and periodically, a manicure for an important meeting or occasion (too much typing to get them on a more regular basis).  While the economy is tough, and I, like everyone else have found things to trim back on, my hair and nails will not stop growing.  So it's doubtful that my spending habits at this salon will change much in the months or years ahead.

This salon has my appointment and purchase history for the last however many years.  A lot of years.  They can probably predict when I need an appointment better than I can.  The technicians all know me by name and are always pleasant to deal with. We have a nice relationship.

So, here's the kicker.  I have right now, sitting in front of me on my desk, the following:

• A letter from my hairdresser offering me $10 off my next haircut
• A gift card from a nail technician offering me $15 off my next service combo of $65 or more
• 5 (count them) $5 off coupons good on my next service or retail purchase now thru April.

So, what's going to happen?  I'll use all of them.  But, as you've probably figured out, I would have made appointments and paid for services whether or not I had this pile of discounts.  I have no doubt that business for this salon is probably not what it was a year ago (hardly anyone's is, after all).  But, they are now making their business worse by spraying discounts far and wide, giving many of them to customers like me, who show no slowdown in their purchase activity.  They'll be making less money on me without the benefit of any extra business.

I know, implementing and executing well on CRM is not an easy task, but if this one anecdotal example is any indication, the payoff would certainly be there.  What if the salon only mailed coupons to those customers that they hadn't seen in 6 months? Or those customers whose spend over a certain period of time had slowed by a certain amount?  The really painful thing here is that they HAVE the data.  I know.  Every time I call for an appointment, the service rep diligently types the info into a computer and verifies my contact and credit card information that they have on file.

Managing customers is about more than having a nice relationship, it's about having a smart and profitable relationship.  In these times, can we afford any less?

Nudge Your E-commerce Customers and Grab the Low Hanging Fruit

Often, I'm asked by clients or prospective clients to look at their e-commerce websites and identify low hanging fruit.  Usually, that means unearthing opportunities to improve the customer experience, and thus, improve conversion.

Here's one way to grab some low hanging fruit: give your customers a nudge.

In any given e-commerce shopping and buying experience, customers are faced with a large number of choices to make.  I'm not just talking about selecting the product to buy. It's all of the various configurations of choices that come after you've found the item that you want:

• What color and size do I choose?

• What shipping method do I want?

• Do I want to sign up for email, and if so, do I want HTML or text?

• Do I want the item shipped to my billing address or a different one?

• Do I want to save my personal info or create an account for next time?

• What credit card do I want to pay with?

• Do I want to donate extra dollars to a good cause?

The list goes on.  Depending on the nature of the product, there can by a myriad of custom configurations of a product (like the Timberland boot builder) or options for receiving a physical product vs. a digital version (such as an airline ticket or software product).  As many online shoppers have discovered, on some websites, it's all too easy to make the wrong choice.  In fact, some websites make matters worse by having the wrong choice "pre-selected", causing frustration, abandonment, or worse, an erroneous order followed by dissatisfaction and returns.

By dissecting all of the places on your site that your customers need to make choices and gently "nudging" them towards the appropriate choice, you can make your customers happier AND improve your e-commerce business results.  

Fortunately, some great brains at HBR have written an article and created a useful decision tree methodology for those of us who lead e-commerce efforts.  The article, Nudge Your Customers Towards Better Choices is a must-read for any information architect or designer faced with getting customers through the online decision making process, and for e-commerce business leaders wrestling with the pros and cons of making "default" choices for customers, either with the intent of achieving a business results (such as getting more email sign ups) or improving customer satisfaction (such as presenting personalized selections).  Note: you will need to pay for this article on the HBR site, but it's only $6.50 and, in my view, well worth the investment, as you'll probably refer to it again and again and put the decision tree they've created on your bulletin board.

Fundamentally, the HBR authors divide the world into two key types of "default" decisions that can be presented to a customer: a) mass defaults, where a retailer "pre-selects" the option that a majority of users will likely choose and b) personalized defaults, where implicit or explicit information about a customer is used to "pre-select" the best option for them. 

Both of these default types come in a variety of flavors, all of which are described in detail in the article, with examples of appropriate usage based on the business objectives and customer information available.   But, to quickly make they point on how useful nudging can improve the customer experience and business results, here are a few examples of my own: 

First, an easy one.  A typical illustration of an e-commerce  mass default is below.  When it's time for the customer to choose a shipping option, pre-selecting "standard" shipping makes sense.  It's the least expensive option, and if I have special circumstances that cause me to need expedited shipping, I don't expect the retailer to know that.  Of course, if they can highlight messaging about shipping deadlines here around key gift-giving holidays, all the better.

  

In the above example, specific info like the anticipated date of delivery would go a step further to helping the customer make the right choice.

Now, let's look at an example where the wrong mass default is a likely source of frustration.  On the Allen Brothers site, notice that the default quantity choice is set to "0".  Why not set it to "1", since customers ordering will order at least one, and must choose a quantity in order to add to cart?

 
How many customers do you think mistakenly hit "add to cart" without choosing a quantity?

Personalized defaults, when well executed can lead to increased conversion, loyalty and reduced returns.  Consider myShape.com, the women's apparel site that "pre-selects" the right size for the customer based on the extensive body measurement information she provides.  Assuming they have the right data, this saves customers the hassle of determining the right size, and reduces the risk of returns.  This is a form of personalized default HBR calls a "smart default".  I agree, it is smart.

Then, there are those mass defaults that would be so much more effective if they were personalized. I'm a petite.  I've stopped growing (at least vertically), so that's not likely to change. Yet, every time I shop online from my favorite stores, I have to "override" the default "regular" size setting. Sure, most women are "regular", and while most stores probably don't know enough about me to recommend a specific size, they could easily get enough data from me, either in my profile or in my purchase history to pre-select "petite".  Incidentally, when I was rushing through some shopping last holiday, I mistakenly ordered "regular" from two websites (see eddiebauer.com below) and promptly returned them, I was too aggravated to make an exchange.

    

After reading the HBR article and doing a quick drive by on a few sites, I've concluded that paying close attention to key points of customer choice and applying the right form of defaults is an area of untapped opportunity for many. If you're under pressure to improve your business results through low hanging fruit (and who isn't these days?), try this:

Buy and read the HBR article. Identify all of the decision points on your site where defaults are used or could be used. For each, ask yourself:

• Is this the appropriate form of default?
• Is the appropriate choice pre-selected?
• Are there areas where we're using mass defaults when personalized defaults would be more effective?
• What customer data could we gather or what data do we have that would help us offer a truly helpful personalized default?

Then, set up some A/B tests, and gently "nudge" your customers to the right choice.  Chances are, you'll see that a well placed nudge might just push them over the "buy" threshold, and allow you to pick some low hanging fruit.

 

 

 

 

 

 

 

The High Definition Value Proposition: Courting Online Customers for the Long Haul

When I was in college, most of the women I knew had a "list".  Some of the guys I hung out with had one too.  The "list" was the inventory of qualities that the person they'd eventually marry would have.  Ok, I confess, I had a "list".  Mine was ambitious and multi-dimensional.  The guy would have to be almost freakishly smart, and equally funny. He'd have integrity. He'd love to read as much as I did, and probably some of the same books.  He'd like cats and red wine.  (The list goes on, but I think you get the point.)  The key here is that even though there were plenty of potential mates who were nice or funny or smart, all of us with a "list" were looking for someone who could play on more than one dimension, someone who was uniquely "all of the above".

So, what does this have to do with e-commerce?  Well, actually quite a bit.  I'm a big believer in the power of a strong value proposition, and value propositions at their best are multi-dimensional.

Your customers need more than one reason to buy.  Ideally, those reasons to buy will appeal to them on a number of levels, both rational and emotional.   In our current economic climate, it's easy to get caught up in the one hit wonders of free shipping and 25% off.  While valuable, those things alone won't set you apart or help you build a loyal, lasting relationship with your customers.   To do that, you need a value proposition that is high definition, that's "all of the above".

So, is your e-commerce value proposition high definition? The new year is a good time to "take inventory" and see how you stack up on all of the necessary dimensions.   Ask yourself the following:

What are the emotional benefits of buying from your company?  In other words, when a customer buys online from you, how do they feel? If they tell someone at a cocktail party that they bought online from you, what does that say about them?  Think of it this way: if I buy a Volvo, I might feel safe or feel confident that I'm keeping my family secure.  If I tell someone I own a Volvo, it might say that I'm safety conscious or willing to spend extra money on quality.  Does your site experience or the product you sell deliver emotional benefits? Or do you fall into the emotional void?

What functional benefits do you provide?  For most e-commerce sites, functional benefits are things like 24X7 access, a robust on-site search feature or a large number of skus for sale.  The fact that the Volvo has a bunch of airbags and a frame that holds up in a crash means that it has solid functional benefits (note how those functional benefits fuel the emotional benefits described above). Amazon's one click checkout, Borders magic shelf and Etsy's shop by color match tool are examples of  unique functional benefits.

What are experiential benefits your customers enjoy?  In other words, when someone buys from you online, what do they experience? It might be a friendly customer service rep, a fast and courteous email response or a surprise gift of free samples when the package arrives.  To stick with the Volvo analogy, it might be the mechanic at the Volvo dealer that's honest and doesn't speak in automotive jargon. It could be a surprise thank you note from the salesman that sold you the car, or someone serving you a hot beverage while you shop the showroom. Beyond the pure transaction, what's the experience that surrounds it like?

Does your e-commerce business offer relationship benefits that foster longevity? These are the benefits that grow over time, that deepen loyalty.  Yes, it does include things like traditional loyalty/points programs, but many truly unique relationship benefits are deeper and more personal.  As I do more business with you, do you know me better and help me more effectively?  In the offline world, think about the salesperson at Nordstrom who calls you when she gets something new that she knows you'll love, or the car dealership that gives you a free loaner car for life when you buy your second car from them.  In the online world, it might mean personalized recommendations, or participation in an online community of people who share your passion. It might mean the opportunity to attend special events or help design the new product line.

The goal of course is to offer a truly robust and unique value proposition that is emotional, functional, experiential and fosters a relationship....all of the above.   If all of the parts aren't there, it's easy to see how a lopsided value proposition falls apart.  For example:

•  The airlines offer a relationship benefit in the form of frequent flier miles.  But, the experiential aspect of traveling on their flights is miserable and getting more so all of the time.  So, all of those "relationship" benefits don't really foster relationship at all.

• You might love your hairdresser's personality and the "experiential"  hip decor in her salon, but if her core functional benefit (the quality of her haircut) doesn't stack up, you'll probably move on. 

• A technology company that offers a product that functions well will only get so far unless they bring some emotive or experiential elements into the mix.  We like the iPhone for its functions, but what makes us love it is the fact that shopping for it in the Apple store and using it is an engaging, fun experience. 

So, how do you determine if you have a balanced, multi-faceted value proposition? Start by taking an inventory of all of the things you offer in each of the categories. Circle the ones that are unique to you or that you do better than your competitors.  You'll probably see that in at least one or two categories, you have an opportunity to do better.  That means when you look at the list of initiatives you need to prioritize for '09, things that enhance those weak categories should be towards the top of the list.

Just like the good looking date who can't hold a conversation or the wealthy date who has no personality, customers are unlikely to stick with a retailer whose value proposition is lopsided.

And, in case you're curious, I did find a guy that met the "all of the above" criteria on my "list".  Granted, it was a full thirteen years after college, but worth the wait.

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

A Tall Tale Called the Long Tail? A Sensible Merchant's Point of View

WARNING: This post is too long by almost anyone's standards. But it's a cool and very important topic to e-commerce merchants.  You might want to read it anyway.

Back in 2006, like a bunch of other people, I bought Chris Anderson's book The Long Tail: Why the Future of Business is Selling Less of More.  Like a bunch of other people, I loved it.  At last, it seemed that someone had intelligently outlined the forces at play in the world of e-commerce and the changing dynamics triggered by increased product choice & accessibility.

Anderson's work sent an alarm bell to many traditional merchants: it's time to start obsessing about product extensions, limitless choice and highly personalized niche "micro" assortments.  For those tasked with managing inventory and running a profitable business, not an easy task.

Then, just to keep us on our toes, around the same time The Paradox of Choice: Why More is Less by Barry Schwartz was published, calling on those same merchants to avoid the pitfalls of over-assortment, to allow customers to focus on just a few choices and avoid the "overwhelm" factor.

So, what's an e-commerce merchant to do?  Sell less of more and risk over-assortment and dead inventory? Or sell more of less and risk commoditization and lack of brand differentiation?

I was prompted into thinking about this again recently, when I saw a brief article in the WSJ: Study Refutes Niche Theory Spawned by Web, which highlights recently released research by Anita Elberse and her supporting Harvard Business Review article Should You Invest in the Long Tail?

As it turns out, the conclusions of Elberse's work challenge some of the Long Tail's key principles. Specifically:

• Best sellers are more important than ever (Anderson says they are losing steam to niche products)
• Scores of niche products are never purchased and are unprofitable (Anderson says they are gaining importance to retailers)
• Niche products don't rate well in terms of customer satisfaction (Anderson says that some long tail products are just bad products)

Elberse's work has spawned a very interesting discussion on Chris Anderson's blog longtail.com. Overall, while Elberse's research is solid and her conclusions worthy of debate, some aspects of her work, specifically the use of percentages vs. numbers in her reporting and her definitions differ from Anderson's.  Those differences are big enough to cause loyalists of The Long Tail to stand firm, and confused merchants to perhaps become even more confused.

After reading the books, the research and the blog (all well worth your time to read, by the way), it seemed to me that it was time for a bit of merchant sensibility to be infused in the mix.

The risks of going too far with both limited "best seller" assortments and over-specialized niche offerings are well known to retailers.  While the web gives us exciting opportunities to break down brick and mortar barriers, capitalizing on those opportunities takes strategy, discipline, investment and plenty of hard work.   To be successful mining long tail profits, there are are few big things you need to master:

A) Know your product category. Long tail examples typically cite books and music: digital consumption or high sku count or both.   If you're not in one of those categories, you need to think through how the long tail applies to what you are selling.  Are there niche size ranges, colors, designs, or features that cater to an under-served market or to extreme loyalists who can't get enough of what you sell?   What data do you have to support investing in long tail inventory?  It's not just about carrying everything under the sun.

B) Take clues from your other channels.  If you are a multi-channel retailer, talk to the merchants for stores and catalog to understand where the opportunities are for logical product extensions.

• Is there a hot category where the limits of shelf space simply don't allow for a full assortment?
• Are there areas of the catalog where space has been cut back due to tighter mailing budgets?
• Are there product lines where the amount of product information desired by the customer is inappropriate for the store or catalog to tackle?
• If you have a limited number of stores, are there opportunities to aggregate demand via the web, therefore building enough volume to justify the investment in an extended product line?

All  of these areas could potentially yield insights as to where long tail merchandising could be successful.

C) Invest in customer insights.  One of the key takeaways from Elberse's research is the need to have intimate knowledge of your customers and their buying behavior.   There are some customers that will never venture into the long tail (such as the busy mom who always buys the same brand and size of popular jeans).  Others will actively seek out long tail products (such as a petite woman who is hard to fit, or a cooking enthusiast eager to try a rare French sausage in her cassoulet recipe).  Understanding who will buy in the long tail and successfully predicting what they will buy is critical to inventory management and profitability.  Elberse points out that a large number of long tail products in music are never purchased.  That's no surprise.  The long tail doesn't let merchants off the hook; quite the opposite.  We still need to intelligently select, assort, and manage inventory to our customers' needs.  A good merchant is a good editor, even in....NO, especially in the long tail world.

D) Invest in product discover ability & accessibility.  Herein lies the key to long tail success.  Carry a lot of the right stuff, and be religious about helping people find it.  Assuming you know your customer and have picked the right products, they have to be able to discover those products in a relevant context.   E-commerce technologies are critical to unlocking the long tail.  Among the the tools you must have in place are:

• Powerful search, preferably in guided navigation format, allowing customers to sort, edit and drill down on a wide variety of attributes, from top level to granular.   Tools like this will help your customer avoid the paradox of choice.  And don't underestimate the manpower and work required behind keeping your product data in search shape.
• Product recommendations.  Don't think that this can be done by a merchant manually assigning "you might also like" items on every product page.   That won't scale, nor will it give you the success rate of automated recommendations that draw from customer history and product data.
• Product information.  Sure, amassing and maintaining a vast body of product content is hard.  But a huge part of what makes that long tail product discoverable to people that might want it is what you have to say about it, or in the case of customer reviews, what other people have to say about it.   The more that oddball product is described, tagged, and recommended, the more likely it will be found by the perfect prospective owner.
• Product reviews and ratings.  As mentioned above, it's not just the reviews themselves, but how you use them as a discovery tool.  Incorporate them into search, comparison tools and site navigation.  Allow customers to ask questions and answer one another.  Incorporate the terminology and attributes used by reviewers into your product descriptions and copy.   And of course, read what customers are asking and saying about the product.  Sometimes a long tail product is a poor seller because it's a lousy product, not because people can't find it.

E) Don't abandon best sellers.   Elberse makes this a cornerstone of her article, citing her research findings indicates that retailers are selling more blockbusters, not less.  Anecdotal case in point:  Last week I bought a CD that would, by anyone's definition qualify as a blockbuster.   The only reason I bought it was because I was on a site  that offered me "top sellers" as part of my recommended products.   Now that I am no longer 15 years old, I am not that savvy about what's selling in music.  I would have likely never known that this CD existed or that it was appealing to me.  The fact that the site I was on knows my musical tastes and offers me a multitude of ways to navigate and discover products was what drove the sale.   So, just like good e-commerce merchandising tactics help people discover the long tail products, they also help less aware customers discover the blockbusters.  And sometimes, it's the blockbuster purchase that drives the customer into the long tail the next time they visit.

So, is The Long Tail a tall tale or a real profit opportunity?  Ultimately the question rests with the retailers who are working to execute e-commerce well.  Comments and success stores are of course, welcome.

And, if you are still in the mood to read more, here are a couple of good case studies of companies successfully navigating the world of long tail retail:

The Hyper-Personalized Business Model Trend

A Niche E-tailer Size up Glamour....One Customer at a Time

And, last year's post:  The Long Tail in Real Life....3 Variations on a Theme